Step Up to World Class Standards (1,745 words)
By Ernie Schell
Wisely selecting appropriate back-end technologies can help bolster your multi-channel, direct-commerce operations
Thanks in large part to the innovations developed by and for Internet marketers, the pace of change in direct commerce has been dizzying in the past few years. Now that Web sites are de rigueur, most successful merchants have become "multi-channel" marketers—whether they like it or not.
While some Web merchants invest in multi-million-dollar advertising and marketing campaigns to attract traffic to their sites, others have created successful e-commerce sites that rack up sales without much, if any, money spent on promotion.
For example, when a well-known catalog of upscale household and kitchen products with a chain of popular retail stores launched its Web site in the summer of 1999, it got 15,000 visitors the very first day—without any advertising. The retailer went on to achieve strong, sustainable sales in the e-commerce channel.
As all too many marketers have learned the hard way, there's a big difference between attracting visitors to a site and turning them into customers, not to mention happy and satisfied repeat customers. Of course, the unequivocal, top-of-the-heap rule in direct marketing is that without repeat customers you're headed out of business. In e-commerce parlance, you want your site to be "sticky" so customers return often and stay long enough to get involved and make another purchase.
To achieve stickiness, start with savvy merchandising, competitive pricing, strategic targeting and compelling offers. But while all of these are necessary, they're not sufficient to sustain success in a multi-channel, direct-commerce business. For that you need good systems to manage orders and customer data cost effectively and at world-class standards—in short, a strong back end.
There are two fundamental approaches to implementing systems for customer and order management. The first, selecting "best of breed" technologies, entails setting up and integrating multiple applications, each one specializing in a critical function, such as a customer relationship management system for managing prospects and customer service; order entry; inventory management; and warehousing.
The upside of the "best of breed" approach is that each system is presumably fine-tuned for its core competence. Unfortunately, there are many downsides to this strategy. First and foremost, although each system may be best suited to its appointed task, it's likely (in fact, almost certain) the assumptions and logic underlying each of these systems will be different, and in some cases incompatible.
There also are cost considerations. When you go for the so-called "best," you pay a hefty premium. And to get these multiple systems to talk to one another and share data, you're likely to invest considerably more in programming effort and in some kind of "middleware."
Finally, as time passes, keeping the systems in sync with one another can become increasingly difficult, as upgrades from one vendor may cause problems in another's system.
An alternative strategy is to invest in a comprehensive direct-commerce package designed to handle customer orders, inventory and fulfillment on a consolidated platform. While such systems may be a "jack of all trades, master of none," they're often better suited to the direct-commerce environment than their "best of breed" cousins. They not only have most of the same features and functions of each of the specialized systems, but also have a major advantage in having been fine-tuned for direct commerce.
Let's look at one example. Direct marketing fulfillment involves high-volume, low-value distribution—that is, a large number of orders must be shipped every day, and each order is relatively low in value, less than $500 in most cases. But typical non-direct-commerce distribution centers and the systems that manage them are optimized for high-value, low-volume environments characterized by a few dozen or a few hundred shipments, each one consisting of multiple pallet loads or large case lots, with values in the thousands or tens of thousands of dollars per order.
A warehouse management system not customized for direct marketing fulfillment will have a hard time meeting the demands of direct commerce, whereas a comprehensive direct-commerce solution will have all the appropriate functions designed in.
A major challenge for direct merchants who manage both a contact center and a Web site is to coordinate critical data between them. The information may reside in three databases: customers, inventory and orders.
If a customer already has placed orders with the contact center, orders from that same customer on the Web should not result in creation of a duplicate customer record. Orders entered on the Web also should be visible in the call center in a timely fashion for customer service follow up.
Inventory master files set up for the catalog shouldn't be duplicated for the Web (where changes would also have to be duplicated). In addition, although it's acceptable to allocate some of your inventory for Web sales, the "holy grail" of inventory management is real-time access to inventory from the Web site to indicate in-stock positions. Even if you don't want to display items that aren't in stock, a real-time or near-real-time update of inventory positions with your e-commerce platform is still a requirement to facilitate timely removal of the item from the site's inventory selections.
Another consideration: It's highly advantageous to have a single repository for business rules regarding prices, discounts, shipping/handling, sales taxes, etc. While there may be variations specific to e-commerce, for the most part it makes more sense to manage these critical issues from a single business rules engine.
Virtually all catalog management or direct-commerce systems will provide these kinds of unified, integrated features and functions. While many offer bundled e-commerce servers and shopping-cart modules, nearly all have application programming interfaces (APIs) that support integration with most standard Web-commerce platforms.
One challenge these systems haven't yet fully resolved is seamless support for convergent media: providing a unified communications center for fax, phone, e-mail, mail, Web and pagers. If your customers typically require multi-channel communications, investigate solutions from companies such as Interactive Intelligence or Appiant Technologies.
There are several critical objectives to keep in mind when managing direct-commerce customers and orders.
1. Maintain a unified view of the customer. All customer activity—from shopping behavior on the Web to inquiries handled by the contact center (chat, e-mail, phone, fax or mail) to orders placed and returns made—should be visible to your customer service reps and sales agents. The system also should have access to this data if it's relevant to pricing or discounts.
2. Provide one-touch customer service. Agents should either be empowered with sufficient information to resolve issues on their own, or your system should make it possible to pass a customer's call, with the rep's notes and customer data to whomever is best able to provide a resolution.
Your system also should support efficient order entry, both in the call center and on the Web. Creating a new customer record should not require excessive time, data or aggravation. And strive to set up business-to-business customers in a way that lets you easily track relationships among company contacts, headquarters, divisions and individual business sites.
In addition to ordered-by, ship-to, and bill-to names and addresses, it's convenient to be able to log and track mail-to names of decision makers. These are people who may never appear as an ordered-by (or anywhere else in your order records, for that matter) but who are more important than all the other names mailed.
3. Build a dynamic, multi-dimensional knowledge base of customer activity and product information. Here, the primary purpose is to support customer self-service on the Internet with threaded discussion groups, frequently asked questions, or other database or community applications that permit customers to learn more about your products, share information about them, troubleshoot problems, or find answers to questions about your company or the products you sell.
At its most elaborate, such a knowledge base becomes an information portal accessible not only to customers but to designated suppliers and partners, too.
The Fulfillment Challenge
A well-configured fulfillment module enables you to handle the following:
• multiple ship-tos. The ability to assign ship-to addresses by line item on an order and to maintain a list of previous ship-tos a customer has used may improve efficiency and reduce errors in order entry.
The stamp freemium is rewarding for every one, regardless of past purchase history.
• kits/sets. This includes prepacked kits, kits assembled to order, dynamic kits, mix-and-match, and configured kits. When kits are not pre-assembled, the quantity available is equal to the quantity of the least-available kit component.
• personalization. This includes not just line-item notes, but also templates assigned to the personalized item to track size, type, font, color and other parameters for each personalization.
• gift messages/wrapping. Flexible options could include where the gift message is imprinted, length of the message, a library of standard messages that can be modified, and spell-checking for ad-hoc messages.
• future shipments. Those items that must arrive by a given date and those that must not arrive before a given date could be so marked.
• picking option. This includes batching of orders by order-placement method, payment type, number of line-items, shipping method and destination. You also should have the option to do consolidated and zone-picking in addition to single-order picking. But for single-order picks you want to be able to print the items on the order and the orders themselves in warehouse sequence.
Reporting and Analysis
In addition to tracking lost demand, forecasting total demand and monitoring fill rates (initial, current and final), the system should enable you to analyze customer behavior in order to produce meaningful customer segments based on recency, frequency and monetary values of orders placed and product categories purchased.
Customer segmentation also may be based on demographics available from third-party data sources. Typically, such data are overlayed onto your customer file by third-party service bureaus, which may also provide more focused expertise for statistical analysis and segmentation than you may reasonably afford in-house.
One final thought: Few direct-commerce companies have achieved "systems nirvana." This is a dynamic field, with most vendors still modifying and re-engineering their solutions to take advantage of emerging technologies.
To invest your dollars wisely, create an enterprise systems plan. It should be a work-in-progress that can accommodate changes as you grow, as the competitive environment shifts (to incorporate mobile commerce, for example), and as the state-of-the-art in object-oriented, componentized systems evolve.
Ernie Schell is president of Marketing Systems Analysis, Southampton, PA, and author of "The Guide to Catalog Management Software." He can be reached at (215) 396-0660, or by e-mail at firstname.lastname@example.org.