Consumer Driven Business Solutions contact: [email protected] 7 Keys to building mail...

Consumer Driven Business Solutions contact: [email protected]

7 Keys to building mail volumes

profitable

What is driving direct mailSpring 2003

WORLDWIDEBENCHMARKING STUDY

In association with


The Research…• Methods

– Detailed surveys from 60% of the industrialized postal markets– Discussions with dozens of industry leaders– Interviews with 212 leading direct mailers– Data from UPU, WARC and the World Bank

• Top-line results– Some growth, unfortunately, a lot due to falling results at leading

mailers– Volume being hurt by advertising slow-down and growth of email– Mail losing share of total media spending


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%Mail Growth / Media Growth 1997 to 2002

100% = growth in line with total media growth

Average Index: 62%Media > €100/person: 73%Media < €100/person: 56%


Key Findings

• What drives direct mail volumes– Economic growth / Advertising spending– Alternative media choices– Initiatives in the direct mail industry

Important note: No significant direct relationship between pricing and mail volume, except a negative impact associated with large price increases


You can’t change the economy, you can’t change your competition,

but you can do something…

The solution is not about doing what you’re doing better,

it is about doing different things


A warm up exercise

100040

100030

100020

100010

5,000

90 % of businessexecutives agree

Note: When shown these numbers line by line and asked to add the total, over 90% of business executives will answer 5,000. (The correct answer is 4,100). Just because the prevailing paradigms suggest one set of answers, it doesn’t make these paradigms correct


Paradigms = models, patternsthe basic way of perceiving, thinking

valuing

A dominant paradigm is seldom if ever stated explicitly;

it exists unquestioned… transferred through culture and unspoken

business practices

William Harmon- An incomplete guide to the future


With few exceptions…The Postal business paradigm• Pricing focus• Owning the value chain• Key client mentality• We own the market• Cutting the non-essentials• Operational excellence• World class planning

If we get operations right, business will follow


These are comfortable,logical business principles

but they are not the wayto build profitable mail

volumes


Competitive pricing is what counts

Work on volume not on price

1


The elasticity of demand

• A study for EEC on postal liberalization by MMD Ltd & Hydra Associates

• Analysis of price and volume over 10 years – Postal Solutions

• Interviews with 212 direct mail users - what impact would a X % price decrease have on mail volume

a 10% reduction in price will not increase volume by more than 10%


Current MarketSales 100Margin 15%Profit 15

Break-even ResultsA 10% price reductionSales 300Margin 5%Profit 15

Sales 300

Expected ResultA 10% price reductionSales 108Margin 5%Profit 5.4Index 36%

(A simplified) Break-even Analysis

8% more volume, but

64% less margin


Owning the value chain

partners are your biggest asset

2


Case Study: Worksharing USPSPeriod 6, FY 2003(Billions of $)

Potential Billings

Work-sharing

discounts

Net Billing

s Base Costs

Cost of worksharing

services Net

Result Current Results $40.7 $8.0 $32.7 $31.1 $0.0 $1.6

The Impact of worksharingLooking at Costs only $40.7 $0.0 $40.7 $31.1 $11.8 -$2.2

Assuming a 10% $36.6 $0.0 $36.6 $28.7 $11.8 -$3.8 volume impactwith 60% of costs fixed

a profit of 1.6 Bil to a loss of 3.8 Bil That’s the difference between viability and bankruptcy


Key Client Mentality

Building Client Depth

3


Small/ Medium size mailers is where the volume is

• 53 % of private sector employment• 75 % of new jobs• Limited media options• In most markets, this segment has the potential to send

3-4 times the mail they are sending now

What they want is simpler, easier ways to send their mailings . . . Not 24 pages, 8 flow charts to send 1000 mailing pieces


It is simple…


We own the market

We are another media

4


Selling Benefits

• 80% of your clients will ask for price reductions• The key to building volume is: To sell benefits vs.

other media...

“ I have never even seen someone from the postal service, except to discuss prices”

“I have never seen someone from the postal service”


And you might be selling to the wrong people…

A leading agency’s point of view…

“Direct mail is too much work for the money we make…”

“If we got a commission on the mail, we might recommend our clients mail more, but right now it isn’t worth the work…”


Question

When is the last time you offered a pay for performance

contract ?

your competition is doing it every day


Cutting the non-essentials

Investing for growth

5


Cut-backs

Lower volume

Lower margin

Business Pressure


The biggest opportunity for investment

• Building value in the “mail moment”– Is it junk or is it interesting offers ?– Perception is everything !

SidelineIn a 1982 Gallop study “getting the mail” was the average consumers favorite daily task


Operational excellence

Adding real value to the direct mail value chain

6


Should be Should notinvolved be involved INDEXES

Data ServicesBereavement Register 91% 3% 2,676 Gone Aways listing 87% 6% 1,402 National Change of Address 79% 10% 814 Opt-out files 69% 17% 414 Opt-in files 66% 19% 345

Strategic consulting 45% 21% 214 List Broking 20% 50% 40 Agency 16% 46% 34 Lettershop services 12% 56% 21 Printing Services 12% 63% 18

Mail users study: April 2002 N= 212

What your customers think …


Investing in consumer data

United Kingdom

• Both services collect information on the mail consumers want– Consumer/ advertiser approval ratings

over 90%– Each address collected generating +/-

30 more mailings per year

For perspective, in the UK this represents

90 million extra mail pieces/yearDenmark


World class planning

Fire, fire, fire

7


420 years of potential activity

• 42 postal services provided information about initiatives over the last 10 years to build mail volumes

– 7 pro-active business initiatives– 6 were a success

No action = no success


The Kotler Doctrine:

until 1980: R.A.F.(Ready.Aim.Fire.)

1980-1995: R.F.A.(Ready.Fire!Aim.)

1995-????: F.F.F.(Fire!Fire!Fire!)


Forget>“Learn”

“The problem is never how to get new, innovative thoughts

into your mind, but how to get the old ones out.”

Dee Hock


A focus on volume not on price

Logistic & Operational Excellence

work with partners

expand your client base

sell vs. other media

invest in the future

move quicker

Profitablemailvolumeswill follow

add value to to the value chain


A not so famous quote

“I think there is a world market for about 5 computers... “

Thomas Watson, Chairman and founder of IBM

Imagine where IBM would be now if they hadn’t

changed their business pardigm...


Summary: New paradigms for the future

1. Competitive pricing is what counts

2. Owning the value chain

3. Key client mentality4. We own the market..5. Cutting the non essentials6. Operational excellence

7. World class planning

1. Forget pricing, more volume is the only answer

2. Partners are your biggest asset

3. Building client depth 4. Selling like a media. 5. Investing for growth 6. Adding real value (eg Data,

Change of address, etc..)7. Fire, fire, fire


Contact InformationPostal Solutions is specialized in helping the national postal services with the development of products and services to build the volume of direct mail.

Our core expertise is in creating consumer data programs. Members of the Postal Solutions team were responsible for the start-up of the following companies: The Preference Service, Consodata UK and Pin-Point Marketing.

For more information on our services visit http://www.postal-solutions.comor send us an e-mail: [email protected]

Postal SolutionsBeekstraat 19A8550 ZwevegemBelgium

Tel: 32-485-027-535, Fax: 32-2-706-5213

Consumer Driven Business Solutions contact: [email protected] 7 Keys to building mail...

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