Direct-to-Customer Commerce

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Strategic insights into the direct commerce industry, including ecommerce, direct marketing and related fields

Branded Operations

I was with a client yesterday and was reminded about an article I wrote a couple of years back, entitled, Branded Fulfillment. My client and I were discussing the perspective that marketing types bring to the table when discussing prospective outsourced solutions.

Regrettably, all too often, both marketing and operational executives view outsourcing only as a way to cut expenses — and if you can’t cut expenses, then just continue to do it yourself.

And equally regrettably, many outsources see their business the same way.

The result is that prices for outsourced services are under immense pressure to at least stay flat, if not move downward. And I understand that, and think it’s fair — up to a point.

The responsibility of Operations is not just to execute or deliver whatever Marketing wants, it is to deliver on the promise of the Brand. I admit, if your Brand is not important to you, then just go for lowest possible cost. But if your Brand has value to your business, then there are additional considerations.

  • What kind of experience do your customers expect of your Brand?
  • How tolerant will your customers be of operational errors, such as miss-picks, misships, damaged parcels? What are your current KPI’s in these areas?

Would expect LLBean to offer the same Brand experience as Nordstrom? or Saks Fifth Avenue? or Tiffany? Of course not.

And that one question should point out the need make sure your direct-to-customer operations deliver on that Brand promise.

Outsourcing can save money in some areas and may cost more in other areas by offering superior service at a cost that may be higher, but may be worth the price.

And the calculation of “effective cost” is much more complex than most accounting types appreciate. Here’s just one example of what I mean:

Let’s suppose for a moment that your current internal fulfillment operations have a overall shipped order error rate of two percent. That is, two percent of the orders you ship have something wrong with them when they leave the shipping dock.

It would not be unusual for that 2 percent to account for 10 percent of the customer service calls.

If an outsourced solution handles customer service inquiries at a cost that is 15 percent higher than your internal cost, but at the same time reduces the shipped orders error rate to 1 percent, then you save money (specifically, you save 57.5 percent of the customer service cost related to these calls).

So, just remember that calculating the cost to fulfill the promise of the Brand is more than just about dollars and cents, it’s about customer retention, customer satisfaction and customer expectations — if your direct commerce operations don’t meet those criteria, the cost in dollars won’t matter.

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Filed under: Direct Commerce, Uncategorized

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