Big news on the postal front! A study commissioned by the USPS Office of Insprecter General and done by the George Mason University School of Public Policy has determined that the USPS can survive the come years when mail volumes are projected to decrease. Estimating decreases between 75 and 150 billion annual pieces of mail, mainly advertising mail, that they could survive, but only with rate increases.
They also noted that rate hikes could raise the possibility of tipping the USPS into a ‘death spiral’ where price hikes drive out customers and drive volumes down further. They based their beliefs, in part, on the review of other foreign mail services that charged higher rates. The possibility of reducing the days of service to 5 days from 6 was also seen as a cost savings that could keep rate increases down, but not out of the question.
Then the news came today that the Postal Regulatory Commissions denied the recent rate increase requested by the USPS for special ‘exigent’ reasons. The USPS lost $1.6 billion in August, and projects a $11.1. net loss for the first 11 months of the year. Things don’t look good. I’m glad a bought some additional ‘forever’ stamps at the $.44 rate. I think soon those will become collector’s items. Buckle up and welcome to the ‘death spiral,’ it’s going to be a bumpy ride from here on out.
Most of my clients are looking for signs of a turnaround in the economy. Something that will give them the signal that it is ok to move ahead with expansion plans. The signs have come and they aren’t good. The new ‘abnormal’ will continue for the immediate future. In a couple of articles in both Bloomberg and CNN there are continuing signs that we will not be getting out of this downturn soon. The signs? The big issue is that consumers, those who really drive our economy, are still not spending. Why? Income is not growing, and in fact, has not grown for years. The bubble burst in 2007, and the bubble is not filling up again, and may not for years.
The CNN article focuses on the Consumer Confidence Index which fell to 48.5 in September – its lowest level in 7 months. Not a great trend. The biggest factor from consumer interviews – jobs. The CCI is based on a survey of 5000 U.S. households and is important since two-thirds of our economy is based on consumer spending.
What does this mean for your business? Probably more slogging, and more activity to drive results. Now is a great time to be laying down your ‘pipe’ for future purchases. Market like hell, but know the results won’t happen tomorrow, but they will happen. When the buyers decide to open their wallets they will already have an idea of where to go and what to buy. Catch them now while they are ‘just lookin.’
Recently, Royal Mail in Britain, proposed major cutbacks in response to the economic crisis on that side of the ‘pond.’ We posted that as another of the signs of the apocalypse for direct mail marketing as we have known it. Yesterday, Senator Thomas Carper (DE) introduced a bill that would allow the USPS to reduce the number of home delivery days, close unnecessary post offices, and open less-expensive retail outlets or automated kiosks in grocery stores and other retail locations.
The bill, named the Postal Operations Sustainment and Transformation (POST) Act of 2010 would also give the USPS financial relief by addressing pension and retiree health benefit issues that have tied their hands from making what they saw as needed changes.
Wow, it’s about time. We have a marvelous mail systems in this country, but like so many other legacy systems their effective synergy just doesn’t work the right way any more.
I look forward to seeing the battles that will take place in Congress between the proposals for reform and the constituents of stasis who still relish dictating where and when post offices will be located and hours of operation. Get a grip. The time is right to effectively right size the USPS for the benefit of all, including the postal carriers and postal patrons.
Advertising mail drove huge volume increases in the ‘ought’ years with all of the mortgage refi’s and credit cards offers. There is excess capacity there now and it is downsizing – if you call closing the doors and many mail shops and printers. Now is the time to finish the job so that direct mail marketing can continue in a leaner and more effective manner as one of the still great direct marketing tools for all of us.
FORTUNE in a recent post highlighted the low lights now shining on Harley-Davidson. HOG, the loving ticker signal is suffering mightily now. Sales have suffered and they have taken to reducing labor costs as a last step before moving their manufacturing operations overseas. Built in America was one of their great credos, but that may not last forever. I have to confess I rode a Triumph when I was living in Germany in the 70’s and coveted a BMW ‘sewing machine quiet’ motorcycle. I have never liked the iconic loud pipes on a Harley, but my head still turns when one comes down the street, not out of choice, the racket is just so loud.
What’s the business lesson in Harley now. Even iconic brands can run out of ‘gas.’ Previous economic downturns helped create the cache that new Harley’s were scarce which drove demand even more. Not this time. Aging boomers are more likely to be tapped out this time, paying for college for the kids and for medcines for the pain after they ride. It’s also a sad sight to think of that 60-70 year old rider who can barely swing his leg over on his Harley seat. One should really avert their eyes when that happens.
Is your brand out of gas. Now is the time for a tune-up and a check out. Our changing demographics with a growing number of millenials have avoided Harley – what will they do to your brand. For the loyal customers even tough economic times can cause a change in their buying habits when it hasn’t happened in the past. Check out those marketing assumptions and go to the whiteboards before you – ‘run out of gas!’
The problem with recessions is that you don’t know you’re in them until the experts tell you. I forecasted the 2007 recession in early 2007, confirmed it in late 2007 when I saw all the trends going against the direct marketing business I was leading. Now we are being ‘officially’ told that the Business Cycle Dating Committee of the National Bureau of Economic Research (I’ll bet that goes well on a business card) has confirmed that the current, and longest recession since the Depression was over in June, 2009. Whoop de doo!
Officially, the downturn part of a recessionary period ended and we are now is the recovery phase. Our problem today is that this is really a jobless recovery and the outlook for employment growth is grim. We are also in a major remake of the world’s economy and many jobs lost in the U.S. will never come back. They were in faltering industries, or they have gone overseas to lower cost labor centers.
My clients are taking this in stride and looking for slow cautious growth. In California our engine for growth was housing and that market will be down for several more years from the experts I have recently talked with. In Texas the housing outlook is a little brighter and less dependent on housing to drive the macro economy of the area.
The best advice for most businesses is to keep your head down and keep on doing everything you can to hold on to your current customers, and invest in finding new ones. The action is starting to happen, but very slowly. This is a good time to start laying the foundations for your new clients to find you. It may take a while, but it will be worth it.
For my friends – my best advice is to find a nice California Cabernet – 2010 is going to be a great vintage. Lay it down now, and in 2014 you can open it a toast the return of the economy. Both should be ready about then. Sliante! (Cheers, in Irish)
The Tribune Company just couldn’t keep its name out of the news this week, and they own the presses. First off there is still more speculation that Michael Eisner would be a good fit to lead the company. He has a strong name in the media area, and strong allies in the owners of the debt that Sam Zell took out to buy the Tribune Company several years back. I can joke about Eisner and his “Mickey Mouse” ties, but he is all business and a visionary so I’ll take off my “MM Ears” for now.
Someone who could wear those ears right now is the man who Eisner would replace, Sam Zell. The junior creditors in the Tribune bankruptcy case, those not favoring Eisner, want to sue Zell for the original deal that Zell used to buy the Tribune Company, saying that the $8.2 billion deal loaded the company with more debt than it could handle necessitating the bankruptcy filing in just one year was fraud. It appears that the junior creditors will work to handle this after the company comes out of the early pre-planned bankruptcy. Michael, pass those “ears” over to Sam, I think they’ll fit just fine.
My favorite stamps
It appears that our mail problems, those of the USPS that is, are also being matched by those in England. A recent report – “Royal Mail to be privatized or sold” in the The Guardian highlight the problems. Too little revenue from declines in mail volume, and huge pension obligations due to its workers. Where have I seen this before?
Tomorrow I will be at a local Postal Customer Council Day in honor of National Postal Customer Council Day. I’m very interested to get the take on our current situation and outlook on the future with this group of industry insiders. I started in direct mail and direct marketing in 1979 so I still have a lot of stamp glue on my fingers and in my soul, but I don’t have good feelings about the future of the industry.
Mail volumes have continued to decline both in First and Standard Class mail. We don’t send letters like we used to, pay our bills via mail, and standard mail – ‘advertising’ or ‘ junk mail’ to outsiders is on the decline. Why? Simply stated it has been impacted by the economy and also by Internet options – email and social marketing. Direct mail is still incredibly effective, not just as cost effective for large-scale mailings. Best practices now has it being used on highly targeted campaigns – and it works VERY well under those circumstances.
The USPS like Royal Mail in England is looking for solutions, and fast. There is little time to waste with the huge deficits that are being run in both countries, and little appetite to continue much into the future. I’ll be very interested to hear what some of those things are tomorrow. Reminds me, I need to buy a new role of stamps to pay a few bills this month.
Arthur Sulzberger, Jr., Publisher at the New York Times, told a gathering overseas – “We will stop printing the New York Times sometime in the future, date TBD.” For someone who spent years in the publishing field this is a sad note, but totally, and obviously true. The economies of printing and delivering a daily newspaper just done make sense anymore.
The 24hr news cycle, and the cost of newsprint, labor and delivery have made the process – less than optimal, and a real money pit for most major news organizations. The Christian Science Monitor went online only more that a year ago, and USA Today is pushing in that direction as well with recent moves.
The American newspaper is an invaluable tool for local news gathering, but they have lost their core strengths in advertising, the classified market which drove a high percentage of their total profits. National advertising is also declining as major advertisers go online and social. The remainder of their revenue base is local advertising and that cannot carry the freight.
We will survive, but it just won’t come at 5AM via the ‘plomp on the driveway.’ It will arrive via Kindle or online, and that’s ok. That is essentially how I get my newspaper news content. It is always timely now, and even better – no ink on my hands. The king is dead, long live the king. R.I.P NYT, we will miss you.
It was an interesting week in the newspaper field with two papers making further moves to cutting back on print in favor of internet and mobile coverage. The first announcement came from USA Today the relative upstart as papers go at only 28 years of publishing. They announced that they were cutting staff and will focus on mobile instead. Like all newspapers a big reason has been the drop in advertising. As a national paper their biggest advertisers were national in scope and heavily oriented to the travel market. With travel down they suffered big hits in newsstand and hotel sales. Owned by Gannett, they will batten down the hatches on expenses in this move and reduce their content as well. Did I say content, that’s what they call it. Newspaper people don’t say content – it’s news, or at least it used to be.
The second major announcement came from the Deseret News, the Mormon Church owned paper. They are combining forces with their sister TV station, again sharing content and staff. This is resulting in a significant overall reduction in staff on the news side. They are also planning to use a network of community content from community volunteers and bloggers to add to their content base and give the combined operations a more community feel.
The interesting thing about the Deseret News is that it is run by Mark Willes who cut his teeth in newspapers as the Publisher of the LA Times after a career at General Mills. Captin Crunch as he was known at the Times ran afoul of the editorial side and was later relieved by the Chandler family. He is again showing his novel approach to managing and hopefully growing his papers.
This is just one week in the evolving news business. Let’s hope we can still see the news leading the way, and hold that content stuff. News is still the ‘breakfast of champions’ if I can borrow one of Mark Willes old slogans from his cereal marketing days. Content is for sausage making, not news.