Evolution of Mail Inevitable

The economic downturn hit many industries hard, including the direct mail industry. As the mortgage crisis became the credit crisis, consumer confidence and spending plummeted, causing a change in how businesses approached advertising.

Although change is already underway for the mailing industry, most experts agree that mail will continue to be a vital and powerful engine in our nation's economy for years to come. Direct mail is critical to the economic well-being of communities, businesses and charities throughout the United States. Here are a few reasons why:

• Last year, advertising mail contributed more than $702 billion in increased sales to the U.S. economy.

• Small businesses, which produce 60 percent to 80 percent of all new jobs, depend on advertising direct mail as the most affordable and effective way to communicate with customers.

• There are 8.3 million jobs associated with the mailing industry, according to a 2008 study by the Envelope Manufacturer's Foundation.

Mail remains the backbone of business and consumer communications. Yet, a shifting focus by businesses to multichannel advertising, initiatives within the United States Postal Service (USPS) and the national and state political climate promise an evolution in how the mailing industry operates.

Multichannel Marketing

As the economy rebounds, the direct mail industry must evolve to meet the needs of a changed business environment driven largely by new consumer attitudes and behaviors. As customers' preferences for communications have changed from purely physical to multichannel, this means a necessary expansion by the mailing industry to offerings associated with digital media.

In fact, with the proliferation of ways to communicate in recent years, many customers are expressing more complex channel preferences to avoid what is commonly referred to as "information overload." It's more important than ever in this environment for the industry to offer a variety of personalized and targeted methods of communication for businesses to reach consumer groups.

The capabilities of transactional paper statements show how a multichannel approach to direct mail can transform customer relationships. For instance, if a large bank embeds a promotional offer directly onto its billing statement, it can drive customers to a unique Internet page, increase the number of customer "touch points" and increase its chances of winning additional business.

Getting customers to the company's website also helps expand customer knowledge of the company and enables them to make connections with other customers. In today's era of social media, blogs, customer forums and fan sites have the customer's attention and are more credible than any type of marketing collateral.

Organizations that understand the importance of social media can enable customers to help promote a product or service they like by giving them the ability to participate in social networks directly on the company's site. Thus, a mail piece, which was once just a one-way communication channel, has opened up multiple channels with numerous people engaged at a far deeper level than before.

A multichannel direct marketing strategy also allows customers to communicate with representatives using the channel that the customer prefers (e.g., telephone, chat, e-mail). For these reasons, a personalized direct mail campaign can be extremely effective at increasing relevance and response rates. In fact, research has shown that using mail in combination with other types of direct communication has increased response rates.

Consistent with these findings, there is a substantial difference in return rates for general advertising versus direct advertising. In 2009, the ROI for direct marketing was 44 percent higher than for general advertising. And if the online component of direct marketing continues trending upward and there is financial recovery in some key markets, an even greater ROI for direct marketing is in store for 2010.

USPS Programs

A second factor affecting direct marketers this year is the health of the USPS. The mailing industry and the USPS must work together to increase efficiencies and productivity and cut costs.

Innovative programs and offerings such as Intelligent Mail® and hybrid mail are aligned with these imperatives. The ability to track the mail through the postal network is becoming essential to streamlining and increasing productivity. In fact, tracking the mail with unique identifiers allows carriers to better monitor their mail for inefficiencies. And it allows mailers to confirm that delivery standards are being met.

Hybrid mail is a growing offering from specialized printing and mailing shops. Hybrid mail allows the originating company to send a printer a file holding a letter's text, tagged with postal codes. The printer then sorts the letters by delivery route, prints them and places them in envelopes. This helps move physical production of the mail closer to the point of delivery, increasing efficiency and reducing transportation costs.

Mailers also are increasing the efficiency of their mailstream by adopting address management techniques that reduce the number of duplicative and undeliverable mailings. In addition, all mailers should be in compliance with the USPS Move Update standards, with their new performance-based verification that requires mailers to validate their address lists are up-to-date.

Political Environment

Although these programs and initiatives will help the mailing industry create efficiencies and cut costs, the challenges faced by the USPS are unprecedented. In 2009, there was a 14 percent decline in standard mail by 28 billion pieces to 176 billion pieces. Such a large decline in mail volume only exacerbated the $5 billion deficit faced by the USPS.

One issue to watch closely in 2010 is the fate of five-day delivery for the USPS. This proposal was first floated by Postmaster General Jack Potter in 2009 as a way to save billions of dollars in response to the economic downturn. The idea met with some resistance from Congress, which is worried about constituent services, as well as from some in the mailing industry, which is concerned the move might reduce mail's appeal as a communications channel. The Postal Service took no formal action during the year, but has signaled it will return with a modified five-day-delivery proposal in early 2010.

At the state level, the Do Not Mail (DNM) movement poses continuing challenges. At least 19 state legislatures have considered or introduced legislation for the creation of state DNM registries. Proponents of DNM policies aim to reduce the delivery of unsolicited advertising direct mail, citing the environment and identity theft, among other reasons, as why it should be stopped.

Although none of the 19 states have signed on to DNM, two large cities (San Francisco and Seattle) passed non-binding resolutions calling for the creation of a DNM registry. It is imperative that direct mailers and the USPS promote alternative solutions, including those managed by the direct mailing industry itself. Examples include a service from the Direct Marketing Association that offers consumers an opt-out preference system for catalog and other advertising at www.dmachoice.org and a registry for credit and insurance mail offers at www.optoutprescreen.com. Mail Moves America's website, www.mailmovesamerica.org, contains additional facts about advertising mail and the DNM movement.

Looking Ahead

While economists do not expect the year ahead to be a repeat of 2009's economic cataclysm, 2010 will hold more than its fair share of challenges. The DNM movement exemplifies the urgency with which the mailing industry needs to act on initiatives that will help spur growth as the economy recovers. The mailing industry's resilience and agility to adapt to a multichannel environment, to work together with the USPS on ways to increase efficiencies and to operate effectively in the face of increasing regulatory threats, will be a major test of our leadership abilities and business skills throughout the year.

About the Author:

Ramesh Lakshmi-Ratan is the president of the Pitney Bowes Document Messaging Technologies division, a global business that is the market leader in high-speed, high-volume mail production equipment and support services.