OLD CRISIS OR NEW CAPABILITIES?

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1 OLD CRISIS OR NEW CAPABILITIES? Changing the Mailing Industry Conversation Kent B. Smith, Research Director and Senior Consultant Ursa Major Associates for Postal Vision 2020

2 Framing the Discussion What s your drop in this bucket? A crisis of confidence in the mailing industry Headline writers focus on the negative Bureaucrats avoid risk Customers focus on benefits Entrepreneurs focus on opportunities Kent Smith, Ursa Major Associates 2

3 Old Crisis or New Capabilities We need a new discussion Today s solutions to yesterday s problems will not be enough to address the challenges of tomorrow Kent Smith, Ursa Major Associates 3

4 The Golden Age of Mail is Gone We need a new vision The successful endgame (legislative reform) restores the status quo (incremental improvements to business as usual) and that will not be enough to profitably grow the industry in the digital future Kent Smith, Ursa Major Associates 4

5 We Need to Work for It Now Profitable growth is possible but not inevitable Golden Age Automatic mail volume growth No real competition Supply chain complexity is tolerated Costs considered reasonable Continuous incremental improvement Commodity (2% response rates, profit on volume) Less of a link with economy Online diversion The Real World Supply chain simplification Less patience with price increases Disruptive innovation Create value for customers (ROI, mail moment experience) in markets Kent Smith, Ursa Major Associates 5

6 Challenge Industry Assumptions Some of what we think we know is not completely correct Diversion drives mail volume decline (Yes, but not entirely) Alternative explanations Boomers Rule! (Life cycle changes) Rise and fall of the credit card industry (maturation/saturation) Consolidation of the financial industry (and accounts) Structural economic changes (long-term decline of middle-class) Extended enforced adolescence of Millenials (and they do like mail) Kent Smith, Ursa Major Associates 6

7 What New Capabilities are Being Created? Game changers that deliver value to customers 1. Winning with Data becoming an information powerhouse 2. Digital Front-End of Mail integrated communications 3. Next Gen Mail Processing robotics and artificial intelligence 4. The Magic of Delivery the sharp end of the spear 5. Adding Value to the Mail Moment helping do jobs 6. Building the Relationship with the Channel - 7. Collaborative Innovation Stronger together Kent Smith, Ursa Major Associates 7

8 1. Winning with Data From black hole to information powerhouse Communication About Mail e-induction Seamless Acceptance 100% Visibility Operational efficiency Customer satisfaction Marketing opportunities Tracking and Delivery Performance Receiver Preferences Universal Secure VPN Known Senders Capabilities and Credibility Innovative Collaboration Communication Universal Secure Private Mailbox Trusted Channel Kent Smith, Ursa Major Associates 8

9 2. Digital Front End of Mail One app to rule them all Using information effectively Target more effectively, improve delivery performance and reduce costs; Develop and use better metrics (response rates, ROI) Designing and producing better mail Making it easier to design and produce effective mail pieces, mailings, and integrated campaigns; Applying digital technology to mail Making mail easier to use Use QR Codes, Purls and Gurls, Clickable Paper, Augmented Reality, Social Media where appropriate Simplify value chain, bypass unnecessary steps and vendors, improve flexibility and speed to market, print and enter mail close to point of delivery Kent Smith, Ursa Major Associates 9

10 3. Next Gen Mail Processing Robotics, scanning and the internet of things This is an industry where much of the equipment was fully depreciated during the Reagan administration. Postal industry publication Supervisor Staff Kent Smith, Ursa Major Associates 10

11 Things Talking to Things (and People) Equipment, containers, vehicles, and mail Kent Smith, Ursa Major Associates 11

12 4. The Magic of Delivery The sharp end of the spear Delivery is NOT a Commodity: Super ZIPS, Super Users and the Mail Moment Connected Carrier Personal, Trusted Relationship Delivering Things I Want or Need Relevance, Preferences Where and When I Want Them Flexibility, Responsiveness, Convenient Access Kent Smith, Ursa Major Associates 12

13 5. Adding Value to the Mail Moment Helping people do things important to them Can Can we attract them? Can we move them to the next level? Best market segment in U.S. I might look at it sometimes Mail can be useful I rely on the T mail (37%) Can we reinforce this attitude? Percentages have not changed much over the last several years Categories are not generation-specific Strong link between mail and package moment Kent Smith, Ursa Major Associates 13

14 It s Not Just About Mail And it never really was Understand the Different Markets What jobs are they hiring us to do? In Growing Markets Financial Services To do tasks Important to Them Manage finances Connecting Customers Communications Advertising Information and Entertainment Distribution and Logistics Build relationships Generate sales or shop effectively Learning, relaxation, and fun Delivery (merchandise) Kent Smith, Ursa Major Associates 14

15 6. Building the Relationship The channel people want to use Without the public services, the Postal Service is just another business This is a unique competitive advantage There is a need to rebalance current services and focus on those that add value to customers Universal, familiar Authentic Trusted, customer protection Fair and socially responsible Personal, local Community involvement Legal requirements Kent Smith, Ursa Major Associates 15

16 7. Collaborative Innovation Stronger together Customer Segments Customer experience ( Mail Moment ) Trust and control, Privacy and Security Convenience and ease of use Sustainability Different Markets Channel selection criteria Customer s Customers Channel selection criteria Reach, reliability, effectiveness Responsiveness Innovative solutions Total cost of mailing Business Results Response rates Return on investment Sales Customer satisfaction Kent Smith, Ursa Major Associates 16

17 Recommendations Action Plan 1. Focus more on customer value and industry opportunities 2. Challenge conventional wisdom to develop industry vision for profitable growth across entire value chain 3. Develop new capabilities 4. Work for it Kent Smith, Ursa Major Associates 17