The document discusses a case study of a successful outsourcing partnership between Seta Corp/Palm Beach Jewelry and Marketing Alternatives, Inc. Seta Corp outsourced their entire call center operations to Marketing Alternatives due to cost savings and the need for a reliable backup site. They discuss how the partnership was managed through aligning goals, setting expectations around key metrics like costs and service levels, and ensuring commitment from ownership at Marketing Alternatives to meeting client needs and principles.

2. Both Sides of Outsourcing – Meet & Talk with a Successful Outsource Client & Provider NCOF – April, 2011 Timothy J. Holody, COO/General Manager Seta Corp (Palm Beach Jewelry) [email_address] Darcy Tudor, Executive VP Marketing Alternatives, Inc [email_address]

3. Guarantee: You will review an actual case study of a successful outsource program from a client and provider point of view.

4. Who is Seta/Palm Beach Jewelry? Seta Corporation of Boca is a family owned company that has been around since the mid-1950 ’s. We sell jewelry and fragrances under the name Palm Beach Jewelry. We also have syndicated partnerships with major catalog and retail companies such as Swiss Colony, the Redcats ’ family of titles (Roaman’s, Metrostyle, Woman Within, BCO) Spiegel, Newport News, Amazon, Overstock and many others. We ship over 1.5 million units per year.

5. Who is Marketing Alternatives, Inc? MAI is a family owned and operated full service organization that provides services in the following areas: Call Center (inbound calls, outbound, e-mail, chat, special projects) Fulfillment and distribution IT – order management and web design/hosting Advertising agency and support services

6. Who is Tim Holody? Currently COO of Seta Corporation (Palm Beach Jewelry) 30+ years of Industry experience including: President/CEO – Total Fulfillment Services, Inc VP-Operations, Orvis President – Home Shopping Network Fulfillment Vice President – Stuart McGuire/Marketechs President – Carefree Professionals, Inc Director of Operations, Ambassador Leather Goods

7. Who is Darcy Tudor? Executive Vice-President, Marketing Alternatives, Inc. 15+ years of Industry experience including: Coordinate and implement continuous process improvement for increased client/customer experiences Responsible for delivery of contractual obligations New Business Development / RFP responses Script development Transition Manager Telecommunications Manager Prior experiences as front-line agent, supervisor, training, call center operations

8. Let ’s start with “ why did we outsource ”? In 2002, we faced a loss of 50% of our overall business due to the bankruptcy of one of our key marketing partners. As a result, we were faced with the need to cut costs dramatically. We operated 2 call center locations – 1 in Boca Raton, FL and 1 in Cincinnati, OH 1 st choice to reduce costs was to consolidate the 2 centers into one as they were both operating at less than 40% capacity at peak volume. After the consolidation was complete, we then faced the worry of not having a back-up site (particularly a problem with the hurricanes in south Florida). We looked to secure a back-up site with an outsourced provider. The success we found with a backup outsource provider as well as my own industry experience as an outsource provider caused us to seriously consider closing our Boca call center and outsourcing 100%

9. What happened next? Once we decide to outsource, we did a detailed cost analysis to determine exactly what we were facing. It was crucial to be sure we captured ALL of our costs . We determined that we would save in excess of $500,000 per year AND establish our costs at a per transaction rate. We developed a DETAILED transition plan. We had to figure out the “right” way to announce the decision We determined which functions specifically were going to be outsourced – our conclusion was to go…………………………… “all outsourced – 100%”

10. Let ’s address – “why not outsource?” Because I will have better control in-house Because my costs will be lower in-house Because my customers will get better service in-house Because outsource companies are unreliable

11. Let ’s address – “why not?” NO – NO – NO - NO Any other objections/roadblocks you can think of? (I will address these in more detail later)

12. What are we going to cover today? How did we outsource?

13. What is the Overall Purpose of your Call Center? Handle your customer calls with proper care Handle your customer calls within established service standards Handle your customer calls within acceptable cost/budget standards Whether in-house or outsourced, these are the 3 major things you must accomplish

14. Setting expectations and installing proper measurements When we had our own call center in-house, we had these key measurements: Labor cost per call Total cost per call (including all overhead) Service levels Upsell success The same measurements needed to be in place as we outsourced. Let ’s review our overall volume and service needs……….

15. CUSTOMER CARE OPERATIONS Volume Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 1 Phone Order AOV $194.96 $167.01 $165.73 $156.87 $166.81 $156.38 $186.37 $173.55 $172.98 $155.33 $161.82 $158.79 2 Total # Calls 27,398 20,173 21,227 18,420 19,702 15,087 24,125 18,476 16,963 15,218 19,005 18,488 3 Total # Phone Orders 8,748 5,284 6,197 5,232 6,310 3,986 8,667 5,793 5,300 4,757 6,672 5,353 4 Call:Order Ratio 3.13 3.82 3.43 3.52 3.12 3.78 2.78 3.19 3.20 3.20 2.85 3.45 5 Chats Handled 557 438 298 340 294 236 508 580 568 642 710 816 6 E-mails Handled 1,744 1,804 1,925 1,910 1,636 1,524 1,614 1,889 1,528 1,642 1,706 2,083 7 Web Calls Handled 3,582 3,641 3,500 3,468 3,251 3,083 3,117 2,926 2,951 3,171 2,924 4,167 8 # web orders 7,230 7,331 7,463 7,055 7,063 6,117 7,281 6,391 5,795 6,254 7,535 7,822 9 Web calls/order ratio 0.50 0.50 0.47 0.49 0.46 0.50 0.43 0.46 0.51 0.51 0.39 0.53 10 Upsell % of AOV 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%

16. CUSTOMER CARE OPERATIONS Considerations 1 Phone Service Level 95% of all calls should be answered. Max of 5% abandons. 2 % Calls Handled on 1st Call We estimate that 95% of calls can be handled by the 1st line rep. Only 5% need to be escalated. 3 Systems All orders will be entered onto the Seta AS400 system. All inquiries will be handled within our system. 4 E-mail Ave Resp Time (hours) All e-mails should receive an immediate acknowledgment to the customer. Specific customer answers must be provided within 4 hours. 5 Chat Response Time (seconds) All chats must be responded within 30 seconds. 6 Hours of Operation 7 days/week, 8am - 11pm, 364 days per year. Only closed on Xmas day 7 Phone Numbers All phone numbers shall remain under the ownership of Seta 8 Pricing Please feel free to quote in whatever pricing format with which you are most comfortable. We will do our own internal pricing pro formas for comparing various providers.

17. Setting expectations and installing proper measurements Labor cost per call All direct labor costs (reps and support staff) All direct management costs All payroll related taxes and expenses

18. Setting expectations and installing proper measurements Total cost per call (including all overhead) All the labor costs from the previous slide All telephony costs All building related expenses (rent, utilities, etc) All IT related costs

19. Setting expectations and installing proper measurements 3. Service Levels 95% of all calls had to be answered. This means that we allowed a 5% abandoned rate (calls not answered). All calls not answered by a human agent are counted as abandoned, regardless of how short or long the timeframe. ZERO blockage (busy) calls are allowed.

20. Setting expectations and installing proper measurements 4. Upsell success We have an extensive upsell program that provides added revenue as measured on a per order basis.

21. What is the Overall Purpose of your Call Center? Handle your customer calls with proper care Handle your customer calls within established service standards Handle your customer calls within acceptable cost/budget standards Whether in-house or outsourced, these are the 3 major things you must accomplish

22. What are we going to cover today? Who did we outsource to (and why)?

23. What is the Overall Purpose of your Call Center? We actually started with a well known Call Center provider in south Florida. However, it became clear that they could not meet the 3 major goals we had for our call center. We then moved to a 2 nd outsource partner in the Midwest. Worked well for awhile, until they were acquired and the whole relationship suffered as a result of the new ownership ’s change in style and philosophy.

24. What is the Overall Purpose of your Call Center? As we prepared to move to our 3 rd outsource partner, we were careful to be sure that the problems we faced with the previous 2 providers could and would be avoided with our new partner. After careful consideration, we moved to a great partner – Marketing Alternatives, Inc. What did we miss with the 1 st 2 providers? OWNERSHIP that was committed to our core principles.

25. What is the Overall Purpose of your Call Center? Once again, we focused on the purpose of the Call Center: Handle your customer calls with proper care Handle your customer calls within established service standards Handle your customer calls within acceptable cost/budget standards What we found with MAI was a company where the OWNERSHIP was as committed to these goals as we were.

26. What are we going to cover today? HOW do we manage our Outsource Partnership?

27. HOW do we manage our Outsource Partnership? We had to be sure that the ownership of MAI was committed to our core principles. We do so not only in a series of meetings and discussions, but by taking the time to align our goals with MAI: Pricing – the classic “win-win” pricing was established Service – MAI and Seta both benefit from improved service Upsell success – both MAI and Seta benefit from improved upsell success .

28. HOW do we manage our Outsource Partnership? In the simplest of terms, we aligned our goals with the goals of MAI. Period. Plain and simple.

29. HOW do we manage our Outsource Partnership? The basics of managing our outsource partnership: Daily reporting of key metrics – service and sales Focus on MTD performance – don ’t nitpick daily fluctuations. Recognize the responsibilities we have as the client partner. Regular and consistent communication with all levels of MAI.

30. HOW do we manage our outsource partner? Here ’s the daily report:

32. HOW do we manage our outsource partner? Here ’s the upsell report:

33. Date Phone orders % of orders with upsell # Attempts AOV Upsell $ Upsell $ per Attempt Upsell % of AOV Q1 2008 9,703 97.06% 9,418 $137.01 $127,444 $13.53 9.9% Q2 2008 9,377 99.41% 9,322 $133.58 $101,219 $10.86 8.1% Q3 2008 9,113 99.97% 9,110 $141.35 $134,092 $14.72 10.4% Q4 2008 9,539 99.97% 9,536 $145.03 $149,604 $15.69 10.8% Q1 2009 9,435 99.96% 9,431 $137.21 $145,378 $15.41 11.2% Q2 2009 9,168 99.97% 9,165 $135.39 $136,321 $14.87 11.0% Q3 2009 8,065 99.93% 8,059 $133.53 $111,301 $13.81 10.3% Q4 2009 10,283 99.86% 10,269 $130.26 $165,836 $16.15 12.4% Q1 2010 10,686 99.36% 10,618 $122.77 $156,561 $14.74 12.0% Q2 2010 8,376 99.79% 8,358 $128.36 $150,994 $18.07 14.1% Q3 2010 7,259 99.85% 7,248 $126.99 $108,072 $14.91 11.7% Q4 2010 9,055 99.92% 9,048 $121.81 $178,474 $19.73 16.2% Jan/Feb 2011 5,510 99.91% 5,505 $123.08 $90,672 $16.47 13.4%

34. HOW do we manage our outsource partner? The responsibilities of Seta: Provide accurate and timely volume forecasts Provide a clear and consistent policy message Provide clear and consistent levels of authority Inform MAI of anything that might impact the business Engage the floor team (leads, reps) Focus on clearly established metrics of success Provide the necessary system support Be available for questions, ideas, feedback Be REASONABLE

35. Let ’s go back to – “why not outsource?” Because I will have better control in-house Because my costs will be lower in-house Because my customers will get better service in-house Because outsource companies are unreliable

36. Let ’s address – “why not?” NO – NO – NO – NO Proper planning, aligned metrics and a shared responsibility will assure a successful outsource partnership. You cannot expect more from your outsourced partner than you can from your internal call center. But…….you should never expect less. Let ’s go back and review our upsell program…….

37. PBJ AGENT BONUS JANUARY 2011 Agent Name Upsell per order # of orders Total Bonus Quality Score Total Calls Monitored LIMP SALLY $29.73 36 $36.00 95.00% 4 GRIGG SARA $26.10 179 $179.00 95.70% 9 KINSER TIA $24.18 174 $174.00 95.60% 10 EDWARDS TIFFANY $21.90 21 $21.00 96.60% 10 PLUMMER WILLIAM $19.87 129 $129.00 94.00% 11 TOLLE ANGELA $16.91 152 $152.00 97.60% 10 JONES RANDI $15.64 57 $57.00 99.00% 10 LEVAULT TIM $15.44 89 $89.00 95.70% 9 TOBERMAN KARI $15.03 125 $125.00 95.60% 10 BILBY DODIE $14.45 120 $120.00 97.60% 10 TOTALS 1082 $1,082

38. Incentives in the Call Center The typical staffing rule of the Call Center: ACD staffing – give the next call to the agent who has been idle the longest – NO – break this rule – give next call to your BEST agent. This goes against the DNA of most call center managers. Let ’s look at that upsell data from January again - which rep would you like taking more of your calls?

39. PBJ AGENT BONUS JANUARY 2011 Agent Name Upsell per order # of orders Total Bonus Quality Score Total Calls Monitored LIMP SALLY $29.73 36 $36.00 95.00% 4 GRIGG SARA $26.10 179 $179.00 95.70% 9 KINSER TIA $24.18 174 $174.00 95.60% 10 EDWARDS TIFFANY $21.90 21 $21.00 96.60% 10 PLUMMER WILLIAM $19.87 129 $129.00 94.00% 11 TOLLE ANGELA $16.91 152 $152.00 97.60% 10 JONES RANDI $15.64 57 $57.00 99.00% 10 LEVAULT TIM $15.44 89 $89.00 95.70% 9 TOBERMAN KARI $15.03 125 $125.00 95.60% 10 BILBY DODIE $14.45 120 $120.00 97.60% 10 TOTALS 1082 $1,082

40. How to avoid the BIG mistake The “BIG” mistake is outsourcing any function and forgetting about it. Your outsource company is not just a vendor – they are a partner. In 3 decades of outsourcing, both as a provider and as a client, the most successful outsource relationships occur when BOTH parties treat the relationship as a partnership . You can ’t turn it over to your outsource company and forget about it. Nor can you have unrealistic or unattainable expectations from your outsource partner. Work as a team and SUCCEED as a team.

41. Why does MAI have a successful relationship with Seta? Frequent interaction between MAI and Seta at all levels from ownership to operations MAI makes a point of understanding Seta business and the catalog industry MAI believes there is always room for improvement, we are not satisfied with merely achieving acceptable performance MAI and Seta engage in frequent conversation regarding how to make changes for the better

42. Do Not Allow your client to dictate HOW you will achieve their goals (service level, upsell, conversion, etc.) Provide a price structure which is not profitable for the sake of winning business Provide services which are not being requested and then ask the client to pay for labor expense Agree to non-matching service level goals (70/30, 3% ABD)

43. Do Be clear about what the terms “dedicated, semi-dedicated and shared” agent pools represent in your call center Agree to how call volume will be forecasted and who owns responsibility for its accuracy Be upfront about what other types of programs “shared” agents may be handling Define, with examples, how the pricing structure will work, especially in a per minute pricing agreement – what ’s included: ACD (talk) + ACW (wrap) + hold + outbound + ??? Agree on what information regarding daily operations will be shared, require client input/approval Plan on weekly, monthly, quarterly and annual business reviews with various levels of operations and management to ensure all client needs are being met Represent companies whose goals and values inherently align with your company Be knowledgeable about the company and industry your client is in

44. Our Case Study - Summary Our case study has and continues to be a huge success: We saved big money and stabilized our costs on a “per transaction” rate Our customers continue to receive service better than we could provide in-house. We have aligned our goals with our outsource partner. Is it time for you to consider outsourcing?