The Drive For Transactional Fulfillment

Publishers’ push to evolve to or optimize consumer-driven, multi-product, multi-channel business models is putting unprecedented demands on fulfillment bureaus. Here’s a status report—including major new developments at the big bureaus in response to these strategic trends.

By Karlene Lukovitz
Friday, September 10, 2010

As advertising-driven consumer publishers push to morph to more consumer-centric business models, and special interest publishers seek to use cutting-edge capabilities to optimize customer lifetime value, fulfillment partners are being challenged to step up to the plate like never before.

Efficient, cost-effective performance of traditional print magazine fulfillment functions remains a core need. But in today’s media environment, realizing profitable growth demands a multi-product, multi-platform business model. These evolving models are heavily geared to increasing emphasis on digital assets, both for creating new, higher-margin content offerings for new and existing customer bases, and for reducing product delivery, billing, renewals and customer service costs.

All of which is driving the demand for systems capable of enabling an integrated, actionable view of all customer transactions, across platforms; employing customer transaction history and profile data to generate real-time, intelligence-based cross-sells, up-sells and relationship-building content; providing immediate access to paid digital content; bundling/unbundling print and digital content formats per customer preferences; handling membership and continuity-based programs and payments; and supporting technical and marketing platforms for e-tablets and other mobile devices.

“Clients’ capabilities requirements for fulfillment bureaus have changed more radically in the past few years than at any time in the industry’s history,” sums up publishing/fulfillment consultant Steve Strickman.

As suppliers strive to be technology/marketing solutions partners, the term “fulfillment bureau” (or at least its traditional connotations) is becoming outmoded.

New Breeds of Systems
While all fulfillment bureaus face similarly evolving client needs, their responses are shaped by a number of factors—including, of course, the architecture and capabilities of their core systems.

Newer systems—for example, those of Strategic Fulfillment Group (SFG), ESP, NCS, ICN, Cambey & West and ARGI—have been built with relational, single customer-file and real-time capabilities.

SFG’s system, for example, offers all of the capabilities described above, plus custom solutions. SFG owner and client DRG, a crafts enthusiast publisher that originally built the core system to meet its own cross-product/cross-channel marketing needs, sells magazines, clubs, Web-based content, and a wide range of affinity-related products through catalog/e-commerce properties such as Annie’s Attic.

All of DRG’s digital and traditional marketing efforts (about a half-billion touchpoints across channels annually) are driven by customer profile data and transactions history and algorithmics-based real-time decisioning, confirms Shirrel Rhoades, a publishing consultant whose clients include DRG/SFG. The hub-and-spokes, affinity-based, cross-product/cross-channel business model exemplified by DRG is shared by many enthusiast publishers, because it enables profitable growth for companies that lack the economies of scale of large publishers, points out Rhoades.

StayWell Consumer Health Publishing, which manages non-editorial business operations for the Harvard Health Publications, has worked with SFG to create “robust” e-commerce capabilities for HHP’s health newsletters, special reports and premium online access offerings, says StayWell president Helen Hoart. The back end of HHP’s recently relaunched Web site has been married to SFG’s system, enabling capabilities including online product cross- and up-sells; gatekeeping for the online archival and current content that’s bundled with paid digital and print subscriptions, as well as for PDF-format paid reports; and immediate email confirmations for all transactions. Staywell/HHP uses database analysis to determine the offers triggered, says Hoart.

Alvin Brockway, associate publisher, audience development and circulation for the publisher of The Chronicle of Philanthropy and The Chronicle of Higher Education, uses ESP’s relational, real-time system for capabilities that include selling print and digital edition subs (including a CHE global edition) and offerings such as a paid niche digital newsletter and survey data sets, as well as for gatekeeping (full access to site content is bundled with paid subs). A new Chronicle store is selling special issues and reports from both brands. (NCS, Cambey & West and ICN offer many of the same capabilities.)
ARGI’s Acuity product, launched last year, which can interface with ARGI’s outsourced subscription fulfillment services through a publisher portal, is an

integrated audience management system that enables clients to create and manage their own audience interactions (content control, personalization, monetization), implement closed-loop marketing campaigns, build custom applications, readily integrate with third-party applications, and provide customers with the ability to manage their profiles, among other capabilities.

Legacy System Challenges
The core fulfillment systems of the two largest bureaus, CDS Global and Kable/Palm Coast Data (PCD), were designed primarily to handle large volumes of print magazine transactions and fulfillment-related processes as efficiently and cost-effectively as possible. The same can be said for the Time Inc.-owned Time Customer Service (TCS) system, although TCS executives point out that the system, built in the 80s, has always applied transactions in real time, and that paywall capabilities were developed a decade ago in response to AOL needs.

Batch processing-oriented legacy systems excel at what they were designed to do, but adapting their actual infrastructures to accommodate new business models is difficult, time-intensive and very costly. And given the advertising declines of recent years and their massive investments in digital platforms and content, major publishers have not been greatly inclined to wait for solutions.

A core legacy system challenge has been achieving true integration of print magazine/newsletter mainfile transactions and other product offerings spanning digital formats and brand extensions such as books, online clubs and events.

In addition, most large publishers have separate marketing or CRM databases maintained by leading database companies or in-house, incorporating customer-level transactions overlaid with demographics and other data, and generally tied to a targeting system informed by analytics and modeling.
Why have relatively few clients of the major bureaus, at least thus far, chosen to use fulfillment house database solutions—which CDS and Kable/PCD have, for example, offered through partnerships or licensing agreements with third-party database systems suppliers? The answer seems to be that publishers have made substantial investments in their database solutions, and either consider them more robust or have not up to this point seen sufficient value-added (in capabilities or cost terms) to migrate to bureau database solutions.

One result has been the need to synch periodically the data in bureaus’ magazine masterfiles with the data in marketing databases to achieve a consolidated view of customer transactions. A magazine title’s mainfile is generally updated weekly, and while pending, as well as completed, transactions may be viewable online by customer service and customers, the lag in updating the magazine database files (to consolidate customer intelligence and magazine transactions) to some degree impedes ability to make timely, customer-specific offers based on up-to-date transactional history.

This processing can generate significant additional costs. Moreover, there are multiple files/systems with different objectives, often vying to accomplish either the marketing execution or the fulfillment logistics, and keeping these coordinated is an additional management challenge for publishers, points out Joe Furgiuele of marketing data solutions provider Furgiuele & Company, Inc.

“Given two files, usually located in separate locations, often by different vendor companies, only one can be the ‘master’ file,” says Furgiuele. “In practical terms, the fulfillment file must be the master, and the marketing database the slave. This makes it difficult to harness the intelligence in marketing databases to make truly targeted offers in real time. The database has to know that Customer A has just subscribed to another of the company’s magazines, or renewed, or has now purchased some other product from the company, or whatever the case may be.”

Many publishers also use third-party suppliers for functions like email deployment (generally citing cost factors). And while most host their landing pages at the bureaus, some have elected to host or have a third party host their landing pages. Reasons: They may find these solutions more efficient than client Web management tools provided by the bureaus, or don’t want to wait for bureau staff to make Web page changes, or they get greater “granularity” in reporting capabilities for testing and analysis purposes through non-bureau hosting alternatives.

One bureau client reports that data coming from different vendors has meant having publishing staff manually create consolidated spreadsheet reports capable of showing detailed online and email results metrics alongside source data from the bureau, to make data actionable. “Digital should be just another source to report, but it’s been challenging for legacy system bureaus,” he says.

Current Big-Bureau Capabilities
All of that said, several clients recently interviewed credit CDS and Kable/PCD with developing viable solutions for working around many of the limitations of legacy systems. Further, according to the bureaus, major leaps forward in capabilities are about to come to fruition as a result of investments and intensive development.

“CDS has been becoming more of a technology vendor as opposed to just a fulfillment house,” says David Ball, VP, consumer marketing at Meredith.

For instance, Meredith has been hosting its own landing pages, but recently shifted Better Homes and Gardens’ hosting to CDS, and also hopes to move the other brands’ landing-page hosting to the bureau over the next few months. “This speaks to their evolving ability to ensure a seamless interface,” Ball says.

On the mobile front, for three brand sites, CDS has created landing pages designed to download efficiently from smartphones, to support enhanced conversion rates, Ball notes. Meredith will also be looking to the bureau to enable a growing range of consumer products, such as a relaunch of BH&G’s online store (requiring product fulfillment) and a Fitness digital health-metrics tracking tool (requiring gatekeeping), he says.

“Up-selling product from a magazine subscription is still a challenge, but most of our challenges are more related to marketing strategies than to technical or fulfillment challenges,” Ball adds. “Technically, what’s not in place now will probably be worked out within a year.”

New Track Media, serving enthusiast areas such as quilting, woodworking and astronomy, has recently completed work with PCD to create an integrated, bureau-housed corporate customer database, reports VP, consumer marketing Dennis O’Brien.

The database enables an aggregated customer view of transactions spanning 12 magazines, two online membership clubs, seven e-commerce affinity clubs (six tied to magazine brands, which sell print issues, books, CDs/DVDs and a variety of affinity-related products, plus online/print cataloger Keepsake Quilting), and about 18 annual events.

“At present, no transactions are fed into the corporate database in real time, but the enhanced database analysis ability allows us to create a path or sequence of promotions based on transaction history,” says O’Brien. “When an online transaction occurs and our email service provider or ESP is pinged, that triggers the appropriate next email, as determined through our database analysis. These promotion decisions at ESP do happen in real time, so we’re able to leverage history to optimize many real-time, event-driven marketing efforts.” He adds that the catalog and non-magazine online products fulfillment are managed on separate systems, and that data is exported to PCD for integration on a monthly basis. Magazine mainfile updates occur weekly; however, pending transactions for a single title are currently viewable for customer service purposes.

“This allows us to improve the targeting of subscribers for ancillary product offers and takes us beyond typical promotional source evaluation to a lifetime value-driven model,” says O’Brien.

New Track will leverage newly accessible multi-product purchase sequence intelligence to optimize cross-sales by determining which brand or business should reach out to a particular customer, based on his/her first or latest transaction, as well as hone the sequence and frequency of email and other contact series. “We’ll be able to tailor the number and content of email contacts to the customer,” and the timeliness and relevance of these will in many cases enable more promotion opportunities without the risk of fatigue, O’Brien reports.

While the path of responses or bounceback contacts are at this stage event-driven, rather than tied to algorithms that produce one-to-one, real-time responses, the current behavioral intelligence should ultimately enable New Track to actually influence or direct the customer purchase path, he adds.
Bonnier Corp., another multi-title enthusiast publisher using all available capabilities to optimize multiple product sales across channels and platforms, offers iPad apps along with a range of other products similar to New Track’s. Bonnier houses its customer database at PCD and accommodates the special multi-file/multi-data point needs of two brands by using a “unified” add-on option for the core fulfillment system, explains senior director of operations Jim Patterson. Those brands are Parenting, which needs to transfer subscribers from one age-dependent version to another, and Sport Diver, which has a club membership tie-in.

At TCS, a major emphasis is on enabling the profitability and customer relationships associated with “recurring” businesses, including subscriptions and membership programs, says president Tim Adams. The bureau’s clients, who include National Geographic, Martha Stewart Living, American Express Publishing and incoming Smithsonian as well as Time Inc.’s properties, are DTP-driven and realize subscription pricing and flexibility benefits from payment capabilities that include credit card (standard and auto renewal) and PayPal, he says. To enable retailer partnerships, an interface with point-of-sale systems allows retailers to verify the customer’s paid status, and online payments can be made via retailer-branded credit cards.

TCS got a jump on developing multi-product and membership-model capabilities, in part to serve the needs of the (now defunct) AFP sub agency, and can treat an order for two different items, such as two magazine subs or a sub and a product, as one order for billing and service purposes, according to Adams.

SIDEBAR

Big Bureaus’ Big Developments

CDS president Malcolm Netburn reports that current areas of focus include e-commerce enhancement, leveraging online customer service contacts (including confirmation/renewal emails) as cross- and up-sell opportunities, and creating seamless combined digital/print subscription capabilities. Another crucial priority: Working with other bureaus that have clients who are participants in the Next Issue Media (NIM) major-publisher digital publishing consortium to create an ordering/launch environment, including an online storefront, enabling subscription sales for various e-tablet platforms, including the iPad.

But perhaps the biggest news is integration. Rather than adapting its core SERV fulfillment system, the bureau is using open-source architecture to create capabilities modules (such as combo/cross-product and cross-publisher offers and digital storefront modules) that plug into an already-built power bar/layer, which consolidates data from the modules and communicates to SERV just the data needed by that system, explains Netburn. Below this will reside a CRM database, built in partnership with Acxiom—the database supplier used by CDS owner Hearst for the past three years—consolidating all transactions into a single customer view and enabling analytics and marketing decisioning capabilities.

The architecture is in place, service modules will go live as they are completed, and the single view will be available within a year, Netburn reports. The new capabilities will be included in basic service costs, and clients will be able to choose which pieces they want to use. CDS parent Hearst has made a $20- to $30-million investment in developing the new capabilities, and database costs can be amortized across many clients, he says.

Netburn points out that maintaining and continually upgrading databases to avoid obsolescence is expensive and complicated. “Publishers will no doubt deploy other touchpoints that never come through us,” he says, but given the capabilities of the CDS database being built, “we think that they are going to want to drop that data to us, too.”

Meanwhile, PCD has moved ahead with a new “technology roadmap” designed to offer publishers an e-commerce platform akin to those in the retail and financial services sectors, according to EVP/COO Mike Taschler. Clients will have a real-time, consolidated view of all transactions across products and channels, and customers will have self-service online capabilities, he reports.

The solution will enable publishers to perform gatekeeping and one-to-one contact delivery and content based on predictive analysis and customer data modeling.

According to PCD, the design/development process began over a year ago and new customers are already in the process of being “on-boarded” to the platform.

Current clients not involved in the development process told AD that the concept sounds promising, but many specifics aren’t yet clear to them. Existing clients were told that PCD’s intent is to convert them from a legacy Internet platform to the new system by the end of Q1 2011.

Aside from the cost structure, some current clients say they’d like to know more about the interface between digital and the fulfillment masterfile—to understand, for instance, how fulfillment for customers who want both print and digital, or to toggle back and forth between formats, will be managed.
PCD executives say that the real-time delivery of digital publications and those transactions will feed into the print fulfillment system, and the print subscriber’s experience with be enhanced by the new system’s online customer service capabilities.

Taschler says the cost savings realized from having consolidated three former EDS and Kable facilities into the Palm Coast facility and consolidating systems, along with work to optimize automated electronic digital transactions, are funding the new system development.

At TCS, a continuing focus is enabling clients to access and interact with all transactions in real time, says Adams, who says that Time Inc. makes six- to seven-figure investments in systems development annually. For example, the bureau’s Web-enabled mainframe makes it possible for customer service and customers to view the same, consolidated account record. The system is also capable of serving iPad and other digital formats and handling associated transactions, he says.

TCS’s global and digital capabilities will be key in driving its growth going forward, says Adams, who notes that digital product models are likely to have global scope, be subscription-based, and use credit card payment or be bundled with another offering.