Issue #0820/2 - In a very interesting strategic move, Lexmark in the US is offering two free ink cartridges (carriage free) for every five cartridges that registered users buy at the Lexmark online store and return to Lexmark when empty.
Clearly designed to promote customer loyalty, users will receive one free cartridge when they have bought their fifth cartridge and will receive the second free cartridge when have returned five to Lexmark. The Lexmark online store tracks purchases and returns in order to administer the rewards scheme effectively.
Lexmark has been struggling to maintain ink sales over the last couple of years, with quarterly financial results showing that revenue from sales of inkjet cartridges is actually tending to decline rather, even, than just not growing very fast. Perhaps this has resulted in an over-supply situation, with Lexmark unable to move cartridges that are fast running towards their expiry date.
For home users, although this is sure to be an attractive offer – and is certainly a very innovative promotion – the average cartridge usage for each inkjet print cartridge per year is still only between two and three! So, for example, on average, a typical user might buy three black and two tricolour cartridges in a year – five cartridges, equals two free cartridges.
These two free cartridges then represent a significant portion of the next year’s printing volume – hence Lexmark’s restrictions to the scheme!
First of all – there is no guarantee of continuation on the rewards scheme!
Furthermore, purchases and returns must be completed within a “single, consecutive 12-month period”. This gives additional weight to the suggestion that Lexmark may be looking to ship out excess inventory within as short a period of time as possible.
What this means in practice as that low volume home users will have to plan their purchasing, and returns, fairly carefully to ensure that they complete the process within the time limit. Purchasing may not be a problem because the user can simply store the cartridges for a while (with an eye on the expiry date!) but, if they do not have at least a couple of used cartridges in hand at the beginning of the reward period, they run the risk of not being able to return as many as five within the 12 months, thereby missing out on part two of the offer.
High volume users (i.e. businesses), on the other hand, are limited to free cartridges based on 50 purchases and 50 returns in the 12 months. For these users, purchases must exceed returns or the number of free cartridges based on returns is limited to five (i.e. based on returning 25 cartridges). This prevents high volume users offloading a large number of accumulated used cartridges while buying few new cartridges.
If users respond eagerly to this rewards scheme and make sure that they have bought as many cartridges as possible within the 12-month period, it will be interesting to see what happens in 12 month’s time. Cartridge sales are likely to fall off because Lexmark owners have several month’s-worth of stock in their cupboards instead of in Lexmark’s warehouses!
Either way, shipping free cartridges to users will have a knock-on effect on Lexmark’s revenue from supplies.
Interestingly, not all cartridges are “eligible” under the rewards scheme. Cartridge numbers 2, 3, 4, 4A, 5, 5A are not acceptable at purchase or return. Otherwise, it sounds as though any five Lexmark cartridge returns is acceptable, not needing to match the type of cartridges purchased.
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