The ID market has changed, have you?

Guest commentary
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Thursday, September 1, 2005

The world of card personalization systems has changed significantly since Fargo launched its first ID card printer, named the Persona, in 1994. Features such as LCD displays and integrated card cleaning mechanisms, now considered essential for ease of use, were non-existent. Meanwhile, card printer/encoders that once could encode only magnetic stripe cards have grown in sophistication to handle smart cards, including contact, contactless and RFID technologies. In addition, the "open architecture" of today's printer/encoders allows for integration into access control, IT security, visitor management, biometric and other secure card identity systems.
With the evolution of the printer/encoder into both a user-friendly product and a processor of complex card technologies, a dichotomy has been created in the ID systems industry: Today, two distinct customer groups--those who require system simplicity and those who require solution sophistication--exist in the marketplace.
Know your buyer
Without a doubt, the demand for system simplification is growing. End users want easy-to-operate products that require little training and little effort to integrate with badging software. Examples of such applications include membership cards, small corporation IDs and school IDs. Due to their "off-the-shelf" nature, simple system sales have become increasingly price-driven. In the U.S. and Canada, buyers commonly use the Internet to price shop, source and purchase printers. Outside of the United States and Canada, ID system buyers may use the Internet to research products, but most often use the phone, e-mail or fax to place orders. (Their move to online buying, however, is imminent.)
While simple systems are required for the non-technical user, technological card advancements have driven the demand for sophisticated solutions. Many employees (including those of us at Fargo) recall carrying two corporate ID cards--one for visual identification and the other for building access. But today's advances in smart cards, development of reverse image printing technology and improvements in technology card surfaces allow multiple applications to be addressed with a single personalized card.
More sophisticated card applications, such as national ID or large corporate security projects, require a complete ID solution that satisfies a set of requirements like physical and logical access control, stored value and visitor management. As a result, the complex system sale cannot be fulfilled via a simple Internet search. Instead, a professional consultation is required to determine the proper solution.
To maintain profitability in this split marketplace, card system integrators need to examine both their current business model and their sales approaches.
Business models
What does the divergence of these buying groups mean for the way you conduct your business? Depending on your geographic location, business profile and long-term strategic business direction, there are a number of routes to consider:
- The "value-add" model. Expand your knowledge, installation, support and product lines to include new applications and grow profits. Integrating access control, smart cards, biometrics, time and attendance, visitor management or other card-related systems can help ensure success. Professional associations such as the Fargo Technology Alliance can help you develop your knowledge and contacts to expand your business. Start with your own database of users and develop new solutions to enhance their current systems. Mine your database for customer contacts who will be receptive to these new solutions. Set aside those customer names that historically have been more price-sensitive. For new customer opportunities, work with your manufacturer or distribution partner on marketing activities that generate leads.
- The "price model"--To compete and survive in this arena, your business must consider its current investment in people, marketing, software and facilities; and determine the future allocation of these resources. Should your business adopt a lower average selling price and lower per-unit profit margin, your success will come in terms of units sold, agility in negotiating and pricing, and speed in responding to customers and filling orders.
If you are considering an Internet/e-commerce thrust, a dedicated marketing effort to drive traffic to your site and a solid plan to handle e-business cost-effectively must be developed and put into action.
- Competition in both arenas--You may opt to separate your business into two units, and allocate appropriate sales, marketing and support resources to meet the required margin of each arm. Your expertise with ID systems and products in general can help you be successful as you address the gamut of customer requirements.
Sales approaches
Once you have evaluated your business model and determined a target market, develop a sales approach that will reach your audience. Certainly, sophisticated solution sales require a far different sales approach than simple system sales.
As in so many industries in which customers' buying habits and product requirements dictate the way the market must move, card identity system customers have initiated a market split: Responding to the behavior and choices of two distinct customer groups--those who require system simplicity and those who require solution sophistication--is key to the business success of both manufacturers and integrators of secure card identity systems.

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Kathleen Phillips is vice president of sales and marketing at Eden Prairie, Minn.-based Fargo Electronics. She can be reached via e-mail at kphillips@fargo.com.