Delivering Something Extra

From the New York Times
By Stuart Elliot
Published: September 23, 2009

Since 1907, United Parcel Service has been delivering packages ordered by consumers. Next week, the company plans to deliver packages they have not ordered, in a test of an effort to expand into direct marketing.

United Parcel Service will begin testing its direct marketing service on Monday.

Beginning on Monday, U.P.S. will experiment in five major markets with a service it calls Direct to Door, giving advertisers and retailers a chance to provide offers and product samples to U.P.S. customers. The marketing materials will come inside small boxes labeled Direct to Door Paks, and will be delivered to customers along with merchandise they actually ordered.

The test, to run through Oct. 2, is intended to gauge whether there is interest in having U.P.S. serve as an alternative to marketing mail delivered by the United States Postal Service or by companies like Valpak.

If Direct to Door goes forward, the added revenue could help United Parcel offset declines in demand for its mainstay package delivery service since the recession started.

In July, U.P.S. reported its sixth consecutive quarter of lower package volume in this country. The decline in the second quarter was 4.6 percent compared with the period a year earlier, which Bloomberg News described as the worst result since United Parcel went public in 1999.

“I wouldn’t say it was developed as a result of the economy,” said Lisa Lynn, marketing director for new-product research and development at United Parcel in Atlanta.

Rather, she said, it stems from “some opportunity we saw at the heart of what we do every day working off our delivery network.”

The test is also meant to see if U.P.S. customers welcome unsolicited packages or dismiss them as some new type of junk mail.

One effect of the economy is that “people are very receptive to offers right now,” Ms. Lynn said.

An experiment in figuring out how to better aim traditional, tangible marketing materials at consumers may seem quaint when so much of the buzz along Madison Avenue is about aiming virtual pitches at them online.

But direct marketing remains a lucrative business. According to the Direct Marketing Association, it accounted for $176.9 billion in ad spending last year in the United States — 52.1 percent of the total, by the association’s tally.

“We did some focus-group research and it really indicated that people were receptive to receiving offers from U.P.S.,” Ms. Lynn said. “What we heard was, ‘If U.P.S. brings it to me, it’s not junk.’ ”

Still, the company is taking several steps to try to ensure that a Direct to Door Pak is received more like a gift than another application for another credit card.

For one thing, the offers inside each box are intended to be special rather than “mass offers distributed through other channels,” Ms. Lynn said.

For another, no Direct to Door Paks will be delivered unaccompanied by packages ordered by that household, she said.

And the boxes will not bear the addresses of the recipients, Ms. Lynn said. Rather, they will carry phrases like this one: “Inside are premium offers from some of America’s best-known brands.” They will also include a photograph of the familiar brown United Parcel truck next to the words “Delivered to you by U.P.S.”

About a dozen companies — advertisers and retailers that use United Parcel to deliver orders to customers — are taking part in the test, Ms. Lynn said. They include the Finish Line; Men’s Wearhouse; Sephora; two Williams-Sonoma home furnishings brands, Pottery Barn and West Elm; and Zappos.com, the online retailer of shoes and housewares recently acquired by Amazon.

“It’s an interesting way to reach out to our customers and partner with one of our closest business partners,” said Aaron Magness, director for business development and brand marketing at Zappos.com in Henderson, Nev.

“We are an online retailer,” he added, “but we want to maintain a high-touch relationship with customers, constantly trying to find different ways to interact with them in whatever means they’re comfortable with.”

Mr. Magness said he liked the idea that the boxes would not arrive “out of nowhere, from random people knocking on your door.”

The offer to be made by Zappos.com during the test will invite recipients to “become a member of our V.I.P. program,” he added, entitling them to “free next-business-day shipping on every order.”

United Parcel plans to deliver about 250,000 Direct to Door Paks in about 150 ZIP codes in Chicago, Dallas-Fort Worth, Miami, Phoenix and Washington.

Those chosen to participate in the test are “high-opportunity consumers,” Ms. Lynn said, meaning that they often order merchandise delivered by United Parcel Service.

“Our drivers have relationships with these people because they deliver to them frequently,” she added. “There’s a lot of trust in the driver and the brand.”

Mr. Magness also cited the trust factor as a reason Zappos.com was interested in the test.

Ms. Lynn described the customers to receive Direct to Door Paks as ages 35 to 54 in households of two persons or larger and living in single-family, owner-occupied homes.

As for what the service will cost marketers, “I can’t go into specific pricing,” Ms. Lynn said, “but the pricing model is similar to other media.”

The goal is for the cost to reach each 1,000 consumers — a common media measurement known as cpm — to be “comparable or less than an equivalent piece of direct mail,” she added.

Tags: Advertising, Direct Mail, Direct Marketing, direct marketing association, junk mail, Letters, Mailing, mailing services, Postage, postage increase, postmaster, United Parsel Service, UPS

Junk mail delivers a sense of satisfaction

From The Chicago Tibune
By
Steve Johnson
Tribune reporter

September 22, 2009
E-mail Print Share Text Size There’s still time to improve my lawn. Public radio needs me to renew my membership. A “quality closet” can be mine for just $495.

And the Lyric Opera, of course, has another great season of songs in foreign tongues and “projected English translations above the stage for all operas,” information clearly worth sending in duplicate.

I’m supposed to hate this stuff. It kills trees, which contributes to global warming, and weakens the grip of the screws attaching my mailbox to my house wall, which leads to stucco failure.

I’m supposed to hate it for constantly nagging me: Buy this, sign up for that, donate to us. And above all, I’m supposed to hate it for having the temerity to try to make me change, in however small a way, the way I lead my life.

But the truth is, except for the rare, genuinely deceptive stuff — credit-card solicitations designed to look like bills — I don’t mind junk mail.

In a “Seinfeld” episode, Kramer once bricked up his mailbox to fend off a catalog onslaught. I open my box to all who care enough to write or, more accurately, stuff an envelope with printed material.

It’s sad psychological comfort, I know, but far better is the day with two credit card offers and a Jiffy Lube coupon than the one with no mail at all.

And in some ways, a Sierra Trading Post catalog is more satisfying than the latest Esquire.

Instead of hanging onto it for a month in hope of finding time to read the carefully written articles, you flip through it in five minutes while waiting for dinner, then toss it on the recycling pile, secure in the knowledge that companies continue to make more hiking shoes than can be sold at full price.

A two-week vacation recently allowed me to revel, upon return, in the full glory of my junk mail.

There, between the rubber bands, were 15 catalogs, four more than the number of magazines, everything from Athleta to West Elm.

There were 25 actual stuffed envelopes of solicitation and such, compared to just 12 pieces of what you would call meaningful mail: utility bills, a library overdue notice, a car registration sticker.

There were another seven pieces on postcards, including, of course, a Bed Bath & Beyond 20-percent-off coupon (I picture cashiers there fainting if someone actually pays full price). And a once-local, increasingly pan-suburban newspaper I no longer subscribe to decided to take a shot and send me a copy.

All told, it was 4 1/2 pounds of clutter. And thumbing through it, opening a piece here, recycling one there, was almost as enjoyable as going through the “real” mail. Sure the junk mailers are after your money, but they’re only asking for it. An actual bill makes demands.

You’d think that junk mail is dying. Beyond the environmental complaints, there’s the relative economic efficiency of spam e-mail.

And although it’s true that last year, for the first time, direct-mail spending actually declined, it’s also true that it continues as a huge business.

I know the statistics (because I looked them up): U.S. junk mail accounts for almost one-third of all mail delivered in the world, and each American household gets an average of 850 pieces of it a year.

Households average 18 pieces of it a week, one survey found, versus one piece of personal correspondence.

I know that not enough people recycle their junk mail, and that direct marketers send out 36 pieces to get one response. I won’t argue that it is all overkill, the sign of a culture with too much disposable income, even now, and too little concern for the ways it chases that income.

But at the same time, junk mail is largely responsible for keeping the U.S. Postal Service afloat; without it we’d have another institution to bail out.

And without all the impersonal stuff around it, the one birthday card in that whole two-week pile wouldn’t have seemed half as special.

Plus, I would have had no way of knowing that I could run an 8K to help abandoned pets, that Clipper Magazine is not about ships or that Trader Joe’s is featuring spicy peanut slaw. Information like that is, literally, priceless.

sajohnson@tribune.com

Tags: Advertising, Direct Mail, Direct Marketing, junk mail, Letters, Mailing, Money, Philadelphia Post Office, Postage, postage increase, postmaster

BMW: Luxury Auto, Meet DRM

BMW is kicking the tires on a direct response campaign targeting luxury auto enthusiasts, turning to an often undervalued marketing platform as a means to entice Mercedes, Volvo and Audi drivers to come in for a test drive.

In a bid to draw likely buyers to their local BMW dealership, last week the New Orleans-based DRM firm Dukky began sending out some 25,000 mailers to premium vehicle owners in the Tri-State (New York-New Jersey-Connecticut) area. Upon registering for a test drive, the recipients of the direct mail material are presented with a $25 American Express gas card.

Participating consumers are directed to visit a unique URL, which directs them to a personalized activation site powered by Dukky. Once the user has registered for a BMW test drive, he or she can share the promotion via email or social networking sites. The digital activity feeds into a dashboard which reports back to the client in real time, thereby creating a database of purchase intent and user feedback.

Although the DRM strategy may seem a bit low rent for the likes of BMW, there are a number of advantages to targeting the mailbox. “BMW for years has been all about acquisitions, whether you’re talking email lists or traditional mailing lists,” said Scott Couvillon, chief marketing officer, Dukky. “By its very nature, direct mail is much more impactful than even the greatest email because it’s there and it’s tangible. Then you take the next step with the PURL and you’re getting feedback on an individual consumer level.”

Couvillon added that Dukky’s ability to track the target’s subsequent interaction with the material, from signing on for a test drive to alerting friends to the offer on his or her Faceboook page, is what separates the initiative from the shills for garage door openers and pizza chains that clog the mails.

“We have no interest in dethroning Valpak,” Couvillon said. “Our technology allows a highly respected brand like BMW align itself with what is essentially an interactive coupon.”

Consumers were also targeted by the specific brand of vehicle they currently own, said Erik Wennerod, vp, director of CRM at Dotglu, the interactive unit of Kirshenbaum Bond Senecal + Partners. “Quite frankly, we wanted to go after each one of the 25,000 competitive vehicle owners with a message that was targeted to their demonstrated preference,” Wennerod said. “So for the Volvo owners, we went after them with a safety message. With Audi, it was tilted toward performance. With Mercedes, it was all about luxury.”

The gas card works as an incentive to get prospective clients deeper into the purchasing funnel, down past the initial part of the decision-making process where people start talking themselves out of a buy. “For better or worse, they start to add practical reasons for not buying,” Wennerod said. “One of the advantages BMW has is, once you drive one, there’s a much more emotional experience that takes place. If we can get them to that step, the car takes care of the rest.”

Wennerod expects activations to begin later this week, as the first recipients of the mailer begin making the jump to the online site. “One of the things we love about this is it’s essentially a turnkey approach,” Wennerod said. “Dukky was able to turn this around very quickly, from the DRM piece to getting the microsite online. It all went live literally just a few days before Labor Day, so we’re hoping to start getting the first round of feedback toward the middle of the week.”

While the typical return on direct mail is less than 2 percent, Dukky’s marriage of DRM, online and social media allows the company to guarantee returns of 8 percent. And in the case of the BMW promotion, Dotglu’s exposure is minimal. “It’s a variable cost deal,” said Wennerod. “We only pay for the people who take the test drive. That’s a lot of upside.”

Tags: Advertising, Direct Mail, Direct Marketing, junk mail, Letters, Mailing, mailing services, Postage, postage increase, postmaster

Target Says It’s Poised to Raise Second-Half Marketing Spending

CFO Says First-Half Savings Will Be Rolled Into Pre-Holiday Efforts
By Natalie Zmuda
Published: August 18, 2009

NEW YORK (AdAge.com) — Target plans to come out swinging in the second half.

Executives today said marketing spending, as a percent of sales, would be up compared with a year ago as the retailer looks ahead to the all-important holiday period. Executives are still feeling cautious about whether consumers will be spending in the second half, but as Target and other retailers begin lapping weaker sales results from last fall, same-store sales are likely to improve.

Douglas Scovanner, Target’s chief financial officer, said that the third quarter, leading into the holidays, is typically a seasonal peak in Target’s marketing and advertising efforts. This year, he said, the retailer has “elected to exaggerate that trend.”

Money to spend
“We expect to spend more as a percent of sales in Q3 and Q4 this year than we did last year,” Mr. Scovanner said during an earnings call. “For the year, our marketing plan is right on. But we have saved some money here in the front half for the expressed purpose of being able to invest it in the back half.”

In the second half of last year, Target spent $451 million on measured media, according to TNS Media Intelligence. In the first quarter of this year, the retailer’s ad spending was down 3% compared with the same period a year ago.

The move comes as execs say the retailer is finally gaining traction in its fight to convince consumers that it’s just as cheap as rival Walmart. Part of that strategy has included the introduction of a “low-price promise.” In March, Target began testing the program in Denver and Orlando, matching competitors’ prices on identical items in local markets. Target took the program nationwide July 12 and has promoted the effort in its circulars and in-store signage.

“We have been confident our prices are right, and we’re seeing our prices are right, because there are very few adjustments being made,” said Gregg Steinhafel, president-CEO, of the low-price program. “It might be one per store every couple of days. So it’s relatively modest. But we think this will be a terrific credibility builder and marketing umbrella to reinforce that we have strong values both every day and on sale.”

Same-store sales down
Same-store sales during the second period continued to lag, however, down 6%. Overall sales fell 3% to $14.6 billion.

When asked directly by an analyst why Target’s sales performance hasn’t been on par with fellow discounters such as Walmart and T.J. Maxx, Mr. Steinhafel said that it was due to consumer perception that Target’s value proposition is not as strong as those rivals. But, he added, the retailer’s research shows that its advertising and in-store signage is starting to “slightly” shift those perceptions.

“We’re starting to see slight basis points improvement in our price perception vis-a-vis where we were in prior periods,” he said. “So, we believe that we’re on the right track. We have made the right adjustments. [We] believe that over time we’ll continue to narrow that perception gap.”

In the second half, Target plans to focus on its pharmacy and grocery areas, both areas that have been outperforming the more discretionary home and apparel categories. A campaign to promote the pharmacy business, including Target’s first TV spot to highlight the category, is planned for the second half. The retailer also plans to sharpen its focus on Halloween, which falls on a Saturday this year. Plans to promote party favors and accessories under $3 are in the works.

Tags: Direct Mail, Direct Marketing, junk mail, Letters, Mailing, mailing services, non profits direct mail, Philadelphia, postage increase, postmaster, Savings, USPS

Reader’s Digest Plans Bankruptcy Filing

From the New York Times
August 17, 2009, 2:00 pm

By Stephanie Clifford
UPDATE Aug. 17, 3:52 p.m. With comments from the Reader’s Digest Association chief financial officer, Tom Williams, and on the banks’ involvement.

The Reader’s Digest Association announced on Monday that it would file for Chapter 11 bankruptcy protection for its United States businesses within 30 days.

As part of the reorganization, Ripplewood Holdings, the private equity firm that owned Reader’s Digest and installed Mary Berner as its chief executive, will shed its shares and board seats, and existing debt holders will become the company’s owners. Ms. Berner will continue to run the company, and Tom Williams will remain as chief financial officer. The company does not expect to lay off any employees or close any of its publications, Mr. Williams said in an interview.

The value of the company will be much lower under the overhaul. Its debt of $2.2 billion will be reduced to $550 million, according to the agreement it has already struck with the majority of the banks. Ripplewood had bought Reader’s Digest for $2.8 billion in 2007 in a leveraged buyout.

“The bank lenders are taking a fairly significant haircut,” said John Puchalla, a senior analyst at Moody’s. While it was common for junior creditors to take a loss, for the senior creditors to take such a loss is “notable,” he said. “It’s certainly a lot less than the value the lenders viewed at the time of the L.B.O.,” he said.

Mr. Williams said a majority of its lenders had agreed to the terms of the restructuring, and the company expected to speed through bankruptcy, completing proceedings 45 to 90 days after it files, he said.

The filing does not cover its businesses outside the United States; it sells publications and products in 78 countries.

The company has lined up $150 million from lenders, through a debtor-in-possession loan, to help finance it through the restructuring, and will get $400 million more upon exiting bankruptcy, for the
total new debt of $550 million.

“Our banks are 100 percent aligned on the vendors that we choose and serve, so there’s no issue associated with paying any vendors,” Mr. Williams said.

That money comes from its new owners: J.P. Morgan, the company’s agent, G.E. Capital, Merrill Lynch, Eaton Vance, Regiment Capital Advisors, Ares Management, and Davidson Kempner. Although Ripplewood made an offer, “the offer from the lender group looks more compelling,” Mr. Williams said.

The company has an additional $100 million in cash on hand, Mr. Williams said.

The overhaul will save Reader’s Digest $65 million a year in cash-interest expense payments, reducing its annual payments from $145 million to $80 million, Mr. Williams said.

The company will continue to operate as usual once it comes out of bankruptcy, but with significantly less debt, Mr. Williams said. “No employees are going to be affected by this, there’s no-to-little
effect on our vendors, our operational performance remains very sound,” he said.

In the company’s most recent fiscal year, ended in June, its revenues, excluding the effects of foreign exchange, declined 1.4 percent, and gross margins and operating profit were flat with last year, Mr. Williams said. Additionally, ad revenue, which makes up about 9 percent of the company’s sales, were down only 3 percent from last year.

The magazine was founded in 1922, summarizing articles published elsewhere, and grew quickly. The company developed other titles, and, in 1990, went public.

The Reader’s Digest Association has been through a turbulent time in the last several years. In 2007, a consortium led by Ripplewood bought the company for $2.8 billion. Ms. Berner, a publishing executive, was installed as chief executive; her brother, Robert Berner, was then a managing director at Ripplewood.

But the company has lost money every year since 2005. The high debt load of the company had led analysts including Mr. Puchalla to downgrade its debt at the beginning of this year. In June, the company announced it was cutting the guaranteed circulation of the flagship magazine to 5.5 million, from 8 million, and decreasing the frequency to 10 times a year, from 12, along with focusing the magazine on socially conservative values.

Tags: Direct Marketing, direct marketing association, new postal regs, non profits direct mail, Philadelphia, Philadelphia Post Office, Postage, postage increase

Plunge in Credit-Card Mailings Slows

Could this be some good news for a change!From Brandweek
Aug 14, 2009
- Mark Dolliver

When the credit crunch took hold last year, it stanched the usual flood of direct-mail credit-card mailings to U.S. consumers. The subsequent meltdown of the financial system had its own restraining effect on such offerings. But now, a report from Synovate says the research firm’s Mail Monitor operation has detected a bottoming out in the volume of such solicitations.

In the second quarter of this year, says the report, households received 349.1 million credit-car offers in the mail. That’s 67 percent lower than the level of mailings in the same quarter of 2008. But it’s down just 6 percent from the level of first-quarter 2009. Some of the big mailers even increased their volume during the second quarter. Bank of America’s mailings were up 77 percent from the first-quarter-2009 level, and Citibank’s were up 65 percent. Noting that credit-card issuers have been growing less risk-averse than they were earlier in the recession, Synovate goes so far as to predict an “uptick” in card offers next year.

An earlier report from Mintel Comperemedia noted a stabilization (after two years of declines) in the number of mailings sent to households promoting mortgages and home-equity loans. But the nature of the offers has shifted, given lessons consumers have learned the hard way in the past year. Notably, direct-mail offers of adjustable-rate mortgages have “fallen out of favor,” according to Mintel’s analysis.

Of course, the fact that companies are making offers of credit cards and loans doesn’t necessarily mean people are taking them up on it. Polls during the past year have consistently found consumers professing their aversion to taking on more debt of any sort. Typical of the genre was a Gallup poll released last month (based on fieldwork in June) in which 46 percent of respondents said it’s “a bad time to borrow money,” vs. 17 percent saying it’s a “good time” to do so.

Tags: Add new tag, Advertising, Direct Mail, Direct Marketing, direct marketing association, junk mail, Letters, Mailing, mailing services, Money, non profits direct mail, Philadelphia, Philadelphia Post Office, Postage, postage increase, postmaster

Mailbox Explodes in Northeast DC

Updated: Thursday, 13 Aug 2009, 11:43 PM EDT
Published : Thursday, 13 Aug 2009, 11:43 PM EDT

By MYFOXDC STAFF/myfoxdc
WASHINGTON, D.C. – D.C. fire crews say a mailbox explosion shut down several streets and forced evacuations in Northeast Washington on Thursday night.

It happened at 49th Street NE and Meade Street NE just before 10 p.m. Officials say a blue U.S. Postal Service mailbox was destroyed by an explosive device.

D.C. Fire and EMS had to close off several streets in the area, and they were checking to see if there was a second device. There were no injuries reported.

Witnesses said debris was scattered over a large area after the explosion.

Tags: Advertising, Direct Mail, Direct Marketing, direct marketing association

Communication Is Best Policy

From Brandweek
Aug 3, 2009
Andrew McMains

From credit card companies increasing penalties for late payments to banks raising interest rates on credit cards, the recession’s bad news knows no bounds. But how consumers learn about such developments can determine how they feel about the companies that dictate them.

Often, people learn about such changes via direct mail. But the good news is, bad news doesn’t have to taint the messenger, according to a recent study from Omnicom Group’s Siegel+Gale. Rather, institutions can actually gain the trust of consumers if they communicate clearly and offer a contextual explanation for such moves, said Lee Rafkin, global director of simplification at strategic branding company Siegel+Gale in New York.

“What we found is, if you can go to the effort of actually explaining why you’re in the situation and what you’re going to do about it in a comprehensive and relevant way, people actually respect you for that,” said Rafkin.

Siegel+Gale’s The Simplicity Survey asked an online panel of 400 consumers to evaluate the effectiveness of four pieces of mail. One, from a credit card company, announced an increase in late fees on a charge card; another, from a bank, an interest-rate increase on a credit card; a third, a need for donations at a not-for-profit that cut its budget; and the fourth, the terms of a mortgage. Half of the panelists looked at two of the letters and the other half, the other two. Each answered questions that probed criteria such as clarity, credibility, relevance and usefulness, according to Rafkin. The mail was real, but company names were redacted.

The bank and credit card company scored poorly in the realm of trust and loyalty because the former’s explanation for raising interest rates was cold and off-putting (“market conditions and maintaining profitability on your account”) and the latter offered no explanation at all. “They’re not interested in me as a loyal customer,” wrote one panelist. “I’m just a number to them.”

Conversely, the not-for-profit’s 2 1/2-page explanation of how and why it cut its budget made it seem “honest” and “forthcoming” to one panelist, and a simple, one-page summary of the mortgage lender’s terms came across as “straightforward” and “inviting” to another.

Tags: branding, deliver bad news, Direct Mail, Direct Marketing, direct marketing association, junk mail, Letters, Mailing, mailing services, Postage, postage increase, postmaster, USPS

It’s Time to Stay the Courier

From the New York Times Business Section
By JOE NOCERA
Published: August 7, 2009
Consider the plight of John E. Potter, the chief executive of the second-largest employer in America. On the one hand, he has a guaranteed monopoly for much of his business. On the other hand, monopoly or not, the combination of the Internet and the recession is absolutely crushing his company, just as it is for so many other companies across the country. His last quarter’s results, which were announced on Wednesday, revealed a loss of $2.4 billion. The business is on track to lose a staggering $7 billion in 2009, on around $68 billion in revenue. That’s practically General Motors territory.

What can he do to fix the situation? Surprisingly little. His employees have clauses in their union contracts that forbid layoffs. Nor can he renegotiate their gold-plated benefits, the way, say, the auto companies did when their backs were against the wall. Political pressure makes it nearly impossible to shut down any of his company’s 34,000 facilities, no matter how outmoded or little used. He can borrow money, but under the law, he can add only $3 billion in debt a year — an amount that isn’t going to come close to covering his losses.

Oh, and get this. Every year between now and 2016, he has to put aside over $5 billion to finance health benefits for future employees. You read that right: future employees. There isn’t another business in the country that finances benefits for employees it hasn’t even hired yet.

Welcome to John Potter’s world. He’s the nation’s postmaster general. Yes, that’s right: for the last nine years, he has run the United States Postal Service, which, since 1970, when it stopped being a government department and started becoming self-sufficient, has been the oddest of ducks. It is expected to operate as a business, turning a profit and so on, and yet it is still subject to Congressional oversight and all sorts of legal constraints, like that ridiculous health benefit prefinancing for future employees, which was part of a big 2006 postal reorganization bill. (Its main purpose, it would seem, is government accounting: those funds get counted against the federal deficit.)

Even so, until recently, Mr. Potter had had a pretty successful run. A smart, likable, lifelong Postal Service executive, he got it through the anthrax crisis early in his tenure. He saw it through 9/11 (in no small part by engaging Federal Express to fly long-distance mail during the day, when its planes were empty, something it still does). He has overseen productivity gains and, according to a poll conducted by Rasmussen Reports, a rise in customer satisfaction. Between 2001 and 2006, he even eliminated the Postal Service’s $11.3 billion debt. That year, 2006, was also when demand for mail service peaked, with 210 billion pieces delivered.

But the last few years have been brutal. The Postal Service lost more than $5 billion in 2007, and another $2.4 billion in 2008. And, of course, it is on track to lose that whopping $7 billion in the current fiscal year. (Its fiscal year ends in September.) The amount of mail being sent is dropping like a stone — it will be down to 175 billion pieces in 2009. Mr. Potter has reduced the Postal Service’s head count to 650,000, from 800,000, almost entirely through attrition. He has cut costs every way he can think of. And still the losses mount.

A few weeks ago, the Government Accountability Office added the Postal Service to its list of “high risk” federal agencies, meaning that it is in such dire straits that it needs “to restructure to address its current and long-term financial viability.” Indeed, if something doesn’t change by the fall, the Postal Service will have to renege on those health benefit prepayments — despite its legal obligation to pay them — or start missing payroll. “U.S.P.S. must align its costs with revenues, generate sufficient earnings to finance capital investments, and manage its debt,” the G.A.O. said. Just like any real business would.

“If you are asking me to run it like a business, give me the same tools that someone would have in the private sector,” Mr. Potter said when I spoke to him recently.

But as I discovered on Thursday, when I watched a Senate hearing on the current Postal Service crisis, that’s not likely to happen. For one thing, Mr. Potter isn’t really asking for the tools he needs to turn the Postal Service into a real business. He is asking Congress to relieve it from the health prepayments, which he is likely to get, at least temporarily. He is also asking that the Postal Service be allowed to reduce mail service to five days a week, and to eliminate some postal branches. These aren’t exactly revolutionary ideas — yet they are viewed as highly controversial in Congress, which frets that constituents might get angry if the local postal branch closes.

But even if Mr. Potter were to get his way on these two items, they would still be only stop-gap measures that fail to tackle the bigger question. As the Internet continues to erode the use of snail mail, does the Postal Service’s business model still make sense? Do we even still need the government to deliver the mail anymore?

To me, the answer is obvious: no.

Think for a minute about the mail that comes into your home. In the modern age, very little of it is personal mail. The vast majority is commercial mail of some sort — advertisements, bills, movies from Netflix or catalogs. Once upon a time, said Rick Geddes, an associate professor in the department of policy analysis and management at Cornell University, the postal service was viewed as “a way to bind together the nation. In subsidizing mail service to rural communities you were keeping them connected to the rest of the country.” But today, he added, “it is kind of silly to say we are binding together the nation through advertisements and catalogs.”

These days, the main justification for keeping the postal service as a quasi-government entity is the belief that no private company would be willing to deliver the mail to sparsely populated rural areas of the country. People fear that it would be a little like airline deregulation: communities that weren’t large enough to justify flights in the newly deregulated environment lost their carriers.

But that mission of universal service has all but blinded just about everyone connected with the Postal Service. Congressmen — many of whom, after all, come from rural areas — are loath to give the Postal Service too much free rein for fear that Mr. Potter’s minions will start shutting down post offices. (Never mind that 2,000 of them serve fewer than 100 people each.) The postal unions, with their no-layoff clauses, have used universal service to justify benefits so generous the Postal Service would save $600 million just by bringing them in line with other federal employees.

As for Mr. Potter himself, while he may want more freedom to run the Postal Service like a real business, he, too, seemed surprisingly wedded to outmoded ideas about mail service in America. “This country needs to have and to protect universal service,” he said. “Our business is all about making sure every American can stay connected with every other American.”

I failed to ask him the obvious follow-up question: Don’t e-mail messages now do that?

For most of us, of course, it does — and that will increasingly to be the case, as broadband makes it way into, yes, even those rural areas that everyone is so worried about. Michael A. Crew, a professor of regulatory economics at Rutgers told me that that while the Postal Service’s “short-term situation is bleak, its long-term situation is really bleak.” He is one of a number of experts who say they believe that even when the recession ends, the Postal Service’s woes won’t be over. As businesses look to save money in the recession, for instance, they are starting to do end-arounds the Postal Service. Online bill-paying is become ever more popular. Evite is starting to replace mailed invitations to parties. None of that business is ever coming back.

Which is why, instead of trying to find short-term, piecemeal solutions to the current crisis, those involved in managing and overseeing the Postal Service ought to be thinking harder thoughts about blowing up its business model. Maybe the Postal Service should turn itself into a giant outsourcer, handling some tasks but handing out others, for a fee, to more efficient companies. Maybe the government should allow companies to bid on lucrative urban delivery — with the proviso that they also deliver to rural areas. Maybe some areas should get mail deliveries less frequently than others. Maybe there should be radically different pricing structures. Maybe it should even lose its monopoly on first-class mail. I mean, why not?

Mr. Geddes, the Cornell professor, says he believes that the only solution is for the Postal Service to become “just another company” — lose its monopoly, shed its bureaucratic mind-set, become able to negotiate freely with its unions, and answer to shareholders instead of Congress, which is always going to resist significant change that might upset a constituent. Only when that happens will it be able to bring its costs in line with its revenue.

“The post office is not broken,” Mr. Potter insisted. But surely it is. And its current crisis brings to mind Rahm Emanuel’s line that you never want a serious crisis to go to waste.

Alas, here in the middle of its worst financial crisis ever, the Postal Service and Congress seem utterly intent on wasting it.

Tags: Direct Mail, Direct Marketing, direct marketing association, Jack Potter, Jack Potter congressional testimony, junk mail, Letters, Mailing, mailing services, Money, Philadelphia Post Office, Postage

‘Junk mail’ deliveries drop off: Recession has reduced amount of advertising

From: Business Matters
LAURA RUANE
lruane@news-press.com
• August 3, 2009

If your mailbox is empty more often these days, you’re not alone: Last year saw the biggest decline in U.S. mail since the Depression.

Leslie Alvarez has noticed. “There doesn’t seem to be quite as much junk mail,” said the 47-year-old North Fort Myers resident.

So has the U.S. Postal Service, which doesn’t call anything “junk” mail. Nationally, mail volume fell by 4.5 percent or about 9 billion pieces, year-over-year, in 2008.

The drop-off is steeper in Southwest Florida, said Anne Murray, postmaster for the cities of Fort Myers and Cape Coral. Year-to-date, volume is down about 18 percent. “Southwest Florida is hurting more than some other parts of the country. That’s impacted all of the businesses.”

Lisa Hixson, a U.S. Postal Service letter carrier for 21 years, delivers mail to downtown Fort Myers’ River District.

On her route, mail volume “has been steadily dropping,” Hixson said. “On one of my streets, I used to have two white tubs (of mail) for two buildings. Now I have one tub for the whole street.”

To be sure, mailings typically decline when tourists and snowbirds depart for the summer. This is more severe, Hixson and Murray said: It’s the economy cutting into direct mail advertising — fliers, postcards and catalogs.

There’s no single answer as to why. Some businesses — seeking to cut costs and try new media — are redirecting some of their advertising to Web sites, e-mail, and social media tools such as Twitter and Facebook.

Others make direct mailings but are more closely defining their target areas. Some businesses just hope to keep their doors open. Some have closed.

At Central Garage in downtown Fort Myers, “we’re still doing direct-mail advertising, but due to the economy, we’ve probably cut back,” said D.J. Hutton, general manager.

Over the past year, Hutton has supplemented print advertising with e-mailed sales pitches; however, he believes no form of advertising is very successful lately.

“Electronic media is cheap and trackable. You save postage, save paper, save a tree,” said Ludmilla Wells, associate professor of marketing at Florida Gulf Coast University. She noted Southwest Florida still has consumers, however, “who like to hold something in their hands to read, rather than peer into a computer.”

Tags: Direct Mail, Direct Marketing, direct marketing association, junk mail, Letters, Mailing, mailing services, Money, Philadelphia Post Office, Postage, postage increase, postmaster