Postal De-Regulation: Direct Mail

For as long as I’ve worked within publishing, distribution of subscription copies has been viewed by the powers that be as nothing more than a necessary evil. It doesn’t really matter what’s being distributed; the main focus has always been on the major costs such as editorial and production, and the major revenue streams such as advertising and newsstand copy sales. As a consequence, publishers have been slow to realise the value that efficient and cost effective use of postal and associated services can add to their business. As a postal distribution specialist, I’m pleased to say that over the last couple of years this attitude has started to change.

It’s time for a change

There are a number of drivers for this change in attitude, such as falling newsstand copy sales and the need for an efficient, cost effective alternative route to market that subscription copies offer. The fact that publishers have driven other major cost centres, such as paper and production, as low as they are ever likely to get them, is almost certainly another. Of course, the main reason behind the change is the liberalisation of the UK postal industry. In January 2006, Royal Mail lost its monopoly of the UK postal industry, and, for the first time in three hundred and fifty years, they now have to compete for business in an open market place. To date, the postal regulator, Postcomm, has issued licences to eighteen operators, which, in theory, gives business users such as publishers, a choice of postal supplier.

That’s all very well, but I’m sure many readers will be sitting there thinking "Yes, but how real are these opportunities for publishers?" I can tell you from experience that they are very real indeed. Consider, if you will, what publishers have got to offer these new entrants, what they have got to offer us and what we, as an industry, have done about it? The answer to the first two questions is quite a lot, but the answer to the last is not a lot at all. Believe it or not, recent PPA research indicates that, unlike other big mailing industries, such as financial services, publishers’ mail volumes are still increasing in an otherwise declining market. As the number of subscribers increase, so does our value to the postal industry. What we have to offer is basically a large volume of mail, produced at regular intervals, from predetermined collection points. That in itself is attractive to all postal suppliers. Add the fact that every subscription sold generates mail in the form of an initial direct mail shot, leading to renewal letters, the odd customer care letter and of course the actual magazines themselves. If you throw in the one-off items we sell and distribute by post, such as back issues, reader offers and event tickets and the thousands of items we mail out through our post rooms each and everyday, it’s not hard to see why publishing is worth in excess of £500 million revenue to the postal industry.

It’s got to be said that publishers have been slow to see the potential. The number of publishers who haven’t yet approached one or more of the new postal suppliers is surprisingly high and, as a consequence, the volume of publishers’ mail posted through Royal Mail’s competitors is unsurprisingly low. Whatever the reasons behind this lack of interest, there is still time to capitalise on what is still a great opportunity. Even the smallest publisher with limited time and resources can quickly and easily realise a substantial saving without having to give a chunk of the money to a salesman or consultant.

Realising the potential

The question publishers should be asking at the moment is how to realise the potential benefits a liberalised postal industry offers. The answer, particularly to smaller companies, is to take it one step at a time. Because the market opened up relatively recently, Royal Mail’s competitors have so far concentrated on introducing services that allow them to collect, sort and deliver mail as cheaply as possible whilst still delivering a cost and / or service benefit to the customer. Consequently, much of the mail generated by publishers is still just out of the reach of most of Royal Mail’s new competitors. But our bulk, machinable mail such as renewal letters, direct mail and general transactional mail is exactly what all postal operators, including Royal Mail, are looking for. It’s here that publishers should focus their attention first as it is here that a realisable benefit can be realised relatively quickly and relatively easily.

Before attempting to contact any postal operator, it’s vital that publishers know what volumes of DM and renewal mail they have to offer, what they currently spend on postal services to deliver these items, the origination points of the mail and the existing operational procedures and suppliers involved producing it. This is all information a Royal Mail competitor will need to know if they are to be able to tailor a solution to the publisher’s supply chain and provide an accurate quote. The publisher will also need this information to help them establish a like for like cost comparison and identify exactly what changes need to be made to their supply chain in order to realise a potential solution.

Choosing suppliers

With this information at hand, the next logical step is to identify which suppliers are of most interest. Unfortunately, many publishers are not close enough to the postal industry to know which of the plethora of suppliers now available might be interested in their mail. The answer is simply most of them. Links to the websites of all licensed operators can be found listed on the Postcomm website (www.psc.gov.uk). To save time and effort, I would advise publishers against contacting each supplier in turn and asking them if they’re interested in pitching for their business. They’ll inevitably say yes and delay the whole project with meaningless sales presentations. Instead, it’s worth spending an hour or so clicking the links to each supplier’s website to see what services they’re offering. It’s then quite a simple process to whittle the eighteen listed operators down to four or five who most closely fit the publisher’s needs.

Primarily what a publisher should be looking for is a supplier capable of accepting sorted and unsorted mail at a cheaper rate than Royal Mail, that are also providing a delivery service inside their latest delivery expectations. At the same time, they should also be looking for the supplier who is right for them and their business. The operational requirements, such as sortation and presentation, will differ slightly between operators. This provides the added benefit of being able to appoint a supplier who can not only save postal costs but, unlike Royal Mail, adapt their production processes to the publishers, meaning less disruption due to procedural changes to the new supply chain. I’ve even known a few occasions where production time was significantly reduced, which lead to a significant cut in production cost as a real value added bonus.

Whilst it’s safe to assume that all the licensed operators are not fly by night organisations, it’s not necessarily safe to assume the services they’re offering are permanent fixtures in their portfolio. Because this is an industry in the early stages of a major transition, it’s highly likely that a service, or even supplier, can be withdrawn just as quickly, if not quicker, than it took to introduce or establish. As well as everything I’ve already mentioned, publishers must consider looking for suppliers who they feel will offer a long term, sustainable service. Organisations that have ignored this advice will run the risk of having to do it all again six months down the line because the operator has decided to pull the plug.

Certainly, a quicker and safer alternative would be to solely approach the major players such as TNT Mail, DHL Global Mail, UK Mail and AMP Citipost, because there’s no doubt that these guys have the services and are in it for the long term. But, if you go down this road, you then risk excluding a smaller potential supplier who could well be offering the exact service your truly searching for. For all the reasons I’ve mentioned, it’s worth investing the time to do a basic evaluation of all the available suppliers and choose wisely.

The services most suppliers are offering, and that most publishers will come across, are primarily downstream access solutions where the supplier collects the mail and distributes it to one of Royal Mail’s inward mail centres (IMCs). Royal Mail is then contracted to deliver the next morning subject to the mail being delivered to the IMC prior to the latest acceptance time. There are also a few niche operators who will happily deliver mail through their own delivery network and these should not be dismissed. There is every chance the suppliers with their own delivery network will also have a downstream access solution which, with the two delivery methods combined, may be able to offer a better saving as a consequence.

Regardless of how many or which companies are invited to pitch for the business, to build their solution and calculate their rates, they’re all going to require the same information I mentioned earlier. If they’re told how to present their solutions and costings, there’s a good chance the analysis of the costings and assessment of the solutions will be as easy, fair and transparent as possible. So, be clear as to your requirements and expectations.

What are the benefits?

One of the major advantages the new entrants are able to offer is virtual day certain delivery. Because Royal Mail is contracted to deliver most of their competitors’ downstream access traffic the next working day, the suppliers are able to say with confidence exactly what day 98%+ of the mail posted through them will be delivered to the customer. The only Royal Mail product offering that level of delivery certainty for a bulk mailing is naturally the most expensive - Mailsort 1. For a marketeer, this sort of information can be invaluable when planning a campaign and the resources required at each point in time.

So, what can publishers expect in terms of costs savings? Obviously, it will depend on the size of the business, the solutions agreed and the prices negotiated. However, as a general rule of thumb, for unsorted letter mail a saving of 15% below Royal Mail STL rate could not be described as optimistic. For sorted services, up to 30% can be achieved if the publisher is prepared to compromise a little on service delivery times.

Finally, it’s entirely possible you may find one or two unexpected value added benefits such as online tracking of mailshots, simplified or departmental billing. I myself have tried one or two ideas with these new entrants, and whilst the ideas themselves didn’t work, I found the supplier open to my ideas and more than willing to try and help me realise them. This can be particularly true if concessions can be made by both parties. The point is, if you have an idea in mind, don’t be scared to ask the supplier if it’s possible. I think you’ll find they’re more able and willing to adapt than Royal Mail ever have been.