Backstage at an Information Revolution

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Most would agree that fulfillment is not one of the more exciting ends of the promotion business, yet few could deny that 1997 gave the industry’s workhorse offer-delivery companies cause for excitement.

New business derived from Internet contests and sampling programs, plus new opportunities in data collection, gave fulfillment companies a 14.5 percent boost, according to a survey of key industry players. That put fulfillment’s 1997 revenue total at $2.86 billion.

Individually, the industry’s fufillment houses produced a mixed bag of results last year, depending on how each reacted to fundamental changes in the roster of promotions in the marketplace. Companies that were poised to offer marketers such services as pre- and post-program modeling analysis, or that pursued and won the business of a new wave of non-package goods promoters, showed ’97 revenue gains of between 20 percent and 30 percent. Those that didn’t still saw Internet-fueled increases on the order of 8 percent to 12 percent, for the most part. A few fulfillment houses endured flat years.

More and less The technological challenge for the fulfillment industry is a full-bore trend toward targeted promotions. “There are more and more promotions, and less and less volume,” comments Roy Spencer, general manager of Promotion Fulfillment Center in Clinton, IA. “Offers continue to be targeted and small.”

Fulfillment executives say that there is an increase in region-specific, Zip code-specific, and retailer-specific offers. Of direct mail promotions, one says “They are so extremely targeted that [one marketer] eliminated 85 percent of the mailings it did the year before – and saw a sales increase! With the sophistication of pre- and post-modeling analysis, we’re going to see a decrease in expenditures.”

Some fulfillment companies are dealing with promotion’s information technology revolution by adding sophisticated, value-added services. Young America Corporation in Young America, MN, (The company was named for the town, not the other way around.) has added interactive voice response and live operator services along with other hi-tech services aimed at helping clients make one-to-one marketing a reality.

“We call ourselves consumer interaction experts, not a fulfillment company,” says vp sales and marketing David Terry.

NCH NuWorld Marketing Limited in Lincolnshire, IL, recently purchased UK-based Brann Software to put its Viper software to work in its coupon clearing and fulfillment operations. The reasoning, as with Young America, is to capitalize on the trend toward relationship marketing. Brann’s suite of software products perform data analysis of retail customer loyalty, as well as data-mining and data-warehousing.

New business Promotion programs may be getting too small for fulfillment executives’ tastes, but at least their roster of clients is widening.

“A lot more durable goods manufacturers are promoting and doing rebate programs. We’re talking about computers, computer peripherals, household appliances, and consumer electronics,” says NCH NuWorld vp corporate communications Charles Brown. “They used to do these programs years ago, and now they’re returning.”

The Internet has also provided a windfall to the fulfillment industry, albeit one that is blowing just a light breeze for the time being. Fulfillment of prizes for Web site-based contests, games, sweepstakes – and especially sampling programs – has given the industry a slow but steady stream of new business that can only get larger as more people come online.

Most package goods clients are doing Internet overlays with all of their promotions, providing fulfillment companies with instant incremental business – even if they have to pay hookup fees to America Online. “Gatorade is a good example,” says Tom Belle, executive vp of Gage Marketing in Minneapolis. “It’s doing an online promotion in which it is giving away product. A lot of package goods companies are doing online sampling.”

Fulfillment companies look for significant growth over the coming years from another new source, again courtesy of the Internet – e-commerce.

“There are at least five times as many companies getting involved in selling on the Net than were in it just a year ago,” says Belle. “It’s drawing a lot of traditional companies for which direct-to-consumer sales is unusual.”

But the Internet still lacks the critical mass to make it a true national marketing medium. It will keep growing, but it doesn’t look to grow enough to offset the dip in business fulfillment companies are seeing with targeted promotional offers. The prognosis is for less than double-digit growth in fulfillment in 1998. N

* Huge mass market programs are out, targeting is in, making for more but smaller pieces of business for fulfillment companies.

* Fulfillment houses reacting to technological influence of promotion programs showed big gains in ’97.

* The proliferation of Internet sweeps, games, contests, and sampling programs proved a windfall for all companies.

* Fulfillment companies’ client bases widen as new industries – computers, appliances, financial services among them – ramp up promotions.

* E-commerce looks to be the savior of fulfillment companies in the coming century

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