Picking a Fulfillment Outsourcer

If one word summarized trends in direct marketing fulfillment over the past few years, it would be “outsourcing.” Lower response rates, list fatigue, unreliable media sources and unpredictable revenue streams have raised the cost of maintaining in-house order processing and fulfillment systems, especially when calculated on a cost-per-order basis.

The fixed costs associated with such systems have proven onerous for many companies, particularly those with only one or two lines of business. In addition, workforce reductions, cost-cutting initiatives and natural attrition have resulted in the loss of senior-level fulfillment specialists at marketing organizations, making it tougher to upgrade systems in response to changing needs in the marketplace.

The solution for many DMers has been to convert these costs from fixed to variable by moving these tasks to outsourced fulfillment services companies that can spread their development and maintenance costs over a broad client base. Some of these moves have been more successful than others. Everyone has heard stories about failed attempts, late implementations, faulty conversions and customer service disasters caused by mistaken shipments and payment processing errors.

How can marketing companies ensure a successful relationship with an outsourcing partner? Here is a list of dos and don’ts when selecting an outsourced fulfillment services provider:

Fully understand and document the services you require before starting your search. Clearly stated needs and goals, written out in an RFP format, let you create a well-defined agreement with your chosen vendor and obtain the most competitive prices. Hire a consultant if needed. He probably can do the job in half the time it would take your internal resources.

Share accurate volume estimates with potential vendors so pricing can be estimated properly. Vendors likely will require that you meet weekly or monthly billing minimums, especially if you are a startup program. If your volumes are uncertain, ask for tiered pricing so that you can benefit fully from the economies of scale associated with an upsurge in your business.

Choose a best-of-breed specialist. Make sure the company has expertise in your particular type of fulfillment, be it consumer one-shot, catalog, subscription or continuity-type program. Consider only experienced providers with a track record of profit, modern systems and knowledgeable staff.

Select a proven solution. Look for one who already has developed and perfected the system(s) you need. Ask pointed questions: How many other clients of your type do they serve? How long have they offered this specialized application? How many upgrades have they introduced over the years? Not only will an experienced fulfillment services company be more knowledgeable, its pricing will be more competitive because it has had the chance to spread development costs over multiple clients and years.

Meet the account services staff. The value of a good account executive cannot be overstated. You want your day-to-day contact to have in-depth knowledge of the types of programs you are marketing (e.g., continuity, subscription, catalog, etc.). You also want your account manager to know how to make things happen within her organization so implementations and routine program adjustments occur without a hitch. Ask for bios of account executives and managers and arrange face-to-face meetings before committing to do business together.

Seek a partner with a strategic focus. Your fulfillment company should understand your marketing programs from a broader, strategic viewpoint in order to implement the mechanics of back-end execution properly. It should possess the ability to set up your campaigns, tests and any versioning in its reporting systems so results can be read quickly and accurately. It should proactively suggest ways to streamline marketing and fulfillment processes and gain cost efficiencies throughout the marketing cycle.

Choose a single-point-of-contact solution. Don’t be afraid to work with a group of companies – such as an order processing specialist, a telemarketing firm and a warehousing and shipping organization – aligned in a strategic partnership. This is one of the best ways to save on fulfillment costs. Each member of the alliance has its own specialty and can offer the best prices, often because of its geographic location.

For example, telemarketing is cheaper when done in less-populated areas of the country; similarly, Middle West locations often offer warehousing and shipping advantages from both a distribution time and cost perspective. However, be sure that the entire package of services is delivered and controlled by an alliance leader, most often the order processing specialist. The account services team of this lead organization should manage the client-vendor relationship and work closely with key account members at all service sites. A single-point-of-contact solution frees you to focus on producing upfront orders and revenue.

Use caution when considering foreign outsourcing of customer service. Foreign outsourcing of customer service seemed wise to U.S. companies squeezed by rising wage and benefits costs. Not surprisingly, this tactic backfired on many. It quickly became apparent that, despite a proficiency in English, foreign-based customer service staffs often lacked the ability to interpret cultural nuances and understand levels of customer dissatisfaction – skills needed to deal with a discerning and demanding American public.

As a result, a number of companies returned customer service to the United States. To save money here at home, consider cutting back customer service hours from a 24/7 model, using IVR functionality to respond to order status requests, driving customers to your Web site for product information and FAQs and using e-mail correspondence when possible to avoid postage and phone charges.

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