THE FUTURE OF DIRECT MAIL – Opportunities for posts?
Raquel Ferrari, Programme Manager, Direct Marketing and Stakeholder Relations, Universal Postal Union First published in MER Mail & Express Review – Issue 20 – September 2012
The traditional postal role in direct mail
Mail and direct mail are core to posts, major contributors of postal volumes and revenues. Posts have usually positioned themselves as distribution agents of advertising mail, and their success has been measured mostly by the quality of the delivery service provided. Universal Postal Union statistics show that direct mail remains a huge business, accounting for some 38% of global letter mail volumes and, in the US, for more than half of total mail volumes. UPU research also reveals that opportunities exist for growth in direct mail.
However, direct mail has known better times. Winterberry Group’s “Outlook 2012: What to Expect in Direct and Digital Marketing” survey showed that while volumes in the US have grown significantly in the past, they decreased towards the end of the last decade, although a modest rebound has been verified in the last couple of years. At the same time, spending on digital media has been growing exponentially. This situation seems to be the same throughout most of the world.
Traditionally, the role of the posts has been restricted to distributing mail pieces. Many posts did not have much knowledge or understanding of the process undertaken by advertisers before mail and direct mail reached their offices for distribution. Many had a socalled direct mail product, but the posts’ role often did not go much beyond the forwarding and delivery of addressed or unaddressed direct mail. The postal focus was, and for the most part, still is, as a distribution solution.
However, as technology advances and communication processes become progressively integrated, and as mail is increasingly combined with other media channels in customers’ marketing campaigns, posts have also changed their role in the media markets, developing their strategies and activities to be in line with customers’ requirements.
Horizontal value chain expansion
Over the last few years, two distinct but more or less simultaneous trends have become evident. The first one is what I call horizontal expansion of postal solutions along the customers’ value chain. More and more posts around the world have been adding value to their core distribution services by offering products and services both before and after delivery. These include consultancy and agency services, data management and list offers, printing, finishing and lettershop services, as well as response management, logistics and reverse logistics, and customer service. Some of these value added services have even become core to some posts, such as data management, since these facilitate and drive the efficient use of the mail channel.
A survey conducted annually since 2007 by the UPU’s Direct Mail Advisory Board among posts around the world clearly demonstrates this trend: at least 43% of all posts now provide mailing list services, 36% possess mapping and profiling capabilities for unaddressed direct mail, 58% offer mail preparation services such as lettershop and/or printing, and 40% provide a service to manage returns of undeliverable items. These developments apply in developed and developing countries alike. Furthermore, some 42% of posts offer consulting in direct mail and/or actively train their customers in direct mail techniques. Some have turned into full service agencies, offering one stop solutions allowing advertisers to plan and implement their entire direct mail campaigns through the post. Such solutions are often, but not exclusively, focused on small and medium enterprises.
Vertical value chain development
A second and more recent trend is what I call a vertical expansion of postal services, which relates to channel diversification. Specifically, posts are offering other channels besides the traditional physical direct mail, thereby not only ensuring that the mail channel is fully integrated into a customer’s overall communications mix but also adding other ways through which businesses can contact their current and potential customers.
This means, on the one hand, providing other direct marketing channels. According to research conducted by the UPU, there are 55 different kinds of electronic services provided by posts worldwide, including e-post, e-finance, e-commerce and e-government. Hybrid mail services (electronic to digital and vice versa), postal electronic boxes and electronic delivery of physical mail are some examples. Again, this diversification has been happening not only in industrialised countries, but also in the developing world.
On the other hand, some posts are beginning to provide full communication services through the creation of special divisions dedicated to digital channels, or through the acquisition of subsidiary companies specialising in direct marketing. To give just a few examples: Canada Post is currently expanding into digital media offerings, placing great emphasis on the collection and use of data; Norway Post has acquired Bring Dialog, a customer relationship agency that offers end to end campaign planning, including delivery through various media channels; nugg.ad is one of the companies owned by Deutsche Post DHL specialising in targeting for online advertising; and PostNL’s subsidiary Netwerk VSP, which delivers unaddressed printed advertising throughout the Netherlands, launched an interactive platform in 2011 offering leaflets online on behalf of retail clients.
These two major trends demonstrate not only an adaptation by posts to new market conditions, but a necessary anticipation for their survival and growth. More and more, posts are positioning themselves as a direct marketing channel, be it through physical or digital direct mail, rather than merely being a distribution service. And posts are adding value to those marketing channels through innovative solutions.
The importance of data and integration
Data is fundamental to the achievement of successful direct mail campaigns, and it is also the foundation of digital media campaigns. Advertisers have learned how to work with, and benefit from, data collection and analysis to achieve effective direct mail. Data is also responsible for the growth and the success of digital and electronic marketing. Investing in data and information management has been a major innovation in the postal world, often building on previous operational data used for quality distribution of physical mail.
When expanding horizontally along a customer’s value chain, as mentioned above, posts have been acquiring and enriching address data and demographic knowledge that are extremely useful to advertisers for better targeting. When expanding vertically into channel diversification, one of the key developments is exactly into digital data management.
So what does the future hold for posts, and for direct mail in particular? Posts need to position themselves as a direct marketing channel, as many have started to do. They may “own” the physical channel, direct mail, but they must also master customers’ own processes in a multi-channel world. The convergence of media, which includes but is no longer restricted to direct mail, represents an opportunity for posts provided that they understand how advertisers plan, develop and execute their marketing campaigns, what instruments they use for targeting, which channels they choose and why. Posts need to understand the role of direct mail in this new environment, and to create innovative solutions facilitating the integration of mail into advertisers’ marketing strategies.
The skills and expertise necessary to devise such strategies are not always present in the traditional postal service. Therefore they need to be acquired.
In the multi-channel, integrated media market we now live in, the mail volume growth that we saw in the past is unlikely to come back. But that does not mean the end of direct mail, nor a decrease in the importance of postal services. On the contrary: in diversifying and expanding their strategies both horizontally and vertically, posts can take advantage of the convergence and integration of new media into advertisers’ campaigns, add new value by offering solutions that facilitate the use of several channels, and use technology wisely and efficiently to that end. There are opportunities not only in the developed world, but also in emerging and developing countries. The time for direct mail is not over: it is definitely a part of a greater, diversified world in which data rich, direct media channels are intrinsically related to each other.