Have We Achieved ‘Peak Mail’?

In the energy industry, a couple of years ago, there was active discussion of “peak oil”—the very point where half the world’s known, proven oil reserves had been extracted and put to use, leaving less than half yet to be tapped or discovered.  In the U.S. mail industry, perhaps, too, we’ve reached “peak mail”—except there’s no extraction and no finite supply here: simply the notion that pricing, and changing use and acceptance of mail by consumers and businesses, is driving demand elsewhere, and that we’ve entered an era of post-peak mail in volume.

In the energy industry, a couple of years ago, there was active discussion of “peak oil”—the very point where half the world’s known, proven oil reserves had been extracted and put to use, leaving less than half yet to be tapped or discovered. The thought then was that oil still available would become more dear (read, expensive) because our unrelenting global appetite for the stuff would far outstrip supply.

Of course, conservation, increasing fuel efficiency, and alternate sources of power could mitigate demand in such a way that the pricing effects of past-peak oil could be less severe. What if the world, in fits and starts, simply transformed to an economy that relied on other, less expensive, sources of energy (nuclear, natural gas, hydroelectric, geothermal, solar, wind, biofuels and the like). Perhaps this scenario is happening now.

In the U.S. mail industry, perhaps, too, we’ve reached “peak mail”—except there’s no extraction and no finite supply here: simply the notion that pricing, and changing use and acceptance of mail by consumers and businesses, is driving demand elsewhere, and that we’ve entered an era of post-peak mail in volume.

In 2010, the Boston Consulting Group in its “Projecting U.S. Mail Volumes to 2020” report stated:

The U.S. Postal Service will experience profound declines in its volumes of mail and its net income over the next decade under its current business model, presenting a grave threat to its viability. Massive structural changes are required to avoid this outcome. We forecast U.S. postal volumes to decrease from 177B pieces in 2009 to around 150B pieces in 2020 under business-as-usual assumptions. Notably, volumes will not revisit the high-water-mark of 213B pieces in 2006 – on the contrary, the trajectory for the next 10 years is one of steady decline, which will not reverse even as the current recession abates. Expressing the decline in terms of pieces per delivery point highlights the challenge: we project pieces per household per day to fall from four pieces today to three in 2020 – driven by decreasing volumes delivered to an increasing number of addresses. We also project a rapid mix shift from very lucrative First-Class Mail to less-profitable Standard Mail. The volume decline and the mix shift, coupled with an increasing cost base, will cause profits to experience steep, unrelenting declines. Starting with the 2009 loss of $4B, we expect a steady string of increasing losses, culminating with an approximately $15B loss in 2020 (based on USPS and McKinsey cost forecasts). These declining volumes are unlikely to reverse.

So far—four years, and two years of data—toward 2020, this striking scenario is largely playing out: “USPS: A Decade of Facts and Figures.” (See the chart in the media player at right.)

None of this is to say there is a diminished role for direct mail in a post peak-mail digital age. Quite the contrary, the role of direct mail is simply changing, gaining efficiency in targeting, response and engagement—and learning its space and place in an omnichannel marketing environment. In its various postage promotions for 2014, the USPS is testing and encouraging such innovation and integration.

In a recent presentation to the Direct Marketing Club of New York, Bruce Biegel of The Winterberry Group, saw direct mail spending in 2013 actually grow by 1.2 percent, and is projecting another 1.1 percent uptick this year. (Postage hikes in 2013, and coming in 2014, well exceed both these growth percentages.) “Direct mail should be growing because it works,” Biegel said as he announced his findings and projections. “Digital doesn’t do enough in customer acquisition.” This is encouraging news following years of decline.

Volume, however, is not immune to increases in postage, paper and print costs, and to digital migration, and in this scenario, we are really in a situation where USPS infrastructure must continue to adjust to changing mail composition, shape, class and purpose—while continuing to serve all its stakeholders. First-Class Mail peaked in 2000, and Standard Mail in 2007—and we most likely never will return to such volumes ever again.

Augmented Reality, Wearable Electronics and the Postal Service’s Future

In my previous blog post, I commented on the United States Postal Service and its announced plans for five-day delivery, discussing the importance of hard-copy communication and a commitment to deliver such communication on a daily basis. In extending this commentary, I claim no nostalgia for daily mail delivery, rather simply recognition that such communication has its unique position as a vehicle for superb brand engagement. The Postal Service is not standing still in the digital age.

In my previous blog post, I commented on the United States Postal Service and its announced plans for five-day delivery, discussing the importance of hard-copy communication and a commitment to deliver such communication on a daily basis. In extending this commentary, I claim no nostalgia for daily mail delivery, rather simply recognition that such communication has its unique position as a vehicle for superb brand engagement.

The Postal Service is not standing still in the digital age.

Last October, when the Postal Service announced its intention to raise rates this past January, it also announced its schedule for postage promotions through 2013. And in the mix is a bevy of technology-driven, multichannel “positioning” of direct mail that leverages mobile and interactive channels.

Discounts
Look at this selected line-up from the USPS promotion calendar:

  • March-April 2013: Mobile Coupon/Click-to-Call
    This promotion seeks to increase the value of direct mail by further highlighting the integration of mail with mobile technology in two specific ways. First, the promotion would encourage mailers to integrate hard-copy coupons in the mail with mobile-optimized platforms for redemption. Second, the promotion will drive consumer awareness, and increased usage, of mail containing mobile barcodes with “click-to-call” functionality.

    Provides a 2-percent discount on the qualifying postage for First-Class Mail and Standard Mail presort or automation letters, postcards and flats sent during the established program period that include a two dimensional mobile barcode inside or on the mailpiece. The barcode must either lead the recipient to a coupon that can be stored on a mobile device, or enable the recipient to connect by telephone to another person or call center via a mobile device.

  • August-September 2013: Emerging Technology
    This promotion is designed to build on the successes of past mobile barcode promotions by promoting awareness of how innovative technology—such as near-field communication, augmented reality and authentication—can be integrated with a direct mail strategy to enhance the value of direct mail.

    Provide a 2-percent discount on the qualifying postage for First-Class Mail and Standard Mail presort or automation letters, postcards, and flats that are sent during the established program period and include print that allows the recipient to engage in one of the following:

    • an augmented reality experience facilitated by a smartphone or computer,
    • authentication of the recipient’s identity, or
    • an experience facilitated via Near Field Communication.

To receive the discount, mailers must comply with the eligibility requirements of the program.

  • November-December 2013: Mobile Buy-it-Now
    This promotion will encourage mailers to adopt and invest in technologies that enhance how consumers interact and engage with mail, and demonstrate how direct mail can be a convenient method for consumers to do their holiday shopping.

    Provides a 2-percent discount on the qualifying postage for First-Class Mail and Standard Mail presort or automation letters, postcards, and flats which include a mobile barcode inside or on the mailpiece that facilitates a mobile optimized shopping experience. To receive the discount, the qualifying mail must be sent during the established program period by mailers that comply with the eligibility requirements of the program

Augmented Reality
Next, in January during the media-frenzy of Consumer Electronics Show in Las Vegas, this Venture Beat post appeared, reporting on a USPS mobile app that uses “augmented reality” (subject of the August-September 2013 promotion) to integrate direct mail promotions with interactive programming on a mobile device and give recipients an enhanced digital experience with the mail piece. In augmented reality, a physical ad and an interactive ad comes together by way of an app, developed by Aurasma, rather than a QR Code. Augmented reality can be applied to any visual cues.

The apps keep coming. Associated Press then reported that Val-Pak, the company that sends blue envelopes stuffed with coupons, also wants consumer households to save money while driving. Valpak has partnered with Roximity, a Denver-based app developer, to bring coupons and deals to drivers of newer-model Fords and Lincolns who use the voice-controlled Sync AppLink connected to their mobile phone. The app allows people to hear about personalized deals from stores, restaurants and other businesses as they drive. The “coupon” appears on the driver’s smartphone and can be redeemed once the car is stopped.

Wearable Electronics
And how can you keep it all connected—the mail, the apps, the augmented reality, the mobile coupons? Why through wearable electronics, of course, article courtesy of The Atlantic Wire. The fashion verdict may be out, but the Postal Service is clearly thinking hard on how to keep mail relevant in an increasingly digital—and mobile—age.

I still maintain that the six or seven direct mail pieces I receive a day are precious real estate. They represent a tiny portion of the thousands of advertisements and brand “touches” I’m exposed to each and every day. Yet this is advertising that is largely targeted, and one with which I have a tactile experience—reading, responding, recycling as I deem appropriate. This is a powerful consideration, one that I certainly pay closer attention to. Will I be running to the app store to integrate this experience with my smartphone? Not anytime soon, but a hoodie for my iPod, ThinkPad and Samsung to tote and plug into would be nice.