Optra S offers options

Office World News, Oct 1999

An Interview with Lexmark International's Betsy Lang

A press release issued in June by Recharger Magazine's Office of Industry Advocacy reported that Texas and Connecticut have passed legislation restricting state agencies from purchasing products that cannot be recycled or remanufactured. The release specifically referred to Lexmark International's Optra S Prebate program, calling it a "single-use program that threatens the printer cartridge remanufacturing industry." Office World News interviewed Betsy Lang, general manager, supplies marketing at Lexmark, to find out more about Lexmark's Prebate program and its response to Recharger Magazine's press release.

OWN: What impact might the laws passed in Texas and Connecticut have on Lexmark?

LANG: The laws that passed in Connecticut and Texas will have little or no effect on how Lexmark does business. The bill that passed in Texas, SB 1127, is a preference law that requires state departmental purchasing decision makers to prefer recycled and remanufactured products. Lexmark supports this bill. Our sales reps have been working closely with various state agencies to sell them Lexmark's remanufactured cartridges.

In Connecticut, the bill that passed prevents programs that prohibit remanufacturing. Lexmark's Optra S Prebate program encourages remanufacturing, so it is not a target of the bill.

OWN: Please explain Lexmark's Optra S Prebate program.

LANG: Lexmark introduced the Prebate marketing program in May 1997, when we announced our Optra S line of printers. Customers can purchase a regular cartridge at a regular price, or they can choose a Prebate cartridge at a $30 discount. If a customer chooses Prebate, there is a license agreement on the cartridge box, much like on software, that says that once the box is opened, the customer agrees to use the cartridge only once and then to return it to Lexmark for remanufacturing. Customers who want to use an all-new cartridge enjoy Prebate because they get a discount. Customers who want to remanufacture with a third party can choose regular cartridges that have no special terms associated with them. Both Prebate and regular cartridges are identical. Any customer can purchase a regular cartridge at a regular price with no special terms. The Prebate program was designed to give customers the option to remanufacture with a third party if they wanted to.

OWN: Is the Optra S truly a "singleuse" cartridge?

LANG: Lexmark has changed its packaging and license agreement to get away from the "single-use" terminology. Some customers may have been confused by that terminology and felt they should use the cartridge once then discard it. Our new packaging/ license agreement directs customers to use the cartridge once and return it to Lexmark for remanufacturing. The Prebate concept was designed to get customers to return cartridges to Lexmark after they've used them once so that Lexmark can remanufacture them.

OWN: Much of the single-use issue has to do with environmental concerns and I happen to know that those issues are a high priority for Lexmark. Can you comment on Optra S from an environmental standpoint?

LANG: Lexmark has a tradition of environmental initiatives. We've had a free, simple return program for empty cartridges since 1990 called Operation ReSource. Under this program, customers simply put their empty cartridge into the box the new cartridge came in, then they seal it up with the prepaid US postal service mailing label on top and put it in regular mail. When it gets back to Lexmark, it goes to a sheltered workshop called Opportunity Workshop of Lexington (OWL) where cartridges are sorted for remanufacturing or dismantled for recycling. A real closed-loop process. Prebate has really been a wonderful success story for the environment. Prior to Prebate, our rate of returns through Operation ReSource was about 12 percent. With the Prebate program, our return rate has risen to more than 50 percent and we're remanufacturing the returns. That means far fewer cartridges going to the landfills. It seems that the program really has raised the level of awareness of our customers to return empty cartridges and benefit the environment.

OWN: Can vou comment on the business reasons behind Lexmark's Prebate strategy as well as on the legal issues involved in what Recharger Magazine has called Lexmark's "anti-competitive marketing scheme?"

LANG: Lexmark's business reasons for Prebate are simple. We have historically led the printing industry in offering the lowest price per page. We've had remanufacturing programs for our printers since the early 1990s so that we could offer customers who print high volumes of mainly text the opportunity to buy a high quality, reliable remanufactured product at a lower price per page. With any remanufacturing program, you are dependent on a good supply of empty cartridges so that you can keep your costs low and pass that savings on to the customer. The Prebate program was designed to motivate customers to return empty cartridges to Lexmark to fuel our own remanufacturing program. So, Prebate really evolved to support customer choice. Customers can choose to purchase a regular cartridge at a regular, competitive price, or they can choose an all-new Prebate cartridge at a $30 discount, or they can choose an even lower priced remanufactured cartridge. And we are fair to competition because the regular cartridge is readily available. Our Prebate offering has been available for over two years now. There is no litigation questioning the legality of Prebate, and neither the FTC nor any State Attorney General has asked us to change our offering in any way.