There’s been a lot of focus in the industry lately about billing models, specifically the merits of some models as opposed to others. We’ve put together a blog series highlighting three of the most popular approaches to billing for managed print services (MPS)—transactional, cost per page (CPP) and cost per seat—to tackle some common questions and discussion points. We’ll be looking at the arguments for and against each billing model in addition to the associated benefits and risks, starting with cost per page.
What is CPP?
The first step is defining cost per page, sometimes referred to as cost per click or cost per copy, CPP is a billing model in which resellers charge their customers on a per-page basis and the cost of consumables, maintenance and support is covered by the cost per page. CPP is arguably the most well-known billing model and the one that’s been favoured in recent years over its transactional predecessor, particularly among dealers and in the traditional BTA channel.
There’s no complex math involved and customers typically know what they are getting with a CPP contract; it’s a familiar, proven model for managed print engagements that, when executed correctly, ensures customers don’t have to worry about placing supply orders after they’ve run out of toner or make service calls once they discover a device is down. Despite this relatively low barrier to entry, it can be difficult to set your solution apart from competitors’ with a CPP model, simply because it is so popular and widely adopted in the managed print space.
One of the ways to communicate the value of your offering is to break down the cost per page for your customers and show them, line by line, what’s included, from supplies fulfillment and invoicing to maintenance and service. Sending them a bill at the end of the month that just provides a total based on their usage may not effectively illustrate what they are getting as part of their managed print contract. If the value you offer your customers isn’t clear to them, they may consider looking elsewhere for what they don’t see or feel they’re getting. Transparency in your CPP contracts can help demonstrate the value of managed print services in a way that’s similar to a transactional model – not only do they see what they’ve purchased in terms of individual line items, but your solution is presented as a total, inclusive service that provides them with worry-free device management.
On top of the popularity of CPP, declining print volumes, shrinking margins and the commoditization of managed print have prompted some in the industry to explore other billing models as a way to mitigate the impact of these issues. But can a different billing model address the core issue with commoditization?
Commoditization is a process by which products become indistinguishable from one another in terms of features and functionality, usually due to an influx of similar products on the market, and the only distinguishable difference becomes price. Managed print solutions have become commoditized to the point that many MPS providers are competing with one another on price and, as a result, have limited pricing flexibility.
If the key issue with commoditization is a lack of diversification, calculating a new way to charge customers will not resolve the problem. Businesses can address the lack of diversification in the market, reduce costs for customers and increase their margins by leveraging the competitive advantages of automation and predictive analytics. These processes can turn a customer’s cumbersome, manual business processes into low-cost and low-touch workflows that not only save them money but provide them with value they might not get with a competitor solution.
When looking at the billing models available to you, it’s important to keep in mind that the core issue in a commoditized market is a surplus of solutions that are difficult to distinguish from one another. Billing your customers one way instead of another will do little to address the underlying problem: the quality of the solution itself.
One of the main arguments against a CPP model is that it doesn’t align the reseller’s interests with their end users’. With a cost per page contract, resellers typically benefit when end users print more, but the premise of a managed print solution is to reduce unnecessary printing for a more environmentally-friendly print environment. Many organizations are also going paper-light, adopting digital workflow solutions to minimize how much they print.
Although studies have shown that page volumes are slowly declining, the paperless office seems to be a long way off yet; paper-intensive verticals like legal, real estate and healthcare still depend heavily on print.
Print is still a reality for many organizations and a potential way to address the lack of alignment is to offer a value-add like PrintReleaf’s global reforestation solution, PrintReleaf Exchange (PRX), as part of your managed print program. Through integrations with industry-leading device monitoring solutions like PrintFleet’s, PrintReleaf accurately measures your customer’s paper consumption and enables them to distribute their paper footprint to several reforestation projects across the globe.
While CPP is billed on utilization, you may find yourself taking extra steps to account for fluctuations in print behaviour. The most common way of managing the risks associated with CPP is writing minimum, maximum and overage fees into contracts to protect yourself from unforeseen costs if your customer suddenly print significantly less or more than usual. If your customer prints too little or too much during the month, these fees are a way to safeguard your margins and limit some of the losses or expenses you may incur with changing print habits.
While these terms certainly mitigate the issue, regularly charging your customers additional fees may not be well-received on their end. A good contract should be tailored to your customer’s typical print behaviour so less of these additional fees are necessary. Some terms will obviously be necessary to manage your financial risk, but limiting the amount or frequency of these fees may be more effective for long-term relationship building and fostering customer loyalty.
One of the best ways to understand your customers print practices is to use the information you collected during your initial assessment and, if that information isn’t comprehensive enough, conduct an additional one to gather anything else you might need for a CPP contract that reflects your customer’s particular use case.
Look for our next blog post in the MPS Billing Models series where we’ll look at the benefits and drawbacks of cost per seat, and the implications of cost per seat in the managed print space. For an all-in-one overview of the three billing models we’ll be looking at in our series, download our free Managed Print Playbook. The playbook includes an introduction to each model, examples and a list of pros and cons.