Seven Steps to More and Better Benefits for Customers in the Mailing Industry

Headlines and articles about mail and postal issues almost always focus on declining mail volume, postal red ink, rising costs and reduced service. Business and consumer customers want benefits – more and better of what they need, not less. They have no intention of sacrificing anything they value. The industry can begin to put together a more coherent story of a positive future based on things that are happening now – a vision of new capabilities and value for their customers. There are at least seven major changes that could create a radically improved postal platform that will make it possible for the industry to compete more successfully in the digital world.

1. Winning with Data: Becoming an Information Powerhouse

The Postal Service was, for many of its customers, an information “black hole.” Mail went in and everyone assumed and hoped it would be delivered accurately, efficiently and at reasonable cost. Information about operations was inconsistent, ambiguous, and anything but real-time. Some business customers were driven to develop expensive “reporter” systems to determine when mail was delivered.

It has been long in coming, there are “birthing” pains, and there will be adolescent problems to be worked out, but the Postal Service is becoming an information powerhouse. The creation of mail, its transportation, processing, delivery, and feedback from customers will be linked in an increasingly sophisticated and powerful information system. This will provide detailed real-time information about the mail along the entire value chain. The first application will be internal – improving service performance and productivity. This alone will be a significant improvement, but the more important benefit will be to provide the capability to use mail more effectively and to use mail in different ways. This will move mail beyond the world of mail rooms and postal operators into the more creative world of marketers and service entrepreneurs. One intermediate-term opportunity is more realistic cost and pricing designs.

 

The potential benefit does not stop there. As the postal information platform matures and the Postal Service gains credibility for its information technology capabilities, a new digital communication platform is being created. It will be focused first on communications about mail among the mailing service industry and its customers, the Postal Service and its suppliers, and the recipients of mail. But a unique secure private network is being created, where senders and recipients are known and voluntarily share relevant information about their needs. The world of digital notifications, feedback, hybrid mail, private electronic mailboxes becomes a real possibility and the Postal Service can enter the digital world as a legitimate player.

2.       The Digital Front End of Mail: Mastering Integrated Global Communications and Shipping

The digital world hates complexity. The mailing industry is a complex, highly fragmented assortment of specialized firms operating in a world bound by rigid rules (have you seen the Postal Service’s Domestic Mail Manual, or the Postal Regulatory Commission’s three part Annual Compliance Report?). The best GUI’s (graphical user interfaces) of the digital world are simple yet powerful, empowering users with easy access, customized features, flexibility and responsiveness (think Amazon).

What this means is that the mailing industry value chain is ripe for disintermediation. Someone somewhere is working on a digital interface that will empower any business compete with the current “big boys” in the industry without directly having to put together mailing lists, pre-sorters, printers and others to easily and effectively use the mail. This is happening now if you look behind the numbers from studies such as the Mailing Industry report from the Envelope Manufacturer’s Foundation. While the number of firms in the industry is declining, industry sales have not significantly declined. Firms are merging or being acquired, and firms are developing more sophisticated, multi-media approaches to serving their customers. Plentiful anecdotal information indicates growth rates of 20 or 20 percent are possible for firms taking advantage of the new capabilities.

This will also include the ability for senders to apply QR codes, Augmented Reality, Clickable Paper or any number of technologies which link mail with the digital world, making it more effective as a communication and marketing tool. The evidence is in, from sources such as PODI, and printing programs from RIT, Clemson, and San Diego State, among others, which have demonstrated the talent of the next generation of designers (See Print in the Mix, from RIT). Firms with processes built around traditional high volume standardized mailings with response rates of 2 to 3 percent will be replaced by firms that can demonstrate response rates many multiples of that – demonstrating real value to senders and recipients through flexibility, responsiveness and relevance.

The same thing applies to shippers as well. This is a global market, and as digital tools which enable cross-border shipping and address management across national boundaries become simpler and more accessible, more firms will enter the e-commerce market. Again, this will place small and medium sized businesses – often new to the market – on a more competitive and level playing field.

The mailing value chain will be realigned, and the Postal Service can play a larger role in providing the platform for industry growth.

3.       Next Generation Mail Processing: Leveraging Robotics, Information and Print Technology

The Postal Service revolutionized the industry with the “quiet liberalization” of mail processing and logistics with the twin strategies of work sharing discounts and automation. However, this peaked with the implementation of the Corporate Automation Plan in the late 1990’s. While incremental improvements continue to be made, particularly in scanning and information technology, postal and mailer operations have not changed noticeably in the last decade or so – one industry consultant noted that “this is an industry where most of the equipment was fully depreciated during the Reagan administration.” The Postal Service has not had the capital to invest in new technologies, but robotics and other developments hold promise for significant improvements in productivity.

It is also clear that information technology can create integrated networks of local printers, so mail can bypass initial postal operations altogether and be entered close to the delivery office. FedEx and UPS have both invested in such networks. This is another potential application for hybrid mail – a technology that has been steadily improving but has yet to find a significant place in the U.S. market (see Cick2Mail and others). Technological development will also alter the delivery process.

The application of information technology creates a connected environment where pieces of mail “talk” to postal equipment (I’m in the right tray, on the right truck). Mail talks to customers (I will be delivered at 10:30 on Tuesday) and to letter carriers (you have an important package for the Smith’s on Renner Road). The vehicle guides the carrier throughout the route, and wearable technology connects the carrier with customers and the delivery office.

4.       The Magic of Delivery: Sharpening the End of the Spear

The Postal Service and the mailing industry have been clustered around a simple assignment, based on the needs of senders for certain basic functions: accurately delivering items at the lowest possible cost. The industry has naturally focused on the needs of the business mailer community. However, this is only the beginning.

The value of the postal (or any other channel) depends on the preferences of the end user (recipients). Consumers, empowered by the availability of alternative choices and the increasing ability to select how they wish to be served, must now be considered a part of an equation that must be solved simultaneously (see recent Accenture research). Old postal channel performance metrics are only the first steps in a complex dance.

The magic of delivery remains the same: providing information and services that meet the needs of both senders and recipients. There is something special about receiving something you want or need that is relevant and timely, where and when you want it, but convenience, control, ease of use, and security are all part of the equation. It is no longer just a cost center, but should be the real focus of the firm’s efforts to improve the channel and the customer experience.

Some ZIPs (or cluster of ZIPs) would probably be profitable six days a week throughout the year. Others may be profitable before major sales holidays or in peak season. Still others may only require four or five days of delivery. Even within the less profitable delivery routes there may be “super users” who would be willing to pay for an extra day of delivery or delivery to a specific place (door delivery). The point is that cost-based delivery is no longer the only way to look at this part of the business, and bureaucratic responses are not appropriate to the competitive delivery market.

Delivery is no longer a utility function, delivering a commodity according to the dictates of the provider and the regulator. It is a service that must be adjusted to meet the needs of different customers in different markets. This is a profound shift of perspective that will result in a new delivery environment, with new providers (Amazon, regional logistics firms and networks of local courier services) and new ways of providing delivery (Cluster boxes, drones)

5.       Adding Value to the “Mail Moment”: Helping Customers do “Jobs” More Effectively

It is not just about the mail, and never was. People use mail (and its alternatives) to do jobs that are important to them. Instead of focusing on the artificial constructs of various categories of mail, the industry and the Postal Service should concentrate on improving how mail and mail services help people do these jobs (see Clayton Christensen). Instead of delivering a bill – a mere transaction – the Postal Service is helping households manage their finances and helping companies get paid. This is how bill payment facilities (payment in person, or the Office of the Inspector General’s proposals to provide limited financial services to the underbanked and unbanked fit within the mission of the Postal Service).

Postal “Mail Moment” research documents that a significant percentage of households (“CEO’s of the Mail”) are critically important customers. They are typically women, and have the responsibility for managing household relationships, paying routine bills, and doing household shopping. Most are very comfortable in the digital world, but still “rely on the mail and would be lost without it.” There is a tremendous opportunity in reinforcing this attitude, and more in attracting those in other segments who have not yet created the mail “habit.” It is important to note that this “habit” is not necessarily age-specific – contrary to much of the accepted wisdom, younger consumers actually like mail (if it is relevant, personalized, and “fun”.)

Most postal carriers know, informally, that they are not just about delivering “junk mail” (a phrase, by the way, introduced by the newspapers when they were competing for advertising against Direct Mail). They are helping their customers shop more effectively, and helping businesses grow. This is at the heart of their unconscious engagement with their customers and jobs. Leveraging the engagement of front-line postal employees in a connected, post-industrial workplace is another key to significant growth. Most customers feel that mail is important to them, but they cannot quite articulate why (see InfoTrends research, What Americans Want from the Postal Service). The deeper research conducted by the Postal Service shows why – mail as a means to an end – a tool to help them do things they want to do, and mail still does a good job.

 6.       The Importance of the Personal Touch in the Digital World: Building Better Relationships

The Internet is an impersonal world and channels proliferate. Today’s next new thing is forgotten by tomorrow. There is a real value to the “goodwill” created by a trusted, universal channel. The Postal Service has that trust, but almost by default. It has not really invested in building that relationship with businesses, communities, and consumers. The public service functions of the Postal Service actually work to create a unique competitive advantage with the American people. Front-line postal employees are actually highly regarded by the public, and often serve functions far beyond simple delivery of items to an address.

Communities are willing to fight to preserve their post office. The Postal Service provides a social benefit beyond its business activities. Many mailers are increasingly unwilling to bear the extra cost burden, but global posts have found ways to rebalance social service obligations so that postal services can be more competitive. Some functions such as the Postal Inspection Service, the Office of the Inspector General, and the Postal Regulatory Commission, are purely governmental services which can be funded separately. While some public services may need to be reduced or eliminated, there are others that can serve the community and the nation – especially if new revenue models can be developed.

7.       Collaborative Innovation: The Value of the Postal Platform

For businesses, the variables of value go beyond the simple mission of promptly and accurately delivering an item at the lowest possible cost. This has been the primary measure of effectiveness within the Postal Service and the industry. But the real criteria for success of the Postal Service and others in the value chain are much more complex.

These may include response rates, return on investment, improved customer relationships and sales. Consumers have a number of other concerns. Both customer groups must be satisfied if the channel and its contents are to be successful in a competitive world.

In today’s world, even organizations as large as the Postal Service cannot go it alone. The Postal Service maintains an extensive outreach program to many of its major suppliers and business partners, but the efforts are generally highly specific, technically oriented, tactical, and driven primarily by the needs of the Postal Service. The Postal Service has developed some successful innovative approaches (worksharing) and creative contracts with competitors (UPS and FedEx), these are generally operations-driven, and do not get to the heart of innovation, technological or market development.

These critical competitive measures of success of the total value chain are rarely the subject of Postal or industry conferences, intensive research, or focus. However, successful firms within different segments of the industry have figured it out and work more strategically towards understanding these goals and helping customers (both mailers and consumers) achieve them.

Summary and Action Plan Recommendations: The Postal Growth Platform

The “Golden Age of Mail” is gone. Long established industry habits must change. Today’s solutions to yesterday’s problems will not build capabilities necessary to meet tomorrow’s challenges.

1. Customers are not interested in sacrificing. They want to hear about how the Postal Service and the industry will help them do things that are important to them. The postal story should be about new capabilities and relevant new benefits for customers.

2. The industry must challenge conventional wisdom (accepted way of doing things) and develop much deeper understanding of customers, markets, competitive services and how they interact. The industry must also develop an understanding of the real metrics of success for the value chain.

3. There are many opportunities for profitable growth. The seven listed here are just a sample. Most of these do not require significant legislation or regulatory review. They are based on real current trends and are immediately actionable.

4. The industry must find new ways to work together to create a more efficient and effective value chain in the digital world. The Postal Service can be a platform for profitable industry growth.

By Kent Smith

Kent Smith is Research Director, Ursa Major Associates / Postal Vision 2020. His 38 year career in the Postal Service included Rate Classification Research, Market Research, and Strategic Planning. Ursa Major Associates / Postal Vision 2020 is dedicated to taking a broader, longer-term perspective on the future of the mailing industry ecosystem. The thoughts expressed in this “Point of View” are his own.

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