This Week in Imaging: Are Customers Investments and are Subscriptions Bad?
This week, HP CEO and President Enrique Lores took a bit of heat regarding several statements he made in a CNBC “Squawk Box” January 18th interview.
The CNBC interviewer noted that some customers are angry – surprise – that HP frequently deploys firmware upgrades to its home/small office printers that then block the use of less-expensive third-party cartridges. HP maintains that the firmware upgrades provide necessary security upgrades – likely true – and that third-party ink cartridges are a security risk. It says it’s own sponsored testing has shown that third-party ink cartridges can transfer viruses to the printer, which can then transfer them to the network.
Customers as Investments
Some were apparently offended by Lores’ statement that customers who don’t use HP supplies are a “bad investment.” This reflects the “razors and blades” business model under which printers are priced low, with the idea that customers’ purchase of supplies will make up the difference. However, over the last several years, printer makers have increasingly replaced this model with one in which printers are priced higher, but offer large-capacity ink tanks and/or ink subscription plans with low cost per page.
Meanwhile, it’s not just the printer industry in which customers are seen as investments. Car dealerships make a large portion of their money from service – according to the U.S. Bureau of Labor Statistics, just 16 percent of dealers’ profits came from new car sales, while 43 percent came from parts, labor, and service. (Which may account for some dealers reluctance to sell electric vehicles, which have much lower service costs due to their more simpler design.)
But back to HP. In his interview, Lores also noted that one of HP’s goals is “to make printing a subscription” – something the company has been talking about for several years, and which is also a model that managed print services for the office are based on. This somehow raised the ire of some, although it’s hard for us to see how a subscription model is so objectionable, when it’s basically a pay-as-you-go model that makes purchasing financially easier.
In the end, this issue will continue to simmer, as it has for decades – just as HP will continue to retain the world’s largest printer market share, as it also has for decades. Meanwhile, customers who purchase the cheapest printers out there – instead of opting for ink-tank models and ink-subscription plans that substantially lower costs – will continue to complain when their third-party cartridges are blocked.
This Week in Imaging
Commercial and Specialty Printing