Versatility Adds Value
Fulfillment spending rose 13.5 percent to $3.6 billion in 2002, according to PROMO estimates based on industry sources. The industry took a 15 percent nosedive in 2001, but investments in technology and an increase in rebate and premium offers helped spur a rebound. “The industry had been pretty severely hit by the economy,” says a senior VP of a leading fulfillment house. “Obviously, when you’re in marketing or marketing fulfillment services you ride the wave with your clients. All of our clients were hit by the Sept. 11 situation, with some rebound coming in mid-year 2002, and then the threat of war hit.”
But political uncertainty and a dampened economy haven’t caused widespread revenue problems among the bigger fulfillment players: “From our perspective, we feel that the industry is growing,” says Mike Leonard, VP Marketing for Continental Promotions Group, Scottsdale, AZ. “When the economy is poor or soft, our experience has shown that companies use sales promotion products more than they might in peak times and we’ve seen the results of that in increased revenues for CPG.”
Please sir, more?
Industry experts agree that clients want more of everything from fulfillment houses, and the players who can’t bring added value to the table will no longer have a seat. Companies are willing to spend money on fulfillment services, but they expect a lot in return. “Clients are shifting the marketing mix and looking at more targeted marketing, because the dollars are shorter,” explains one fulfillment VP. “They want to know how to get more bang for the buck.”
Fulfillment houses are making major technology investments to compete online. In high demand are analytical services, such as real-time information accessible from the client’s desktops, and the ability for clients to manipulate that information to maximize ROI.
“We have — and so have our competitors — invested a lot of money into automation and Web-based technology to support the ease of consumer submission,” explains Leonard. “Measurement and reporting is becoming much more complex. Manufacturers and retailers want a more detailed focus on their promotions than ever before and fulfillment houses had to take the step to provide those resources, particularly for retailers. It’s a tough business, and very competitive price wise.”
While Web-based technology and enterprise management systems may be necessary to compete in an online world, fulfillment houses still need to maintain the old proficiencies. Minnesota-based Young America Corp. processed more than 13 million phone calls and more than 50 million pieces of mail in 2002.
Still room for mom and pop
Despite ongoing industry consolidation — for example, earlier this year, Valassis acquired coupon processor NCH Marketing — and the need for heavy investment in technology, there’s still room for the niche operator.
“There will always be a spot for boutique fulfillment houses that can focus on a limited number of clients and do a good job,” claims Leonard. “However, the opportunity to secure large viable national clients is not available to them anymore. There’s too much automation, and too much tracking and reporting necessary to enable them to be major players. There’s still room for the boutiques, but not on a national scale.”
FULFILLMENT SNAPSHOT
total spent in 2002: $3.6 billion
Fulfillment spending rose 13.5 percent in 2002
Heavy technology investment is key to growth
Boutique houses can still be successful in niches
