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Episode 27 – Industry Corner Podcast

IN THIS EPISODE: Ep027 - Recap of 2019 Information Exchange User Conference, an update on the Board of Governors and Postal Regulatory Commission confirmations, highlights from Board of Governors meeting as well as 2019 Household Diary Study highlights

Links to the resources mentioned in the podcast.

Information Exchange User Conference
PostalPro
Household Diary Study

Transcript

Chris: 00:00 Hi, this is Chris Lien.

Anita: 00:01 And I’m Anita Pursley. Welcome to Industry Corner, a podcast where we share postal industry news to help you stay informed.

Chris: 00:11 On today’s podcast. We recap the Information Exchange User Conference here in Rochester, New York and update on the Board of Governors and Postal Regulatory Commissioners confirmations, and highlights from the Board of Governors meeting as well as some Household Diary Study highlights. So let’s get into it. Welcome to the podcast. Hi Anita.

Anita: 00:31 Hi Chris. How are you today?

Chris: 00:32 I am doing great. You know we had a fantastic User Conference here in Rochester. We call it Information Exchange. It was our fourth year, Anita you were there. What a great time to interface with our customers and our partners and get directly from them the pulse of what’s going on with their business and that helps guide us for enhancements to our products and our services going forward. So it was a lot of fun. What’d you think?

Anita: 00:52 Oh, I thought it was fabulous. And my favorite part was getting to know the customers.

Chris: 00:56 Exactly.

Anita: 00:57 And also seeing the exchange between them where you know, light bulbs would go off in their head and you know, new ideas would come up and then the information that they did exchange was very valuable to everybody. I thought it was great.

Chris: 01:08 Exactly. And I like it that you mentioned the light bulbs because it was fun. You know, you’ve got a group that’s large enough to have some really good conversations. We had over 60 people that were attending the conference. Uh, we had Marc McCrery, Vice President of Payment Entry and Technology, and I think Education as well. He’s got a whole bunch of things that Marc is responsible for. But so glad that he came out to the conference. I know, uh, we kicked that off right away on Tuesday morning with Marc and the attendees really appreciated hearing directly from him. And then thankfully he was able to stay for most of the time on Tuesday. So he heard directly from the customers on the market forces and things that are happening to their business. But it was just a great conference with good information, which is the whole point of it.

Anita: 01:47 I think the customers really valued that time with Marc because so many of them had one on one time with them and I think they were very pleased with that.

Chris: 01:55 Agreed. Yep. So again, for our listeners having a user conference like that, I’m, I’m a big fan of not having a sales pitch. That’s not the whole point around it and it really is listening to what the customers have to say. I know a lot of you out there do let us know because that’s what we asked, you know – how can we help? And you are responding with that. But it was, it was a good, a good exchange. One thing just to share with our listeners that we’re hearing, we’ll talk a little bit about this later on, is that there are definitely some market forces that are impacting their business: volume changes, consolidation in the market and pricing. You know, the way that postage is folded into the way that different types of mail service providers are pricing their products. So it’s an interesting way that the dynamics with it. I know it also gave me an opportunity to talk to Marc about something we mentioned before in a prior podcast that I really would like the Postal Service to focus on setting their pricing relative to the attributable costs to be able to deliver the mail, and let us on the industry side work within those boundaries to come up with the innovation and the opportunities to prepare better mail for induction and transport through the Postal Service rather than the Postal Service watching to see how are we going to respond. It just feels like we’re kind of chasing our tail that way. So I know, I let Marc know that and we’ll see as it goes forward.

Anita: 03:05 I know, don’t get me started on that subject. We could talk for an entire podcast.

Chris: 03:10 I know, we could, we could, we could. But um, but it does feed into the next topic, right, which is the Board of Governors and Postal Regulatory Commission. So we’re coming into mid-August here. Congress is in recess, both the House and the Senate are currently in recess, but before the Senate went on their recess, they did get a chance to finish up some confirmations. Right?

Anita: 03:28 Right. It was great news.

Chris: 03:29 Yeah, exactly. So walk us through a little bit on what’s the situation with the Board of Governors and the Postal Regulatory Commission.

Anita: 03:34 Okay. Don’t you just laugh though how everything is last minute? I mean we get the news on Friday the 9th that they were confirmed, so, right. So it’s great news because we did get all three of the governor nominees, excuse me, Ron Bloom, Roman Martinez and John Barker all confirmed as of Friday the 9th they had not been signed off by the President yet, but I’m sure that’s just a technicality.

Chris: 03:57 And they gotta to be sworn in, right to Anita? I mean, that’s part of it. Right? So those are kind of more perfunctory in the process, but important. Right. It’s a legal aspect to it. But I think until that happens, they technically can’t really exercise their full authority. Right?

Anita: 04:09 Right. So in other words, they couldn’t participate in the Board of Governor’s meeting. And I know we’re going to talk about that because they had not gone through that formal process.

Chris: 04:17 Okay.

Anita: 04:18 But on the other hand, over at the Commission, both Ann Fisher and Ashley Poling that we’ve talked about in the prior podcast, they were both confirmed. They were signed off on and sworn in.

Chris: 04:29 Oh nice. Okay. So we have a full slate of Commissioners. We’re almost ready to have a quorum for the governors, they just got to finish off those few extra things. But that’s great. That’s good news cause now we’re going to have the proper oversight and management. You want that top level that that the Postal Service really, really needs to be able to move forward.

Anita: 04:45 And you know what, I think maybe not swearing in the governors was probably a smart thing cause they couldn’t really participate in the last governor’s meeting in any knowledgeable or any effective way to enhance the board meeting or, or to add to it I should say because they’ve got a large learning curve before they get their feet wet.

Chris: 05:04 Well there’s a lot of things to discuss right away though, right? I mean we’ve got pricing for next year that has to be discussed and presented and agreed upon. We’ve got promotions and then of course everything that we’re waiting for is that 10 Year Plan from the Postal Service on exactly what they’re going to do for the next 10 years to ameliorate that $125 billion projected loss. Right?

Anita: 05:22 Right. That’s a great segue into the Board of Governors. But I just recalled something that I forgot to mention is that not only did the Commissioners get sworn in Michael Kubayanda, the most recent one prior to Ann and Ashley, he was voted as the PRC Vice Chairman.

Chris: 05:39 Oh, okay. Well Great!

Anita: 05:41 Yeah, so that’s kind of a dubious position in the sense that it’s the other Commissioners that vote on who’s going to be the Vice Chairman. It’s not like the chairman position. So it’s a one year term and it typically rotates. I know Mark Acton has been Vice Chairman several times since I’ve been following the Commission and I think the most recent one was possibly Nanci Langley. But anyway, so, uh, Michael’s elevated right away to Vice Chairman and he will act as Chairman in the absence of Robert Taub. So we’re in great shape with the commission and I think that their number one priority is going to be the 10 year rate review.

Chris: 06:16 Yeah. We need to take a look at what that’s going to be and I know that the longer it waits to be able to be presented, it creates sort of this vacuum, which, you know, nature abhors. And so it’s going to come up with some of these different statistics and grumblings and innuendos of what the Postal Service might do, and chief among those, I think is some cost cutting and it’d just be nice to see exactly what’s in there and not speculation.

Anita: 06:36 Right. So like I said, that’s a great segue into the recent, I can’t call it a BOG meeting, a Board of Governor meeting, because technically it was a meeting of the Temporary Emergency Committee.

Chris: 06:47 Right, it wasn’t a quorum yet.

Anita: 06:49 Right, right, it wasn’t a quorum yet. Because three governors haven’t been sworn in, but it was a pretty eyeopening meeting. Um, what happens is on the first day, of course it’s closed door. The second day is an open session. Not every one of their meetings have an open session. I think the last one was during the NPF. So Chairman Duncan started out the meeting welcoming everybody, but he announced that the 10 year plan, which they have named strategies for a financially sustainable Postal Service. I don’t know that he used the word has been finalized, but he did say that the release is being delayed until the new governors have a chance to weigh in on it.

Chris: 07:26 That actually makes sense. I mean, it’s unfortunate because it, you know, it just drags it out a little bit longer, but it makes sense. Particularly if you’ve got three new governors coming in, you’ve going to have a quorum. At least give him some time to take a look at it.

Anita: 07:40 Yeah, get your feet wet. Definitely. Here, here’s our 10 year strategic plan. Can you imagine? I mean, with an organization, a $71 billion organization. So yeah, they have a lot of work to do, but they’re all very, very qualified governors in my opinion, and be anxious to hear their input.

Chris: 07:57 Good, good.

Anita: 07:57 Yeah, so there’s a couple other things I wanted to share. First of all, unfortunately, and not surprising, mail volume and revenues are down, service is also down and I don’t think it’s important to get into the details, but what was most interesting to me is that the shipping and mailing business, I guess that’s the packages, revenue is up of course due to the price increases, but volume is down for the first time in 9 years.

Chris: 08:22 Yeah, I saw that too. In fact, volume was down in a number of areas, particularly in marketing mail, which is the, the class of mail that I watch very closely. A lot of our customers are preparing marketing mail and that’s the largest class of mail in terms of piece volume, but a 4.7% compared to the same quarter last year. That’s a real concern. It’s just the part that I have a concern with that is that also begins to kind of square up with some other market forces that we’re seeing are kind of, uh, indications going on the Household Diary Study. I know I want to get back to the Board of Governor meeting, but the Household Diary Study was released by the Postal Regulatory Commission, the Postal Service a little while ago. It’s available on prc.gov. In that diary study, it stated that, and I have to be careful how I say this, the wallet share we’ll call it, for a marketing company, when they’re deciding where are they going to spend their marketing dollars – is it going to be television and going to be radio? It can be digital, social media, direct mail. Of that pie, if you will, direct mail was down. It’s down to 8% now, Anita, and it had held sales steady at 12% for such a long time over the course of the last several years, I think less than 10 years. It’s been this slow decline and now at 8% that’s a real concern to me because we’re seeing it in the volume, but the part that doesn’t square up, is just the value that that mail provides. Multi-channel marketing. I can’t rationalize that in my mind why a marketer is putting all this money into digital marketing. I mean that’s an important part of it, don’t get me wrong. But to focus solely on digital marketing when you know that all the digital marketing by themselves together don’t equal 1% and yet direct mail is sitting at over 5% for house list and over 3% for prospect list – it just doesn’t make sense to me. And so I wonder if it’s just education, if it’s awareness, I’m not sure what it is, but that jumped out at me when I saw that from them.

Anita: 10:11 I agree. I know you and I always look at those numbers first because that’s the area the Postal Service is really focusing on besides the package business. But let me just say one last thing about the package business. It was funny because, unless I heard her wrong, you know when the PMG made her introduction, she said that they were focusing on stabilizing and improving the mail business of course. And then she said, and growing the package business, which represents 32% of their revenue now. But then she said they continue to see positive revenue increases from the shipping and package business. And I thought, hmm, I wonder if she made those remarks or wrote her remarks before they saw the financials. Cause those, you know, those just came out as well. But she recognized the intense competition in the package business with the competitors diverting their last mile volume by insourcing that. So that was very interesting that she said that. I don’t think she mentioned so much marketing mail, but I’m with you on that. That’s just a disturbing trend. Although we will see a lot of election mail coming out.

Chris: 11:12 Okay. So we’re banking on that. Maybe we should have, right. I mean really, you’ll almost literally the Postal Service I think is, you know, because we saw such a great increase in political mailing in the 2018 election, we certainly saw in 2016 but we really saw it for 2018, and so there’s a lot of anticipation that when we come into 2020 that we’re going to see a lot more mail pieces. And of course there’s two pillars here. When we talk about political mail, we’ve got the, the marketing mail, the postcards, and the awareness. And a lot of that is represented in saturation mailings and for BCC software, we certainly see that in the volume of DSF processing because we’re the direct licensee for DSF to data, one of them from the Postal Service. So we can see that in our volume. And I know a lot of that is what we saw leading up to 2018 so I anticipate that for 2020. Simultaneously, I’ve had a lot of conversations and I’ve heard from the market that there’s a growing interest in tracking through First Class Mail the ballots, to be able to track the outgoing ballots and then in turn, is there a way you’re a mechanism now with Informed Visibility to be able to track some of that inbound in terms of the balance to get a better idea on the response for voters. So it’ll be interesting to see how all that begins to come together, there’s a convergence of Informed Visibility, the increase in political mail. So we’ll kind of see how that begins to shape up what we’re doing in early 2020 with that part of it. I want to touch on the packages though, Anita, and it’s really disturbing because it’s not only the Postal Service that is seeing these changes in packages. There were some headlines around Federal Express as well. I know Amazon has started delivering their packages directly. Certainly the people that are out in kind of a rural setting like myself, by the way on a quick commentary still creeps me out. I’ve said it before and it just, it really bothers me. I would love to have the Postal Service deliver the last mile for Amazon again, because I know it’s trusted. I know exactly where that carrier is going to put that package, and because Amazon is doing it directly like that, it’s a mystery, right? I feel like I’m on an egg hunt every day trying to find, you know where, where’d they leave my package today?

Anita: 13:09 Right. What kind of car is going to pull up to your driveway? That’s disturbing to me too.

Chris: 13:13 It’s a few creepy experiences. I’m sorry, I just have to say from the commentary aspect. But uh, we’ll see how that shapes up. But to me it comes down to the marketing mail. That’s the one that I watch closely.

Anita: 13:24 Right, right. Hey, before you talk about the Household Diary Study more, let me just mention that Brennan went over the three core areas of activity that are necessary for them to go forward that is pursuing opportunities within their current legislative model. She did say she encouraged the PRC to eliminate the price gap. And then last she announced that the leadership of the House Oversight and Reform Committee has signaled their intent to introduce postal reform legislation this year. So I know, I know everybody’s heard that before. So I mean nobody’s gonna you know, celebrate that by any means because we’ll see. But anyway, so those were my highlights from the governor’s meeting. So do you want to talk about the Household Diary Study a little bit more?

Chris: 14:07 Yeah, I kind of touched on the core piece on the ad. Certainly the demographics and the breakdown on the open rate at the time that people spend with mail, it continues to show directionally the same as it’s been. The mail compared to other channels of marketing has a higher level of response, more time that people are spending with it. They talk a little bit in there again and they break down the demographics. We watched the millennials very closely because that is a demographic now that is coming into access to more money. They’re making bigger purchasing decisions. They’re spending more time with the mailpiece, but again, they were expecting a higher level of personalization. A lot of what’s in that Household Diary Study and again, I urge our listeners to download that from prc.gov that also compliments and squares up with some of the things that we’re seeing out of the Office of the Inspector General, and we touched on this a little bit before as well, so I encourage the listeners to look at these different pieces of information because one, they’re free, which is great, but two, it also gives them at least a talk track, right? With their customers and mail owners that are coming to them and say, hey look, you know, as you’re preparing your piece – you can at least begin a conversation possibly because the access to data and the ability for tracking and things is now coming to fruition. Who are you targeting with this direct mailpiece? Were you aware of the open and response rate for the individuals that are going to be receiving this?

Anita: 15:27 Right, especially compared to digital.

Chris: 15:29 Exactly. So that’s in there. So do take a look at the Household Diary Study. There’s a lot of statistics in there when you, in the interest of time, I touched on a few of those, but then also square that up with the OIG report and I think our listeners are going to find that direct mail works. It works extremely well, but for some reason we need to get the market to be better educated about how the value of that is there. So we can at least see that in the revenue piece and weight reports from the Postal Service.

Anita: 15:53 Right. You know, I think that study is a so critical that’s done every year. It’s just chockfull of information that I think just gets, you know, it’s almost like it’s posted and then nothing happens with it or there’s no advertisement about it. So, I’m glad that you keep mentioning those statistics because I think it would go a long way in getting marketers to take a second look at direct mail.

Chris: 16:15 Agreed. So again, those sources, prc.gov and you’ll have to do a search cause it’s kinda hard sometimes to find these resources on the Postal Regulatory Commission webpage, but then also the OIG, the Office of the Inspector General. Uh, do take a look at those. And then just finally, you know, one last thing Anita before we wrap up, you know, I know Informed Delivery, the promotion, uh, is out there. When Marc was, uh, was out here for the Information Exchange last week we talked a little bit about that. A lot of the people that were participating in the exchange last week are actively working with Informed Delivery. They’re well aware of the promotion, but it bears repeating to our listeners: Be very careful and make sure you’re fully educated on what qualifies and what does not qualify for the Informed Delivery promotional discount because it’s not going to apply to every piece. There’s a whole list of pieces and types of sortation that are not eligible for that. I just really want to make sure that our listeners understand you need to test before you do this. Make sure the webpage is appropriate, the landing page for that, that go along with the complimentary part, and make sure that you couch the situation with your customer that hey, not 100% of the pieces are likely going to get this 2% discount at the time of mailing. So don’t come into it thinking 100% of it’s going to get it because there’s a very good chance that it’ll be less than 100% of the pieces are going to receive the 2% discount. I just don’t want anybody to be caught off guard.

Anita: 17:32 Right. No, that’s great advice. I know it’s right around the corner.

Chris: 17:36 It is and a lot of people are signing up for that, so hopefully the Postal Service has their systems in place. I know that Bob Dixon and the team have made some good strides in getting things together, but let’s make sure that everyone’s testing, especially if you’re planning on submitting campaigns through Mail.dat. We’d mentioned before that 33% of the Mail.dats were working to carry that information, but a large percentage were not. So the business customer gateway and the portal for the campaign is another alternative to set that up.

Anita: 18:02 Right. That’s the preferred method according to the Postal Service. Right, right. Well good. I’m glad you mentioned that because that is something that’s on everybody’s mind at this time of year.

Chris: 18:11 Absolutely. All right. Anything else Anita?

Anita: 18:14 No, I think that’s it. It’s funny how when we don’t have much to talk about, we run out of time, right?

Chris: 18:19 Well, there’s always, there’s always something going on even in the, uh, the dog days of summer here of August. Well, thank you Anita. I appreciate all the good information as always.

Anita: 18:27 Thank you, Chris.

Chris: 18:28 All right, and thanks to our listeners as well. We really appreciate you logging into the podcast and giving your comments. We wish you a wonderful day, and as always, please let us know: How can we help? Thanks and have a great day everyone.

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