Canon seeks customer loyalty with True Value

Canon is seeking to make new inroads into the copier and MFD market with its new service initiative called True Value. Rahul Neel Mani explains what this new initiative is all about and finds out whether it really provides true value to everyone concerned

Lakshmi Narayan Rao says True Value will help Canon rope in more partners—the company's strategy is to look for robust partners who can undertake both sales and service

Canon, the document management major, has thought up an innovative way of strengthening customer and partner loyalty. The new innovative service product will be known as the ‘True Value’ service product. Canon’s True Value is all about providing the customer the best product usage experience throughout the product’s life.

All the product segments where Canon is present are growing between 30-80 percent. Meanwhile, the 13-20 ppm (pages per minute) segment will continue to be the main battleground for the company, comprising 60-80 percent of business. But the mid-size segment is supposed to contribute the major chunk of revenues for any company, including Canon. In terms of unit size the mid-size segment (above 20 ppm) is a meagre 14 percent, but in terms of revenues it brings in 50 percent of the overall business for the company. Naturally, if the company has to aggregate more volumes and revenues, this is the segment it must concentrate on.

“Most of the time when we talk about the channel business, all it means is the launch of a product, support of channels with collateral, and stopping churn. But this happens to be an old-fashioned approach. What this company is now following is something very different,” says Lakshmi Narayan Rao, assistant director, Canon India. The company now needs to have people who can assist dealers and partners to move up the value chain. This is of vital importance for the value products of Canon.

Canon believes that as time passes the think line between copiers and multi-function devices (MFDs) is getting fuzzier. “The paradigms in terms of services were different. We had something called ‘all-inclusive copy charges’. People used to call it by different names. It’s all about click-charges—you pay for every copy you make. The IT majors basically looked at annual maintenance contracts (AMCs),” states Rao. However, the reality is that product positioning is changing very fast today and the customer is more likely to decide on a vendor that will not necessarily offer the cheapest product but the best value proposition. This means three things are important—the organisation experience, basically people; the technology differentiator, or the product; and finally, the value proposition, or the lifetime value that is provided.

Canon, through its three-pronged marketing strategy, is targeting all these three areas. For example, as part of its lifetime value proposition, the company has developed new skill-sets and services. “If we see the old paradigm, people used to talk about FAB (features, advantages, benefits). The emphasis was entirely on the cheapest product with little or no emphasis on recurring costs. In the current paradigm, customers are no longer unaware. They look for benefits and value pricing,” says Rao. Return on investment, total cost of ownership and lifetime value are now carefully measured before buying a particular device.

The typical challenges faced by any customer today are incremental costs going up, complexity of products growing by the day, and too many products in the market to chose from. Meanwhile, the challenges for vendors are no less. Box margins are coming down, service margins are on the decline, and consumable margins are also declining.

Why True Value?

The new paradigm that Canon is talking about is ‘service assurance of click-charges’. Why do people go for click-charges? Simple. It saves a lot of time and companies can work more on their core competencies. However, the monthly payment mode for it is very inconvenient. The payment comfort of an AMC is what most people prefer. But even this doesn’t ensure everything in terms of good service. “The challenge is to balance these two situations… the customer’s expectations with the partner’s profit margins,” notes Rao. This led to the genesis of the True Value service product. The company claims that this service-based product is the first of its kind, and that there has been hardly been any kind of precedent.

What is True Value?

True Value offers preventive maintenance to the Canon customer so that his needs are taken care of. Free service calls, free spares, genuine Canon spares and low cost per copy are the essential ingredients of True Value. Basically, the advantage is the harmonious balance between the click-charge option and the AMC. “In True Value we will offer the benefits of both click-charges and AMC. Both are very user-friendly,” says Rao.

In the True Value service pack the customer first signs an agreement. He gets a pre-fixed (36,000) copies by signing for it. For that prefixed life the customer gets all the benefits of click-charge and AMC options. The payment is collected up-front like an AMC. Because Canon is taking the payment up-front, it also ensures competitive pricing. When the contract reaches 90 percent of its life, the customer call a Canon partner for renewal. “As you go up the value chain the denominations will also go higher—far more than 36,000 copies,” says Rao.

In terms of benefits to partners, well, there’s lots there too. The total margin a partner can make on a 36,000-copy contract is roughly Rs 6,870, which is very attractive for him. All this is good, but how will it help Canon? Explains Rao, “The company will be able to sell 100 percent genuine products and block grey market products.” At the same time, Canon will be able to generate enough interest for the partner as well with a healthy margin of 17 percent.

Benefits for Canon

The company says that True Value will have a very positive influence on sales of products because now it will be able to position itself differently. “The new programme will help Canon rope in more partners. Our strategy to move ahead in the market is to search for robust partners who can both sell and service to match our service levels,” says Rao. Canon’s sales partners are also its servicing partners, unlike many others who have sales partners while the companies handle servicing themselves.

How will customers migrate?

Existing customers who already have click-charge-based contracts and AMCs will be given the option to upgrade to True Value. “This migration will be given free of cost to existing customers. For AMC customers this scheme will be available only once the AMC comes to an end. But very few customers are on AMC as of now,” informs Rao.

Both Canon and its partners will be jointly inviting customers to switch to this new True Value service offering. The sales team and partners will be specifically trained for it.

Conclusion

“The challenge for Canon is to get into a segment where the company can offer medium prices with very high value for its products,” says Rao. The company doesn’t believe in dropping prices. Secondly, the company also doesn’t want to drop margins at the cost of the dealer. Canon is therefore planning to provide best-of-breed services to its customers—and the True Value service pack will guarantee it.

rahul@expresscomputeronline.com