Abandoning the mail
Abandoning the mail
Although Netflix supports USPS' plan, it is also shifting more of its business model to platforms that stream content directly to consumers through computers and home entertainment systems.
“The cost is the same, but what we do is put the money for postage towards more streaming,” he says. “We will spend the money; we will just spend it differently − and we'll spend it so that consumers have more and more content to watch instantly, rather than spending it on postage.”
JCPenney is another household business name shifting its mail strategy. The company recently discontinued its traditional catalog business in favor of “look books” − mailed books that refer consumers to the company's e-commerce website. However, a year after the company also stopped distributing its “Big Book” catalogs, JCPenney spokespeople told media outlets the company would not stop mailing marketing materials to consumers. The company, once as well-known for its catalogs as its retail outlets, also heavily used social media and mobile components during this summer's “Back to School” integrated marketing campaign. A company spokesperson did not return queries seeking comment.
“Getting out of the catalog business is not getting out of the mail business,” says Cerasale. “I don't know how it is going to work, but it's interesting that they didn't abandon the mail, they just changed the way they use the mail. A lot of people are saying, ‘How do we change the mail to make it a complement to other channels?'”
The US Postal Service's financial health is directly tied to its sales volume. Therefore, the USPS is making plans to adjust its finances for 10 years from now, when mail volumes may drop.
Although the Postal Service's rate increase was ultimately rejected by the PRC, leaving the USPS to ponder whether to try again with another “exigent” case or enact an increase at the rate of inflation, it may have scared some businesses into reducing their use of the mail. Hamilton Davison, president and executive director of the American Catalog Mailers Association, contends that “even the threat of a postage increase can harm mail volumes.”
“From the time the increase is announced until the time it is accepted or rejected, mailers have to use the most recently available information in their forward planning. After the [Postal Accountability and Enhancement Act of 2006], mailers felt they could count on postage at or below the rate of inflation. Recent developments throw this to question,” he says. “To the extent executives feel they do not understand what is happening at the USPS or have no input or control over it, there is greater pressure to reduce mail dependency to mitigate further risk and put more resources to moving out of mail.”
Tom Heim, director of operations at Infocus Marketing, a list management firm, said that companies are “following the leader” to digital, adding that the lower cost of digital marketing has also attracted them. However, the recent exigent case, and the fear that the USPS could again turn to that option in the future, have lessened consumers' confidence in the mail as a long-term marketing strategy, he says.
“There is still a mandate on the USPS in terms of universal home delivery to addresses. That's what postal reform was about, and adding the predictability tied to the [rate increase cap] so that companies could budget for that,” he says. “I would say that a lot of the clients plan on an annual basis, or maybe two to three years out, so I would say as a service provider that the decision by the PRC was the first little bit of good news we've had in a while.”
With the Postal Service's uncertain future in mind, even companies with mail in their long-term plans are diversifying their marketing mix further. Ed Perez, VP of marketing and sales operations at US Cellular, said his company is working on reaching customers with time-sensitive offers and campaigns through digital methods, but it still plans to incorporate direct mail outreach into its future marketing campaign strategies.
“The way things have trended, I would say we are investigating many other ways to market to consumers, such as QR codes and other methods new to our strategy in 2011,” he says. “But we still have our direct marketing pieces as something we acknowledge works well for us and that our associates find customers are comfortable with.”
He adds that US Cellular will reassess that strategy if a major rate price increase is enacted, or another factor drives up the cost of mail significantly.
“Like all companies, we are very conscious of being fiscally responsible, and we always have to make sure we are getting a good return on our investments,” he says. “So if there is a significant price increase and we aren't able to raise the response rate, we would have to consider other ways to market to consumers.”
There is considerable debate among industry experts on what the USPS of the future should look like. A bill put forward by Sen. Thomas Carper (D-DE) would rectify the Postal Service's perceived overpayment of its retiree funds − as well as allow the USPS to reduce delivery to five days per week. However, many Washington experts are unsure whether this Congress will take action on the bill in a lame-duck session, or leave the issue for the next − and possibly very ideologically different − group of legislators to tackle.
Davison says he hopes to see considerable change in the near future at the USPS, adding, “The consequence of no change is death.”
“They must become much more customer-focused if they are to maintain and build volume,” he says. “The mail works − it still works − and works better than many alternatives. I think that if an intense customer focus becomes the norm, and the external forces undermining the long-term potential of the agency are corrected, there's no reason we won't have a vibrant Postal Service for generations.”