HP to Shoppers: Think About the Ink


By Olga Kharif Hewlett-Packard has watched "Intel Inside" -- a campaign by supplier Intel to brand processors within PCs -- turn into an unparalleled success. PC makers feature the slogan not just in marketing campaigns but on the actual hardware; PC buyers look for the label when shopping. The higher-ups at HP got to thinking: If Intel can brand chips within computers, why can't HP brand ink inside its printers?

That's why, on Aug. 27, the printer heavyweight unveiled the first-ever ink brand from a major manufacturer. Called Vivera (a derivative of the words "vivid," "vibrant", and "era", according to HP), the brand is designed to show consumers that the ink in a photo ink-jet printer is critical to performance -- just like the processor in a PC. "Branding ink makes all the sense in the world," says Ted Schadler, an analyst with tech consultancy Forrester research in Cambridge, Mass.

PROVE THEM WRONG. HP (HPQ) is kicking off a multimillion-dollar marketing campaign to grab market share from discount ink and cartridge makers. Many customers balk at paying big bucks for HP cartridges and go for low-priced products, which generally cost about 50% less. Shipments by nonbranded cartridge vendors will grow from 17% of the market today to 23% by 2008, estimates Jim Forrest, an analyst with imaging consultancy Lyra Research. HP, which currently has a 41% share of the ink and cartridge market, according to Lyra, hopes that Vivera can help it prove those predictions wrong.

The printer heavyweight argues that ink -- as much as hardware -- makes beautiful photos. HP claims that pictures printed with Vivera's special-formula ink -- on Vivera-branded photo paper and new, Vivera-compatible printers -- will last more than 100 years without fading. The quality would be dramatically reduced were the consumer to use an HP printer with non-HP ink or paper, says Henry Wilhelm, founder of consultancy Wilhelm Imaging Research. And yet most users don't know that. "We decided to create this brand to educate the consumers," says Pradeep Jotwani, senior vice-president for HP's supplies, printing, and imaging group, which contributes 30% of revenue.

Vivera could also prove to be a potent weapon against HP's rivals, whose numbers are multiplying. Industry insiders expect filmmaker Eastman Kodak (EK) to enter the market within a year, either by introducing its own photo ink-jet printer or acquiring one of HP's smaller rivals, like Seiko Epson. "We have more than 1,300 patents in ink-jet technology, and we are certainly looking to put those to use," says a Kodak spokesperson, who declined to comment further.

PRICING PRESSURE. HP is also hoping Vivera products will convince consumers that they can get photo-lab quality at home -- and for less money. Two years ago, 90% of digital photos were printed at home, but only about 75% met the same fate in 2003, estimates Chris Chute, an analyst with tech consultancy IDC. He says that disappointing results have sent shutterbugs back to the neighborhood drugstore. HP claims Vivera ink and compatible printers will result in top-quality prints, with prices potentially as low as 29 cents each. Standard photo-lab prints cost between 19 cents and 30 cents, while at-home prints run from 40 cents to $1, says Andy Slawetsky, a vice- president at imaging consultancy Industry Analysts in Rochester, N.Y.

Of course, rivals like Canon (CAJ), Lexmark (LXK), and Epson could start branding their ink as well. A bigger obstacle may be that because Vivera ink works only with new, specially designed printers, HP's installed base will continue using non-Vivera supplies. That leaves plenty of time for nonbranded ink suppliers to woo consumers with the idea that the quality gap isn't as big as HP claims. "The aftermarket is beginning to catch up [in quality]," says Gerald Chamales, chairman of ink and cartridge supplier Rhinotek. Also, HP rivals, including Dell (DELL), say they'll lower prices on brand-name cartridges, which could force HP to lower prices, too. (Prices for Vivera products were not available.)

Still, Vivera could give HP an advantage. After all, if branding worked for Intel's (INTC) chips, why can't it work for HP's ink? With Ben Elgin in San Mateo, Calif.

a href="mailto:olga_kharif@businessweek.com">Kharif is a reporter for BusinessWeek Online in Portland, Ore.


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