Catalog Marketing 101 (8 of 8)

Catalog Marketing 101Catalog Marketing 101WorkshopWorkshop

By

Dudley Stevenson, Mark Eubanks

(651) 315-7588(651) 315-7588 Catalog Marketing 101 WorkshopCatalog Marketing 101 Workshop 11

Table of ContentsTable of Contents

• Part 1 – Catalog Marketing Overview & E-Commerce Synergy

• Part 2 – Front & Back End Marketing• Part 3 - Catalog Merchandising• Part 4 – Catalog Creative & Design• Part 5 – Catalog Copy• Part 6 – Catalog Production• Part 7 – Management, Financials & Analytics• Part 8 – Operations & Fulfillment

(651) 315-7588(651) 315-7588 Marketing Planning 101 WorkshopMarketing Planning 101 Workshop 22

Catalog Marketing 101Catalog Marketing 101Part 8Part 8

Operations & FulfillmentOperations & Fulfillment


OverviewOverview

• Perhaps the most important part of your business.• All the marketing in the world cannot save your business if

operations and fulfillment are not adequate.• Your customers will simply not return if they are not having good

experiences with your company.• Test your competition by calling, texting, writing, emailing,

ordering and returning - - everything - - just to see what you are up against. You are in competition with everyone in your space and must be better than them all.

• Because there are so many sources for each product or service, companies must distinguish themselves from the herd, and superior customer service is one way to do so.


Customer ServiceCustomer Service

• A cataloger should provide these services to customers to maintain good relations:– 24/7 operations

– #800 inbound phone service

– Well trained multi tasking agents

– Real time access to everything

– Live chat

– Unconditional merchandise guarantee

– Price uniformity across all channels

– Fast accurate pick/pack/ship

– Fast returns processing – refunds and exchanges


Catalog FulfillmentCatalog Fulfillment

• This is a list of the primary catalog operations in fulfillment:– Receiving

• Quality Control

– Warehousing

– Pick/Pack/Ship

– Returns processing • Refurbish and restock; Exchanges; Return to vendor

– Order processing• Inbound telephone; Web; Mobile

– Catalog request fulfillment

• The most important factors of catalog fulfillment are having the fastest service with the least amounts of errors.


Fulfillment StandardsFulfillment Standards

• The standard fulfillment expectations for the catalog industry– Orders for in-stock merchandise shipped within 48 hours

– Returns processed within 72 hours of receipt

– Customer service issues handled within 48 hours of receipt

– 85% of all phone calls answered within 20 seconds

– Average wait time for calls to be answered – less than 30 seconds

– Abandon call rate of less than 3%


Fulfillment ResponsibilitiesFulfillment Responsibilities

• Key areas - Functional responsibilities are usually broken down by those handled in the warehouse and those handled in the office.


• In the warehouse– Receiving

– Quality Assurance

– Returns Processing

– Inventory Control

– Picking and Packing

– Shipping

• In the office– Telemarketing

– Customer Service

– Caging

– Order Entry

– Computer System

– Telephone System

Setting Operational ParametersSetting Operational Parameters

• This is the planning phase and it involves a series of exercises aimed at understanding your business.

• The exercise involves building financial, operational, and organization models based on revenue forecasts and anticipated characteristics.

• The characteristics known as parameters, represent the building blocks of the operation.

• All your manpower planning and staffing, scheduling and forecasting will be based on the “parameters” that follow.


Parameters ListParameters List

1. Order volume

2. Hours of operation

3. Order methods

4. Merchandise information

5. Order characteristics

6. Special services


Parameter – Order VolumeParameter – Order Volume

• The availability of capital usually dictates your catalog circulation. The number of current customers as well as the availability of appropriate prospect lists will contribute to the development of the catalog circulation plan

• In turn, order volume depends on circulation. • The entire fulfillment operation—size, components, maybe

even location—is dependent on projected order volume. • Once you know your circulation size, you must anticipate

response rates in your market and forecast volume. – e.g., if you have a circulation of 500,000 catalogs and can expect

a 1.5% response rate, your projected order volume is 7,500 orders.


Parameter – Hours of OperationParameter – Hours of Operation

• Many of your costs are influenced by the hours you are open for business.

• The primary goal here is to be competitive. If your primary competitors offer 24/7 order processing and customer service, you better do so as well, and be much better at the same time.

• Creating an atmosphere that makes it difficult for a customer to consider going elsewhere for their purchases requires that we are positioned competitively with our operation.


Parameter – Order MethodsParameter – Order Methods

• Your competitors will dictate what you need to do here, but the best idea is to allow customers to contact you any way they wish and then develop the infrastructure to support your decision.

• The manner in which orders come to you—via 800 lines, toll lines, mail, web, or fax—influences your personnel and equipment requirements.

• Determine which options you’re going to provide for your customers and build the associated operation procedures.

• Don’t forget to include customer service calls and catalog-request volume in consideration for personnel and phone lines.


Parameter – Merchandise Parameter – Merchandise InformationInformation

• The main factor here is “accuracy” and “completeness” of the information.

• Your order processing system should reflect “real time” inventory position and create an alert or suggest an order when any item hits a predetermined level indicating reorder is required.

• The number of stock-keeping units (SKUs), line items, sets, inventory turns per year, peak inventory volume, assembly requirements, and the size, stackability, and type (handing or folded, soft goods or hard goods) of your product greatly influences your warehouse space requirements.

• The computer software system you select dictates your ability to manage the merchandise in the system and in the warehouse.


Parameter – Order CharacteristicsParameter – Order Characteristics

• Knowing the percentage of orders that are drop-shipped from manufactures, the percentage of back orders, and the average number of units per order affects warehouse space needs, labor requirements, and demands on your computer system.

• Drop-shipped items eliminate the need for space in your warehouse. • Back orders put added stress on data processing and productivity. The

system must generate 30-day, 60-day, and 90-day Federal Trade Commission notices for back orders.

• Split shipments require duplicated effort in picking and packing time and extra shipping costs.

• Other parameters under order characteristics would include:– Average order value $; Average units per order; Pay type (credit, cash,

check, etc.); Gift recipients (any portion of the order being shipped to recipients other than the ordering customer)


Parameter –Special ServicesParameter –Special Services

• Offering gift boxes, cards, and warp requires additional packing time, and depending on volume, additional personnel.

• Customization procedures such as engraving and monogramming require extra space and special skills. You must determine how these special services will be handled.


Shipping & Handling CostsShipping & Handling Costs

• Determining shipping and handling cost is a key factor in the success or failure of a catalog.– 1st consideration – do you want to make a profit or breakeven on

shipping and handling costs?

• Three ways of presenting shipping charges– A shipping charge for each piece of merchandise

– A shipping charge per number of items

– A shipping charge based on the dollar value of merchandise ordered


Order Processing RequirementsOrder Processing Requirements

• 24/7• Qualified agents• #800• Web site integration• Accurate data entry• Online real time access to inventory and order history• Accept all pay types


Catalog Inventory Management Catalog Inventory Management FactorsFactors

• Purchase order management– Initial order

– Replenishment/backup orders

• Accurate and complete receiving documentation• Accurate demand sales information• Cycle counts• Back order processing• Picking procedures• Complete documentation on all procedures and guidelines are

required.• Quality control inspections of inbound merchandise should be part

of the process of receiving. Inspect for color, size, specifications


Organization & FunctionOrganization & Function

• Executive• Operations Management• Office Operations• Warehouse Operations


Operations ManagementOperations Management

• Operations management people are responsible for the customer experience and are key factors in the creation of long term happy customers and profitability.

• The fulfillment operation typically relies heavily on the office operations manager operating in compliment with the warehouse operations manager.

• Depending on volume, these divisions can be supported by many other management positions.

• Each management position requires a working knowledge of fulfillment techniques and an understanding of data processing support systems.

• The fulfillment function is supported by two operations areas: the office and the warehouse. In most organizations, administration supports both. It is charged with the handling of all accounting, communication, supplies management, budgeting, and personnel.

• While, the two groups interface directly or indirectly with the catalog customer, it is the charter of administration to provide the framework and materials necessary to make the other office areas fail-safe.


Office OperationsOffice Operations

• In most companies, the office operations people are responsible for the data entry off all product information into the operating system.

• Order processing

– Receives and enters all new orders by phone, mail, email, web or fax.

– Phone operator activity is monitored via the report capabilities of the automatic call distributor (ACD).

– In the mail/fax order area, the caging and phone order entry functions must be tracked to measure efficiency and establish productivity standards.

• Customer service

– Handles pending orders and other inquiries as well as complaints.

– Accurate data capture and quick responses to issues

– Fast turn around on returns and refunds


Warehouse OperationsWarehouse Operations

• The breakdown of the warehouse functions must include: – Receiving and quality assurance checks of new merchandise

– Returns processing of customer merchandise

– Inventory control

– Shipping of parcels to customers

• The warehouse staff is charged with maintaining the merchandise so that the orders may be processed accurately and efficiently.

• Setting up pick area with high volume items easily accessed and order processing system that creates pick tickets in warehouse walk sequence allows for faster fulfillment.

• Make sure pack stations have everything necessary for packing, including any inserts and other marketing material required.


StaffingStaffing

• Hiring associates– Need to find and hire the right people.

– Don’t underestimate the amount of time the hiring process requires.

– Match the personalities of your customer service reps with those of your customer base.


StaffingStaffing

• Pre-employment screening techniques

– Company specific employment application and personal interviews

– Written integrity tests to assess person’s character to determine if applicant is prone to violent behavior, dishonesty, or otherwise unsuitable for certain types of employment

– Medically supervised physicals and drug screening

– Call and voice test prospective phone reps• Make sure that even though the reps and customers speak the same

language that their understanding and use of the language is similar

– Match the personalities of your customer service reps with those of your customer base.

• Studies show that phone reps and the customer are more comfortable if they share common interests


StaffingStaffing

• Start-up personnel– Plan to have most of your personnel in place 2 to 4 weeks prior

to mailing the catalog

– Plan an adequate amount of time for training.


StaffingStaffing

• Flexible associates– Because of the variable volume of orders, it is a good idea to

have an organization of permanent part-time employees to compliment your full-time workforce.

– The profile of the ideal permanent part-time employee is an individual who is not interested in working full-time, but is seeking a supplemental income

– Look for people who require little notice to work extended hours (e.g., college students, housewives, disabled persons, retirees)

– If you can afford to work with a reputable employment firm, do it to reduce the initial time to screen for certain positions.


StaffingStaffing

• Associate work areas– To perform the functions of their job effectively, and efficiently,

each associates needs to have sufficient space, a clean environment and the necessary tools.

• Ergonomic furniture and work stations• Adequate supplies, etc.


Training - ProceduresTraining - Procedures

• To assure good customer service, every associate must be familiar with company policies and procedures, as well as receiving job-specific training relative to their job function.

• Some associates require special training and a license to operate equipment such as forklifts.

• Build outside training needs, such as software classes into the process and budget.

• Training takes anywhere from 3 days to 2 weeks for most entry level associates such as mail handlers, receiving and returns clerks, and other associates that cross-train to support another job function.


Training - CSRsTraining - CSRs

• For CSRs supporting a simple and easy to understand product line, a 3 day training agenda consisting of reviewing the products, policies, and procedures

• 2 ½ days of working on the phone w/ a senior associate• More complex products require more training and hands on experience• Develop a catalog product manual for a reference guide for phone reps

– Create your own product manual by removing the binding of your catalog and putting the sheets in a three-ring binder.

– Behind each catalog page, provide the detail necessary to support each item displayed: e.g., dimensions, true color, weight, or other features not easily seen in the catalog photograph

– Or this information can be entered into your catalog management system


Training – Management ProgramsTraining – Management Programs

• There is no formal fulfillment education available, a requisite skills management training program in complement with on the job training and mentoring should be quite effective.

• The classroom should emphasize– The marketing side of DM

– Finance

– Controlling and measuring fulfillment

– Working with hourly associates

– Developing and improving productivity standards

• The DMA offer some course work in this area


Training - RecognitionTraining - Recognition

• A key to guiding your associates toward achieving their peak efficiencies is to train your managers to recognize good performance.

• Encourage managers to get to know their people – monitor progress, reward performance

• Not only should managers be trained to recognize good performance, but upper management and owners should recognize and reward superior performance at every level.


Calculating ProductivityCalculating Productivity

• To determine how your associates are doing, you need to gather and evaluate statistical data on productivity.

• To calculate productivity, 1st identify each labor task as a measurable unit.• By diving the total units of output by the total labor hours associated with

the activity, you have a current performance statistic for a given task• Another method is to set performance standards and calculate their

associated labor costs. Over time after accumulating output and cost data on each task, you can summarize the information into the total labor cost per unit of output for the fulfillment operation.

• Communicate the productivity standard for each task to your associate and measure individual performance against it.


Inventory Control FactorsInventory Control Factors

• Inventory Management System

• Order Entry/Customer Service

• Orders Out, Ship Confirmation

• Product Vendors

• Receiving• Stock Status• Ancillary Costs• Impact on Nonwarehouse

Functions


• Everything that touches inventory can also mess it up.• Accuracy and standardized procedures can help, but nothing is

more important than associates paying attention to what they are doing and striving for accuracy.

Inventory ControlInventory ControlManagement SystemManagement System

• Perpetual real time information is critical to the successful operation.

• The computer system handles repetitive inventory tasks, such as counting merchandise and compiling daily demand

• The system should update records instantly so that the merchandise is immediately available and orders can be filled quickly.

• This provides a perpetually current listing of what and how much merchandise is in your warehouse.


Inventory ControlInventory ControlOrder Entry/Customer ServiceOrder Entry/Customer Service

• The ability to access inventory records as an online resource enhances your level of customer service

• The CSR can advise the customer if the merchandise is in stock; or if a back order situation exists, when the next shipment is due

• The system should also offer substitute and cross-sell opportunities from existing inventory


Inventory ControlInventory ControlOrders Out / Ship ConfirmationOrders Out / Ship Confirmation

• System controlled inventory in conjunction with bar-code technology and a manifest system can tell you exactly when the merchandise is out the door.

• Emailing a shipment confirmation keeps the customer informed about the status of their orders.

• When possible, a tracking number should be communicated so that customers can track their own orders.


Inventory ControlInventory ControlProduct VendorsProduct Vendors

• Since each SKU originates with a purchase order and a vendor, you should maintain a complete history of all product-related transactions with your suppliers.

• To simplify the receiving process, instruct your vendors to mark inbound shipments with a purchase order number. – The PO triggers the system to call up the vendor record, a listing

of all pending transactions.

– Your receiver may then compare the details of the goods received with the PO and note any discrepancies.


Inventory ControlInventory ControlReceivingReceiving

• When new merchandise is received, the system should assign an SKU number and select the appropriate prime or bulk storage location, taking into account such product specifics as size, weight, storage requirements, and sales forecast.

• Depending on demand, replenishment goods should go directly to a prime location.

• Backordered merchandise should bypass storage and be sent directly to the packing area so that pending orders may be immediately expedited.

• The SKU is an internal tracking number and the system must automatically cross-reference each SKU to one or more merchandise catalog numbers.

• To further assist inventory control, some systems generate identification stickers with a product description and SKU imprinted both alphanumerically and in a bar code.


Inventory ControlInventory ControlStock StatusStock Status

• Some systems reconcile inventory against all SKU activity from a beginning position, weekly, monthly, or cumulative to a time fixed by the cataloger.

• The system should list on the report every transaction that affects your inventory status – by SKU and reason code

• Your sorting parameters should include specific activity categories such as receivable, returns, damaged, defective, outbound orders, and goods returned to vendors.

• You may want to further define your stock activity in adjunct reports by volume (SKUs with the most activity listed first) and/or revenue (SKUs with the highest dollar value.)


Inventory ControlInventory ControlAncillary CostsAncillary Costs

• Inventory costs include inputs above and beyond the price of purchased goods.

• Besides handling costs, there are holding costs such as taxes, insurance, and storage space.

• With better inventory control techniques, you can reduce these ancillary costs


Inventory ControlInventory ControlImpact on Nonwarehouse FunctionsImpact on Nonwarehouse Functions

• The data associated with an inventory control system provides accurate trend and point in time information on stock availability to marketing and merchandising. As a result demand and product reception in the marketplace can be analyzed daily as well as over time to assure more accurate and timely purchasing and forecasting.

• They system should update the cataloger’s book inventory to subtract goods/orders shipped and add receipts and returns for the days.

• The daily system reconciliation process should include back orders, held orders by reason, and in the warehouse (packed and labeled but not shipped) packages.

• As a direct result of the inventory control process the system provides an audit trail to accurately represent a day’s revenue activity.


Fulfillment TechnologiesFulfillment Technologies

• Technology has made the fulfillment function easier and almost mistake proof.

• With these technologies, the associate time and related expense to perform warehouse functions is reduced, thus reducing the actual number of people required to perform the activity.

• The customer’s order can be accommodated more quickly and accurately

• The selection of a core software system is one of the most important decisions you will make

• Determining your catalog policies and fulfillment procedures will be easier with an understanding of the system’s capabilities.


Fulfillment TechnologyFulfillment Technology

• The technologies – bar coding, computerized inventory control, electronic purchase orders, system generated pick lists and customer packing slips– Bar codes have significantly expedited the shipping process

– Wanding bar code at shipping dock triggers several simultaneous things in the system

• The customer record is updated to show that the merchandise has shipped

• The physical inventory and book inventory are revised• An electronic data transfer (EDT) advises the credit processing

company of the transaction so that the proper payment is issued to the cataloger

• The shipping manifest is printed automatically


Systems SupportSystems Support

• Picking your fulfillment software system is of supreme importance– Do your homework, check with other users of the system before

purchasing

• The same applies to the selection of an automatic call distributor (ACD) telephone system

• Make sure there are active, vendor sponsored user groups when deciding about fulfillment, telephone, or any system. These groups of active users are very valuable resources for trouble shooting.


Space RequirementsSpace Requirements

• Once you know your projected order volume, the number of SKUs, the average number of items per order, the peak inventory level, the number of phone vs. mail orders, the type and size of your products, you are on to determining your facility’s space requirements.

• Order entry/customer service• Merchandise storage and handling


Building Supplier RelationsBuilding Supplier Relations

• Credit authorization– The majority of transactions today are credit card, so be sure

your computer system is able to communicate electronically and transmit information back and forth to the authorization company.

• Check validation– It will be more cost effective to use an outside check-verification

company


Building Supplier Relations (cont’d)Building Supplier Relations (cont’d)

• Transportation– You need to establish good relationships with shipping companies.

– The most commonly used are USPS, UPS and FedEx in the United States

– Whichever carrier you chose as your primary carries, you will need to develop a computerized manifest system to track the shipment of each order.

– Perform a cost analysis to forecast your shipping costs per year. This will help you determine customer shipping & handling.

– You can also save money on your inbound transportation – you should calculate your annual shipping requirements and based on these compilations, negotiate volume discounts with no less than three carriers. You may save as much as 20%.


Building Supplier Relations (cont’d)Building Supplier Relations (cont’d)

• Consultants– If you need help with your fulfillment operation, seek out a

consultant familiar with the direct marketing industry and the characteristics of your catalog segment.

– The consultant can provide estimates on key metrics – such as % of back orders, returns, and mail vs. phone orders, based on the customers you’re targeting and the product you’re marketing


Third-Party FulfillmentThird-Party Fulfillment

• Keeping up with the latest technology is expensive and time consuming, so you may want to consider third-party fulfillment as a viable alternative to running your own in-house operation.

• Economies of scale enable them to provide quality service below the cost of an in-house operation.

• Choosing a third-party fulfillment operation – you will need to know all of your operating parameters and costs to compare them to the third-party supplier to aid the selection process.


Partial 3Partial 3rdrd Party Fulfillment Party Fulfillment

• Outsourcing the inbound telemarketing if often a good way to reduce costs while maintaining high levels of customer service and avoiding the inevitable issues associated with doing everything in house.– Overflow

– Avoid overstaffing

• Drop shipping - Drop shipping, results in having the orders for particular items transmitted directly to the manufacturer or “source” for shipment directly to the customer.– This reduces the amount of work and costs necessary for all

warehousing, buying, inventory management and disposal.


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Catalog Marketing 101 (8 of 8)