The post office's priority - U.S. Postal Service

The U.S. Postal Service brand is not exactly magic with chief executives or small-business owners. But with a $4 billion Priority Mail product sinking, the post office turned to a wildly-effective direct mail effort to rescue its maligned service business.

Along with low volume and scant brand awareness, despite eight years in the corporate market, Priority Mail's revenue growth had declined for a year-and-a-half. It had plummeted from its traditional 12% growth rate to a 6% increase in October 1995, to only 3.5% in March '96. That was 10% below the growth rate of Priority Mail's two main competitors, United Parcel Service and Federal Express.

Bailing with a sieve, David Shinnebarger, manager of worldwide marketing (expedited and package services) at the USPS, faced some serious institutional hurdles. One big challenge: no matter a customer's volume of business, the USPS can't offer discounts beyond a very modest 11 cents-off per package for pre-sorting. As Jeff Tarakapan, senior vice-president at FCB Direct NY, pointed out, as a quasi-governmental operation, the USPS doesn't have much flexibility to tweak the product.

Joining forces with FCB Direct in January 1996, the USPS decided to roll out a direct mail campaign to pre-qualify leads for the sales force. Eventually a list of 300,000 names was culled from 2.9 million business shippers, and the first pieces were mailed in June that year.

There are some trade publication subscriber lists available, said Shinnebarger, but they're freighted with uncertainty. "There's no list out there identifying companies who spend $100,000 on shipping and no great indication of who the decision-makers are," he said. Frustrated, he turned to the Colography Group in Atlanta, providers of competitive intelligence on the shipping world. Ad agency, client and consultant assessed their targets by company size (as defined by number of employees); and by the number of packages shipped, broken down further by weight, content and distance traveled.

Shinnebarger's interest in content is based on value. Priority Mail, for example, will ship computer peripherals such as keyboards. But currently lacking signature confirmation on delivery, it won't handle the far pricier central processing units. (The USPS is trying to add signature confirmation, with a decision from the Postal Rate Commission expected this April.)

The Colography Group, said Shinnebarger, was particularly helpful in identifying potential customers with shipping volume over $100,000--companies responsible for 70% of all U.S. packages shipped.

Three different postcards were sent in sequence every three or four days to CEOs and CFOs detailing how Priority Mail offered more drop-off and pick-up points than its competitors and offered Saturday delivery. The cards also pitched the fact that Priority is $3 a pop for a two-pound package and $4 for a three-pounder, putting its cost at only half or even a quarter of that charged by UPS and FedEx.

CEOs pay a surprising amount of attention to shipping costs, but the message directed to them was short and sweet. The CFOs got more detailed information on potential savings.

The campaign achieved a remarkable 10% response rate from the 300,000 targets; add telemarketing to the mix, and the response was 27%. A hefty 74% of them were aware of the Saturday delivery, one of the main selling points. Three-thousand of the leads had shipping volumes above $100,000.

And the results? Shinnebarger proudly noted, that for the prior 18 accounting periods of a month each, sales increased by 16.9%--more than double what top management had called for using standard linear regression forecasting. During some months, that figure, which does not include the bump from the UPS strike, spiked at 23%. The total revenue increase for 1997 was $535 million.

"There was no restaging, no new news," said FCB's Tarakajian. "The product was the same two years ago and five years ago. The only thing that changed was the communications. We found something that wasn't leveraged and built a whole campaign around that."

After an eight-month wooing, the USPS succeeded in establishing relationships with Nordstrom, an out fit you might think would be associated with a delivery service perceived as a little classier. Spiegle and Lane Bryant also came on board, and the Home Shopping Network now trumpets the fact that frequent buyers get a free upgrade to Priority Mail.

One indication that real relationships were formed, said Shinnebarger, is that of a universe of 5,000 CEOs, 11% phoned in to hear about upcoming rate matters, and 80% of them stayed on the line for the full seven-minute message. Building on potential relationships, the program now hot-links callers into a fulfillment house to get a kit out to them quickly and take advantage of other sales opportunities.

Tina Cohoe, president of FCB Direct NY, said that most customers, especially the 7 out of 10 who are sending documents, don't care whether the package gets there in two or three days, Priority Mail's delivery schedule. "The other guys may talk about what hour it gets there. But we didn't realize the biggest part of the business is in two days. That's where all the margin is, in documents."

The campaign has been so successful, the USPS has just boosted its 700-person sales force by 125 people. With a wicked grin, Shinnebarger claimed institutional credit for forcing Federal Express to lower its price from $12 to $8 a package. It was, Shinnebarger, said, quite "self-actualizing for the `lowly' Postal Service to bring Fed Ex to the playing field," and added that the USPS now "helps announce United Parcel's rate increases."

COPYRIGHT 1998 BPI Communications, Inc.
COPYRIGHT 2000 Gale Group