OUR VISION AS CUSTOMERS We Still Call Our Business Mail

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OUR VISION ASCUSTOMERSWe Still Call Our
Business Mail

• Major Mail Users 2001
• Sydney, July 26, 2001
• Christopher Smith

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Webbing of the World

• We cannot talk about the future of mail the most
  traditional of marketing media
• Without talking about the newest medium the World
  Wide Web.
• As you know, the Web, which went public only
  eight years ago, has grown all over the world at
  a phenomenal rate.

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How fast?

• Well, consider this.
• Back in January 1993there were ONLY 50 sites on
  the Web. FIFTY!
• And today?
• There are 28 MILLION domains registered
  worldwide
• And nearly 18 million of these are dot-coms. THAT
  is, unbelievably, almost a HUNDRED percent
  increase from just SEVEN MONTHS ago!

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People all over the globe are visiting these
sites.

• Today, an estimated 360 billion people around the
  world have Web access.
• Alright, sotoday we have millions of Web sites
  and HUNDREDS of millions of people surfing the
  Web.
• So, what happens when people take to the Web?

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For one thingthey are communicating.

• Today, there are more than a BILLION e-mail
  addresses.
• This is not good news for postal services, which
  is one more reason for them to develop direct
  mail and package delivery services that will
  bring in money that e-mail has the potential to
  drain from the posts.

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Today in the U.S

• U.S. Postal Service studies show that EACH
  RESPONSE to ONE direct mail advertisement can
  generate as much as
• 2 parcels
• 13 First-Class mail piecessuch as letters,
  bills, and consumer inquiries
• AND up to 25 additional pieces of advertising
  mail.

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In totalthat is 40 additional pieces of
POSTAGE-PAYING mail for the post officeand ALL
from that ONE piece of direct mail!

• We find another good example of this so-called
  "multiplier effect" when we look at an offer for
  a magazine.

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Assuming an acceptance rate of just three
percent, a mailing of 10,000 annual subscription
offers for a monthly magazine will produce the
following

• 3,000 acceptances 
• 36,000 monthly magazines 
• 1,800 payment mailings  
• 3,000 offers of subscription renewals 
• 30 customer letters, and  
• 30 responses. 
• Thats more than 43,000 additional pieces of
  mail!

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We Still Call Our Business Mail

• In the U.S., direct mailers spent more than 14
  billion dollars last year on postage for direct
  mail alone.
•  
• As these numbers showits just plain good
  business for posts to enhanceand to actively
  promotedirect mail in their countries.

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A Fishy StoryFresh from Japan Post

• In Japan, there are many customers who send
  seafood by parcel post.
• Japan Post offer a service called Chilled
  Yu-Pack, which keeps parcels refrigerated at 0 to
  5 degrees Celsius during transportation and
  delivery.
• Due to the increasing number of families away
  from home during the daytime, they offer
  customers a choice of delivery time frames, up to
  9 oclock at night.

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Their aim

• is to meet customer demands for greater
  convenience and less expense, as well as
  rationalizing customer service.

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Another example of progress

• New sorting machines installed that scan postal
  codes and addresses and arrange items in delivery
  order. There are 727 such sorting machines at 458
  post offices across Japan.

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Talk about complexity

• Address description in Japanese is complex, with
  a number of buildings located at the same
  address, and the numbers are not necessarily in
  order. Japanese writing also uses kanji,
  hiragana, katakana, and the English alphabet and
  hence demands highly advanced OCR technology to
  read hand-written addresses.

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Despite all of that

• The new sorting machines can arrange 83.2 of the
  targeted mail items in delivery order.
• That amounts to 65.2 of all small letters posted
  in Japan.
• The information system for the new sorting
  machines is able to monitor the operation of
  these machines in real time, which helps in
  coordinating operations among post offices.

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UK Govt. and Postcomm

• Postal Services Commission
• www.psc.gov.uk

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MAJOR MESSAGE FROM READERS DIGEST
WE LOVE MAIL!
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Pan Pacific Activity

• Advertising Mail 47.1 million
• Magazines 12.7 million
• Books, Video, Music Products 5.4 million
• Bills, Correspondence etc 9.2 million

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Supplier Profile

• Commitment to Our Business Needs
• Entrepreneurial thinking
• Investments in Infrastructure
• Long Term view
• Flexibility, ability to change
• Tight control on costs
• Commercial attitude

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HIGH-LEVEL ASSUMPTION FOR MAIL

• The communications market, as a whole is
  expected to grow by 5.6 per year compared to
  about 2.5 for physical mail. Their (posts)
  overall share will decline further.
• By 2005, the share of physical mail will account
  for about 15 of the total communications
  market.
• Source UPU-Postal Development to 2005

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Is There a Future for Mail?
QUESTION By comparison with electronic
communication, would Postal Services by the year
2004? Be less important 10 Be equally
important 70 Be more important 20 Sour
ce Survey of Direct Marketing Industry for CEN
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Mail use increases quicklywith income per capita

Source UPU Statistics
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DIRECT MAIL WILL DOUBLE WORLDWIDE IN THE NEXT 10
YEARS
Source Arthur D. Little Consultants
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ADVANTAGES OF DIRECT MAIL

• IS STILL NEW TO MANY REGIONS
• REACHES A WIDE POTENTIAL OFCONSUMERS
• (90 of households worldwide have general public
  access to physical mail)
• HAS LOW FIXED COSTS FOR THE MAILER
• OFFERS EASY ACCESS TO MANY CONSUMER GOODS,
  GLOBALLY

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ADVANTAGES OF DIRECT MAIL - 2

• IT IS CONVENIENT FOR CONSUMERS
• BRINGS PERSONALIZED OFFERS
• PROFESSIONAL PRESENTATION AND USE OF COLOR
  INSERTS
• BANDWITH AND COMFORT WITH PAPER FOR OFFERS /
  CATALOGS

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ADVANTAGES OF DIRECT MAIL IN THE WORLD OF THE NEW
ECONOMY

• IT IS IDEAL FOR CUSTOMER ACQUISITION
• 70 OF DOT COMs USE DIRECT MAIL
• SUPPORTS PARALLEL GROWTH IN E-MAIL
  COMMUNICATION
• USE OF TECHNOLOGY TO ADD VALUE TO MAIL
• TARGETED DATABASES OF INTERACTIVE SUBSCRIBERS
• USE OF CRM SYSTEMS FOR MORE PERSONALISED
  APPROACH

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TRENDS FOR MAIL
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The mail mix could end up weighted toward heavier
pieces
Volumes/ Revenue
Today
Future
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Speed in shifts in mail patterns will depend on
the state of mail and technology development

• PARCELS E-Commerce will fuel significant
  increases in parcel shipments and returns from
  remote shopping for digital and physical goods
• ADVERTISING DIRECT MAIL will continue to be
  needed by old and new businesses alike
• LETTER TRANSACTIONS are at increasing risk.
  Electronic substitution is well underway in
  advanced economies

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As electronics compete with mail,
keytransactions are at increasing risk
Mail Transactions Most at Risk
Household to Business
Business to Business

• Response to direct mail
• Bill payments credit card utility

• Purchase Orders
• B-B Invoice
• B-B Payments
• Correspondence

Household to Household
Business to Household

• Correspondence

• Bank Statements
• Bills
• Correspondence/Notices
• Payments

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OVERALL TREND MAY AFFECT MAIL VOLUMES IN
DEVELOPED COUNTRIES
change

• LOSSES
• Financial statements
• Direct ad mail mass/segmented
• Catalogs general purpose (heavy)
• GAINS
• Direct mail targeted relationship
• Letter mail responses, confirmations
• Catalogs targeted (light)
• Parcels

1990-1998 3.4 3.8 3.5 2.7 2.7 5.0 1.0
1999-2010 -1.5 2.0 2.5 6.0 7.0 5.0 7.0
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HOW DOES READERS DIGEST SEE THE
POST/DISTRIBUTION MARKET OF THE FUTURE?
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DISTRIBUTION /POSTAL RATES MUST BE AFFORDABLE AND
RISE BELOW INFLATION, WHICH WAS NOT THE CASE IN
THE LAST 10 YEARS IN MANY MARKETS
Distribution/Postal rates
Inflation
2000
INCREASE
1990
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The issues for governments will be to enable
posts to respond in commercial ways to the
threats from globalization rather than continue
to confine them to servicing a domestic monopoly
for too long time.
Source UPU-Postal Development to 2005
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The future of advanced postal organizations
promises to be a radical departure from the past
Operator of Commercialized Services
2005
Offering Services
Manage Segments
Customer Contact
Global
Value-Added
Corporation
Enabler
Institutional Framework
Regulator Role
Preferred Customers
Marketing
Products
Technology
Scope
Referee
Universal
Government Unit
Large Business
National
Holding Rates
Optimize Processes
1975
Traditional Postal Authority
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Five broad business responses are enabling postal
businesses to compete in the new environment

• Adapt to trends in mail shifts and mail
  substitution
• Pursue advertising mails potential
• Anticipate the impact of Electronic Commerce on
  payments and mail order
• Automate to add value to heavy-weights and clean
  mail
• Satisfy key customer segments

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READERS DIGESTS VIEW OF THE FUTURE

• LARGE, MULTINATIONAL MAILERS WILL BE WINNERS
  UNDER DEREGULATION
• RATES WILL FALL BY 20 BECAUSE OF INCREASED
  COMPETITION AND HIGHER PRODUCTIVITY
• THE MAIL BUSINESS CONTINUES TO BE A VITAL,
  GROWING SECTOR OF THE ECONOMY

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Let us hope that some of the new

• Can teach some of the old
• New tricks
• Thank you for your attention.