THE KEYS TO MEETING CUSTOMER EXPECTATIONS.
TODAY'S DIRECT MARKETERS know that building an eye-popping, customer-facing portal is not the only way to meet demanding customer expectations. Indeed, less glamorous, but nonetheless critical, back-end e-logistics processes, such as inventory and warehouse management, are becoming the key differentiators of success in the online arena.
But the harsh reality remains: The major complexity lies in the integration of back-end e-logistics to front-to-office processes.
E-TAILERS' REPORT CARD 2000
The Internet is a great equalizer; it changes business paradigms and increases customer expectations. Specifically, it offers the following:
* Instant access. The Internet increases consumers' expectations of ubiquitous, anywhere-anytime access to information, goods and services.
* Greater convenience and choice. It also enables increasing demand for purchasing convenience and fuels the explosion of choice in products and services.
* Speed, flexibility and reliability of services. It compresses customer response times, including order-to-receipt cycles, and repositions traditional business-to-consumer and business-to-business supply chains.
* Personalization strategies. This is accomplished by integrating customer relationship management (CRM) solutions, and allowing for greater customization of products and services to the individual consumer, further enabling one-to-one marketing.
According to International Data Corp., the Internet as a new retail channel quickly can complicate logistics and fulfillment supply and value chains. While the products and services sold to consumers via the Web often are identical to those sold by traditional brick-and-mortar companies, the Web creates tremendous differences in consumer expectations, forcing direct marketers to re-evaluate their existing business strategies.
During the "Nightmare Before Christmas" of 1999, many e-tailers failed to meet heightened customer expectations. As a result, opportunistic direct marketers took a hard look last year at improving e-fulfillment and distribution processes, especially their approaches to e-logistics in areas such as inventory and warehouse management.
This strategy realignment appeared to pay off in 2000. Although holiday sales fell short of many e-tailers' expectations, according to the NPD Group, online holiday sales generated $12.2 billion in 2000, almost doubling the amount spent in 1999. What largely met expectations was customer satisfaction. In a marked improvement, 90 percent of shoppers who bought items online during the 2000 holiday season were satisfied with their overall online experience. According to Accenture, the failure to make an e-retail purchase during this past holiday season occurred with only 8 percent of attempted orders--a significant drop from 1999 when 26 percent of order attempts failed. That's good news, because customers quickly respond to poor customer service and missed shipments by jumping to competitors only a click away.
However, not all companies were able to turn things around so quickly. For example, eToys, reportedly afflicted with high start-up costs and lack of profits, recently announced that its remaining 293 employees would be looking for jobs soon.
EFFECTIVE INVENTORY MANAGEMENT
The winners in satisfying holiday online shoppers were e-tailers who invested in improving back-end operations, according to Jupiter Research. Moving forward the winners will be those who retain and expand customer relationships and increase online sales, thus justifying operational investments.
One of the key aspects of effective inventory management is ensuring delivery accuracy by enabling e-tailers and their customers to know what's available in real-time and what can be delivered on time through an integrated solution.
Many direct marketers realize the benefits achieved by outsourcing these vital business functions to experienced, technology-savvy, third-party, e-logistics (3PeL) providers. In the long-term, a 3PeL can help a company balance seasonal demands and peaks through leveraged, multi-client, operations management, as well as by allowing visibility of the order throughout the fulfillment cycle--from order to delivery. The need for end-to-end visibility ranked high on a recent Forrester study of critical business challenges. To be sure, an integrated system enables information to remain accurate and visible across the delivery process.
What can a direct marketer do to ensure a fulfillment vendor is offering good fulfillment off the Web? Accurate, timely reporting is critical. Many vendors provide daily reports via e-mail or fax. More advanced fulfillment houses offer online, real-time reports that can provide up-to-the-minute snapshots of inventory and shipping status.
INTEGRATION IS CRITICAL
Look at the life cycle of a customer order in relation to customer expectations:
* Instant access to information, goods and services. When an order is entered, an e-tailer's system must be able to check inventory to determine if the item is in stock. This information must be conveyed to the customer in real time. For this to happen the order management system must be integrated with the warehouse and inventory management system. Information should flow seamlessly between the two systems and be easily extractable for business use.
* Greater convenience and choice. Another challenge arises when a customer orders multiple items. Ideally, these items must be managed as one order and shipped to the customer in one package. This reflects package personalization options by the direct marketer, rather than multiple packages at different times for the customer's convenience and to optimize the direct marketer's brand strategies.
For this to happen, the items must be consolidated and packed together. Again, this task requires multiple backend systems to be integrated with one another. Wan e-tailer uses drop-ship suppliers, its order management and CRM systems should be plugged into its suppliers' systems.
* Speed, flexibility and reliability of services. Building these integrated systems internally can be an intimidating, expensive and resource-consuming job. For example, an e-tailer using drop-ship suppliers must build real-time interfaces with individual suppliers. Leveraged, integrated 3PeL solutions may provide the building blocks for tightly integrating e-tailers' front-end online stores with their back-end e-logistics processes from order management, customer service, fulfillment. delivery and returns. In this way, there's a single conduit connecting all of an e-tailer's disparate business processes, ensuring speed, flexibility and reliability across the supply chain.
* Personalization strategies. Under the auspices of CRM, every customer touchpoint, both in the front and back-office, is a golden opportunity to optimize the customer experience. The market focus today is based less on the products sold as it is on the nature of the customer served. (CRM is a core business strategy for managing all customer interactions to develop individual customer relationships that build brand loyalty in order to improve customer acquisition, retention and life-time value.)
A practical aspect of an effective CRM strategy is integrating the front-office fulfillment operation, such as the customer interaction center, with back-office operations, such as inventory and warehouse management--online and in real-time--and linked to a customer data warehouse providing timely and targeted customer intelligence.
In 2001, more than 50 percent of Fortune 1000 companies will continue or start initiatives aimed at increasing the value of existing information assets. Companies will utilize high-value, analytically based customer data to: upsell and cross-sell their products and services; personalize products and services tailored to the individual customer; and promote higher profitability by more effective customer targeting, acquisition and management.
An integrated inventory and warehouse management system can enable businesses to surpass an electronic-transaction mentality and go "beyond e" with higher-value, customer-centric services. To justify these investments, e-tailers face the challenge of retaining and expanding customer relationships while continuing to increase online sales.
Integrating back-end functions into the entire fulfillment process repositions value-added information such as customer preference information, resulting in increased selling opportunities and customer satisfaction, transforming fulfillment and distribution centers from cost centers to revenue centers.
Integrating CRM and real-time, online inventory and warehouse management with your online fulfillment strategies is one of the most important aspects of keeping customers satisfied--delivering on the promise of e-business and then going beyond "e."
RICHARD BRADLEY is portfolio director for EDS Fulfillment and Distribution
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|Date:||Apr 1, 2001|
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