Higher Costs and Slower Response Time Point to Less POS Outsourcing

More distributors say they want to keep POS marketing “In-House”

Since 2010, we’ve been hearing and talking about the trend of outsourcing the development and production of Point-of-Sale (POS) marketing materials. Some beverage alcohol distributors have shut down their in-house POS marketing operations and shifted to outsourced printing companies, presumably to take advantage of lower costs and improved time to market.

After several years of experience with outsourcing there are now indications that the trend may be reversing, or at least that the practice is being closely examined.

Recent feedback from distributors:

• Many have discovered that good POS marketing management generates sales lift and that POS campaigns and initiatives are best managed when kept in-house
• Many more understand that POS marketing is not just printing. POS marketing is a core business driver and distributors want and need to keep POS marketing materials development and production in-house

This blog discusses our current observations regarding the initial value propositions the distributors were presented when they made the decision to outsource their POS marketing management — Cost Savings and Time to Market. Did they get what they expected?

Cost Savings

The majority of the expected cost savings from outsourcing come from the reduction in distributor head count and elimination of graphics department infrastructure. Believing that these reductions would more than offset the costs associated with outsourcing, many beverage distributors shut down their in-house POS marketing materials production.

After a year of outsourcing, problems have developed for these distributors. The outsourcing company’s production and printing fees began to increase at an alarming rate. What was once imagined to be an approach that would substantially cut costs, had not. In some cases lower cost ‘generic’ POS materials were offered as a substitute for custom POS materials to keep the growing costs down.

Time to Market

The expectation of an outsourced solution was that the turn-around time for getting POS marketing materials to market would be similar to what was achieved when POS development and production were done in-house. Instead, with the outsourced solution, turn-around time for delivery was increased from days to weeks. The initial outsourced solution only provided two-day per week delivery, rather than the six-day per week the in-house solution offered. More frequent delivery charges also negatively impacted the expected cost savings.

We have not met a distributor who doesn’t have “customer emergencies” that require a rapid response — the same day in some cases. Customer satisfaction is critical, but at what cost? - The Answer: Significantly higher for the distributor who has outsourced their POS operations.

What’s Happening

As a result of these unanticipated outcomes, we’ve noticed there is a shift taking place within the alcohol beverage distribution market. Distributors who have been considering outsourcing their POS marketing, as well as those who already have, are now becoming aware of systems that will allow them to better manage their in-house POS marketing departments.

The data points above suggest we’re beginning to see a shift back to “POS in-sourcing”. Distributors of all sizes are learning more about Marketing Management solutions that more effectively manage their “In-House” POS Marketing.

OnTrak Software solutions help distributors gain or retain a competitive advantage by:

• Getting POS to market faster — Days ahead of their competition
• Generating sales lift with timely, high-quality, custom, POS materials
• Tracking, measuring and managing one of their core business processes — POS Marketing