GoCargo.com is an on-line exchange for ocean freight. The site works like most B2B exchanges; shippers post their ocean freight shipments on the site. Freight companies bid on the shipment, posting the prices that they are willing to charge to carry the cargo. This is a reverse auction; the lowest bidder wins.
Auctions only work if there is volume. The founders of GoCargo.com realized they needed shippers and freight companies to get the bidding going immediately or the venture would sink. They also felt they had a short time to become the leading shipping exchange; they had to find a way to generate leads quickly so their competitors would find themselves looking at their stern.
The Manhattan-based company, whose offices overlook the container ships in New York harbor, felt its skilled sales and account management team needed to concentrate on relationship management, a strategic corporate role, according to Marc Rappaport, vice president, trading and operations.
However, telemarketing, advertising and direct mail, though important, are not the anchors of its client acquisition strategy. So the shipping exchange decided to outsource its telemarketing efforts to CS Direct, a Buffalo, New York outsourcing provider. The exchange went live last December; CS Direct began generating leads in January.
CS Direct’s job is to inform companies with ocean bound shipments to check out GoCargo’s Web site. Once they became members of the exchange, the in-house sales staff takes over to attempt to create customers for life. However, the site makes no money until a shipper actually books a shipment with an ocean carrier.
Vendor Incentives Help The Buyer
GoCargo.com believes in incentives for its staff. Employees’ incentives include common stock as well as commissions for its sales people. “We wanted to incent our vendors, too,” says Rappaport. Telemarketing is an easy process for outsourcing incentives because the results are easy to measure.
Because telemarketing is part of the sales function, GoCargo.com felt it was important to compensate CS Direct using sales incentives. The dot.com company pays its supplier a flat fee. Since the exchange only makes money with bookings, GoCargo.com chose to pay an incentive to the supplier every time a CS Direct lead books a shipment. “We wanted our vendor to experience the same zest for booking that we do,” explains Rappaport.
The supplier earns cash bonuses if it meets certain booking goals. The incentives are based on how many bookings its leads generate each week. At the moment, the incentives GoCargo.com is paying are “modest.” Rappaport says he didn’t want to make the incentives too large because he wanted CS Direct “to have some skin in the game.”
Rappaport believes incentives are a good idea. “I’ve observed for years that incentives are a great behavior inducer,” he says. It’s harder to motivate an employee who just shows up and punches a clock. “Once you put incentives in place, working is clearly not a job. It’s an opportunity to better yourself by bettering us,” he continues.
Increasing the Commitment Level
The executive also feels incentives make the job more fun. He likens them to sports, transforming the sales effort into a game.
Outsourcing a process does not guarantee there won’t be rough water. Rappaport says he monitored the outsourcing supplier’s performance “to a T” to determine the success of the program. “If incentives didn’t work, we wouldn’t offer them,” he says. Instead, he discovered “we do get more using incentives.”
When first hiring an outsourcing provider, companies take a risk that the supplier will have the commitment to get the job done. “There’s no guarantee their people will be emotionally involved with your cause. Incentives increase the commitment level to you,” the executive says.
But not every process lends itself to incentives. GoCargo.com outsourced its Web development. But it offered no incentives to this provider.
Incentives clearly kept the dotcom on course. By June, GoCargo.com had 12,000 members participating in its exchange. “A lot of that was due to the good work that CS Direct did on the shipper’s side. They are a key cylinder in our sales engine,” says Rappaport.
The executive says selecting an outsourcing supplier in this case was simple because GoCargo’s board of directors recommended CS Direct. “They blew everyone away,” reports Rappaport.
Managing the relationship is as important as correctly trimming the sails. Rappaport says he travels to Buffalo to train the telemarketing staff working on his account. He says he can tell by the questions they ask that “they feel part of our team.”
Lessons from the Outsourcing Primer:
- Incentives align the goals of the buyer and supplier in generating new customers.
- Sales functions are good processes to outsource because the results are easy to measure.
- Incentives are a good behavior modifier and make the sales effort fun.
- Incentives increase the level of commitment to the buyer.
- Not every outsourced process lends itself to incentives.