Kodak Develops New Model: Expensive Printer, Cheap Ink

Tries Radical New Tactic in $50 Billion Category

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YORK, Pa. (AdAge.com) -- Did you know printer ink is three times more expensive than premium champagne? Kodak plans to help consumers come to that realization this month with an aggressive "think ink" marketing strategy as it enters the highly competitive inkjet-printer and -cartridge market.

The strategy revolves around Kodak's cheaper ink costs vs. the traditionally high price of ink. And while that may sound like a simple price-advantage marketing gambit, it's something that's never been done before in the $50 billion industry.

aggressive advertising

Printers until now have been sold at a loss, with profits being made up by the later sales of high-margin ink cartridges. Kodak's plan is to invert that model by selling premium-priced printers with no discounts, then selling much cheaper ink cartridges for a profit, although at slimmer margins.

To do that, the company will aggressively advertise its lower ink prices -- $9.99 for black and $14.99 for color cartridges -- on packaging, with in-store displays and in mass-market advertising. The printers range in price from $149 to $299 and will be branded with Kodak's popular EasyShare moniker as EasyShare All-in-One printers.

"Our strategy around point of sale is to crystallize for consumers that they're not only buying a printer today but also buying into three to four years of ink purchases," said Bob Ohlweiler, Kodak marketing director-worldwide inkjet division.

"When you look at where revenue comes from now, almost all of the profits in the industry come from cartridges," said Charles LeCompte, president of Lyra Research. Kodak is "plastering their costs per printed page all over the place. No one has ever done that before in this market. They don't want to remind consumers how much it costs."

But changing the way the industry functions, as well as persuading consumers to buy the new products, is a huge task, and one that will require a multifaceted and ambitious marketing approach. Mr. Ohlweiler said the effort is "the biggest campaign that Kodak has done in many, many years."

Online viral efforts already begun center around two humorously dorky guys named Nathan and Max who love to print but lament the high cost of ink. Their home on the web at InkIsIt.com includes viral videos that have been seeded on YouTube. They've also got a MySpace page where they provide more ink-related thoughts.

More traditional ads will be built around the idea and visual image "think," with the first two letters in black and the last three in white, creating a truncated "think ink" message.

The Concept Studio and Animax Entertainment created the Max and Nathan online and viral work, while Kodak's primary agency, Ogilvy & Mather Worldwide, is handling the "think" campaign that will appear in media including TV, print and online.

Mr. Ohlweiler said the target buyers for Kodak printers and inkjet cartridges are consumers the marketer calls "enterprising parents." They have above-average incomes and want to empower their kids' creativity but don't want to be hampered by "silly economics." While the Nathan and Max work may not reach those consumers, it will touch people around the target, such as teens, savvy friends, consumer advocates and bloggers.

The printers will be sold exclusively at Best Buy until June to take advantage of its on-the-floor sales staff and ability to educate consumers.

Whether Kodak will succeed has been widely debated, but most agree it needs a hit as it transitions to digital. Fourth-quarter revenue swung into the black for the first time in two years, but that gain came through cost cuts.

"Kodak is in a bind. They've finally got a good position in digital cameras, but the only place to make money there is printing," Mr. LeCompte said. "For them to succeed, they've got to succeed in printers."
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