PRODUCT EVALUATION

BASED ON REAL WORLD

PRINTER APPLICATION AND
CUSTOMER EXPECTATION
Luke Goldberg
SR. Vice President
Sales and Marketing

PRODUCT EVALUATION BASED ON REAL WORLD

PRINTER APPLICATION AND CUSTOMER EXPECTATION

Every printer sold is marketed and positioned by the OEM specifically to one of 5 distinct sales channels as
defined in the cart below (Figure 1.) Each of these 5 customer types has distinct expectations and product
requirements that are based on application and usage

CHANNEL

CORE PRODUCTS

LEVELS OF RETAIL DISTRIBUTION

Ink Jet, Photo Ink jet or Entry Laser-based

MFP; Thermal Fax

Mass Merchant, Office Products, Computer Retailers,

Consumer Electronics

Entry Level Laser, Entry Level Color (HP

2550/2600, Samsung CLP 510, QMS 2400),
Laser-based MFP (Brother leads here)

Office Products, Discount Warehouses, Computer

Retailer, Computer Catalog (CDW, Tiger)

Medium-sized
Business

Mid-Range Color (HP 3700/3800, Xerox

8500)
Mid-Range Laser of MFP (i.e. HP2400,
etc)
Business Ink Jets

Office Products, Discount Warehouses, Computer

Retailer, Computer Catalog (CDW, Tiger), Catalog
Stationers, Superstore Catalogs

Large Business

High-speed Network Laser and MFP, HP

4350, 4345mfp, Lexmark t634

Catalogs Stationers, Super Store Catalogs, Contract

Stationers

Departmental

HP 9500, Xerox Phaser 7700, HP 9000 MFP,

Digital Copiers

Catalogs Stationers, Super Store Catalogs, Contract

Stationers, OEM Contract

Consumer

Home Office/Small
Business

EARLY QUALITY ISSUES

In the past, our industry made mistakes in our efforts to govern the expectations of our customers. Early,
poor quality issues led the industry to oversell the quality benefits of a compatible/remanufactured cartridge.
Rare exceptions to this are HPs Colorsphere branding requiring CPT knowledge.

The OEM sells quality as an assumed benefit without disclosing the specifics.

Remanufactured products should be sold and positioned as a cost-savings alternative product to the OEM,
offering consumers a choice, environmental benefits and acceptable quality.

Our industry has overused the adage that all products meet or exceed the OEM standard.

Historical Examples Illustrating This Include:

Monochrome gray scales/resolution (There is no aftermarket 6 Micron aftermarket toner and therefore true
1200 dpi resolution is impossible.)

Workgroup color quality remains elusive to the aftermarket due to availability of high quality matched
systems and a shortage of needed materials such as developer rollers, adder rollers, and even toners.
HP has released a renewed line of midrange and workgroup color printers including the 3800, 4700, etc They
brand their toner as Color sphere in order to differentiate themselves from aftermarket.

EARLY QUALITY ISSUES

OEM BRANDING
OEM Challenges
Imaging Process
Sub-branding of OEM toners ColorSphere

HP claims they are on their third generation of color imaging processes, which enhances toner fusing
properties, etc
HPs own internal documents address the aftermarket deficiencies in pulverized toners and the
superiority of chemical toner to produce true color in terms of charge characteristics, flow, efficiency,
pile height, etc

EARLY QUALITY ISSUES

Another example of this on the inkjet side is inkjet archival qualities,

water fastness, dry times etc Epson with its Durabright and HP
with its Vivera have played the marketing card that their prints will
last 100, 120 years without fading under glass. Clearly the
aftermarket is just learning how to determine the archival qualities of
its inks and is not in a position yet to compete with these claims.
Hopefully with the advent of STMC for inkjet, there will be a
correlative basis to compare aftermarket inks to the OEM to
determine just how archival our products are.
I also dont know of an aftermarket ink that will allow submersion in
water without running as you would see with a pigmented Lexmark
or Epson durabright ink.
Can we meet or exceed this OEM standard?

How many consumers care whether or not they can spill their beer
on their photos?

Do they care that in 120 years their photos will need to be reprinted?

EARLY QUALITY ISSUES

QUALITY ISSUES SUMMARY

The aftermarket has done a great job in achieving a standard that is acceptable to as many as 30% of
the consumers out there.

Aftermarket quality continues to improve and in many cases we can get close to the standard of the
OEM or even match it.

Improper management of their quality expectation will mean you dont get a reorder.

Proper management will endear you to your customer because you have treated them with the respect
that all consumers want, and that is to be given the facts so that they can make an informed decision.

PRODUCT LINE REVIEW

PRODUCT LINE REVIEW BASED ON REAL WORLD

PRINTER USAGE/USER EXPECTATIONS

With laser monochrome, as with all product categories, printers must be broken down into at least 2
segments:

SOHO/SMB/Micro SMB
Workgroup

Within each product category the user will have distinctly different usage patterns and therefore
distinctly different expectations.

ENTRY-LEVEL MONOCHROME LASER TRENDS

ENTRY-LEVEL MONOCHROME LASER TRENDS

MULTIFUNCTIONAL REVOLUTION

Hardware features and speed have been increasing while printer costs
have decreased dramatically in the last two years. Today, the average
single function monochrome entry-level laser such as the Dell 1100,
Samsung ML2010, Page Works 1350W or Lexmark E220/230 can cost
less than $50.00 at retail with rebates.

The average MFP/MFC multi-functional printer/copier (printing, faxing,

scanning, and copying; also called AIO or All-In-One) costs less than
$200.00. Brother is a leader and has done exceptionally well in laser
and ink based AIO printers especially with the huge success of its
tn/dr350 engine.

Dell 1100

Samsung is also strong here with multifunctionals based on both the

ML1710 engine (scx4216) and based on the newer ml 2010 engine.

Samsung ML2010

ENTRY-LEVEL MONOCHROME LASER TRENDS

ENTRY-LEVEL MONOCHROME LASER TRENDS

MULTIFUNCTIONAL REVOLUTION

In many cases these printers cost almost as much as the consumables themselves. Todays OEM selling
strategy is to offer faster, feature-laden printers at very low costs to attract small business looking to have
one device for all-purpose printing or to attract a home office consumer looking for low-cost printing
solutions.

Because of this razor and blade selling strategy, consumers who reorder their OEM consumables often get a
case of severe sticker shock.

OEMs bank on the fact that MFP usage is 2 3 times more than single function.

This scenario creates huge aftermarket demand and is a big factor in expanding the growth of the aftermarket
across all SOHO product categories.

ENTRY-LEVEL MONOCHROME LASER TRENDS

Revenue (in billions of U.S. dollars)

Shipments (in millions of units)

Worldwide Monochrome and Color Laser

Printer Shipments and Revenue, 2003-2005

Source: Lyra Research, Inc., Hard Copy Industry Advisory Service,

Second-Half 2005 Forcast.

Installed base is around 6%. (somewhat under projections from 2004 where 10% was seen as the figure)

QUALITY EXPECTATIONS FOR ENTRY-LEVEL

MONOCHROME USERS

QUALITY EXPECTATIONS FOR ENTRY LEVEL

MONOCHROME USERS

These products are sold and positioned as low cost printing devices for small business and home users.
They are usually host-based, lower volume machines, used for text printing or faxing and general office
usage.

Users of these printers are looking for low-cost and are not typically employing them for high-volume
external presentations, graphics or other professional usages.

Not designed for this, and therefore the users dont have very high quality expectations.

Especially true for MFC usage where copy and fax quality is not highly scrutinized. The reasoning is,
generally, as long as they can read it, it is good enough.

These users are not on cost-per-page programs and are not analyzing total cost of ownership; therefore, they
are clueless as to page yield.

Our customers dont typically do a lot of STMC type testing for these types of printers; therefore, shortfalls
on yield that are not dramatic in these devices are also not an issue.

In short, as long as there are no hard failures that show up early on (back grounding, improper fusing, etc.) it
is unlikely that a failure that we would encounter in stress testing would ever occur. Take your own home
printing as an example of how most printing is done in the SOHO environment.

QUALITY EXPECTATIONS FOR WORKGROUP

MONOCHROME USERS

WORKGROUP MONOCHROME LASER

Unlike the Entry Level Monochrome space, workgroup users have very
different quality expectations. Typical workgroup users are doing
networked, higher-volume printing with anywhere from 5 to 50 users on a
networked central printer. Typical workgroup printers for larger
workgroups of 20+ would be the 4300/4350, 4345 MFP, the 9050, 9050 MFP,
the Lexmark T634, etc
These printers are getting faster and faster with more copier like features
(sorting, stapling, etc.) The 4345 MFP, as an example, is really a copier with
a laser engine. The convergence of lasers and copiers in the office is
placing more and more importance on cost per page and therefore, also
page yield.

Page yield is the single most important quality feature of these types of
printers. It is also these printers that our customers are more likely to
use STMC and other types of yield tests; since it is these devices that
are typically sold by our customers on a cost-per-page or TCO
programs.

In many of these products, solid back page coverage is not nearly as

important as text character fill and page count.

Quality evaluation must include long run life tests, since long runs are
common in this environment.

HP 4300/4350

Lexmark T634

COLOR LASER

COLOR LASER

We will examine color laser and segment the printers and customer usage and expectations between
entry-level color printers, which are typically sold at $400.00 or less and targeted towards the small
business/SOHO channel, versus the workgroup color printers which sell for over $1000.00.

ENTRY LEVEL COLOR LASER

Entry-level color laser is classified as any single-function color

printer selling for under $500.00. This is by far the fastest growing
segment of the laser color business. How these products are being
sold and positioned is critical in understanding user demands in
terms of quality.

When the HP 2550 was first introduced, it was the only color printer
priced and positioned as a monochrome replacement. It was
marketed as a black and white printer that offered color neophytes
the option to print in color.
HP 2550

ENTRY-LEVEL COLOR LASER

According to Lyra, color overall remains the highest % growth channel in laser along with entry level
monochrome lasers.
In 2005 sales of color toner cartridges grew to 3.7 billion from 2.4 in 2004.

Worldwide Revenue: Laser

Toner Cartridges, 2004-2005
Revenue (in billions of U.S. dollars)

Source: Lyra Research, Inc., Hard Copy Supplies Advisory

Service, First-Half 2005 Forecast

ENTRY-LEVEL COLOR LASER

ENTRY LEVEL COLOR LASER

According to most OEMs, in the space for entry level printers (e.g.
Samsung CLP500/510, QMS2300/2400, OKI5100/5200,
HP2500/2550/2840), these users will print between 70 to 80 % of their
pages monochrome.

A serious color user will buy a more capable, faster color printer such
as the HP 3700/4700.

The one example that runs counter to this trend is the HP2600, which
at 8 ppm color and only 8 ppm black is meant for more highly-colored
users, according to HP.

Samsung CLP500/510

When evaluating these products, therefore, you are really evaluating

70% of an entry-level black-only printer used by a small business with
the same expectations as the users as described above. In general,
those who do use color here are not extremely quality-conscious.
They are cost-conscious users who, in this case, are seeking
consumable savings.

OKI5100/5200

ENTRY-LEVEL COLOR LASER

ENTRY LEVEL COLOR LASER

In almost every instance of entry-level color, a set of 4 cartridges costs far more than the printer itself.

The newly emergent trend of entry-level color MFPs designed to offer AIO (all-in-one capability) for the
SMB channel will translate to more consumables business for the remanufacturing industry since they
will offer copying, faxing and printing on one device.

Examples of these products can now be found in retail for under $750.00 (e.g. HP 2840MFP, Konica
Minolta 2480MF, Brother 9420 MFP).

Clearly these are going to be marketed at small business seeking one device for all general office
printing needs with an OPTION to print in color. According to my customers survey (see below), the
majority of the pages on these devices (80+ %) will be monochrome documents for general office
usage, not full color marketing documents. Therefore evaluation simply based on color performance is
not true to these printers intended application.

An important point to remember in general: in the SOHO channel, the printer buyer is also the owner of
the company, or it was bought for his/her personal use. Because of this, cost is much more of an issue
than in corporate America where, typically, the buyer is not motivated to save money on consumables.

ENTRY-LEVEL COLOR LASER

ENTRY LEVEL COLOR LASER

To illustrate the varying needs and expectations of color users in the small office versus the
workgroup environment, I hired on the prestigious research group of LG Inc. To survey office users in
the workgroup environment and SMB environment in order to better understand their printing needs
and quality expectations. The head researcher of LG Inc., Luke Goldberg, analyzed typical customers
in the SMB channel with the findings below.

WORKGROUP COLOR

LG SURVEY
The LG survey of 10 small offices using entry level color laser and monochrome MFP type products
included the following types of business:
E-commerce company selling online imaging consumables
Single agent real estate
Small dental office
Jeweler
Fiances brother (Real Estate Developer)
Tattoo Shop (Not that I frequent these establishments)
Printers used include the OKI 5100, QMS 2400 and HP 2840 MFP
Most pages printed are black even on the color printer (80+ percent).
Color is not used in the SMB channel as an external marketing tool.
All of the users surveyed feel taken advantage of and are upset at the low printer and high consumables
cost.
No one said they would not try aftermarket cartridges due to the fact they were all owner/operators
upset with high prices of OEM cartridges.

WORKGROUP COLOR

LG SURVEY
The LG survey of workgroup color users. I spoke to the marketing, IT, and purchasing agents at
the following companies:
Future Graphics
Corporate law firm
Insurance Company
Real estate firm
Printers used include the JP 4650, Xerox 8400, Xerox 7700, and HP 3700
In every instance these were printing as high as 80 percent of the pages in color.
Documents produced in color were used to market to the outside world, such as mailers with four-color
pictures of properties, color logos, etc
None surveyed (other than FG) tried aftermarket cartridges.
Given the high cost of marketing and the importance of image, none felt the savings for compatible
cartridges were worth the risk.
One asked about warranty issues for compatibles and one asked if the aftermarket cartridges contained
ColorSphere toner.

WORKGROUP COLOR

WORKGROUP COLOR

The users who fall under this category are the most quality-sensitive customers in the world.

As HP states, color is a tool used to promote, to persuade, to sell.

Keep in mind, when evaluating monochrome, that 99% of all documents are used for the internal
dissemination of information within a company. These documents rarely make it outside of the
company. Workgroup color, conversely, is a marketing tool.

Take FG, for example. At FG, workgroup color users using printers such as the HP4600/4700, HP3700,
and Phaser 8400/8500 are using these to market their image to the outside world, and therefore, are
primarily concerned with quality.

They are generally not cost-conscious users.

(See survey of workgroup color users)

When evaluating workgroup color, long run continuous stress tests are required. Marketing jobs will
often be hundreds, or thousands of continuous prints.

INKJETS

INKJETS

Inkjet quality has to be looked at in two different segments:

OLDER SINGLE-FUNCTION (1 or 4 COLOR SYSTEMS)

Anyone serious about digital photography would invest $100.00 in a 6-color Epson
or HP printer if they wanted photo quality.

Older models taking cartridges such as the 23a, 78a, 49 etc., are generally not going
to be used for photo quality and therefore should not be evaluated solely based on
this criterion.

INKJETS

INKJETS
NEWER PHOTO-SPECIFIC 6-COLOR SYSTEMS

The digital home printing revolution really has taken the printing world by storm in the last two years. During
this time, over 150 million digital cameras, 1.2 billion ink cartridges (annually), and 3 billion units of 8x11 photo
paper have been sold. Most of this growth is driven by the quality, low-cost, and ease-to-print photos at home
trend.

Almost every printer released today is photo-capable with a photo memory card slot. Even though the majority
of home printing consists of printing off of the internet, all of these can be used to print photos requiring close
matching to the OEM when using photo paper. Evaluation should be based on the following:
Acceptable photo quality using photo paper. If it does not look as good as the OEM in regular
printing, with low-grade paper this is not an issue. Even faint lines will not cause a return generally in
text printing.
Water fastness is not an issue. Users dont expect to be able to submerge their photos in water and
not have them ruined.
Dry times can be longer than the OEM as long as it is not a matter of days.
Archival qualities are important although difficult to prove. Limited archival studies on our inkjets
will only help to debunk OEM propaganda efforts.
Yield is not an issue unless it is excessively low. Home users dont count pages.

INKJETS

INKJETS
NEWER PHOTO-SPECIFIC 6-COLOR SYSTEMS

Since most inkjets are consumer products where cost is certainly an issue, it is important to
position compatibles as low cost alternatives to the OEM.

It is difficult to compare some of the OEM claims made by HP that their prints will last 120
years under glass since there is no correlative test standard to confirm this.

It is important to understand, however, that in an era of digital photography, the option to

simply reprint your photos always exists if indeed they do fade!

INKJETS

In many cases, the OEM selling strategy of giving away hardware in order to shore up revenue
should play into the hands of the aftermarket by creating an angry public who is tired of paying
through the nose for the most expensive liquid on the planet as Kevin Rollins of Dell claims.

Should you encounter a user who is a photo professional using, say, a Photosmart 8250 or a
similar device, they are not going to be as receptive to a low-cost alternative since printing for
them is their living, not a home hobby.

In these instances, sometimes it is better to forgo the sale and gain credibility until the product is
ready.

SUMMARY

SUMMARY

It is impossible to have a quality standard that attempts to paint all product evaluation with a
broad stroke.

Every product in the categories above must be tested and qualified with an eye to the printers
intended purpose, the type of customer, and the users expectation.

It is impossible to educate our customers and therefore properly manage expectations, unless
product evaluation is based upon this real world standard.