Is it news that printer companies manipulate their customers?
Probably most of you know that printer companies follow the razor-blades business model: sell printers cheaply to make money on ink refills. There’s nothing wrong with that business model, but over the years printer companies have found a bewildering number of ways to make sure that you purchase an ever-larger number of their print cartridges. Most of you will know some of these, but I was surprised by the sheer number of techniques that manufacturers have found to ‘encourage’ you to replace your cartridges – often.
Printer ink is expensive. Estimates vary by manufacturers, of course, but estimates of $8,000 per gallon are fairly common. That’s several order of magnitudes larger than the price of oil, for example, or even many pharmaceutical drugs. Black ink, on the other hand, the kind that is not in a printer cartridge, is sold at retail for $20 for a bottle of 8oz, which works out to a price of $2,560 per gallon. The plastic that goes into making the actual cartridge is, let’s say, $10. That means that manufacturers essentially charge a 300% margin by packing ink into plastic cartridges. A good business, and one that deserves some creative thinking about how to maintain it.
So how have manufacturers tried to protect this very lucrative business? Most of their techniques fall into two categories: getting customers to use more ink, and preventing the same customers from switching to cheaper providers of ink.
How do you get customers to use more ink? Well, obviously, you start by selling printers increasingly cheaply – the game is not to make money on the printer, but to lock in customers into your inks. Beyond that, of course, you get creative. You put electronic expiration dates on your printer cartridges, so that after a set number of months the cartridges become unusable, regardless of how much ink is actually left in the cartridge. You include starter cartridges with the printer itself that are only half-full. You make cartridges which contain multiple inks but which will need to be replaced as soon as a single color is empty, which means that users typically throw away half the ink they buy. You set up the ‘low ink’ alarm to go off increasingly early, prompting users to buy new cartridges even if the old ones are still quite full. You can even get your printers to use up a fair bit of ink during the cleaning cycle. And of course, you make sure that each generation of printers uses a different set of cartridges from the previous one, just to make sure that every printer upgrade results in a new cartridge buying spree.
Ok, so you got your users to use up ever-increasing amounts of ink through a combination of all of the above. They’re buying the expensive stuff by the bucketful, and your business is booming. Printer ink is a $30B business, after all. Life is good. But wait! What’s this? Here come some start-ups trying to sell your users cartridges for half the price! What’s going on?
Any business with 300% margins will attract competitors. So it was not surprising that a number of companies sprung up around the beginning of the decade to offer cheap alternatives: third-party cartridges that were drop-in replacement for the more expensive manufacturer ones.
This was a direct threat to the manufacturers, and they displayed the same creativity in trying to crush these upstarts as they had in manipulating customers to buy more cartridges. Lexmark decided to sue competitors under the DMCA, for example, claiming that their replacement cartridges were bypassing electronic security installed in their printers to force customers to only use Lexmark cartridges. Other manufacturers included electronic chips in their printer that would record low ink levels, and, even if the cartridge was replaced, would prevent the printer from printing if the cartridge did not include a special code to reset the ‘low ink’ sensor (a code that would be difficult for third-party companies to manufacture). Some decided to take that idea to the next logical step and integrated the print head to the cartridge, making it harder for others to copy. HP decided to patent its ink, and tried to sue refillers and third-party manufacturers for infringing their secret (well, publicly secret) ink formula. And all of the manufacturers issued warnings to consumers that using third-party ink was poor judgment, unsafe, and would potentially void the printer waranty.
None of these steps were illegal, of course. They were massively customer-unfriendly (actually, downright customer-hostile), they violated any number of ethical guidelines, and some of the more creative patent and DMCA lawsuits may get thrown out of court, but they are good examples of manipulations: most of these techniques were completely invisible to the customer; most of them, despite having taken years of development, were focused on changing behaviors only by a tiny bit (buying a cartridge a few days early, paying a few dollars more for a single ink cartridge); and most of these techniques were misleading but certainly not illegal, all of which are hallmarks of good manipulations.
Another common feature of a good manipulation is that even once people realize what you’re doing, the very nature of what you’re doing means that it’s hard for anyone to really care. So, even today, most people buy printers based on anything but ink prices or ease of replacement – they check features and compare prices, but rarely compare the price of ink. At first glance, this makes no sense, since a $130 inkjet printer could cost you over $200 in ink during the first year alone (depending on how much you print). But comparing features and printer price is easy, and comparing total ink costs is much harder (“how much will I print this year? Text? Color or black and white? How quickly does this printer use its ink? How expensive are the individual ink cartridges? Etc….), so people do the former and rarely do the latter. In fact, understanding and estimating ink prices is difficult enough that your basic online how-to buyer’s guides to printers often don’t even tackle the question.
Does it matter, at the end of the day? It’s a personal choice – how much do you care about your printer ink cost? Most of you won’t care, but for those that do, there are some good resources out there. Personally, I tend to buy Canon printers, because their costs are fairly low and they have historically been far less manipulative in this segment than others such as HP or Epson.