Fulfillment houses rethinking strategy

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Just like the rest of the magazine-publishing business, fulfillment houses are hurting financially and feeling very wary of the future. “Our country is literally in a black hole till January 20. Until then, we're in a holding pattern,” said Mike Oberman, CEO of Omeda Communications Inc., referring to the day President-elect Barack Obama replaces President George W. Bush in the White House. But clients aren't prepared to sit in a holding pattern until the economy begins what is expected to be a long, slow return. Shannon Aronson, director of group audience development at UBM, suggested companies use the downturn to learn more about its audience and its purchasing behavior. “Data analysis around engagement has been critical,” she said. “For fulfillment houses to survive today, it's less about lists and more about behavioral data.” Christine Oldenbrook, director of marketing and e-media at Bobit Business Media, said much the same thing. “What publishers will need from their fulfillment bureaus are tools for database development, data mining and efficiencies in data maintenance,” she said. “Publishers need to squeeze every last drop out of their customer files. Brand extensions will be in high demand and being able to easily target new customer categories will be key.” Cary Zel, president of consultancy ProCirc, is expecting things to get much tighter for fulfillment houses because of shuttered magazines and lower rate-bases. He added fulfillment houses will either need to shrink or diversify their service offerings to stay afloat. Oldenbrook also said fulfillment bureaus should be worried about, not only how many publications will survive this recession, but how many will simply move all of their content online. That movement to the Web could cause price fluctuation in the fulfillment industry. Circulation consultant Greg Jones, president of Granite Bay Media, is concerned that cost-saving programs fulfillment houses use that are based on the economies of scale, such as postal co-mingling, will disappear as that scale shrinks with titles becoming Web-only or being shelved. “With lower volume from their clients, fulfillment companies will either need to cut back on their new equipment purchases, services, staff or some combination thereof,” he said. “Their only other alternative will be to eat the higher average costs, which may not be a viable option for an industry operating on very tight margins to begin with.” Meanwhile, Penton Media is working with its fulfillment house to cut costs no matter how small. Jerry Okabe, who is VP-audience marketing/circulation at Penton, said that Penton is reviewing all of the inactive files his fulfillment company is carrying in order to remove all unnecessary names from the files. The cost-per-record is small but across 90 titles, the company will incur some savings. Penton is also instituting an online option for subscribers to change addresses in order to save on calls from customer service. Reducing the number of printed subscription forms processed by fulfillment house is also something Penton would like to do, but Okabe is doubtful much can happen there. “One of our lowest cost-per-order sources is cover wraps, and there isn't anything at the moment that will replace cover wraps, so we'll continue to use them,” he said. Meanwhile, direct mail is being tested to determine whether it has become a viable option again. Bill McMillan, president-CEO of Computer Fulfillment, said he saw the current decline coming a few months ago when he noticed “cancellations of contracted fourth quarter 2008 ads, reduced 2009 ad frequencies and sizes and some longtime advertisers "going dark' for the first quarter or half of 2009.” McMillan fears that achieving double-digit cost reductions without damaging the brand or its competitive positioning will be difficult. He noted it will require “input, and sometimes choices, from publication management as well as operating staff,” he said. Oberman said one trend that is continuing despite the financial crisis is the emphasis on creating global databases of everything in one company's files so the information can be sliced and diced in numerous ways. His company now has variable registration in which they set up three questions to get a reader into the site and then varying questions to gather more information each time he or she comes to the site. “It's things like this that will help put us and the companies we serve into a good position when we finally come out of this thing,” Oberman said. Oldenbrook warned publishers and fulfillment houses of overusing files. “The problem will come with publishers trying to justify the additional expense for new tools and options now that revenues are so uncertain,” she said. “It will take great understanding from fulfillment houses and real attempts at providing scaled-down solutions.” M
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