Article prepared by C. Clint Bolte, C. Clint Bolte & Associates, Chambersburg, Pennsylvania. For additional information please call 717-263-5768, fax 717-263-8945, or e-mail to clint@clintbolte.com.

National Postal Forum 2007:
Transformation of the American Postal System

The traditional spring cherry blossoms were only days away from engulfing our nation's capital when nearly 7,000 mailing aficionados gathered at the Washington Convention Center March 25-28 to attend the National Postal Forum. An unusual number of first timers representing publishers and corporations actually paying the postage bill joined their mailing service providers to attend a few of the more than 160 workshops (95 new topics), see the latest innovations from well over a hundred vendors in the trade show, and hear first hand how the first postal reform in three decades was being implemented.

Part of the legislative reform was the addition of the Postal Regulatory Commission (PRC) chaired by Dan G. Blair. The Commission is charged with setting the new guidelines of how future postal rates will be set in order to comply with the legislative mandate of an inflationary cap. Mr. Blair joined Postmaster General John E. Potter in the opening general session appealing to publishers to give constructive feedback on the proposed rate changes affecting the larger flats mailing in which all periodicals and catalogs fall.

The Mailing and Fulfillment Service Association's Leo Raymond reported the first class postal rate increase modified by the PRC to show first class letter increases up an average of 6.9% and standard mail up 9.3%. These will go into effect May 14. The bump for periodicals will be in the double digits (averaging 11.8%) and not be effective until July 15. This two-month delay is necessary to allow time for another PRC review after smaller publisher customers respond following their price shock plus the software vendors need time to include the revisions in their programs. This new periodic rate structure includes charges for single containers going outside county, which were recommended by the PRC to reflect these non-palletized cost drivers, as well as the traditional pieces and pounds costs. Details of the proposed rules and standards for periodicals are available at www.usps.com/ratecase. PMG Potter emphasized, "Dialogue is the key if we're going to successfully navigate new roads that have barely been mapped."

Potter gave three examples of redesigning mail products to take advantage of potential automation discounts; (1) medicine packed in bottles to switch to blister packs to mail as a flat rather than a package, (2) boxed greeting cards and checks if moved to a flat shape would save for the same reason, and (3) lighter, oversized envelopes and catalogs can be folded and mailed as letters.

He highlighted the new Flats Sequencing System (FSS). This new technology is hoped to bring a new level of efficiency in sorting flats as has been realized with letters. The pilot machine has been running in Indianapolis this past year. The first production model will go into the Dulles plant in Northern Virginia this summer. Over the next two years the USPS expects to roll out another 100 machines.

The Partners for Progress Award 2007 was given by Mr. Potter to Daniel Scapin, the President of RR Donnelley's Logistics Division, for their OneSite™ website. Utilizing the USPS' intelligent mail software, the Confirm Service™, every mailing client of RR Donnelley can trace the status of his or her mailing project(s) from entry until actual delivery through OneSite™.

Potter did not gloss over the "Do Not Mail" legislation that has popped up in over a dozen states. "We need to focus on the issues spurring these legislative initiatives. Mail that reaches a home where it's not welcome is not a good use of anybody's time or resources," remarked the Postmaster General.

The Postal Reform legislation must be implemented by June 2008. However, under the old law, the USPS can possibly ask for another rate increase by December 20, 2007. Both Blair and Potter said that it was too early to determine whether another rate increase would be requested under the old law provisions.

New USPS Global Business Initiative

The USPS announced a major new global business initiative for corporate clients according to Mr. Paul Vogel, the first USPS Managing Director of Global Business. The international package and express revenue market grew at a compound annual rate of 8.0% for the decade 1995 through 2005 and yet the USPS international business grew at only 5.2% a year over that time frame up to $1.9 billion in 2005. The USPS announced in July 2006 a dedicated effort to both grow this market and to gain a larger market share. Mr. Vogel's business plan calls for custom solutions addressing American companies' worldwide distribution objectives.

The USPS expects to accomplish this with many of the same success formulas they have used domestically; (1) work sharing partnerships and outsourcing to integrators and consolidators, (2) collaborating with other posts and the Universal Postal Union in conjunction with the U.S. State Department, (3) no acquisitions will be considered, (4) manage and operate five state side International Service Centers (ISC) in New York, Miami, Chicago, Los Angeles and San Francisco for processing all international mail, and (5) operate as a self contained business unit with its own profit and loss statement.

International pre-sorting services are expected to be available in every U.S. metropolitan area. A few cities with dedicated International departments, such as Seattle, Houston, Puerto Rico, and Dallas may ultimately be spun off as an additional ISCs as volume demands dictate.

Vogel responded that there are no plans to set up extra territorial offices (ETO) in foreign ports, as has often been the modus opperandi for foreign posts seeking international mail business stateside. With a focus on small to medium sized businesses, International mail seminars will be conducted with key contacts being initiated by the USPS domestic sales force.

Initial marketing research indicated that 85% of the international mail traffic goes to 15 countries. With this travel itinerary in hand Mr. Vogel earned almost as many frequent flyer points as Condoleezza Rice in visiting the posts in these countries during the later half of 2006. His message was a simple one. Let's work together utilizing common technologies and proven softwares to grow the total size of the pie. The Universal Postal Union has been given all of the specifications and source code to consider utilizing the single 4-state bar code through out the 187 countries they represent.

With the United States accounting for nearly half of the total mail processed throughout the world, it is obvious that advertising mail or direct marketing is a cultural Phnom unique to the U.S. This leap forward only occurred in the 1980s with the advent of ZIP+4 and the marketing ilk to presort and target ever finer market niches. The sister posts expressed continued interest in learning how to offer these services as variable data digital printing is making inroads throughout the world.

Mr. Vogel has extensive professional experience working with periodicals. He expects these clients to work with proven consolidators such as DHL when a publisher does not have enough volume for a country "sack". This type product will be consolidated into a co-mailing, which will fall under an International Customized Mailing Agreement. This contract will operate similar to the USPS' highly successful Negotiated Service Agreements (NSA). Any publishers interested in additional information on international co-mailing should contact michael.j.nappi@usps.gov.

Strategic Review Suggests Strong Industry

A session dealt with strategic trends and issues that would be worth including in future corporate planning. Kent B. Smith, Manager of USPS' Strategic Business Planning, suggests there are three key strategic questions; (1) what continued effect will electronic diversion have on mail volume, (2) what factors are driving the mailing industry and (3) what technologies are driving change?

He concludes that much of what mail can be diverted has been because

1. Security - the greatest barrier to further (electronic) diversion,
2. The Mail Moment and Paper Preference of consumers,
3. Personalized financial transaction statements are desired with only isolated adoption of electronic bill payment,
4. Broadband growth rates slowing as most households have this Internet access and
5. 20% permission e-mails are blocked.

The advertising market competitive review is showing recognition of the limitations of traditional advertising (especially broadcast), demand for more performance measurement, which is a unique mail strength, the integration of multi-media channels, and the increasing opportunities for small business to use mail more effectively.

Technology has evolved to offer increasingly effective, complex, multi-phased marketing programs including linking massive databases and list management, Intelligent mail with complete processing visibility and measurement, variable data digital printing and multi-channel integration with mail complementing the other media.

The mailing industry as a whole is becoming increasingly global, linked by the Internet, continued consolidation and concentration at the top, new mailing technologies and methods providing flexibility and creativity for smaller mailers, and overall a very healthy industry.

Mr. Smith concludes, "Mail is being re-invented and adding value with new application uses and better ways to do the same thing."

Delivery Point Validation to Replace ZIP+4

ZIP + 4 was a major leap forward when introduced a couple of decades back as an answer to the need for a more in depth pre sort algorithm. As address hygiene and accuracy improved, this algorithm proved to have distinct limitations. For example, the plus 4 digits were assigned to a range of addresses on a particular street without regard for the fact that the original street number may have been a vacant lot. Now this old mainstay is quietly and effectively being replaced by CASS Delivery Point Validation (DPV) encoding software.

DPV will be implemented on August 1 this summer and the mailing service providers will have this updated software version in their hands at least three months prior to this implementation. These vendors will be running this new software to determine how significant the slow down factor may be because of the increased DPV database size.

If renting a mailing list, be sure to specify only delivery point validated addresses. Early tests indicated that a 91% ZIP+4 "clean" list was elevated to 96% after a DPV cleansing.

DPV's whole purpose is to eliminate the undeliverable as addressed (UAA) pieces, which are increasingly costly. For those few percent of addresses that do not pass DPV, mailers can either exclude them from the mailing or have the Postal Service dig further into the address by the direct delivery unit. This additional Address Element Correction (AEC) service will carry a fee of 1.5˘ per record with a $15 minimum.

Intelligent Mail - Clearly the Future

At last year's National Postal Forum the roll out of electronic data exchange for postal transactions was announced. Intended to eliminate paper flow, the new process uses the Internet for the electronic submission of mailing information from the mail service provider. Additionally the ultimate client can have online access to their USPS PostalOne! account to see a summary of mailing activity and to transfer needed funds electronically for upcoming projects. Smaller mailers could use the Postage Statement Wizard™ tool, the higher volume clients would use Mail.dat™ while the heaviest users would opt for the more robust Web Services.

Upon receiving the electronic advance notification of the expected job, the post office will assign an appointment time to the mailing service provider to save them time in the induction of the mailing project. Unique bar code labels applied to the trays, pallets and containers begin the process of total visibility of the processing of the job.

The two key elements are the application of the single 4-state bar code on each piece of mail and the subscription to the Confirm Service™, which gives Internet access to the mail flight as it passes each of its downstream entry and/or sorting stations.

As multi-channel and multi-media advertising programs grow in use and importance, the essentialness of Intelligence Mail will be shown. Consumer behavior has verified that the complementary timeliness of a direct mail piece, such as a postcard, must be followed within 36 hours by the opt-in e-mail or personalized URL (PURL) to achieve reinforcing and therefore optimum effectiveness. Only through the use of Intelligent Mail and the Confirm Service™ can there be verification of when the direct mail piece is expected to arrive at its end destinations throughout the country.

Following its formal introduction in September 2006 the average weekly count of mail pieces containing the intelligent mail barcode has quadrupled to eight million pieces nationwide. The largest mailers will be converting to the Intelligent Mail Barcode in 2007. The USPS acknowledges the challenges of coordinating five equipment vendors with eight different sorting "platforms" during the transition period from the present state to full-blown Intelligent Mail environment in 2009.

JC Penney's Director of Postal Affairs, Martin Bernstein, gave his firm's business reasons for moving forward with the Intelligent Mail Barcode. "It provides us more space in the mail piece, improves (envelope) overall appearance, and allows more data capacity for our own coding purposes." They are targeting full implementation for August 2007.

Jay Oxton, President and Chief Operating Officer of Pitney Bowes, said that his firm's implementation of Intelligent Mail, through their wholly owned subsidiary PSI Presort Services, will be able "to further leverage our national network of 33 operating centers and our long term investment in IT infrastructure." Their 2,900 employees process more than 42 million pieces of mail daily.

Companies who want access to their PostalOne! Account can contact the help desk at 800-522-9085. Publishers might get additional specific information from IDEAlliance at http://www.idealliance.org. Web Services are being continually improved and additional information will be available April6, 2007 at http://usps.com/postalone/guides.htm.

Conclusion and Personal Observation

In his presentation during the session entitled The Printer - Postal Connection MFSA's Leo Raymond offered this as an overview of the current rate case; "Inefficient mail pays for its inefficiency plus there is a stronger correlation between cost and price." This observation might well herald the theme for the future proactive role the Postal Regulatory Commission might play in setting and monitoring rates and their effects on Postal operations. That is, poorly prepared mail, which requires more manual intervention to process, will pay the highest rates.

Each mail participant could have an action plan and valuable "take-aways" from this National Postal Forum 2007, such as;

• Corporate CFOs will see the cash flow benefit of consolidating their regional mailing accounts into their own single central payment account with the USPS via the Internet. This will not adversely impact the relationships that multiple product managers in different cities have with a myriad of local mailing houses.
• Direct marketers should be more stringent in dealing with their mailing list brokers to assure that each rented list has been DPV cleansed. Don't pay for ZIP+4 only any more!
• Similarly direct marketers of all size should be choosing mailing service providers that will help them stay abreast of the innovations being developed by the USPS and that includes inkjeting the 4-state barcodes exclusively.
• Larger direct marketers and publishers may choose to have their own Confirm Service™ subscription. If not, they should be encouraging each of their mailing service providers to make this modest investment for the benefit of their entire client base.
• Publishers, again of all sizes, should be negotiating with their full service printers to help them get linked up with logistics consolidators - both domestic and international - for co-mailing. This is the collaboration with different titles of similar trim sizes into one mail stream to maximize presort and drop ship savings as well as ultimate delivery performance.
• For mailing service vendors of every size their future viability will be closely linked to an operational goal of 100% address integrity plus leveraging their USPS expertise and knowledge to contributing to their client's marketing as well as financial objectives.
• Everybody in every conceivable niche should be utilizing the universal and unique mail feature of being able to be measured. Rigorously track response rates. Calculate Return on investment for every project.
• Learn first hand the impact all the gimmicks like Repositionable Note (RPNs) and cloth or clear envelopes will have on your direct marketing programs. The investment is nominal, the learning curve vertical and the potential exciting.

European Sidebar

Leading technologies are developed and utilized around the world. No one has a lock on smarts as evidenced by the dispersion of international patents being issued. And yet every good marketing idea is a local one, which highlights the importance of recognizing distinct cultures and ethnicity.

During the Forum a conversation was held with the USPS Chief Operating Officer Patrick Donahoe about why Europe, and for that matter the rest of the world, has not embraced direct mail like the United States. The fact that the United States Postal Service processed 212 billion pieces of mail in 2005 accounting for 44% of all mail processed would offer the clear conclusion that U.S. advertising mail via standard class is driving this significant disparity.

Mr. Donohoe remarked that this unusual shift is a relatively recent phenomena beginning in 1983 when the USPS introduced ZIP+4 presorting capabilities and discounts. Population database information has become more sophisticated spurred by each decade's census. The success of the use of credit cards and therefore their solicitations of new clients is only one example of fueling this fire. The entire mailing list brokerage industry grew out of this marketing penchant for targeting ever finer niche prospect groupings.

The incentive for Europe and the rest of the developed world to get on board would seem to be led by (1) the universal recognition of the potential of variable data digital printing (it's not an "if" but a "when" game breaker), (2) the custom made high volume presorting technology engineered and debugged by the USPS was and is manufactured by global firms with strong European roots, such as Siemens, Buhrs, Bowe (Bell & Howell) to name a few, (3) the basis for Intelligent Mail, the 4-state bar code, has been given to the Universal Postal Union (UPU) by the USPS as part of its Global Business initiative to be adopted and used by UPU's 187 member country posts, (4) virtually all posts throughout the world are private companies, not quasi-government entities and hence do not need legislative edict to make product development initiatives, and (5) the marketing and management acumen is every bit as strong in other countries as in the U.S. which would mean they would recognize and be eager to pick up on a proven, good idea. All of this might suggest that free enterprise might work to spur one or more of these private posts to begin some product development experimentation.

The problems in these countries are basic but not insurmountable. First, there is no standard classification of mail in these countries, which carry substantial volume discounts off first class mail. Second, the foreign postal business models are built around substantially higher overall postal rates than the U.S., which presents an initial psychological barrier. Third, building substantial and credible demographic databases would probably require federal government intervention to keep the information within the public domain. You can imagine the problem of a private enterprise owning a country's address database and treating it as proprietary.

Two other instances observed at this year's National Postal Forum would suggest that the timing might be opportune for international collaboration on direct marketing products outside the U.S. First, there was a Mexican Post on the trade show floor trying to attract mailers shipping south of our border. Second, one of the featured speakers heard via video broadcast was Sir Martin Sorrell, the CEO of the WPP Group headquartered out of London.

With 98,000 employees and over $11 billion annual revenues, WPP's various advertising agencies see the advertising spend shifting among the various media. Traditional medias like newspapers, magazines, radio, TV and outdoor is shifting to the Internet and direct mail. This shift is due to "the multi-tasking consumer who is in control" and choosing to skip over or surf to select media messages that they feel are more personally engaging. Sir Martin's prognostication for the next five years include "more Asian, more outside traditional advertising, more branding via the Internet, more personalization, more measurable media channels, and more globalization." He concluded with this advice to mailers; "Experiment, move into new areas."

The USPS Direct Marketing Mail initiatives have generated multi-billion dollar advertising revenue streams and jobs for hundreds of thousands of citizens in every burg and hollow. It is hard to imagine that the very bright government officials and visionary entrepreneurs in other developed countries won't smell the money and want to get on board in helping distribute targeted, tailored and timely advertising messages. Particularly when the USPS and its Global Business Director is extending a hand of partnership with the 15 largest mail volume countries and offering to "grow the pie" for everyone's benefit.

Additional Valuable Reference Sources:

• www.usps.com
• www.usps.com/nationalpcc
• www.ribbs.usps.gov (to find certified product information)
• www.nonprofitmailers.org
• www.usps.com/nationalpremieraccounts
• www.uspspostalone.com/howto.htm (Obtaining access to Business Customer Gateway)

Article prepared by C. Clint Bolte, C. Clint Bolte & Associates, Chambersburg, Pennsylvania. For additional information please call 717-263-5768, fax 717-263-8945, or e-mail to clint@clintbolte.com.