Post Office plans to review the tariffs for direct mail indicate a
change of heart. But has the move come too late, asks Neil Denny
The Post Office must have been making deliveries along the road to
Damascus because it appears to have had a revelation.
Chief executive John Roberts told a meeting of senior marketers at a
conference in Jersey earlier this month that the PO was considering
changing its rates for direct mail marketers.
Such a move would almost certainly make direct-mail campaigns cheaper
and the medium more attractive to advertisers.
‘Our traditional position has been that prices can only be discounted if
our costs are avoided by extra work undertaken by the customer, such as
pre-sorting,’ said Roberts.
‘But life and business has moved on. That approach is restraining us,
and you. We must find a better one, a more commercial one,’ he told the
So, after years of lobbying by the direct marking industry, it appears
the message has finally got through to the Post Office: it needs to
start behaving like a major media owner and cater for its business
Part of the timing of this announcement of intent is explained by the
industrial action gripping the Royal Mail. Roberts knows it is costing
him business and customer confidence.
He says that, in the event of a three-month suspension of the Royal Mail
monopoly, he would not be able to maintain the business tariff/public
tariff link - and he would not be able to reimpose it if the monopoly
Such a change would mean an entirely new rate card being worked out for
direct-mail campaigns, which for the most part would make mailings
John Tew, Royal Mail director and general manager in charge of business
mailings, says: ‘It’s cheaper for me to deliver in towns and cities. In
theory, some areas of high density might, for the sake of argument, get
a 40% discount and rural areas a 15% discount.’ This tiered pricing
structure will only affect direct-mail advertising campaigns. It would
not apply to business post, such as bank statements or bills.
Such a pricing structure would be in contrast to current costing of
campaigns where there is a crude discount scheme of 32% worked out for
any mailing of more than one million.
Mark Elwes, director of postal affairs at the Direct Marketing
Association, believes that breaking the pricing link with the public
tariff would have ‘a very profound effect, boosting business
He estimates that for every 1% increase in discounts, volume will rise
by 1% as more investment is placed in direct mail.
The Post Office would then be talking about additional revenues running
into millions of pounds and the direct mail market would see the
potential for a massive influx of advertising spend.
But is it too little too late? Simon Hall, managing director of
Barraclough Hall Woolston Gray, says: ‘It is such bad timing because of
the strike. They should have been doing this ages ago; it’s a wonderful
piece of inappropriate timing. They only change things when their balls
are about to be chopped off.’
Tony Coad, development director at the Daily Telegraph (one of the
country’s top ten mailers), thinks the Post Office is unprepared for
media ownership and competition.
‘It has a very significant cultural problem. It is a monopoly and it
focuses on operational, not customer, issues - and it still thinks of
itself as part of the Civil Service.’
The comparison he draws is with the pre-privatisation British Steel and
British Airways: first-class top managers but indifferent middle
management and hostile, unionised mass workforces.
The media ownership position, backed by promises of increased support,
has partly been forced on the Post Office by the strike, and partly by
the fast-gathering competition.
Within mailing the lifting of the monopoly has raised the prospect of
serious competition, with profitable areas cherry-picked by nimble
rivals. Already TNT has announced a trial service in the West Midlands,
undercutting the first class rate.
Perhaps more serious are threats from other media. Coad says, ‘Ad
revenue for the national press is going through the roof - perhaps we
are seeing a shift from the post to direct response through the press.’
Most serious is the emergence of electronic media. Alex Letts, chairman
of new technology agency SMI, explains: ‘In the US traditional mail is
declining and e-mail is increasing. The cost of electronic interaction
is a damn sight cheaper than the cost of snail-mail.’
Home banking and the growth of the Internet will start eroding the
traditional post within five years.
How will the Post Office fare against these threats? Roberts says: ‘Real
competition would focus everybody on one key thing: you have to get it
right to survive. You can’t replicate that in the public sector.’
Neil Denny is editor of Marketing Direct