Aug. 10 2006 02:35 PM

Editor's Note: In this interview, APL Direct Logistics' CEO Frank DiMaria, a former package handling executive, explains why package tracking/notification service for consumer-direct marketers are important and what every consumer-direct shipper stands to gain from maintaining closer ties to package carrier performance.

Mailing Systems Technology: You have recently been quoted as saying that consumer-direct companies need to take more responsibility for the package delivery process. Isn't that kind of difficult to do when companies don't have their own package delivery infrastructures?

DiMaria: Outsourcing a service doesn't mean relinquishing strategic responsibility for it. Online retailers and other consumer-direct companies shouldn't assume their job is done after they turn packages over to package handling companies for delivery. That hands-off policy sells them and their customers short. Just as important, it deprives them of a potentially lucrative competitive advantage.

MST: Why do you think they should be more hands on?

DiMaria: Package carriers are far from perfect. And I'm not just saying that because I spent 11 years working for a major package carrier!

Current statistics show that nearly six percent of all packages are delivered late or not at all. So, on average, six percent of a company's consumer-direct customers will have an unsatisfactory buying experience due to poor package carrier performance.

The problem is these unsatisfied customers probably won't blame the package carrier. They'll blame the e-tailer, cataloguer or other consumer-direct company that they ordered from. And that e-tailer, cataloguer or other consumer-direct company may lose a loyal customer as a result.

MST: Explain why shippers, rather than package carriers, suffer the consequences of late deliveries.

DiMaria: It's a classic case of guilt by association. Even though customers technically understand that their packages will arrive via a package carrier, they still associate the transaction with the company they ordered it from because that company books the package shipping for them.

The average consumer's attitude is, "You're the pros. You told me whom to use. I might have used a different carrier if I'd been doing the choosing. My package is late. I hold you responsible."

MST: So what's a consumer-direct company to do?

DiMaria: Consumer-direct companies can't change the fact that late deliveries occur; although they do need to be sure they're using the right carrier based on their business rules. (And I need to point out here that many late deliveries are due to bad weather or other circumstances outside a carrier's control.)

What they can change is how they choose to deal with those late deliveries from a customer service perspective and do a better job of communicating with their customers about them.

MST: Ordinarily, the terms "late delivery" and "customer service" don't go hand-in-hand.

DiMaria: That's where you have to shift your paradigm, because with the right customer service practices in place, you can change a potentially negative buying experience into a positive one.

Let's say, for example, that you're a consumer-direct company that has sent an order out. If you continue to track that · order via the right kinds of systems and you discover that it's not going to be delivered within the promised window of time, you can let the customer know the package is going to be late instead of letting him discover that fact when the package isn't there. Depending on your business rules, you may even want to reship the order and send it via expedited delivery.

In the process, you've sent a lot of important messages: you care, you're in control and you stand behind every order you process. Little things like that go a long way in terms of customer retention.

MST: But isn't it kind of redundant to recommend that a shipper or its third-party fulfillment provider track packages, considering that many package carriers offer some form of package tracking?

DiMaria: Not if you're customer service oriented. Web shoppers are typically time-challenged or time-sensitive people. Requiring them to spend extra time doing their own package tracking removes one of the key advantages of Internet buying.

A lot of them just won't bother to track the package. And even if they are monitoring their packages, they won't necessarily be able to recognize that a delivery is going to be late based on the information provided. For example, a carrier's tracking system may show an Internet shopper that her package is at the carrier's sorting center on the Thursday before a promised Friday delivery. What it doesn't tell her is that it takes an average of two days after a package leaves the sorting center for that package to reach the consumer, which means the package won't be there on time. That's the kind of thing only a logistics department is going to know.

MST: Let's talk dollars and cents. How much money could companies potentially save by keeping their customers better informed about package delivery exceptions?

DiMaria: On average, it costs approximately $15 to $20 to acquire a customer in the Internet arena. So for every customer you avoid alienating because a delivery was late, you've technically saved that amount of money in marketing fees not to mention preserved whatever profit margin you'll get from that satisfied customer's repeat business.

Another big savings is the area of customer service. Nearly 20% of incoming customer service calls are from customers who want to know where their shipments are and it's safe to say that many of those calls are coming from customers whose promised delivery dates came and went. If you can get to the customer first with some form of communication, you can substantially trim your CSR budget.

Finally, there's the savings that comes from avoiding fines and considering that the Federal Trade Commission just fined one e-tailer $1.5 million for false advertising related to deliveries, that's something you can't underestimate. There are strict regulations about the steps consumer-direct companies have to take to notify customers when delivery exceptions happen, and by being more diligent about watching packages, companies can be sure they'll be compliant with those regulations.

But better parcel management isn't just about saving money. It's about carving out a competitive advantage in a very competitive arena. Services like this have the potential to dramatically enhance an e-tailer's branding.

MST: Let's say a shipper decides to follow your advice and be more aggressive about package tracking. What would you recommend that shipper actually do in terms of supporting customer communications?

DiMaria: There are a lot of choices. You can e-mail the customer. You can call him. Or at the very least, you can send a postcard letting him know about the late delivery although that kind of defeats the purpose of advance notification, because the postcard will probably get there after the package.

Depending on how time-critical the order was, you also might consider re-shipping the product, giving the customer a discount on his next order or some other form of restitution. It all depends on your company's business rules and operating margin.

The important thing is to let the customer know as soon as you see that a delivery is going to be late so that he has a chance to make alternate arrangements.

MST: Prior to becoming CEO of APL Direct Logistics, you were head of a major Internet consulting company and participated in dozens of Internet start-ups. How has that affected your view of package delivery and the place it should have in Internet marketing?

DiMaria: One of the things I've most consistently seen is that the customer service experience is still lacking at many e-tail sites. They do a great job of getting the traffic and capturing the order. But they don't do a good enough job of making the shopping experience a positive one for the customer from start to finish.

It's a huge blind spot for e-tailers and a huge window of opportunity for anyone willing to seize it.

MST: Any parting words?

DiMaria: At the moment, consumer-direct companies have a major opportunity to differentiate themselves from their competitors by the way they handle their package delivery. If they want to do what it takes to build a successful brand and to avoid being a replaceable commodity, then they cannot relinquish responsibility for any part of the selling process.

Consumer-direct companies have always been very sensitive about how their Web sites look and feel. And they're doing a much better job of worrying about the fulfillment part of the transaction, which is probably where a lot of the focus is at the moment.

But they need to be just as mindful of the fact that package delivery is the last contact they have with a customer and that last impressions are often just as important as first ones.