2003 Jan 01
Direct Logic Solutions DirectIntegration
David M. Raab
DM News
January, 2003

Direct marketers have always been somewhat separate from the rest of the marketing community. Even their computer software is different. While most businesses run generic manufacturing, order processing, customer service, inventory and financial systems, direct marketers typically use an integrated catalog management system that combines these functions. In scope, these catalog systems resemble the integrated enterprise resource management (ERP) systems sold by vendors like SAP. But ERP systems run multi-billion dollar businesses, while few catalog operations exceed $50 million. This makes ERP and catalog systems fundamentally different products, despite the superficial resemblances.

Perhaps nowhere is the divergence between direct marketing and other businesses more apparent than sales planning. Conventional marketers build forecasts by territory, salesperson and specific deals. The heart of direct marketing plans is the campaign. Each campaign is itself a combination of specific offers to specific lists. Since direct marketers select the offers, lists and timing of their campaigns, they can plan their sales with grand precision.

This precision is not free. Users must estimate sales and returns for each product in each campaign, primarily based on past performance of similar products, catalogs and lists. Estimates are then aggregated across campaigns and summarized by time period. Consolidated demand is compared with existing and on-order inventory, to calculate what additional goods will be required and when. Values are continually adjusted as actual orders are received and plans change.

This process requires managing huge masses of detail–particularly for catalog marketers who run dozens of campaigns with hundreds of products in each. Integrated catalog management systems capture much of the needed information, but do not always provide the adequate planning functions. Nor does every catalog marketer use an integrated package.

The obvious alternative for marketers without a prebuilt planning system is a computer spreadsheet like Microsoft Excel. After all, this is often the only tool they control for themselves. But it’s easy for errors to creep into a spreadsheet, and hard to use one spreadsheet for several purposes. So a spreadsheet-based approach is not practical for a large catalog operation.

DirectIntegration (Direct Logic Solutions, 309-688-5500, www.direct-logic.com) provides a direct marketing planning system that can work with any order processing system. Like somewhat similar products from Forerunner Systems and Galvin Associates, DirectIntegration combines campaign plans with inventory and sales data to produce detailed estimates of product requirements. It differs in providing broader marketing analysis functions, including detailed reporting on catalog and list performance.

The system is divided into modules for planning, forecasting, inventory management and reporting. The planning module lets users define campaigns, which can be assigned top-level metrics such as total circulation, response rate and budgeted revenue. Users can then specify product and list details, adding response, revenue and cost forecasts at those levels. Each list in a campaign is assigned a unique mail ID, which can be related to key codes in the order processing system. Each mail ID can also be assigned non-unique list and segment codes. The list code would typically identify names from a particular source, while the segment code would identify a selection within the source. These codes let the system generate reports that show results from a given list or segment across campaigns.

Product detail shows the individual items sold in a campaign. The system can record product IDs used in the order processing system, and can store the page number, amount of space, and financial details for each item. An optional integration with Pindar content management software lets the user view an image of each catalog page along with reports on the performance of each item the page contained.

The forecasting portion of the system can estimate final sales for active promotions. Like most catalog forecasting systems, DirectIntegration bases its estimates on response curves that show the percentage of final orders received by each day after the campaign begins. The system can analyze historical data to develop these curves and can apply different curves to different product groups or individual products. Specialized forecasting methods are available for continuity programs, which involve a sequence of shipments over time.

Forecasts from different campaigns can be combined to estimate total demand by product up to three years in the future. The inventory management module combines demand and return estimates with existing inventory and scheduled replenishments to show projected inventory, orders, shipments, backorders and related values over time. The system can recommend when to order additional products, taking into account lead times as well as minimum order quantities, and generate the necessary purchase orders. It does not perform the more advanced calculations needed to balance risk of overstocks vs. understocks, however–a specialty of Forerunner. DirectIntegration can work with Direct Logic’s own purchase order module or import results from external purchase order systems. The system does not provide operational inventory management capabilities such as tracking inventory stored in different warehouses. It does have the ability to manage kits made of multiple products and families with color and size variations.

Reporting in the system is particularly flexible. Users can select from a wide range of financial and operational metrics and view these from different perspectives such as campaign, product, list and segment. Reports can be produced in tabular or graphical formats and can exported to Excel for further manipulation.

DirectIntegration runs on Windows 2000 servers with Windows workstations. It can also be accessed remotely with a Web browser. The system is designed for large organizations, with support for multiple business units, sales channels and currencies. Screens, data access and functional capabilities can be customized for each user or work group. Data is stored in the SQL Server relational database. Information is typically exchanged with external systems through flat file imports and exports.

Pricing of DirectIntegration starts at $60,000 and is based on the modules purchased and size of the installation. The system was originally developed in 1998 and has since been deployed at several firms, although there is currently just one active installation. DirectIntegration is one of several products and services from Direct Logic.

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David M. Raab is a Principal at Raab Associates Inc., a consultancy specializing in marketing technology and analytics. He can be reached at draab@raabassociates.com.

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