Kodak’s proposition was simple; convince consumers to pay more for the hardware in the short term in return for cheaper ink down the road. If the strategy succeeded and the existing order was turned upside down Kodak might just find itself on top of the heap.
We all know the story of Kodak’s failure to adapt to digital photography. But what went wrong with its recent and unsuccessful foray into the consumer inkjet printer market?
Kodak’s intention when it entered the inkjet market in 2007 was no less ambitious than to overturn the raiser/raiser blade business model that has been a feature of the printer industry from the beginning. Under that model the original equipment manufacturers (OEMs) sell printers cheap and make their profits on cartridges. Kodak’s way of differentiating itself as a late entrant into a mature and crowded market was to sell the cartridges cheap and make money on printers, a complete reversal of the prevailing model.
It was a bold strategy. The raiser/raiser blade model had created a lucrative market for ink, liquid gold some were calling it, but with hardware prices continuing to drop and ink prices reaching into the stratosphere, frustrating consumers and bolstering a growing market for refilled and remanufactured products, you couldn’t help wondering where things were heading. Kodak’s proposition was simple; convince consumers to pay more for the hardware in the short term in return for cheaper ink down the road. If the strategy succeeded and the existing order was turned upside down Kodak might just find itself on top of the heap.
But it didn’t take long for the casual observer to notice that Kodak’s strategy was in trouble. It had seemed a safe assumption that Kodak had the muscle to force its way onto shelves of all the major retailers but Kodak’s all-in-one printers were only available at Best Buy and later in Wal-Mart. They were selling in the $250-$300 price range on the shelves next to much cheaper models from Brother, Canon and HP. If I’d learned anything from eight years in this business it was how laser like the consumer focus is on the price of hardware. The average printer buyer doesn’t know or care about what’s inside the printer. As a rule he doesn’t learn about the price of the ink until it’s time to replace the cartridge.
In the end it proved impossible, even for a company with Kodak’s marketing resources, to convince the printer buying public to look beyond the lure of the cheap printer. Cheap hardware is the siren song that only the most informed consumer is able to ignore. Kodak used U-tube and social media to get its low ink price message out to a more youthful audience but young consumers don’t print as much from their smart phones as their parents did from their PCs and laptops. Whatever ink they do consume is usually replaced by parents.
The inability to sell it’s printers in the $250-$300 price range forced Kodak to bow to the inevitable and change course. Printer prices came down to around $100 and ink prices went up. People came into my store with Kodak cartridges they wanted refilled. The ink wasn’t as cheap as we thought it would be they’d say. There were also a lot of complaints about the quality of the hardware. One customer told me that Kodak had replaced his printer three times because of print head problems. So in the end the old order prevailed. With nothing to differentiate itself from more firmly entrenched competitors the game was over for Kodak, in the consumer inkjet market at least. It will come out of Chapter 11 bankruptcy focused on services and other core businesses. We’ll see where Kodak goes from there but I wouldn’t bet against such a powerful American brand.
In the next blog I’ll talk about Lexmark, a less powerful and much hated brand in my industry. Lexmark is also exiting the consumer inkjet market.
