Outsourcing: Four Ways to Choose the Best Service Providers

A panel of marketing executives at multichannel merchants addressed the dual challenge of deciding to outsource and finding the right service firm during a session at last week’s Mid Market eTail conference in San Francisco. Following are their tips:

* Learn from the best merchants. “While I try to find out about great solutions from other merchants at conferences and events, often the best resources are top 100 or top 500 lists that are published in magazines,” said Adrienne Hartman, director of the Internet for footwear merchant Shoemall.com and a former Internet manager at Lands’ End. “I’ll browse through a top merchant list and find out which vendors these companies are using.

Ben Chavetz, vice president of marketing for printer supplies merchant 4Inkjets.com, agreed. “Often I’ll just cold call the marketing directors at other successful merchants and ask which vendors they use,” he said.

* Identify your needs and expectations. Before you settle on services from a particular vendor, establish what you actually need. Hartman offered an example that saved Shoemall.com a lot of money. “A vendor offered us what seemed like a really great deal – a bundle of services for $10,000 per month,” she recalled. “But when we broke down what we actually needed rather than what was offered, we were able to contract for those services for just $1,700 per month.”

Chavetz noted that bringing in a new vendor is much like hiring a new employee. “You have to establish success metrics and expectations,” he said. “The better you can show them what you need, the better they’ll perform.”

* Look for vendors who’ve done the homework. “I got a cold call from a search agency that had done some research and identified the weak links in my search strategy,” Chavetz recounted. “Incidently, these weak spots were the very things upsetting me.” He noted that he ended up canceling the contract with his then-current search agency because the cold-calling agency had taken time to address his concerns before he had voiced them. “If they’ve taken the time to look into your industry, your company and your metrics, that differentiates them,” he said.

* Develop a plan to get past the sales pitch. “I have a six-step process for every new vendor interaction,” Hartman said. “It makes the decision process a more quantitative event, rather than a personality driven decision.” Hartman offered six steps:
1. Gather information, either through publications or peers.
2. Prepare a templated proposal for the vendor-client relationship. Include success metrics, expectations and possible extensions of the relationship.

3. Define the criteria on which each vendor will be judged and include it in a spreadsheet. Criteria should include company background, ability to meet a timetable, personality and cultural fit, Hartman pointed out.

4. Negotiate to ensure you’ve gotten the best price for the best services.

5. Close the deal, double checking to make sure all your criteria have been met.

6. Periodically re-evaluate the vendor’s performance. “Once we’ve chosen a vendor, they’re not a vendor for life,” she noted. “We constantly re-evaluate the relationship to ensure we’re getting the results we expect.”