POSTAL `IDEA MAN' GOES $87 MIL OVERBOARD ON AD PLANS LOREN SMITH EXITS JOB AS OFFICIALS INVESTIGATE 62% OVERRUN IN BUDGET
Loren Smith, the ex-consumer marketing executive who tried to take the U.S. Postal Service into everything from phone cards to taking on Federal Express Corp. and Mail Boxes Etc., acknowledged last week that he overspent his $140 million annual ad budget by $87 million, or 62%.
The postal service is conducting an internal audit of the ad spending and named Allen Kane, VP-operations support, to replace Mr. Smith on Nov. 1. Mr. Smith held the post of senior VP-marketing.
DEFENDING HIS PROGRAMS
The "idea man"-who lost fights to have the postal service sponsor the Democratic and Republican national conventions and to offer neighborhood businesses direct mail without any need for mailing lists, but won others-is strongly defending both his advertising programs and his goals.
His only apology, he said, is to the reportedly irate postal service Board of Governors, for not keeping members better informed on the ad spending line item for the fiscal year ended Sept. 13.
"Anytime you have a surprise, somebody wasn't communicating," Mr. Smith said. "The communications problem was the board didn't understand the line item advertising would rise as a result of some of our program decisions."
SHIFTING MONEY AROUND
Mr. Smith said he moved money in his $650 million marketing budget from development programs not yet ready or from less successful programs to the more successful ones. The overall marketing budget came out about on plan, he said.
Most of the additional spending was for the successful Priority Mail campaign from FCB/Leber Katz Partners, New York, in which the postal service compares costs with FedEx and United Parcel Service of America, he said.
(Last week, FedEx announced it will sharply drop prices on Nov. 1 for the two-day letter the postal service uses for comparison).
At least one postal critic expressed "outrage" at the overrun.
"We thought they were spending $90 million on advertising. Now we hear their budget was $140 million and they're $80 million over," said Scott MacDonald, communications director for the Coalition to Make Our Mail First Class. "This is for basically a monopoly . . . This is outrageous."
CONTROVERSIAL FROM START
Mr. Smith, a former marketing executive at General Foods Corp. and Colgate-Palmolive Co., has been controversial almost since he walked in the door of the postal service two years ago. Believing that raising stamp prices risked lowering volume at a time the service was already experiencing volume problems, Mr. Smith moved to start a wide variety of new services and offered marketing programs to back them.
Post offices were redesigned with open bins of dramatically lit and shrink-wrapped sheets of commemorative stamps on black backgrounds replacing the nondescript machines and windows. A store was opened in the Mall of America to test the concept of offering games, T-shirts and merchandise based on stamps. Plans were put in place to offer electronic stamp cancellation and verification for Internet messages.
The postal service soon will roll out nationally pre-paid phone cards called the FirstClass Phonecard, in a partnership with American Express Co.
Mr. Smith switched from a single ad agency to several with Young & Rubicam, New York, as the main agency but Leber Katz doing major work and several other shops handling specific projects or promotional activities.