Neodata bounces back

Folio: The Magazine for Magazine Management, August 1, 1995 by Lambeth Hochwald

Forgive and forget: That seems to be the sentiment among Neodata clients these days, compared to last year when the fulfillment giant was under intense scrutiny amid rumors of a cash crunch.

"The company is making strides," says Michele Bennett, circulation supervisor of Los Angeles-based Fancy Publications, which has eight titles managed by Neodata, the nation's largest fulfillment operation. "Everyone knows there have been bad times in the past, but they're moving in the right direction."

Boulder, Colorado-based Neodata finished 1994 with a 15 percent increase in revenues - and a major overhaul in the way it does business. With a new management team in place under president and CEO Larry Jones, the company established six customer-service centers (CSCs) last year to streamline each magazine's fulfillment - from order entry through lettershop - under one roof. (There are three other CSCs for product fulfillment. Neodata also introduced such time-saving systems as NCOREaccess (a desktop query and reporting tool) and List Lightning (a list-order fulfillment device).

Tough year on the PR front

With so much going on at once, it was only natural that some clients might wonder if the company had bitten off more than it could chew. There were leftover concerns from a 1992 incident in which some magazines' renewal invoices and promotions went unmailed for six to eight weeks, ultimately hurting circulation numbers for many titles. (Neodata serves 412 magazines, more than 100 million active subscribers and nearly 150 publishers, including Meredith, Wenner Media, Conde Nast and Hachette Filipacchi Magazines.)

Last year, rumors of a cash crunch began circulating through the industry when the company (owned by the Dallas-based investment concern Hicks, Muse & Co., along with General Motors' EDS and Neodata management) sent letters to its customers demanding prompt payment of accounts receivable. Many clients interpreted the move as an attempt to shore up cash-on-hand.

"It's been a rocky situation," notes Jim Forsythe, vice president and circulation director for New York City-based Essence. "I would say that this year has been been positive on the whole."

Adds Robert Gursha, vice president and director of circulation at Time Inc. Ventures' health and Sunset: "I think the worst is over. [Neodata's] financial performance is improving. Of course, they can still improve, but that's true anywhere. There's been a lift in turn-around time on billing and renewals."

Profits, service improve

At Neodata's annual client gathering at Colorado's Keystone Resort in early June, Jones reported that the company posted revenue gains of 24 percent for the first quarter of 1995 over the first quarter of '94, with first-quarter profits reaching $7 million, compared with a little more than $5 million over the same period a year ago. "Finances have started to spring back," Jones told those in attendance. "Clients have started to say positive things again about Neodata."

Most clients agree that the CSC setup is a definite improvement; it has cut processing time from five days down to three and made employees more accountable to the specific publication they're working on. "For the most part, we're happy," says Dana Sacher, associate circulation manager of Vibe, a Time Inc. Ventures title with a ratebase of 275,000. "With the new CSCs, we have more focused attention on our title."

With 6,000 employees, Neodata is the second largest employer in Boulder County. (The operation also has major offices in Des Moines, Phoenix and Ireland.) The restructuring takes greater advantage of all that. "The company had grown so large that employees couldn't be as effective," says Francie Anhut, senior vice president of sales and marketing. "That's much improved with the CSC structure. There are now career paths available for employees, whereas 18 months ago there were so many problems to fix and financial urgencies to take care of first."

Anhut admits that the transition to the CSCs wasn't always smooth. "The clients were anxious about the changes, and some balls got dropped in that transition," she says. One client that became dissatisfied was Entrepreneur, which pulled all of its product fulfillment business from Neodata, keeping only the magazine there. The loss was a significant one for Neodata, as Entrepreneur had 13 operators allocated to its product orders, according to Bruce Miller, circulation director for the Irvine, California-based publication.

"Ask two people in the same CSC, and you get two opinions about how they think things are going," says one circulation executive who wishes to remain anonymous. "The industry feels that because Conde Nast and Meredith are there, nothing bad could happen. But that's no guarantee."

Neodata executives seem to have realized this, too, which is why customer service has become an even bigger priority for the company in light of the many changes occurring in the fulfillment industry (including Quad/Graphic's purchase of Newsweek's fulfillment operation last December and The Kable News Company's acquisition of the Fulfillment Corporation of America a month later). It's why Neodata plans to invest $42 million over the next year in maintaining, networking and enhancing its systems, as well as investing in future technology.