Get a Better Backend the Multichannel Way
By Barbara Arnn
No one claims it's easy for direct marketers to keep customers satisfied, but the answer to how multichannel merchants can best achieve that goal may be simpler than you expect.
If there's a single maxim to which everyone in direct marketing subscribes, it is that you can't afford to disappoint your customers. A happy customer will return and bring a few friends; an unhappy one will spread the word and keep a dozen more potential customers from ever visiting your business.
What methods do successful direct merchants use to make sure their customers get what they want, when they want it, no matter the channel used? Does customer satisfaction depend on software or some sort of sophisticated management system? Does it depend on an array of complex supply chain management processes best handled by mega-retailers?
The answer is none of the above, according to industry experts. Instead, the best way to keep customers happy might be summed up in two simple words: Pay attention. The sort of attention required to run a successful, customer-centric enterprise comes in many guises—attention to your customers, to the details of inventory management, to communications with vendors and with employees. Direct merchants with a satisfied customer base must pay careful attention to details in all those areas and more.
These days, everyone is a customer at least some of the time, and stories about the difficulties of dealing with direct-to-customer merchants abound. A customer sends 11 e-mails to a major computer retailer and doesn't receive any response other than a computer-generated message that someone will look into the problem—11 times. A customer orders a product online, then makes a trip to the merchant's retail store to pick it up that same day and discovers, despite the fact that the Web site said the product was available and waiting, the item is sold out when she gets to the store.
After a decade or so during which direct commerce sales channels and technology have undergone revolutionary changes and e-commerce has become mainstream, consumers are no longer excited by direct marketing. They're just as likely these days to be either blasé or discouraged, attitudes that signal a real challenge for merchants. In fact, says Debra Ellis, president of Barnardsville, N.C.-based Wilson & Ellis Consulting, the fourth quarter of 2004 marked the lowest customer satisfaction levels since the 1993 baseline customer satisfaction index started off at a rate of 75 percent. Seventy-five percent, as Ellis is quick to point out, is nothing more than a passing grade. "Customers are very disillusioned," Ellis says. "I see it in the call centers. Customers are so much quicker to respond negatively, because they've become accustomed to poor service."
If customer service is acknowledged to be so crucial to business success, then how has customer satisfaction fallen to such low levels? Part of the answer may lie in a commonly perceived need for businesses to cut costs. David Bolotsky, founder and CEO of online and catalog gift merchant Uncommon Goods, sees that sort of decision as part of a business' philosophy. "A lot of us fall into the trap of thinking of customer service as a cost center," he says. Bolotsky explains that Uncommon Goods follows a model that responds instead to the question, "How do I like to be treated as a customer? Let's treat our customer in that manner."
Kirk Etten, divisional vice president of database marketing for business products marketer Deluxe Small Business Services in Groton, Mass.—which includes brands New England Business Service, Safeguard and RapidForms—also points to a customer-centric business philosophy as the bedrock of good customer service. "Deluxe Corporation has been around for 90 years, and NEBS has been around over 50 years, and both businesses have developed on the kind of service that they give their customers," he says.
Reducing labor, skimping on training and devaluing the contributions of front-line employees quickly can lead to poor customer service. Make no mistake, says Bill Kuipers, principal of Spaide, Kuipers, & Co. in Haskell, N.J., systems support the human element, not the other way around. Kuipers cites Lands' End as providing exemplary customer service during testing he performed recently. The customer can access support services easily, and reps are trained to provide the same level of care in different channels. "What's incredible about them is their emphasis on training and consistency," Kuipers says. "They've documented every transaction type and no matter who you get, they're all going to handle it the same way."
So-called front-line employees provide the crucial interface between a direct merchant and its customers, and successful merchants are quick to credit them as irreplaceable team members. "Customer service here at NEBS and Deluxe starts with the customer service reps. They're the ones who are really providing the experience that our customers have," says Etten.
John White, executive vice president of operations for Medford, Ore.-based musical gear retailer Musician's Friend, feels that it's vital to customer satisfaction that management supports front-line managers and gives them the freedom to keep customers happy. "That involves a certain amount of risk," White admits, "but we have intelligent people, like every business does, and they won't put you out of business. All your managers have to make the tough choices; that's what you pay them for."
Bolotsky concurs. "If I look at the incremental cost of having a trained, intelligent, motivated human being compared to the cost of acquiring a customer," he says, "then it makes sense to pay to have enough customer service reps to retain customers and keep them from being frustrated."
A Watchful Eye
Strategically, the first step to making sure customers are happy and goods are available to satisfy them is for direct merchants to concentrate on relationships with their vendors. "Know thy supplier," says Stephen Harris, of Harris & Harris consulting in Lincoln, Vt. "There's no one source of a product that you're going to find [that] nobody else knows about. So the only way to maintain your advantage is to have a personal, detailed relationship with somebody supplying this product, so when they have to choose between giving it to you and somebody else, they give it to you."
Ellis agrees that vendor relationships are crucial to successful direct marketing. "You have to listen to your vendors and find out what's moving for your competitors. The reality is that sales reps are pretty much territorial, so odds are they have information as to what's selling." She suggests that even if they don't want to increase inventory, merchants can develop plans with vendors to drop-ship items in the event of a sudden surge in demand.
Then there are the customers themselves. John White keeps his finger on the pulse of the business by paying close attention to customer comments, reading feedback from BizRate and customer e-mails. "Any time a customer sends an e-mail to management, it goes to me personally. I look at it, review it, then send it to the person who can most efficiently handle it," White says.
Avoiding management of divisions and sales channels as separate silos can be a real challenge for larger enterprises, especially for multichannel merchants. The very technology that has allowed them to expand and operate in more than one channel has increased both the complexity of communications and added significantly to the costs of merging data management systems and databases. Those challenges, Kirk Etten says, demand "another level of integration and coordination across the company to ensure a good experience for the customer."
But the same challenges also provide opportunity. Etten describes an example of teamwork at Deluxe to develop a specific strategy—account management by a personal rep—for high-value customers. Development included 12 months of testing. "It really involved some discipline around here," Etten says, "because there was some uncertainty whether this would bring any value to the company." Etten's team eventually was able to show upper management a tangible 5 percent contribution from the highest-value customers. "You show that type of result, you start to get the systems in place then to support it," Etten says.
The Oz Effect
When technology is implemented as a way to reduce labor costs and increase profit, Harris says, "It has nothing to do with enhancing the customer experience." Still, that sort of cost reduction immediately is attractive, because it provides visible, short-term benefit to the bottom line. "It's hard to put a tangible number to offering a service that costs 5 percent this year but will yield intangible benefits," says Ellis, who sees this emphasis on short-term growth as a sacrifice of future growth and sales, and all too frequently, immediate customer satisfaction.
"I've gone into huge, household-name companies expecting to see something special, and even feeling kind of intimidated," says Kuipers, "and [CRM] turns out to be the fat man behind the curtain." On the other hand, he says, "A lot of companies get by without state-of-the-art warehouse management systems, and they do that by being clever, explaining inventory management to the lowest person on the totem pole, using kanban methods on pallets." (The kanban method of order fulfillment is a card- and container-based system that moves specific product to the processing area only as needed; it also helps companies efficiently manage inventory and labor.) Still, he cautions that target marketers "must have a direct commerce system, period; or at least direct commerce functionality, and the best way to get that is to at least base it on an order management system."
One of the basic steps toward keeping customers satisfied, says Harris, is to staff and fund your fulfillment operation adequately, noting that a salary of "$50,000 a year doesn't cut it for people who can lead with imagination and attention to detail." Beyond that, Harris advises, keep the lines of communication open between all segments of the business, from vendors to warehouse workers. "Your fulfillment people need to know the phone numbers and the fax numbers and the e-mail addresses; they need to know the names of people and the rack rate; they need to know what the factory level of engagement with other members of the market is."
Many companies "just accept the metrics they get," says Debra Ellis, "They're not rolling up their sleeves and doing the hard work that's required." Although cautious about the success of customer relationship management in general, Ellis is still optimistic about its possibilities, especially for companies that work to develop their own CRM on the basis of whatever order management system they have.
Deluxe's Kirk Etten still is a believer in CRM, but says that what he terms the "spend $10 million on this system and CRM will magically appear" approach doesn't really work. Instead, he says, "The relationship with the customer and how you manage it is the key to the success of the business."
Etten calls technology an "enabler" for developing strategy. "Technology provides access to information," says John White of Musician's Friend. "I can find out anything I want about the business. I start my morning and end my day just reviewing broad-based reports." All that raw material is the basis for planning operational improvements, or if necessary, dealing with problems. "I'm a great believer in: If things are going wrong, management can take action," White says.
Direct merchants shouldn't forget to take prior action, either. The fewer surprises the better, for customers and businesses alike. Harris suggests developing a strategy for possible stock-outs well ahead of time. For instance, a merchant that sells perishables—such as foodstuffs, flowers or plants—should have a back-up plan that automatically recommends comparable substitution items for SKUs that are hard to forecast, especially during high-volume gift seasons. And if such recommendations can be made in real time, all the better. Once you've developed a back-up strategy, it's just as important to let everyone know what the strategy is. Harris warns, "There are lots of different people in the company who have to be able to react to a plan, and if it was put in place before you need it, it's automatic."
Uncommon Goods tries to test a product before actually listing it in the catalog, to get an accurate reading on demand. Bolotsky also believes that customer expectations should be met "at the highest bar of any given channel; in other words, if you offer free shipping online, offer it for catalog orders also."
Musician's Friend, on the other hand, prefers to keep its customers happy, and loyal, in part by maintaining an in-stock position of between 94 percent and 95 percent on its 36,000 SKUs. White characterizes his company's customers as passionate, knowledgeable, particular, technically savvy and loyal. "They love their music," he says, "It's part of who they are, and we try not to lose sight of that."
In other words, hard work and attention to human detail are crucial elements that separate truly successful, customer-centric direct merchants from those with unhappy customers. The best-managed companies tend to focus on one practical step at a time and use the available technology to their maximum benefit, without ever losing sight of the need for clear and consistent communication within the business, with vendors and suppliers, and above all, with customers. Simple, but not easy.
Barbara Arnn is a freelance writer and editor based in Port Townsend, Wash.