JPS
JPS
|
Top If you like our site, please bookmark it so it will be easy to find later.
 REDUCING
SHIPPING COSTS THROUGH NEGOTIATIONS
"A
STUDY OF THE INCENTIVE MERCHANDISE AND TRAVEL MARKETPLACE, 2000"
INDUSTRY TAKES
STEPS TO CONTROL REBATE FRAUD KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM
MARKETING
& MISCELLANEOUS ARTICLES
Various states have passed new laws in recent years regulating resulting in offers that were lawful a few years ago may now be illegal in some states and I am sure many marketers aren't aware of the new requirements because these laws have not been publicized. Marketers who continue to use old blueprint offers from previous years without the legal departments reviewing them to see if the new laws apply to them may fined by their state regulators. Many rebate laws dictate what verbiage may and may not be used in their rebate offers. For example, laws in New York and Oklahoma prohibit advertisers from mentioning an item's post-rebate price (the price after the rebate is deducted) unless the pre-rebate price (the price consumers pay at the register) is clearly disclosed. Even in states where such a disclosure is not specifically mandated by rebate laws, this information is perhaps necessary to comply with disclosure requirements under general advertising laws. There are some the states that have more rigorous requirements such as Connecticut and Rhode Island which both prohibit companies from advertising a post-rebate price unless the rebate is given to consumers at the time of purchase. Under these statutes, it would be unlawful to disclose, for example, that a product costs $10 at retail, but will cost $7 after a mail-in rebate. You can, however, advertise that the product costs $10 and that a $3 mail-in rebate is available (as long as you don't mention the final price). In addition to price disclosures, regulators have been focusing on how rebates are fulfilled. On the federal level, the Mail Order Rule requires companies to mail rebates within the time promised or, if no time was promised, within 30 days. If the rebate cannot comply, they must notify the customer by first class mail with the reason why there is a delay and when the customer can expect to receive their rebate. States have been adding additional requirements such as in New York and North Carolina where certain rebates must be fulfilled within 60 days. Texas recently passed a law similar to the Mail Order Rule that in addition adds a requirement that companies must give consumers the opportunity to correct deficient rebate requests. In recent years, a number of companies have been charged, prosecuted, and fined for failure to disclose terms and fulfill rebates on time. For example, last year, the Federal Trade Commission charged Soyo and InPhonic over their rebate practices alleging that the majority of Soyo's rebates were delivered late and consumers had to wait over a year for checks to arrive n some cases. Another complaint against InPhonic alleged that the company failed to disclose material terms, provide necessary rebate forms, and mail rebates on time. Last year, a class action lawsuit was filed against AT&T over the company's $100 rebate offer. Although consumers received the promised rebates, instead of getting rebate checks, they received Visa Rewards cards that were subject to numerous restrictions and expired in four months. The plaintiffs claim that these material terms were not adequately disclosed prior to purchase. Marketer’s need to make certain that their rebate offers clearly disclose all material terms and comply with laws regarding post-rebate prices. It is also very important to ensure rebates are fulfilled in a timely manner. Companies need to pay attention and be able to react quickly to changes in the law as states continue to pass new laws.
Rebate checks that never get sent to the consumer and Gift cards that end up being worthless and are two black marks against the promotional marketing industry. Retailers, rebate fulfillment houses and their retail and manufacturer clients need to do more to return the millions of dollars in unclaimed funds due to people who in good faith bought the cards or filled out the rebate forms and if the rightful individuals don't get reimbursed, most states have laws that say the money should be turned over to them after a certain number of years. All parties claim they make efforts to pay back consumers, but the numbers and actions don’t substantiate those claims. Best Buy is among a number of retailers that have set up separate subsidiaries for their gift card businesses in states like Virginia where laws allow them to keep the millions of unused dollars left on the cards, according to a recent article in the New York Post. Many states enacted laws that eliminate expiration dates on gift cards following scores of consumers complaining about finding out at the cash register that their presents could no longer be redeemed. The sales of gift cards increase sales in the retailers' balance sheet and result in 100% profit on the income statement. This has resulted in a lawsuit filed in 2006 in Iowa alleging that Young America Corp. and its clients are holding $129 million that should be paid out in rebate checks. If the people can't be found, then the states should receive the proceeds, Iowa and 40 other states insist. Young America is the world's largest processor of rebates and handles more than 80 million rebates annually with a value exceeding $2 billion on behalf of a cross-section of brands covering every major product category. Its clients have included Hewlett-Packard, Sprint PCS, Anheuser-Busch, Best Buy, General Mills, R.J. Reynolds, Nestlé, Target, McDonald's and Pepsi-Cola, all of which do business in Iowa. Iowa, the lead plaintiff, says Young America's clients held $86 million in unclaimed sums between January 1, 1996 and June 30, 2002, and violated a statute when they did not report the money as abandoned property. According to court documents, Young America took as its own revenue uncashed checks, known as "slippage" totaling almost $43 million between January 1, 1995 and June 30, 2002. But Young America and others still question whether rebate checks are subject to unclaimed property laws. "These companies have to agree that rebates fall under unclaimed property," says Stephen Larson, Iowa's deputy treasure and president of the National Association of Unclaimed Property Administrators. "Our hope is that Young America and the companies that Young America contracts with have great records. If we get names, we're going to go out and try to find them to get them their money back."
Consumer rebates have been and continue to be used to initiate the relationship between consumers and brands. Rebates use the promise of a discounted purchase to capture consumer information: ideally this transaction is supposed to establish a positive and continuous relationship with consumers, however, in many instances, the opposites occurs. Consumers love the savings provided by rebates; however, they hate the long wait that can be associated with payment or feeling left in the dark wondering when their check will arrive. On the retailer or manufacturer side, companies are challenged with implementing a rebate program that will please consumers while increasing consumer loyalty at a "reasonable" cost. This relationship becomes strained and trust is often lost. One major problem facing retailers and manufacturers is the increasing cost of acquiring consumers at the beginning of the relationship. A Jaffray & Company 2006 market study of five channels for customer acquisition revealed that the cost per new customer using Internet search engines was ($8.50), Yellow pages ($20.00) On-line display ads ($50.00), Email marketing ($60.00) and Direct Mail ($70.00). Another problem is that most retailers and manufacturers can’t reliably communicate with their consumers once acquired. On average, three-fourths of consumers opt out of receiving marketing emails and 25 percent who opt-in are lost in 90 days due to a change of address and email filters making it increasingly apparent that email marketing alone does not work.
Market research firm Aberdeen Group reports that about 60 percent of buyers who could redeem computer-related rebates don't try. "That's money the store and/or the manufacturer keep," says Aberdeen analyst Peter Kastner. Of the 40 percent who give it a shot, half experience problems or don't get a check at all. Part of the problem is that three parties--the product manufacturer, the retailer, and the rebate fulfillment house--are usually involved in the process. Each company ends up relying on the others to ensure that things go smoothly. Rather than process thousands of redemptions themselves, manufacturers and retailers frequently contract with a fulfillment house to open and sort mail, log in consumer data, and, if all requirements have been met, issue rebate checks. But those fulfillment houses can't cut any checks until the sponsoring manufacturer or retail store hands over the rebate money, which can take anywhere from 15 to 90 days after the fulfillment company's invoice date. If the sponsor pays the invoice with a paper check, the fulfillment house must wait several days for that check to clear before it can write any checks to consumers. Sometimes the manufacturer doesn't pay the invoice at all; a few fulfillment houses (which prefer to remain anonymous) told us that they have quietly gone to the Federal Trade Commission to report such a problem.
According to Stanley J. Fenvessy, an expert on the subject and author of Fenvessy on Fulfillment, fulfillment consists of nine major steps.
HANDLING
FULFILLMENT IN-HOUSE
The decision whether to handle the fulfillment process in-house or to outsource it out to a third party hinges on several considerations as with in-house fulfillment you'll have more control over customer service, faster turnaround for reports, and probably lower overall costs. However, you'll probably move thousands, if not millions, of pieces of merchandise. Do you have sufficient warehouse space and computer systems? The same holds true for incentive programs. Merchandise quantities will be smaller, but incentives still require resources and people for tabulating results, communicating with contestants, and selecting and delivering prizes. Also, look at such factors as management time, the need for new computer systems, additions to staff, and possible upgrades for facilities and equipment. Do you have the budget to start a fulfillment program from scratch? Can you afford to divert resources from your core competencies to handle fulfillment yourself? OUTSOURCING
FULFILLMENT SERVICES
Many companies prefer to outsource part, or all, of the fulfillment function. There are four basic alternatives available:
Before
outsourcing any type of fulfillment contractor, ask these questions:
PLANNING A FULFILLMENT PROGRAMIf you decide to run your own fulfillment department, you'll need to establish policies and make decisions on the following:
To ensure that 98 percent of orders are filled and shipped promptly:
Parcel contracts
challenge negotiators with their complex terms and conditions. You
recently negotiated a contract with a parcel carrier and you find out that your
discounts don't apply on certain shipments and that a general rate increase has
raised your rates even though you have a contract and extra charges have added
20 percent or more to your total bill. Below
are our recommendations when you are negotiating a contract with a parcel
carrier:
During
negotiations with a parcel carrier, know your quantities, sizes, weights,
applicable surcharges, and origins and destinations for each package you ship.
Many shippers collect that information with software that can create
package-by-package and aggregate shipping reports. Ask to see rate calculations
based on your actual shipping activity for one or more sample weeks. Be
reasonable about your volume levels because if you overestimate and then fall
below negotiated volume and revenue levels, your discounted rate will not be in
effect.
Certain shipment characteristics are more attractive to carriers than others because they yield high-margin, premium shipments as well as those that are relatively cheap to handle on a per-package basis, such as a large number of parcels delivered to a single destination near a major package hub. Carriers are more flexible with discounts on high-margin business than they are on low-margin shipments such as rural and home deliveries. One way increase your discount is to ask if changing any of the undesirable characteristics would reduce their handling costs.
Parcel shipping prices are based on rolling averages, revenue tiers, cell-by-cell pricing and net revenue per piece. Rolling averages represent average weekly revenue levels during the most recent 13-week period; in the 14th week, the first week drops off and is not included in the calculation. In the 15th week, weeks one and two drop off, and so on. Rolling averages are used in conjunction with revenue tiers or ranges of weekly average revenue you provide to the carrier. The higher the tier, the deeper your discount. Which revenue tier and discount apply depends on the rolling average for that week. If your rolling average falls below a minimum level, moreover, you'll get no discount at all. Parcel carriers also use "cell-by-cell" pricing, which applies to specific zone and weight combinations, because it lets them maximize per-package profits. (Zones are destination regions, numbered 2 through 8. The further the distance from the point of origin, the higher the zone number.) Most parcel contracts also include a "minimum net
revenue per piece" for individual parcels to qualify for the negotiated
discount. If you have packages that fall below that threshold that effectively
negates your discount on lower-weight packages.
Make
sure you are aware of Add-on charges like fuel surcharges, rural delivery
surcharges, excess tracking fees, and as many as 70 other individual surcharges
that can raise your shipping costs
by 15 percent or more. Shippers often don't realize how many of their shipments
are subject to extra fees and how quickly they add up, especially since they
often are billed separately from the base freight charges. Examples include $10
per-package address-correction fees and over-dimensional charges that treat
packages exceeding certain dimensions as if they weighed 50 or 70 pounds,
regardless of their actual weight. Knowing which of your shipments will be
subject to surcharges will give you a more realistic picture of how much revenue
the carrier will be getting from your business.
You
should thoroughly read and analyze your agreement, which may have numerous
restrictions that shippers would find unacceptable in other transportation
contracts. It may be possible to negotiate a waiver of unacceptable
terms, however if a carrier gives up a profit in one area, you can be sure they
will make up for lost revenue with added costs somewhere else in the contract.
No
one wants to read all of the major national parcel carriers' terms and
conditions before starting negotiations. These documents frequently contain
"conditions" you'll want to know about such as: ·
If a carrier is
unable to deliver a package and returns it to the shipper, it will automatically
come back at the 3rd-Day Air rate, unless the shipper specifies otherwise. ·
Shippers are
prohibited from participating in class-action suits against the carrier. ·
Carriers may
designate tens of thousands of ZIP codes in the United States as being subject
to a rural delivery surcharge. Carriers also can add a residential delivery
surcharge for commercial buildings located in residential areas. ·
Carriers may
allow you to track up to 50 packages or 20 percent of your weekly package
volume, whichever is greater, for free. After that, you may be charged up to $3
for each track-and-trace. ·
Carriers will
not honor claims filed by shippers that tendered packages through consolidators. ·
General rate increases (GRIs) apply to all shipments, including those
under contract. When a GRI takes effect, you will still receive the agreed-upon
discount, but it will apply on the new, higher rates.
Set
realistic objectives and don't let the carrier make the negotiation complicated
or make you deviate from your objective. In some cases, giving carriers an
objective goal such as cutting total costs by 6 percent, works best. The shipper
also benefits by setting the tempo of the negotiations. Generally, the carriers
want to make this a long, drawn-out, complicated process because they want you
to give.
Contracts can last anywhere from one to five years, with two to three years being the most common. But you needn't wait until the end of the contract period to renegotiate. Most contracts allow renegotiation on 30 days' notice, and it's wise to do so when shipment volumes and revenue levels change to such an extent that it reduces your discount. Many shippers pay the price for failing to monitor their shipment activity after they've signed a contract. When it comes to contract negotiations, the big parcel carriers will never be as flexible as smaller carriers. It is still worthwhile asking for what you want if you can make a strong argument that it is in the carrier's best interest to make those concessions. Ultimately, the strength of your negotiating position relates directly to how much you know.
Promo Magazine estimates that Premium Incentives total sales dropped 2.4 percent to $26.3 billion in 2001 due to the economic downturn and corporate downsizing. Corporations reduced spending on business incentives to $21.9 billion while consumer-targeted programs increased one percent to $4.3 billion. These trends emerged after September 11th including a very high demand for patriotic premiums (flags, stickers, pins, etc.) and employee incentive programs shifted away from travel to merchandise. In addition, marketers used premium offers to strengthen consumer responses and therefore premiums bacane stronger branding tools. Marketers purchase premiums (merchandise and travel from the following:
Source: Survey of Incentive Practices, Incentive Foundation The challenge with premium incentives is to deliver a unique promotional product with a high-perceived value at a low cost. Gift certificates and gift card programs have become popular incentives. Gift cards offer greater security against counterfeiting and provide improved data collection and makes execution more effective and efficient.
There’s steady growth in the incentive industry, according to "A Study of the Incentive Merchandise and Travel Marketplace" conducted with 8,000 sales, marketing and human resources executives from a cross section of American businesses by the Incentive Federation at the end of year 2000. But there’s plenty of room for further growth, the study shows. Total expenditure for merchandise and travel items used by U.S. companies for incentive programs increased to $26.9 billion last year from $22.8 billion in 1996. The study also found that there’s a 6% increase in the number of responding companies that say they use incentives--from 26% in 1996 to 32% this year.
Of the 32% of respondents using merchandise or
travel, 64% of the responding companies use merchandise and/or travel as sales
and other incentives for sales management and internal/outside sales forces,
dealer and distributor personnel and independent sales representatives. This
year "business gifts" was added as a category. Room for growth Companies with fewer than 99
employees are underdeveloped
The distribution, retail and service
industries are a key target
Companies planning to increase their
incentive budgets in 2001 represent an opportunity
Cash is rated most effective as a motivator
Future is bright for non-cash incentives Promotional products distributors primary
source of merchandise and travel items of organizations using Incentives Companies with Web sites could benefit from
incentive programs to develop and increase traffic In 1999, the Incentive Federation requested that the Center for Concept Development conduct focus groups with incentive users in the New York, Los Angeles, Dallas, Chicago, and Atlanta areas. The purpose of this qualitative research was to identify issues regarding the following:
In 2000, the Incentive Federation requested that the Center for Concept Development execute the second, quantitative, phase of this research. This research consisted of a mail questionnaire sent to 8,000 executives in a cross section of American enterprises on a national basis. The questionnaire, designed by Ralph Head & Associates, was sent with a $1.00 bill and a postage-free return envelope and reflected issues that were learned in the focus groups conducted among incentive users in 1999. A test mailing of 1,000 was made to ensure that the desired results would be obtained. Once it was determined that the desired results would be obtained the full mailing was made. The mailing was sent to Sales, Marketing and Human Resource executives in organizations where such titles existed. In others it was sent to the ranking individual (President, owner, etc.), but in all cases it was sent to an individual and not just a company name. The names were provided by Dun & Bradstreet. Of the 8,000 questionnaires mailed out, 315 were returned as non-deliverable resulting in a net mailing of 7,685. When the mailing was closed for tabulation on November 18, 2000, 808 useable returns had been received. Subsequent to the close 27 additional questionnaires have been received bringing the total return to 835.
For marketers that are planning to issue rebates, the Rebate
Data Center has developed the following checklist to assist you in developing
your rebate.
Terms to Include to Help Minimize Fraud
Restricted or Regulated Products
Setting Time Limits for Offers
Geographic Terms
Participating in an Offer
This form was developed by the Rebate Data Center
Industry sources indicate that rebate fraud costs manufacturers over $500 million dollars annually. The U.S. Postal Inspection Service reports that there are approximately 200,000 fraudulent refunders. The most common types of fraud schemes include:
Manufacturers are looking to control fraud while paying for legitimate rebates for bona fide purchasers of their products. The following are steps that manufacturers and their fulfillment services can take to reduce their exposure to rebate fraud. James Santella & Associates recommends the following keys to detecting and controlling rebate fraud. Detecting Rebate Fraud CONTROLLING REBATE FRAUD The following are steps to follow in designing an effective rebate form. We recommend that your legal department review and approve the finalized form.
Manufacturers who issue rebates should review their rebate programs and procedures to evaluate their susceptibility to rebate fraud.
Below is a glossary of rebate terms commonly used on the Internet and in rebate magazines. CRT: Cash Register Tape
Due to the variety and complexity of offers, you may use several different formats to advertise your promotions. The following guidelines help ensure that the consumer clearly understands your offer and provides a legal and enforceable basis for taking criminal or civil action against a violator when fraud occurs. Failing to adhere to the guidelines could subject your company to significant fraudulent mail-in activity. By using standard rebate terms to clarify requirements, you can minimize fraudulent submissions. Formatting Mail-In Offers We recommend that you use the title "Mail-In Certificate" to differentiate a mail-In rebate offer from a coupon offer, and clearly state the deadline for receiving a request. Santella & Associates suggest that offers not exceed 90 days. Offers placed in or on a product may require an extended offer period or may not have an expiration date, and such offers should be visible to the consumer without having to open the package. Short expiration dates help limit exposure of your offer in refund publications. Text at the top of the offer, sometimes called the "banner," should clearly state the dollar amount of the consumer’s rebate and the fact that it will be received by mail. Consider also the following guidelines when formatting your mail-in offer forms:
There are a wide variety of promotions and legal requirements for offers, and any or all of the items on the list below may apply to your offers. The list includes phrases or terms that can help minimize fraudulent submissions.
We recommend the following procedures that can reduce your mailing costs:
Often, in a bid to retain the business, a fulfillment house will cut corners that the marketer might not notice. Such measures often ultimately reveal themselves in slow turnaround, inadequate customer service and heavy turnover in client administrative positions. Promotion managers however, can find additional savings by reviewing the following items: SLIPPAGE The key elements in determining slippage are the amount of the rebate, turnaround time and the form of check delivery. On a well-managed $3 to $5 rebate offer, slippage often ranges from 3 to 4 percent of the total value of the rebate. If turnaround time to the consumer is delayed for any reason, slippage quickly escalates to 7 or 8 percent or more. Recent corporate downsizing trends and the move to low volume regional promotions have forced many promotion managers to rely on their fulfillment houses to manage their rebate checking accounts. This practice often permits the fulfillment service to receive all slippage dollars. The argument from the fulfillment house is to "use our genetic account, and we'll take of reconciliation, escheat reporting and customer service." The truth is that reconcilement is a low cost automated function in most cases, escheat is nothing more than a scare tactic, and customer service can be handled at a fraction of the cost of slippage. To benefit from slippage, marketers' should require an accounting of all rebate' check accounts. This sets the stage to negotiate for a split of slippage dollars or lower fees. When negotiating slippage, consider these three factors:
POSTAL DISCOUNTS Postage and shipping costs are major expense items in all mail-in consumer promotions. Any savings in postage can impact overall costs in a big way. To encourage the use of barcodes and other mail preparation functions, the USPS offers deep discounts on postage rates. For example, a non-discounted postcard rebate check costs 20 cents to mail. Postage for this same item when bar-coded and sorted with other outbound mail may fall as low as 16.1 cents. This postage discount alone totals an astonishing 18.50%. If a fulfillment house agreement specifies - "standard postage," make sure that the full non-discounted amount isn't being charged. When asked about postage rates, a typical response from some fulfillment houses is that "small volume mailings usually don't qualify for discounts." This is true, but commingling of mail to receive discounts is common industry practice. Therefore, regardless of volume, discounts are being received by the fulfillment house. Discounts also extend to parcels. In some cases, the USPS provides free packaging. In some special situations, United Parcel Service also has started to offer discounts. Ask for detailed accounting of postage expenses. As in the case of slippage, an equitable split of the savings from postal discounts can be arranged with fulfillment suppliers. VALID VS. INVALID CLAIMS This cost-savings idea focuses on the primary reason for using an independent fulfillment company. Expressed another way, the main purpose of a fulfillment house is to relieve promotion marketers from having to deal with consumer inquiries and problems. Audit information from test mailings to several fulfillment suppliers strongly suggests that invalid claims are routinely processed as valid claims. This practice results in increased costs to marketers because the cost of the rebate or premium almost always exceeds the cost of processing a rejected claim. For example, a typical rebate costs from $3 to $4 as compared to a reject fee of less than $ 1. CONDUCT AN AUDIT OF YOUR FULFILLMENT HOUSE To be certain your fulfillment house qualifies claims in accordance to specifications, take the following steps:
REPLACEMENT CHECKS/PREMIUMS Aggressive consumers frequently call fulfillment house customer service units and demand replacement for rebate checks or Premiums "lost in the mail." To hold down costs on these calls, the customer service representatives are often trained to automatically re-issue checks or to mail replacement premiums without researching the inquiry. This practice results in substantial additional costs to the promotion sponsor. Advanced software that permits fulfillment services to quickly determine the status of a lost check or premium is now available through most fulfillment suppliers. Marketers should make sure their fulfillment supplier has this capability. The extra step of checking out a consumer call can yield substantial savings over a long period of time without seriously impacting customer service. FRAUD DETECTION Advancements in technology such as color copiers and personal computers, software programs, counterfeiting offers and register tapes, materials and renting multiple post office boxes has made it increasingly difficult to control rebate fraud and dishonest consumers. Unfortunately, many fulfillment suppliers provide little more than a token effort to identify and control fraud. Fraud detection is often no more than a computer program detecting duplicate submissions. DUPLICATE SUBMISSIONS Duplicate submissions represent by far the largest number of unqualified claims on most consumer offers. If your fulfillment house cannot provide a list of duplicate submissions on a particular program, a red flag should go up. The tightening-up of a computer routine or other simple steps of due diligence in this area can produce significant savings. INTEREST Fulfillment houses receive funds from several sources: consumer-cashiering funds, advance deposits and uncashed checks. In some cases it may be possible to have the fulfillment houses segregate these funds into interest-paying accounts. The Interest earned may offset fulfillment and other promotional costs. INVENTORY After a program ends, leftover merchandise or premiums may be forgotten in the fulfillment warehouse for months and the client continues to pay storage fees. We recommend that you:
Does your fulfillment house meet your needs? You should evaluate each fulfillment house to determine if the firm is large enough and has the necessary experience to meet your needs and expectations and can handle the assignment. It may be acceptable to choose the firm that offers the lowest fee where the program is small and not complicated, but we recommend that you be aware of companies whose bids are out of line. We recommend that you meet the people who will work on your account, not just the account executive, but supervisors and data entry personnel. Instead of checking with references provided, check with other companies that have worked with the firm on your own and ask the brand or marketing manager about their responsiveness, experience and capabilities. How will "float" or uncashed checks be handled? An important issue often overlooked is the issue of float and uncashed checks and how it will be handled. This is the aggregate value of rebate checks that lie around in drawers and which will never be cashed by the consumers. These funds can be returned to the manufacturer. It is generally one to three percent of the promotional budget and can add up quickly on multiple programs and programs with a high non-delivery rate. The practice of allowing the Fulfillment Company to keep these funds may result in higher order entry inaccuracies, which increase the number of uncashed checks. Conduct a Test Mailing. Promotions that use premiums are most likely to experience problems in the mail due to weight errors. If the production model weighs a half-ounce more than the prototype, postage costs may rise to the next higher rate. If an item has an unusual size or shape, you will likely incur special handling costs. The type of merchandise to be mailed should also be considered. For example, a porcelain premium will incur higher handling costs as well as have an increased percentage of broken or damaged merchandise at delivery. Conduct a test mailing of your premium to ensure that your fulfillment company has the expertise to resolve these issues before you launch your promotion. Review Items and Material Affecting Deliverability. You should closely review the offer copy, expiration dates, P.O. Box numbers, addresses, stated delivery time, and the size of the rebate form. An incorrect address will severely effect response rates as well as incur loss of your customer base. Agree on the Order Turnaround Time. Rebates generally indicate a six to eight week waiting period for the customer to receive their check or premium. Make sure your fulfillment house is capable and prepared to ensure prompt turnaround time for your promotional programs. Have a Written Plan Outlining Procedures for Dealing with Consumers or the Press. Develop a plan in case of premium recalls and other sensitive issues. A mishandled call from the press can be a very costly mistake to your company and brand name. It can also cause financial damage and loss of consumer goodwill. Visit the Fulfillment House. You should visit your fulfillment house while a project is being handled and ensure that the inventory (if a premium) is secure. For example, are the employees wearing the shirts that are to be used as premiums? Are the materials stored neatly and in one place and are the instructions for handling clear and being followed? Print Rebate Forms in Two or More Colors. Print your rebate form in two or more colors on coated stock to discourage fraudulent duplications. Colors like light blue and orange are difficult to copy. Get your art department to use a halftone of a photograph. Even sophisticated color copiers have difficulty copying these without producing a telltale moiré pattern. Do Not Accept Requests from Post Office Boxes. Fraudulent refunders keep dozens of P.O. Boxes that they use to beat the one-per-household limit and the fulfillment house duplication check programs. A word of caution, however. Marketers may risk alienating consumers living on rural carrier routes who have no other way of receiving mail. Address on Form Matches the Envelope. This step discourages rebate clubs. You should mail rebate checks only to people whose address on the rebate form matches the address printed on the envelopes. You should make sure to inform respondents that checks will be made out only in the names of those applying for the rebates. Monitor Customer Service, Inquiries and Complaints. This area is very important because every complaint potentially represents a lost customer. An excessive number of complaints involving a particular promotion are a definite sign of a problem that needs to be handled quickly. We recommend that the rebate form have an 800 number for customers to inquire about the status of their rebate, complaints, ask questions, etc. You should review complaint rates by promotion. Conduct an Audit of your Fulfillment House. Joint Industry Guidelines state that it is in the manufacturers' best interest to have their fulfillment house audited either by the manufacturers own auditors or an outside auditor. The audit should be performed no less than once every two years. Santella & Associates can act as your representative in auditing your fulfillment house. The purpose of the audit is to ensure appropriate controls are in place from both a processing and financial standpoint and that the fulfillment house is in compliance with manufacturers' specific standards and conditions of the contract with the fulfillment house. To be certain your fulfillment house qualifies claims in accordance to specifications, take the following steps:
In conclusion, ensure your fulfillment house has earned your confidence in its ability to do the job right. Price should not be the biggest factor as you generally get what you pay for.
INDUSTRY TAKES STEPS TO CONTROL REBATE FRAUD Recent trade publications state that loses from rebate fraud may total in excess of $500 million a year. A single promotion can cost a manufacturer thousands of dollars in fraudulent payouts. To date, the Rebate Fraud Task Force has identified and taken action against over 7,000 individuals involved in rebate fraud resulting in a potential savings to the industry in excess of $100 million. Mail-in offers normally prohibit the transfer, exchange, sale or reproduction of specific forms and qualifiers and limit claims to one per household. Common schemes related to mail-in rebates may include the following:
The methodology employed to address this widespread problem is to establish appropriate levels of criminal and/or civil sanctions consistent with the conduct of the violator. A variety of remedies is employed to deal with offenders including: o Voluntary Discontinuance letters
Voluntary Discontinuance letters Another important aspect of the law enforcement initiative other than traditional criminal and civil sanctions has been the use of administrative court orders. Publications that cater to illegal refunding activities tend to shield themselves behind the First Amendment making it difficult to take appropriate action. However, Task Force attorneys, in conjunction with the Postal Service Law Department, successfully litigated and enjoined the three largest rebate magazines from publishing objectionable rebate information which had promoted fraudulent conduct by their subscribers. The Inspection Service entered into a Consent Agreement with the publishers of Refunding Makes Cents, Moneytalk, and Refund Express. Santella & Associates strongly recommends that if you are a manufacturer who utilizes rebates in your marketing mix, you should subscribe to the joint government industry effort (United States Postal Inspection Services and the Rebate Data Center) to combat rebate fraud. Join major companies that have cut fraud loses by tens of thousands to hundreds of thousands of dollars, by using the most up-to-date technology to identify questionable rebate claims. Every dollar you save goes to the "bottom line!!!" For more information,
email a request to us at santella@email.msn.com.
HOW TO DEVELOP AN EFFECTIVE REBATE/REFUND PROMOTION Rebate and refund promotions provide manufacturers with a marketing vehicle that can increase sales, generate trial, reduce excess inventory, produce multiple purchases, develop and reward customer loyalty. Rebates provide price cuts directly to the consumer whereas with a traditional price cut, the retailer may keep the price on the shelf the same and increase their profit margins. In developing your rebate/refund marketing promotion, the following are Santella & Associates recommended guidelines that you should follow:
KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM Return to the top of the page
KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM Return to the top of the page
KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM Return to the top of the page
KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM Return to the top of the page
KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM Return to the top of the page
KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM Return to the top of the page
KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM Return to the top of the page
KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM Return to the top of the page
KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM Return to the top of the page
KEYS TO EVALUATING YOUR FULFILLMENT PROGRAM
In evaluating your fulfillment program, we make following recommendations in order
to minimize problems and increase the effectiveness of your fulfillment program:
POSTAL INSPECTORS FOCUS EFFORTS TO PREVENT REBATE FRAUD Millions of retail transactions are conducted each year utilizing marketing incentives called rebates (or "mail-in offers"). Rebate offers range from 50 cents up to $100 or more. While most consumers submit rebates according to manufacturer rules, there are an increasing number of fraudulent claims. "Industry estimates of annual losses range in the hundreds of millions of dollars; one source puts it at $600 to $800 million a year". Individuals as well as organized groups are selling rebate forms or computer generated facsimiles of forms and cash register receipts. Others sell magazines and newsletters publishing details of rebate offers and sources for the needed documentation such as cash register receipts or proofs of purchase symbols- the Universal Product Code (UPC) barcodes found on the consumer product. The magnitude of the problem can be seen in the case of a promotion that offered a rebate to consumers who wrote the UPC number of the product on their cash register receipt as proof of purchase. Over 70 percent of the requests received contained the same incorrect UPC number. Further investigation by Postal Inspectors revealed that one of the larger refunding magazines had inadvertently transposed the products UPC number in one of its issues. The incorrect UPC number appeared on three out of every four rebate requests received. Another manufacturer received 2,200 rebate requests accompanied by cash register receipts for a product that was not even in the stores yet. The prevalence of rebate fraud became a major concern of the promotion industry in 1993 and the industry formed the "Rebate Fraud Initiative" to develop solutions that would address the problem of fraudulent rebate's. Lead by Rick Bowdren, Inspector in Charge, the promotion industry joined the Postal Inspection Service to form the Rebate Fraud Task Force to identify the leading causes of rebate fraud, specify guidelines to reduce fraud and promote the widespread adoption of the guidelines by the promotion industry. The Task Force has targeted their sights on the ringleaders of rebate fraud; the counterfeiters who print, photocopy and sell rebate forms, coupons and proofs of purchase; and the refunders who buy, sell, manufacturer and trade coupons, register tapes and proofs of purchases. Investigations by Postal Inspectors and the Rebate Fraud Task Force have resulted in mail fraud indictments against large scale fraudulent rebaters, such as the publishers or organizers of newsletters and rebate conventions. In one instance, Postal Inspectors obtained a federal court order to break up a large rebate ring run by four women in Houston, TX. The ring controlled 68 different addresses in 12 surrounding towns. In addition to using multiple addresses, the group submitted counterfeit cash register tapes they had created on home computers. One individual associated with the group stated she was earning nearly $1,000 a week from her fraudulent activity. Another case involved an Atlanta woman, who Postal Inspectors found was running a rebate scam on numerous manufacturers using a variety of schemes. The defendant received a prison sentence, and the federal government seized her assets, including her home. Total losses to manufacturers were estimated at nearly $500,000. It is in the manufacturer's best interest to audit their fulfillment company on an annual basis. The purpose of the audit is to ensure that appropriate controls are in place from both a processing and financial standpoint and that the fulfillment company is in compliance with the manufacturer's specific standards and conditions. (Portions of this article were reprinted with the approval of the Postal Inspection Service.)
PREMIUM PROMOTIONS REQUIRE CAREFUL PLANNING If you are planning a premium marketing promotion for your company, it is very important to order a sufficient supply of the premium to have on hand at the time of the promotion, otherwise you can wind up with an advertising campaign that will turn your customers against you and provide more negative publicity than you could have ever dreamed possible. Your marketing campaign can be a disaster if your supplier misses the delivery date, has financial problems, etc. If you order an insufficient quantity of the premium, it will increase your costs five to seven times more to backorder the premium and by the time the order is filled, the damage will already have been done. You can avoid getting caught short with proper planning and attention to detail. Your fulfillment company will provide storage, process and ship the premiums to your customers and their main objective should be to get the premium to your customer quickly and in good condition. If the premium cannot be shipped to the consumer promptly, you must notify the consumer that you are temporarily out-of-stock by first-class mail and you must immediately notify your customer service department as they will no doubt need to add staff to handle the flood of complaints. You will also find the cost to backorder will be very expensive. You will also incur additional expenses such as warehousing, rent, insurance, postage, shipping, accounting and inventory management charges. The Federal Trade Commission can also fine your company if strict procedures are not properly followed. The premium must be received within 30 days if a time is not specified. For example, when Burger King and Disney promoted the character's from the movie Toy Story, 58 million puppets, toys and trading card packs were ordered for the six week marketing program. At the end of the second week, less than half of the inventory remained. Burger King quickly ordered and additional 10 million trading card packs which reached the stores a few days after the stores had completely run out. In another case, McDonalds's launched a Teenie Beanie Babies/Happy Meals promotion last year to pump up its slumping sales ordering 100 million of the Beanie Babies for the five week promotion. The initial promotion overwhelmed McDonald's marketing department. While the company knew the full-size Beanie Babies were a hot item, they didn't anticipate the scramble that the miniatures would cause. The consumer response was tremendous and the incentive resulted in doubling the sales of Happy Meals, making it the most successful promotion of its kind in the company's history. However, McDonald's ran out of the Beanie Babies by the end of the fourth week causing many unhappy children and frustrated parents and a public relations mess for the company. The promotion ended early because of the shortages. McDonald's has now decided to run the promotion again this year but has planned by performing a post-analysis of last year's promotion to determine how to improve their promotion to meet the demand by their customers. First, they have increased their order to 240 million of the miniature stuffed toys. They have recommended to their franchise owners to set a 5 or 10 toy limit based on the demand in their respective stores. Each store will prominently display large signs indicating which three Beanie Babies are available each week at that location. While the toys, made by Ty Inc. Oak Brook, Illinois comes free with a purchase of a Happy Meal- typically prices at $1.99, customers can buy them outright with the purchase of another food item. Sold alone, each toy's suggested retail price is $1.59. The toys cost less than 60 cents each, so these have become a high-profit item. Mr. Thossman, an analyst with B.T. Alex stated that this year's Teenie Beanie Babies promotion, launched May 22, appears to be another hit, but without the inventory and publicity problems that plagued the first promotion. Like last year, however, the supplies have been wiped out sooner than anticipated. Some restaurants have nearly run out of food items, demand is so high. Franchise owners credit the toys with pushing sales up more than 30% from a year ago. A third Teenie Beanie Babies promotion is in the planning stages for 1999, but McDonald's hasn't made any official announcement. Santella & Associates recommends that when you are planning a premium promotion, you should form a crisis management team to plan and monitor the promotion. They should have an emergency backup plan in place in case shortages result. You should have a pre-arranged agreement in writing with the premium supplier for an additional order at a specified cost. If the premium will be mailed to the consumer, they should evaluate the premium in advance taking into account the weight of the premium (weight will affect shipping costs) and whether the premium is breakable and needs to be shipped through UPS which will also affect shipping costs. You should be aware that shipping costs may be more than twice the actual cost of the premium itself. The premium offer should be clearly defined to avoid confusion by the consumer. You should indicate that the product will be shipped in "six to eight" weeks from receipt. Consider placing the company logo or designing a customized message to be placed on the premium, if possible. If your premium promotion is not as successful as anticipated, and you have an inventory excess, you can liquidate the inventory and reduce storage fees by donating the items to a non-profit organization, thus providing goodwill and possibly free publicity for your company. In addition, you will receive a tax write-off benefit. You could also distribute the premiums to company employees and clients improving relationships and employee moral. Your objective should be to increase incremental sales, market share and to build customer loyalty to your product.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Telephone: (708)
401-3766
|
