Bits & Pieces Case Study - Picking Up the Pieces
A European adventure teaches a U.S. cataloger a few Valuable lessons
By Kevin Lavery
Most adventures have good and bad aspects. While we generally prefer to remember only the good, we can learn some valuable lessons from the mistakes. Unfortunately, when the adventure involves setting up a mail-order operation in the United Kingdom, the bad parts often can spell ruin.
Bits & Pieces, a Boston-based cataloger that sells unusual puzzles and gifts, embarked on its European adventure in 1995. It began by testing the U.K. market with a catalog mailing to select third-party lists of known mail-order buyers. The test results were encouraging enough to justify a roll out of 1.8 million 52-page books in 1996 and 1997, which in turn was reasonably successful.
The Nightmare Starts
Although Bits & Pieces experienced fulfillment problems from the beginning, such as delays in order processing and poor customer service, nothing could prepare them for the disaster about to happen. As Alan Segal, company president, says, "It really was a case of out of the frying pan into the fire." Of the 50,000 orders received in the fall of 1997, only about 10,000 were fully delivered before Christmas—even though stock was available in the country!
The systems used by the cataloger's fulfillment company were unable to effectively deal with multi-product "pick & pack," so most orders were treated as partial orders. This led to an unanticipated level of customer inquiries, which swamped the call center and, in turn, delayed the processing of new orders.
In short, the situation soon became a vicious spiral with ensuing demands for refunds as customers became anxious for the deliveries of their Christmas gift items. As all catalogers know, this is just about as close to a worst-case scenario as anyone can get. "What went through my mind then is unprintable," recalls Segal.
Disappointed, disheartened and perhaps even dejected, Segal spent most of 1998 mopping up the mess from the Christmas debacle. The fulfillment company was instructed to pay out all customer refund demands without question, even in the situation where company records showed that products had been dispatched in adequate time for Christmas delivery. Segal elected to give his customers the benefit of the doubt rather than trust the word of the fulfillment company itself.
"What was so hard to swallow was the fact that the order levels had shown me that we could have a great business in the United Kingdom and eventually other parts of Europe, if only everything had been handled differently," laments Segal.
Lesser people might have been tempted to cut their losses and run, but not Segal. It was this determination to succeed that led to a series of serendipitous meetings with New Jersey-based catalog consultant Cindy Hertzog and U.K.-based advertising agency Millennium Direct that would help the cataloger turn a disaster into success.
In the course of these meetings, it became clear there were problems in other areas apart from fulfillment. For example, the cataloger had not benefitted from the substantial postal discounts known as TMIs (Tailor-Made Incentives) available to new users from the British Post Office.
It also was daunting to discover the company had been relying solely on cold lists for its prospecting efforts without testing off-the-page advertising or loose inserts. These media generally are much more cost-effective and responsive in the United Kingdom than in the United States. However, it was the apparent lack of communication and coordination among the company's U.K. suppliers and the difficulty of managing the whole process from the other side of the Atlantic that created the initial problems.
Turning Over a New Leaf
Millennium Direct was hired to set up and manage a complete turnkey operation for Bits & Pieces in the United Kingdom and embarked on a test program in the fall of 1999.
"It was vital to find out two key things very quickly," points out Martin Smith, Millennium's managing director. "We needed to demonstrate that efficient order-taking and fulfillment processes exist for third-party operators in the United Kingdom. And it was vital to find out how existing Bits & Pieces customers would react bearing in mind the poor service they experienced with their pre-Christmas orders in 1997."
The agency negotiated postal discounts with the British Post Office; put the fulfillment operation in place with one of the agency's existing clients, HHS Mail Order; set up a new database; and created a marketing plan.
A 16-page digest-sized catalog was tested and mailed to three mail-order and charity lists that previously had responded well in the 1997 campaign, as well as to the 50,000 buyers from the 1997 campaign (the vast majority of which had been disappointed). A letter of apology was sent to the previous buyers along with the catalog, but the tone was upbeat in terms of the system improvements that had been put in place.
Test results confirmed the new system didn't just work, it worked extremely well. Even more gratifying was the discovery that the previous buyers reacted with unbelievable enthusiasm! The mailing pulled a 2.5 percent response rate from the third-party lists and a healthy 8 percent from previous buyers.
Everything was now set up for a roll-out in 2000. Armed with realistic marketing targets based on its fall 1999 test, harder-hitting creative treatments, including the use of sweepstakes, and much tighter cost controls, the campaign kicked off in October 2000.
A number of tests were in place. The first was a 52-page catalog, with a bound-in order form, mailed directly from the United States. This package was tested against a 32-page digest-sized catalog mailed in an envelope with a separate personalized letter and order form mailed within the United Kingdom.
A Syndicated Prize Draw was offered to selected segments within the U.K.-based mailing, and all buyers were entitled to claim a free kaleidoscope. A total of 1.2 million mailings were sent to previous buyers, charity donors and third-party, mail-order lists.
Another million digest-sized books were used as loose inserts in some of the more upscale U.K. national press and women's magazines—an effective use of alternate media in that country.
A Fantastic Voyage
Results far exceeded the cataloger's expectations, and the vast majority of customer orders were satisfied well in advance of the Christmas deadline, generating profits from both prospects and existing Bits & Pieces customers.
"If you'd told me three years ago that I'd be in this happy position today, I wouldn't have believed you," says Segal. "We're already making plans to enter the German market next year, and who knows where after that."
Notes Millennium's Smith, "The key thing is everyone knows what's going on now. They [Bits & Pieces] have a fully managed customer database with complete trading and mailing histories, and we're working with cost structures that are realistic."
He advises other U.S. catalogers thinking of testing the United Kingdom first as part of a larger European campaign to be sure you work with people who really understand the market and who can put together and manage a workable package.
"If a company is 3,000 or more miles away, it's vital to be able to deal with a one-stop shop, it's very cost-effective (there's no overhead to pay), and it's more reliable," Smith adds.
With the bad aspects of this particular journey behind it, Bits & Pieces' European adventure now is just beginning.
Kevin Lavery is executive creative director of Millennium plc, a U.K. direct response advertising agency. He can be reached at +44 (0) 1274 538888; by fax: +44 (0) 1274 538899; or by e-mail: email@example.com.