Monthly Archives: August 2011

A Visit to the Heartland

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Wickenberg Horse Greeting VisitorsRecently I had the occasion to travel from California to Arizona for both business and pleasure.  Accompanied by my wife, the “LRHG” we took our usual route off Hwy 10 using Rte 60 that takes us through Wickenberg and a number of very small towns including Salome to reach our destination in the west Phoenix area.  As we drove through all of the small towns in each one the local Post Office was one of the most prominent buildings in town.

Being a guy who has lived most of his life in larger metropolitan areas, and have worked in larger scale businesses, most the communications field, I was struck by the sight of these post offices.  The local post office holds no personal sway for me.  Most of my professional interactions have been with larger scale facilities.  As a direct marketer I have spent my days selling and managing the design and distribution of millions of pieces of mail.  I hadn’t been in a local post office for personal reasons in years.

The world has changed over the last couple of decades, and the days when we used to get cards and letters from friends and family have been replaced by email and Facebook.  The mailbox is now a commercial place where bills, advertising circulars and catalogs dominate.  Hard to come away from a trip to the mailbox and return with a smile.

My world is mainly digital world today, but all of those small towns in Arizona still live in that past world, mostly ‘analog’ and little digital communications.  The residents are more like those who the USPS was the lifeline and center of commerce that Ben Franklin saw when he helped to pioneer our model of universal service.

In our attempt to find solutions to the current financial the plan is to close a number of post offices.  I hope that we can find a way to keep those open to those who it means the most.  My trip to Arizona found many, and I know that throughout the west there are many more, just are there across a wide swath of the mid-west and south.

In our rush to find cuts within the USPS to help it find solvency we need to prioritize the personal services to those who need it the most.  Let’s make sure that in our plans to financially reshape our postal services that local post offices can remain a hub and key service provider to those who need it the most.

 

 

The Initiative to Radically Change the USPS

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Last month I posted on the issues that the USPS is dealing with in their search to find profitability.  Profitability for a government agency?  Yes, unlike every other unit of our government the USPS operates as a non-funded agency – they make all of their money from postal fees.  Since 1971 they inherited their charter from the old Post Office Department by act of Congress.  Since then they have had good years, and more recently some very bad years running up billions in debt.

There are a number of reasons for the debt, mainly high fixed costs for post offices and labor which they have little direct control over, and for a reduction in volume and shift in volumes from First Class to Standard or advertising mail which is now the primary mail volume flowing through our system.

I’ve lived through the changes since I got into the direct mail field in 1979.  I found postal relations between the industry and local postal management to be poor since I was with a ‘junk’ mailer (Harte-Hanks).  We were tolerated at best, totally disdained at worst.  When we delivered our mail to their offices they held their noses.  Later in the 80’s this changed when ‘junk’ mail became a very large portion of their profits.  Now it is just an even larger part of their losses.

What is being proposed by the USPS leadership would be a major reshaping of postal services and focus.  It would also mean major cost reductions, mainly personnel 120,000 to be more exact, and that will not set well with postal employees.  They have come back with a ‘furious retort’ to management initiatives.

I won’t go into all of the details here, they are well documented in two white papers from the USPS.  One WORKFORCE OPTIMIZATION lays out the general plan and rational for the changes.  I’ve carped at the USPS for years that they had their heads buried in the sand, but this document shows they are seeing reality for what it really is- painful, but honest from my perspective.

The second document POSTAL SERVICE HEALTH BENEFITS AND RETIREMENT PROGRAMS details their initiative to handle one of their biggest burdens the healthcare and pension costs.  In 2007 Congress forced the USPS to allocate the full cost of all future health care and pension costs into annual programs.  Unlike any other like program the monies had to be set aside now.  This extra burden was to ensure that all pension liabilities would be fully funded and banked, but this is the ONLY case that is so funded.  This extra burden is the cause of the nearly 8 billion dollar shortfall for the USPS.  Without that burden they would be breaking even.

For anyone who is interested in the future of our mail delivery system – including all of my marketing buddies, take the time to go over these white papers from the USPS.  I will be scouring them myself, and talking with people in the mailing industry, marketing experts, fundraisers and others to see how they see this situation and see if they can offer solutions and insights.  Back soon….

Tipping Point No. 2 for Newspapers

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In July I commented on the report that the Philadelphia newspapers, jointly operating, are planning to introduce tablets for subscribers in the very near future.  This was the first major metro paper to announce, and now the monster Tribune group from Chicago and Los Angeles announced that they too are planning to introduce tablets for subscribers.  Tipping point #2 has been achieved.

For those of us who currently receive 90% of their news via computers and tablets this seems logical and destiny for print and especially, newspapers.  Why?  I think there are a number of reasons why this will happen.  Among them are:

 Newspapers are no longer monopolies in their markets – Once upon a time newspapers owned the world.  They were 10 feet tall, and everyone opened their doors to them.  They were the only game in town for local, and even national advertisers.  That started to decline in the 80’s and was in full flight in the mid 90’s.  There is all sorts of new ways of reaching customers today, and the newspaper is just one of them.  That is hard to swallow for newspaper folk.

Costs of acquiring new subscribers – The cost of acquiring new subscribers has always been high, and has gotten higher.  With starts and stops for vacations among other factors, subscriber turnover can easily be 100% per year, in some cases higher.  Loyalty has declined to lows never thought possible.

Their audience is dying – The age of subscribers has gone up over the years as fewer younger subscribers have replaced those reported in the obituaries.  Younger readers aren’t appearing to replace them – the digital age belongs to the young.

 Costs of print and distribution – Manufacturing and distribution costs are continuing to increase.  With declining circulation in most urban areas it is very costly to print and deliver this product on a daily basis- and still make money.

News is NOW – not tomorrow morning – All of the other factors are critical, but perhaps the single most important factor to the sustainability of printed newspaper is that news is NOW.  With most of us carrying robust phones that are our tether to the world.  This includes the news.  I read my news on my Android phone, and on my iPad.  I still read my LA Times on the weekends.  I like the content, and if for no other reason, it is a habit.  The older I’ve gotten the harder it is to break habits.  I will always read a printed paper some of the time, but I will read digital news several times a day.

I salute the Tribune group for their pioneering efforts.  I truly think they are in the right, if not just the inevitable path for newspapers.  Take the digital subscription money and run!