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Under the Microscope: Rewards Distributors Embrace Continuous Improvement

Amazon may be gone, but its legacy is still around in the form of higher expectations and increased automation – here’s how the industry is filling the gap

By William Keenan Jr.

When it comes to motivating people, selecting and distributing rewards is a lot different than it used to be. Gone are the days of print catalogs, manually entering orders or product updates, waiting weeks for the delivery of a reward and having to start the process all over again if the product wasn’t available.

In large part, it has been a natural progression over time – with incentive companies and their suppliers working together to improve data transfer and order fulfillment processes to get rewards into the hands of program participants more quickly and more efficiently.

But there have been more abrupt changes as well – as when Amazon recently stepped into the incentive/motivation marketplace with its online retailer model (and then stepped out again almost as quickly). In the short time that the online retailer was in the market, however, incentive suppliers, distributors, end-users and program participants quickly found that programs could be streamlined, product information could be generated and updated in real-time and rewards could be delivered in a matter of days rather than weeks.

As Dave Peer, VP Client Services of Hinda Incentives, puts it, “Amazon established new standards [and] new expectations in that, when we talked to our customers, they were the benchmark against which we were measured.”

Ira Ozer, President of Engagement Partners and consultant with Harco Incentives, also notes that Amazon and other e-commerce models created an expectation that “distributors need to do a better job than they’ve done in the past in terms of having merchandise that’s really popular, keeping those items in stock and providing primary delivery as quickly as possible.”

While a product offering as large as Amazon’s is perhaps overkill, Ozer says, having the proper mix of selected items for the demographic of a particular program is important, as is having the capacity to provide an automated fulfillment process that provides up-to-the-minute data transfer.

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A Tech Legacy

This is perhaps the biggest legacy that Amazon left when it departed: the creation of a “one-stop shop” – not just in terms of product, but even more so in terms of technology.

“Going from one data feed with Amazon to multiple feeds from a variety of suppliers posed a bit of a problem,” says Mike Miller, Owner of HG Worldwide. “You have feeds coming in that may not have been scrubbed, and you may be showing that an item is available when it’s not. We’ve definitely seen issues like that creep up; people just don’t have data feed reliability down yet.”

Melanie Miller-Pusateri, Senior VP at Frosch Incentives, agrees. “We still have the relationships in the special market channels that we had before Amazon,” she says, “but our IT department is saying, ‘Don’t give us 100 different feeds from 100 different suppliers, please. Try to find somebody who can consolidate those feeds into one for us.’ We don’t want to have to manage that.”

Larisa Mendenhall, Director of Individual Rewards for ITA Group, says it’s a delicate balancing act: “We have always had an extremely strong network that integrates hundreds of suppliers. As a result, if we have issues with one supplier, we can manage our other suppliers in such a way that our clients never really feel the impact or fallout.”

She adds that industry suppliers and distributors have upped the ante since Amazon left the market. “I think all of our suppliers have stepped up and made improvements in their processes, their systems and their customer service,” she says. “They all began to look at how they were doing things a bit more closely – and we all benefited from that.”

Data exchange with its suppliers is still something of an issue, however. “We communicate with our suppliers in so many different ways, but I think there’s a willingness to work with each other and find a compromise when needed,” Mendenhall says. “We’re working with a couple of our suppliers to become fully integrated with them, one to one, and that should open things up relative to how quickly we can launch products [and alleviate] that constant back and forth over order status, fulfillment, inventory status, exchanges of images and all of that.”

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Third-Party Players

“When we were informed of Amazon’s departure from the incentive business, of course we were concerned about how we would move forward, notes Holly Spies, Implementation Manager at Altour Performance Network. Fortunately, she says the company was already doing some research and “had some third-party solutions in mind – like catalog hosting sites. We ultimately chose one, and we were able to set up a website, rewards fulfillment and the real-time data transfer we needed in order to serve our clients.”

Spies says the nice thing about working with a third party for the catalog is that “they really manage all of our web service and all the spreadsheets that come in – the distribution and collection of all that information. We still work with the vendors to negotiate our rates, and we still have the relationship with the vendor in terms of ‘we want this,’ or ‘we want that.’ But all of the other data is managed through the third-party vendor.”

There are a number of third-party product and data exchanges serving the incentive market right now, but the two biggest players are the Universal Rewards Exchange (URE) and Bridge2Solutions. Mike Hadlow, President and CEO of Engagement Technology LLC, which runs the URE, notes the need for such services is pretty obvious. “You have all these resellers operating in the industry, connecting individually to some number of fulfillment providers and trying to get the selection of rewards and the pricing that best matches up with their needs and the needs of their clients,” he says. “That’s a lot of redundant connections, and from an industry standpoint it’s not very efficient or cost-effective.”

What the URE and other platforms like it do, says Hadlow, is connect any number of suppliers into the system with a single connection, and on the other side connect any number of incentive companies or other resellers into the system with a single connection.

As a result, incentive companies that use the URE get access to its 40-plus stocking distributors, super distributors and other suppliers and close to 1 million SKUs of product through a variety of price ranges, without the multiple data connections and with aggregated billing. “It automates the back-end processes – the transactional relationship between the incentive company and the supplier in terms of billing, invoicing and tracking – and it allows for basically real-time inventory availability information and updating of prices,” explains Hadlow.

The URE also offers an online reward catalog platform for resellers who don’t have their own, and Hadlow points out that it doesn’t get in the way of established relationships that incentive companies might have with their suppliers. “Those relationships between suppliers and resellers remain intact,” he says. “We’re not trying to automate the relationship between the parties that are doing business together. We’re automating the transaction process that comes out of that process, where a lot of the work ends up happening.”

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Focus On Core Competencies

Some distributors responded to the Amazon challenge by reviewing their core competencies and examining their fulfillment processes from top to bottom.

Rymax Marketing Services, for example, didn’t believe that Amazon would survive over the long haul. “This just wasn’t their core business,” says Allyson Krichman, the company’s Director of Merchandising & Sales Operations. Rymax’s response was to focus on core competencies that Amazon couldn’t offer. “We have a national installation business,” says Krichman. “We have home delivery service – white glove service – to deliver product and make sure that the program participant is handled with care and gets an ‘out-of-the-box’ experience. We also have factory-exclusive relationships with certain brands, and we handle their distribution because we understand the power of brands and brand integrity.”

Likewise, Harco Incentives – which distributes product through the URE, as well as via direct connections with resellers – has focused on some of the things it does best, things it has learned through its long experience in the incentive industry. “Harco is one of the few distributors that takes advantage of the special pricing deals that some manufacturers offer and passes them along to incentive companies and program participants,” says Ira Ozer, “and that process is automated so those feeds are updated several times per day. In addition to inventorying more products, managing that inventory and taking advantage of special deals, Harco can also offer special handling and special packaging options that help differentiate it as an incentive fulfillment company, rather than just a retail distributor.”

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Under the Microscope

Dave Peer says Hinda also reexamined its core business strategies, and as a result completely reengineered its operation throughout the entire supply chain, from the manufacturer to the ultimate delivery of the item to the participant. “And we worked very hard with all of our partners – our manufacturing partners, the branded product partners, fulfillment and delivery partners – to take a look at how each aspect of the supply chain operated and to squeeze every possible shred of inefficiency out of it.”

Everything, HE says, was put under the microscope. Hinda even developed new strategies around how the company received product and where product was placed around the facility. “We arranged the facility so high-turn product is juxtaposed with shipping stations, so you minimize the amount of time it takes to pick, pack and ship an order,” he says. “We reorganized our shipping materials, including where we were placing corrugated boxes and stuffing paper. We took a look at every single movement inside the facility and arranged it so that we maximized the speed and minimized the amount of walking around, picking and packing product.”

Peer sums it up like this: “It’s an ongoing, never-ending process. It’s not something you do and then it’s over. You’ve got to be committed to improving every day.”

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June/July 2011

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