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Current HP4100 Market Conditions and Trends
marketing strategies for chipped cartridges
The presence of a highly sophisticated computer chip on the HP4100 cartridge has had an
unprecedented impact on our industry. Initially this impact was to raise the most serious barrier to
date to our market growth. Now, this single component is creating a unique market opportunity for
some, a new competitive threat for others, and a signal of a new industry landscape for all. Retail end
customers currently being supplied non-chipped HP4100 cartridges are becoming the new growth targets
for resellers who offer chipped HP4100 cartridges. And recent and forthcoming LaserJets
®
from HP
reaffirm that chips are here to stay. HP’s decision to use its sophisticated RF (Radio Frequencies) chip
technology has made it much more difficult for the aftermarket to compete with HP’s OEM cartridges.
Without a chip solution, the aftermarket is placed at a huge disadvantage.
The HP4100 and HP9000 were just the first phase in HP’s chip strategies. Now, HP has utilized their
RF chip technology on the newly introduced HP4600 Color LaserJet. It will also be utilized on a
forthcoming 22-ppm, tandem-engined HP8550 replacement, reportedly named the HP5500 Color
LaserJet. Later this year an even faster color tandem departmental printer is rumored to be in the
works, and it will undoubtedly utilize chip technology as well. The impact of HP’s chips on both the
HP4100 and HP9000 aftermarket is highly visible and measurable.
Aftermarket Status as of April 2002:
•
The aftermarket volume for the HP4100 cartridge had achieved only about 1/3 of its potential
at that point of time compared to the same time period of the HP4000 market in 1998 and 1999.
•
Industry surveys concluded that less than 50% of remanufacturers who currently build HP4000
cartridges are also producing an aftermarket HP4100 cartridge. At this same point of time
during the HP4000’s ramp-up, over 75% of remanufacturers were producing a cartridge.
•
The surveys also revealed that sales of OEM supplies had hit all-time highs for retail resellers,
fueled largely by the sale of HP OEM 8061X cartridges for the HP4100.
•
Wholesale market activity was less than 20% of its potential, despite the existence of an ample
supply of empty cores.
•
No measurable aftermarket volumes of the HP9000 cartridge existed. This had never occurred
in our industry. The aftermarket had never failed to achieve some measurable marketshare
within 12 months of the introduction of a new HP monochrome cartridge going back to the
SX cartridge of 1989.
How do you want to position your business?
Inside discover 3 current marketing strategies for the HP4100.
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Confidentail
First Scenario: “My Customers Don't Need It”
In the first case, selling only non-chipped aftermarket
HP4100 cartridges, the business had entered the HP4100
market prior to the release of the smartek
™
chip. Customer
demand and higher margins (compared to selling new OEM
cartridges) were the key drivers as to why they went to
market with non-chipped cartridges. The majority of
businesses in this
category are smaller retailers. Collectively, this group selling only non-chipped HP4100 cartridges is less than 25% of
all the businesses that originally went to market with a
non-chipped cartridge. The reasons cited for not selling a
smartek
™
-chipped aftermarket HP4100 cartridges general-
ly include:
•
I didn
’
t price my non-chipped cartridges thinking
about adding a chip later. Now, I’m “locked in” to my
HP4100 cartridge pricing and can’t increase the price
(to offset the additional expense of a chip).
•
My customers don’t ask for or need a chipped
cartridge.
•
I’ve trained my customers to watch out for light print
so they know when the cartridge is going to run dry.
•
None of my customers pay any attention to the
supplies status information available from the printer,
they generally have no idea how pages they are
getting from a cartridge.
•
I can’t make as much margin on a chipped cartridge,
so I will continue to just sell non-chipped.
The primary marketing strategy of the businesses in this
category is price. The potential value of offering a superior
product in a chipped cartridge is rejected in favor of a
lower price. Which means the business believes that its customers will continue to reject a superior product if it means
paying a higher price, so they have chosen not to offer this
alternative to any of their customers.
Second Scenario: “Have It Either Way”
In the second case, selling both non-chipped and
smartek
™
-chipped cartridges, the business again had
entered the HP4100 market prior to the release of the
smartek
™
chip with a non-chipped cartridge. Businesses in
this category include the vast majority of retailers who had
chosen this initial non-chipped entry strategy. Collectively,
this group selling both non-chipped and chipped HP4100
cartridges is more than 75% of all the businesses that originally went to market with a non-chipped cartridge. These
businesses cite multiple factors in deciding to add the
smartek
™
-chipped product to their line, creating a two-
tiered product offering:
•
I had planned for a higher-priced chipped cartridge
and built that into my non-chipped price.
•
I only offered the non-chipped product as a temporary
solution and plan on switching all my customers to
the chipped cartridge.
•
If I don’t offer a chipped cartridge and my
competitors do, I could lose customers.
•
I only sold non-chipped cartridges to a select portion
of my customer base.
•
Many of my larger customers would not accept a
non-chipped cartridge.
•
By having a two-tiered product offering with two-tiered
pricing, my margins are similar for both products.
•
I will market both products and let my customers
choose.
The businesses in this category are using three marketing
strategies in this order of priority: product range, customer choice and price. However, a great amount of variation exists in the marketing messages and go-to-market
execution strategies. On one end of the spectrum, there are
businesses for which a chipped HP4100 cartridge is just
another product; it gets added to the product list, and if
How do you want to position your business?
Static Control began shipments of the HP4100 smartek™chip several months ago. We have had hundreds of in-depth
conversations with our customers regarding the HP4100 market and from these conversations we have gained a view of
current market conditions, attitudes, opportunities and threats. Understanding how the industry as a whole is approaching
the HP4100 market should assist you in evaluating your strategies for your business.
Currently, there are three aftermarket HP4100 cartridge scenarios in the marketplace:
1. Business is selling only non-chipped aftermarket HP4100 cartridges.
2. Business is selling both non-chipped and smartek™chipped aftermarket HP4100 cartridges.
3. Business is selling only smartek
™
-chipped aftermarket HP4100 cartridges.
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Confidentail
the customer wants it, they will order it. On the opposite
end of the spectrum are businesses who are leveraging the
smartek
™
-chipped cartridge both as a unique opportunity
to differentiate themselves and as a weapon to capture new
customers. And those that are using such aggressive strategies are finding them successful in the marketplace.
Additionally, a substantial portion of this category is actively transitioning to offering only a smartek
™
-chipped cartridge, eliminating the non-chipped cartridge from their
line. This effectively moves the business closer to fitting
into the next category, “Why Would You Want It Any
Other Way”.
Third Scenario: “Why Would You Want It Any
Other Way”
In the third case, selling only smartek™-chipped cartridges,
the business had chosen not to enter the HP4100 market
prior to the release of the smartek
™
chip. As detailed earlier, more than 50% of our industry had elected to wait for
a chip solution. Businesses in this category cut across every
segment of the business from small retailers to the largest
wholesalers. The top two reasons cited as to why this market strategy was chosen:
1.We chose not to offer a clearly inferior product
compared to the OEM.
2. My customers won’t accept a non-chipped product.
Other secondary factors were cited as well:
•
The size of the available market for non-chipped
product was too small to make it worthwhile.
•
My customers are satisfied with us supplying new
OEM cartridges until we can offer a complete solution
with a chip. We’ve explained the situation, they under
stand it, and they know we will bring them the
chipped product the instant it is available to us.
•
I don’t mind selling OEM product for a few months
longer (waiting for a chip). I make a decent margin on
the OEM, and I’m building a stockpile of 61X empties
to support my market launch of a chipped product.
•
The wholesale distribution channels are neither
capable nor willing to support a product that defeats
critical printer functionality and can cause customer
confusion and dissatisfaction.
•
A two-tiered product offering can be confusing for my
customers and my salespeople. I only want to go
down that road if I believe it’s going to be a lot longer
before a chip is available.
The primary marketing strategies of the businesses in this
category are business value propositions as seen through
product performance and customer demand. A number of
business owners in our conversations detailed how they
saw offering a non-chipped cartridge as totally contrary to
their value proposition and had considerable downside
risks. They believed that offering a product that degraded
printer functionality could directly damage the perception
and reputation they had spent years building that their
products were comparable to new OEM. The owner’s
view was that the small, temporary gains to be made in
selling a non-chipped cartridge were not worth the risk.
Most businesses in this category are actively leveraging the
smartek
™
-chipped cartridge to further build their value
proposition and position themselves as a superior supplier
with the latest technology to boost their message to both
existing and new customers. Some of these new customers
are using OEM product and some are using aftermarket
product. In either case, these businesses are widelyreporting success with well-crafted market strategies.
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Static Control Components, Inc.
3010 Lee Avenue • PO Box 152 • Sanford, NC 27331
US/Can 800.488.2426 • US/Can Fax 800.488.2452
Int’l 919.774.3808 • Int’l Fax 919.774.1287
www.scc-inc.com
STATIC CONTROL
Static Control Components (Europe) Limited
Unit 30, Worton Drive
Reading • Berkshire RG2 0TG • United Kingdom
Tel +44 (0) 118 923 8800 • Fax +44 (0) 118 923 8811
© 2002 Static Control Components, Inc. All rights reserved worldwide. The stylized S is a registered trademark of Static Control Components, Inc. Static Control and smartek are trademarks
of Static Control Components, Inc. All other brand and product names are trademarks or registered trademarks of their respective companies.
Job#1360.0802
Summary
As of April 2002, HP held an estimated 94% marketshare for HP4100 cartridges in North American. Worldwide, their
marketshare was slightly higher. All of HP’s cartridges featured a RF smartchip. The aftermarket held an estimated 6%
share as of April 2002. All aftermarket cartridges were devoid of a chip solution, as there was no availability at that point
of time. In contrast, during the HP4000 market ramp-up, the aftermarket held at estimated 17% marketshare after the
same 13 months since the cartridge’s introduction.
What can be expected from this point forward is a gradual recovery by the aftermarket of lost marketshare due to
impact of HP’s RF chips. Long-term the aftermarket’s marketshare will continue to lag behind the HP4000’s historical
model due to the ramifications of HP’s RF chips. By the end of 2002, the aftermarket is estimated to range from
between 15% to 20% of the HP4100 cartridge market. Chipped cartridges will be the primary growth vehicle and will
constitute the majority of all aftermarket 4100 cartridges shipped by year’s end.
HP introduced the 4100 printer on March 20, 2001. The 9000 followed shortly after on May 1, 2001. The initial question
was, “Will anyone be able to supply a chip?” Now that the technology challenge has been met, the new question is,
“How do we best capitalize on the chip?” The feedback from our customers demonstrates that there is considerable
opportunity. The chip certainly is an account protection product, and in the hands of aggressive marketers, it is becoming
a new account acquisition tool as well.
The current state of the HP4100 aftermarket is reminiscent of our industry in 1990 when aftermarket SX drums were
introduced. There were two groups of remanufacturers: those that took advantage of the benefits of the drums and
exploded into the market, and those that said there was no way they could make SX drums work for them, due to the
additional cost. Within two years there was no second group, they either converted or died. The SX drum provided a
definitive leap forward in product performance and capabilities. Today, a replacement chip for the HP4100 is driving a
similar market evolution as the industry adapts to a new, emerging reality that chipped cartridges will become our mainstream products. Some are running with the opportunity, some are hesitant, and some refuse. Which group best defines
your business? And if you have been standing on the sidelines as this market gains momentum, you have the opportunity
and the knowledge to change that strategy overnight.
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