Growth through differentiation: VistaPrint and Donnelley style

By Philip K. Ruggles

January 9, 2006 --

VistaPrint and R.R. Donnelley – watch them grow.

Graphic Arts Monthly Top 101, published in May 2006 spanning data for 2005, reported that their Top 101 North American printers had an average 8 percent sales growth for 2005 (above 2004 sales), while the five top growth leaders had sales growth ranging from 55 down to 28 percent. And guess what company was Number 1 with a 55 percent sales increase over the previous year - and ranked No. 59 of the largest 101 US Printers?

That’s right, VistaPrint.

VistaPrint may well have developed the default model for the next generation of commercial printer: offer the client seamless, 24/7 internet access, free design tools that integrate into their system, rapid turnaround, and print quality that fits into the “good enough” category for end-users. There are no sales representatives and thus no expensive sales overhead, a significant cost savings. The customer does all the preparatory work at their home or office on their own computer using design tools downloaded from VistaPrint’s web site, then seamlessly transfers their finished digital files to the VistaPrint central server. From there the job is computer-managed with human interface when needed. Jobs are ganged on large press sheets, litho-printed, finished and delivered. 

The VistaPrint model makes sense from both technical and practical perspectives. It draws on current digital technology – all you need is a computer, basic computer knowledge, and internet connectivity (preferably high speed). Their system can be accessed anywhere in the world at anytime. It fits nicely into the print buyer custom-design needs with software that is built for user comfort. It meets a key market requirement of American businesses and Americans overall, which is: Let me order my own custom printing when I am ready and at my leisure. Give me design capability with easy-to-use software, make it easily accessible all the time, keep prices low, and keep the print quality “good enough” for my needs.

The financial savings to VistaPrint clients are obvious: (1) almost no sales costs, (2) substantially lower manufacturing costs because of automated workflow, and (3) lower operating costs as systems are refined and perfected because of reduced redundancy and lower waste. And one of the core beauties is that VistaPrint’s process is a group of interlocking automated systems, so that as the “bugs” are worked out, the refined system becomes predictable, thus removing variation, which in turn minimizes future errors and problems. Of course, as the VistaPrint system is de-bugged, the system only gets better for future users.

As noted in previous columns here, one of the key objectives of any quality system is to remove variation in process and product, which in turn reduces errors and thus eliminates costly re-work. I continue to be surprised that intelligent, proactive printers ignore variation reduction methods when their own job re-work data clearly shows it is a serious problem. Any job that is re-worked has a direct negative effect on the company’s bottom line.  

VistaPrint is also being heralded outside the printing industry as a “classic case of using technology to create a market.” If you are interested, take a look at the July 17, 2006 article in Business Week: “Small Print Jobs for Peanuts” with the sub-head: “VistaPrint’s online design tools for clients and whizzy presses can slash costs by 80%.” (The article mentions “VistaPrint’s $5 million-plus presses” which to Business Week editors must define “whizzy.”)

The article reports that VistaPrint’s 2005 gross sales were $117 million, while 2004 sales in GAMs Top 101 was $91 million – which is a 29 percent sales increase over 2004 reported in GAM and a bit below the above-noted 55 percent increase in sales between 2003 and 2004. And when it comes to ensuring their continued growth, VistaPrint was Number 5 of the GAM Top 101 in re-investing in their own business, investing 20.5 percent of sales back into their company (average re-investment of the Top 101 was 6.6 percent). 

The Business Week article goes on to state some interesting facts: VistaPrint prices “ . . . can be 80% to 90% cheaper that at custom print shops. VistaPrint churns out 15,000 orders per day for 7 million customers and claims 80% of the on-line small business printing market.” 

These figures are staggering for a business that was founded in 1995 by Robert Keane who correctly saw inconsistent pricing and poor service in the printing industry.  

Any company established as principally an on-line business deals with on-line savvy clients, which in turn opens that company up to the possibility that the clients will communicate on-line about their experience(s) with the company. If you Google VistaPrint, there are customer complaints posted about VistaPrint relative to duplicate or unauthorized credit card charges, timely delivery issues and unfilled orders among other problems. Because VistaPrint handles thousands of relatively small transactions hourly and offers numerous specials – and supports a 7 million customer base worldwide, which is huge by any measure – no system is perfect and these problems are not surprising although they need to be addressed. One of the most valuable and best sources for process improvement is our complaining customers, who in their anger let us know what is wrong. This valuable input provides the company vital direction so they can locate root cause(s) of the problem(s) and fix them in a timely manner.

VistaPrint holds 11 patents supporting their systems, with a reported 40 more patents pending. This gives the company a substantial lead in the race to garner a huge number of clients who have no problem with internet purchasing of print and have been discouraged by poor service or inconsistent pricing. Competition is likely to come from other forward-thinking, internet-savvy giants like FedEx Kinkos, although VistaPrint could astutely develop working partnerships with these emerging, like-minded companies.

Given the VistaPrint choice described above, here are the most likely 2006 print buyer choices for commercial print products:

• Print clients print their own limited-run products using a color printer available in their office, with quality of product sometimes compromised;
• Print clients go to a FedEx Kinkos, Staples or other local “big box quick printer” with their computer-designed job have it turned around in a day or so, with varying degrees of satisfaction relative to service, price and quality;
• Print clients go to VistaPrint and use their 24/7 services and integrated design tools to have their litho-printed jobs in a week or so;
• Print clients, by habit and/or with a sense of loyalty, continue to do business with their current (local) commercial printer.

The question becomes: When will the print clients, loyally buying from their current (local) commercial printer, shift their work to one of the other three options? What will it take for them to abandon their habit and loyalty?

The answer comes down to four factors:

1. Which is the easiest to do business with?
2. Which offers the best customer support including the ability to hear and resolve customer complaints and problems?
3. Which offers the best quality product for the money?
4. Which offers the most reliable, dependable, seamless ordering and fulfillment process?

Which brings us to R. R. Donnelley.

I recall a few years ago talking at length with some R.R. Donnelley executives about Donnelley’s “easy to do business with” strategy after a presentation to one of my business classes at Cal Poly. These executives ticked off a list of customer-focused points that these executives said Donnelley sales staff, customer service representatives and line employees were empowered to do so that clients “do less, while our people do more.” It seems to be working since Donnelley was Number 1 in sales volume in the GAM Top 101 in 2005 with sales of $8.43 billion – which is about 17 percent of the grand total $50.8 billion spanning all 101 firms – and growth of 18 percent.

“Easy to do business with” is a very important way that successful companies capture and keep clients, and is a core element in how successful companies differentiate their company’s products and services.

If I were running a printing company these days, I would be evaluating how the company could differentiate itself in making its products and services unique, better, improved, superior or different. Being “easy to do business with” – not just saying the words but REALLY doing it in a myriad of ways – is a critical step to customer satisfaction and is a key differentiation tactic.

Clearly new wave VistaPrint and their internet model for serving millions of commercial printing clients seamlessly, and R.R. Donnelley with their deep and continuing focus on delighting customers, have each captured important ways to differentiate what they do, which ensures growth and keeps them at the head of the pack. Of course neither can rest on their laurels too long, but they know this and they will continue to use various forms of differentiation to meet the challenges their clients demand.

So watch these two very different printing companies grow, driven by different market forces, different client bases and different manufacturing methods. 

If you want to break your own company out of the pack, get on the differentiation train or be left at the station house.

Phil Ruggles is an emeritus professor at Cal Poly State University, having taught 34 years in the Graphic Communication Department. His expertise spans the panorama of business, manufacturing and operational areas in printing and publishing. He is perhaps best known as author of Printing Estimating: Costing Methods for Digital and Traditional Graphic Imaging (4th ed, 1996) and the collateral Printing Estimating Workbook. He passionately advocates that business survival must be "knowledge-based" to identify and resolve core challenges a company faces. He encourages the use of quality tools and concepts including lean enterprise, Baldrige, Deming, ISO 9000/14000 and Six Sigma. Feedback, questions and comments are welcome at