Marketing is an investment. Order fulfillment is an expense. These two statements create the greatest illusion in the direct and interactive marketing industry. It began with mail order. Drop a letter or catalog in the mail and folks send you money! The more you mail, the more you receive. Mail order expanded into direct marketing and e-commerce, but the fundamental belief remained the same. Marketing drives sales.
So, invest in marketing and fill your coffers. Except…the folks who send you money expect you to fulfill their orders. The fulfillment costs add up quickly – order processing, product, packaging, service and shipping – and can turn revenue into losses. It is little wonder that fulfillment is viewed as a necessary evil!
Reducing fulfillment costs becomes the driving force in many companies. Unfortunately, this creates a dichotomy. On one side, costs are reduced, increasing short-term profitability. The other side is a reduction of service that alienates customers. It reduces growth and long-term profitability. The challenge is to find a balance between service and expense.
The first step is to change the way you view order fulfillment. Use your marketing models to define your operational objectives. When you plan a mailing, there are costs, projected response rates and average order values that determine the results. Every good marketing manager reviews both immediate and lifetime projections before approving a marketing plan. Costs are deemed acceptable when the projected results warrant the expense.
The same process works for fulfillment. Evaluate costs in relation to projected results. Look for improvements in sales and efficiency. Too often, operational enhancements are driven by external sources instead of unique corporate objectives. Drive your decisions with the needs of your company, employees and customers.
Next, define specific costs and benefits associated with order fulfillment. When you can plan the results, operational expenditures start to look like investments. Every company must know their exact fulfillment cost. Evaluate enhancements by the return on investment. Define service requirements by your customers’ expectations. For example, timely shipments are necessary, but is 24-hour service required or will 48 hours suffice? Customers think in weeks, so orders placed this week and delivered next week will rarely receive WISMO (where is my order) calls. How would shifting shipment turnaround to 48 hours affect your customers? How would it affect your costs?
Finally, invest in building relationships with your customers. This begins with service dynamics. Find the key service indicators by analyzing your customers’ history. Choose the top 10%-20% customers. How many had backorders? How quickly were their orders shipped? How many had complaints? How quickly were the complaints resolved? What are the service similarities? What are the differences?
Your top customers are the ones that you want to duplicate. You will find that many (if not all) have had problems with their orders at one time or another. The goal is not perfection, it is quick resolution. Plan for challenges, because orders will fall through the cracks. Resolve issues quickly. It will keep your customers happy and reduce fulfillment costs.
Every customer contact is an opportunity to reinforce branding and increase sales. Marketing and operations must be viewed as equal and complimentary partners. Marketing makes the promise. Operations fulfill it. This direct relationship between service and sales can be leveraged into growth and profitability. Invest your resources in understanding how everything works together. Use your knowledge to inspire customer loyalty with every contact. Are you ready? Integrate operational objectives into your marketing plan and watch your company grow!
Debra Ellis is president of Barnardsville, NC-based operations consultancy Wilson & Ellis Consulting.