Five Aces

Aug 01, 2002 9:30 PM  By

Business is no game, and it’s too important an activity to leave the results to chance. An ace in the hole is hardly cheating; instead, it’s a reserve you keep to make sure everything goes according to your game plan. A direct-to-customer operation of any scale at all requires a catalog management system (CMS) to keep it running smoothly. When it’s time to choose one that fits your needs, knowing its must-have features will keep you at the top of your game.

A CMS records and processes day-to-day transactions such as order entry and processing, customer service, warehousing, marketing, merchandising, inventory management, and forecasting. It also serves as the main data repository for the business and its employees. The sheer number of functions that make up the average CMS is staggering. A request for proposal for a CMS typically includes some 1,500 line-item functions. Which of these function sets should get top billing? That depends on the complexity of your business and the level of automation you desire, but here are five features you can’t do without:

  1. Web power

    The business landscape is littered with craters left by dot-bombs, but the Internet has become an established business channel, particularly in the catalog industry. Research shows that a significant number of traditional catalogs attribute between 25% and 60% of total direct-to-customer business to the Internet. Total direct-to-customer sales include all order types (phone, mail, fax, and Internet) from all media (catalogs, Internet, solos, bounce-backs, etc.). The Web has changed the nature of cataloging and will continue to do so. Here’s a rundown of Web-related functions that today’s CMS should be able to handle:

    Self-service

    The Web’s unique self-serve technologies can improve marketing techniques and enhance customer access to information, as well as lower your costs. For example, some Internet merchants use “zoom” technology to provide customers with details of products. Lands’ End enables customers to design their own clothes on its Web site by selecting custom fit, color, and sizing. How much time and expense would it take for a call center rep to do that?

    Savvy operations will also save money by implementing customer self-service inquiry functions (for backorder status, catalog queries, and the like), providing a parallel Web-based path to functions provided by the call center. The more transactions handled over the Net, the lower the cost per order, and the more enjoyable the experience for the consumer.

    Integration

    The CMS serves as the central database that manages and manipulates customer, order, inventory, and order processing data. Many businesses now use batch transactions to move data from the Web site to the CMS. Tight integration between the host system and the Web site will become critical. You’ll need near-real-time synchronization of all channels. Equally important is having automated confirmation for order receipt, shipping confirmation, backorder notification, and returns processing acknowledgement. You’ll also want one-click updates that pass information from the host system to the Web site for item master changes, additions or deletions, and promotional setup.

    Cost savings

    Web-based technology will lower costs for the direct-to-consumer industry. We already see this in the speedy display of new products and promotions online; in customer prospecting, item testing, and e-mail promotions working in concert with catalogs; and in the lower front-end cost of processing customer orders and inquiries. As this trend continues, it will change the economics of retailing.

    Workplace flexibility

    A browser-based system can be accessed from almost anywhere. Several catalogs allow their customer service reps to work from home. WMS systems employ data transfer to Palm Pilots or PDAs; retail stores use the Net to tie Web kiosks into the CMS.

  2. Cutting-edge technology

    Think “open systems.” How many years have vendors and retailers been talking about this requirement? Bill Gates and Larry Ellison have changed the world of computing with affordable, intuitive operating systems and databases. In the past few years, a new generation of market-oriented developers has introduced open-architecture platforms — and they have become the market norm. Yet many CMS developers continue to stress proprietary software platforms and clumsy “green screens.” Reliance on such old technology will leave catalogers increasingly isolated, as well as vulnerable to sudden announcements such as Hewlett Packard’s recent warning that it will end support for its workhorse HP3000 in five years.

    A move to open systems should include all possible systems partners that you might consider. For example, voice-over IP telephony systems with server-based technologies will soon mothball the hard-switch telephone systems of the past. A feature-loaded warehouse management system can drop thousands of dollars to companies’ bottom lines. When shopping for an open system, don’t rule out the Windows NT platform. Although smaller than a typical WMS platform, it can be tremendously powerful and reliable enough to run a large warehouse.

    A Web-enabled CMS should also capitalize on the user-friendly graphical user interface (GUI) style that is nearly universal among the Windows-and-Web-enabled general public. It’s unlikely that new graduates in the workforce have ever worked in a “green-screen” environment — and older workers will likely prefer GUI technology. Happily, we are witnessing a changing of the guard among CMS vendors to more enterprise-wide systems approaches. Savvy CMS shoppers will look for browser-based systems that employ a GUI.

  3. CRM capability

    The shift to multichannel purchasing has been accompanied by a dramatic evolution in the behavior and activities of consumers. Yet few direct merchants are able to measure customer purchases and interaction across sales channels. The 2001 Direct Marketing Association Interactive Survey showed that 95% of retailers engage in multichannel marketing, but of these, 75% cannot effectively track customer activity across channels, and 76% cannot measure a marketing campaign’s return on investment. Research shows that only a few retailers can track catalog and online customer purchasing in a single database, but those merchants who can perform such measurements find that the customer who shops in more than one channel spends 25% to 100% more than the single-channel customer does.

    The potential of measuring multichannel customer behavior is not lost on Microsoft Corporation. In February 2002, the technology leader unveiled Microsoft CRM, an entry-level CRM application, which will be available in the second half of 2002. The system, designed for small to medium-sized businesses, takes advantage of Microsoft’s. Net technology to link data about customers stored in e-mail, contact management, and sales force automation to the CMS or business system. The combined force of Microsoft’s market share, resources, and technical expertise should be able to bring CRM to the masses.

    A major building block of CRM will be universal messaging — capturing on the customer service database all the transactions inbound and outbound from all sources. We can envision a day in the near future when a computer telephony layer or CTI hub will manage all points of customer contact (fax, mail, e-mail, chat, and phone calls) and combine this information into a data warehouse with POS statistics to measure their true net worth across all channels.

  4. Campaign trails

    A CMS should be able to set up and control the essential steps for multichannel promotions and then track and analyze a campaign’s success. This requires source code flexibility, not just to track campaigns, but also to implement special offers, services, and targeted campaigns to selected customers. You must also be able to perform data capture and analysis and break-even reporting. And you need upsell/cross-sell capabilities, including affinity marketing across channels. Tracking the specific promotion that drives an order will always be paramount to measuring the ROI on that promotion.

  5. Old friends

    One of the major reasons for purchasing commercial packages is long-term support and ongoing development of the package. But the changing marketplace and uncertain economy make assumptions about prospective vendors risky. Ask the hard questions: Does the company have the financial resources to improve its products? Is its R&D budget substantial? What do recent and longtime users say about support? Are there independent user groups? What is the policy on scheduled upgrades and new features? And what about on-site and Web-based training, conversion, and interfaces to other vendors’ products that you might add in the future? All of these will make a big difference in your transition to a new CMS and your ultimate satisfaction with it.

    There’s one other must-have requirement that CMS vendors haven’t yet met adequately: a design that promotes productivity among users.

    Our proprietary benchmarking database shows that direct labor accounts for 50% of per-order cost for call center and fulfillment facilities. The total operations cost for call centers and fulfillment ranges from 8% to over 20% of net sales. The cost of labor has steadily increased over the last five years, while the quality of the workforce is changing and the labor pool actually shrinking in many markets. Given this climate, ease of training and use is crucial, yet this remains a weak point of most CMS packages. Perhaps we’ll be able to add this feature to a top-five list in the future.

Curt Barry is president of F. Curtis Barry & Company, a consultancy specializing in direct-to-customer operations strategies, systems selection, and implementation. He can be reached at 1897 Billingsgate Circle, Suite 102, Richmond, Virginia 23233; by phone at (804) 740-8743; or by e-mail at cbarry@fcbco.com.