'Junk Mail' May Be Last Hope for Saving the USPS

Consumers Might Gripe, but Postal Service Sees Direct Mail as Knight in Shining Armor

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Can direct marketers -- which not long ago cut back on mail in the face of a rate hike -- return to save the Post Office?

In financial trouble that has it on the brink of default, the U.S. Postal Service is making an aggressive appeal to catalogers and other advertisers to ramp up their mailings. The theory is that their revenue can make up for steep declines in first-class consumer and business mail that has migrated online.

The pitch -- to be bolstered with an ad campaign touting new easy-to-use direct-mail programs -- is not without irony. It was direct marketers, after all, that contributed to some of the service's woes when they began pulling back mailers in the face of the recession and a steep rate rise in 2007 on catalog postage rates. But direct mail is making a comeback of sorts, with couponers and catalogers still viewing it as an effective tool, even in the digital age.

"Even though we've tried really hard to find out a way of unlocking the secret sauce of electronic media to make it as productive as mail, it's still not as productive," said Hamilton Davison, president-executive director of the American Catalog Mailers Association. "You can't make me open your email; you can't make me visit your website. But if you send me a mail piece, you can compel me to pick that mail piece up and give you a third of a second dwell time to determine whether I'm going to read it or recycle it."

In other words, direct mail ain't going nowhere.

And as a result, the category is becoming increasingly important to the postal service, especially now as it seeks to dig out of the hole forcing it to pursue a four-year, $20 billion cost-cutting plan or risk shutting down. Consider this: First-class mail is forecast to decline from 78 billion pieces in 2010 to 52 billion in 2020 as users migrate to electronic alternatives, according the postal service's 2010 annual report. But standard mail -- a category that includes direct advertising -- is expected to grow from 83 billion pieces to 88 billion in that time. And mail still captures roughly 12% of media spending across all advertising channels, the Postal Service says, citing external sources.

With that trend in mind, the service is seeking to make direct mailing friendlier in hopes of luring more revenue by reaching out to new users. At present, only about 22 % of businesses use direct mail. A new Post Office program targeting small businesses called "Every Door Direct Mail" allows marketers to send out mailings that don't require specific addresses or names, a cost-saver for businesses that used to have to include such information on urban mailings. A pizza parlor, for instance, could target a few city blocks, dropping off up to 5,000 pieces at their local post office and paying 14.2 cents for each piece, as long as it's under 3.3 ounces. Larger mailings must be dropped off at regional centers. Another new program being tested in Austin, Texas, and Raleigh, N.C., called Direct Mail Hub gives direct marketers an online tool for templates and to upload mailing lists, order printing and pay postage all in one spot.

The services will be the subject of a new TV campaign planned for next year. Marketing mail "is holding its own and, in fact, growing ever so slightly in the mix of marketing tools," said Joyce Carrier, the Postal Service's manager for advertising and media planning. And "we haven't ever really aggressively marketed it."

The moves come just four years after the service irked catalogers when it hiked their postal rates by some 20%, a move that the industry said contributed to a decline in mailings from 20 billion pieces in 2006 to 12 billion in 2009. But, with the economy improving slightly, mailings are back up to about 13 billion, Mr. Davison said. The Postal Service is also getting a boost from coupon companies such as Valpak, which is on track to increase its mailings from 485.2 million envelopes in North America in 2010 to 494.8 million this year.

Of course, direct mail is hardly the Holy Grail. Because of lower rates, it makes up only about 28% of total Postal Service revenue, compared with roughly 50% for first-class mail, which also includes some advertising mail. And it is the first-class decline that is forcing the service to consider draconian moves such as ending Saturday delivery and cutting its workforce by 220,000 by 2015.

For now, there are no plans to cut the service's $125 million advertising budget. Indeed, another new campaign slated to debut this month will tout first-class mail, positioning it as safer than electronic communication. "There's something very tangible and secure about the mail," Ms. Carrier said. "It's not like we're being Luddites here to try and get people to stop using electronic ways to pay their bills," she said, but "a lot of people are [giving] a second thought to converting [to electronic]."

Although the Postal Service has put its ad account up for review, both new campaigns are being handled by its incumbent creative agency, Campbell-Ewald.

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