Marketsmith, Inc. - Marketsmith in the News

On Monday March 12, 2008, I was asked by the Director of American Catalog Mailers Association, Hamilton Davison, to join him in Washington to meet the Postmaster General and six other Post Office officials to discuss the current state of the Catalog Industry. The ACMA started last April when a few catalogers were completely stunned by the last minute change in the postal rate that went from an estimated 8% to a staggering 18% to 24%. The ACMA is trying to catch up after the blow was already delivered. Today they have close to two dozen members. For them to be able to sustain their efforts, they need 80 additional members.

Up to this point in time we need to recognize that the catalog industry has had virtually no representation in Washington. There is a general belief that the DMA is working specifically for catalogers, but that is not accurate. The DMA represents publishers and non catalog mailers as well as a wider range of service agencies supporting the broad direct marketing industry. Other industry niches are represented by smaller associations, non profit, financial, etc. Because catalogers are highly fragmented and often very competitive, the group as a whole has not been organized and consequently not necessarily well informed. Therefore the Post Office and the PRC, while not always on the same page themselves, were able to send a wave of change that swept catalogers up in May of 2007 and left havoc in its wake. We are still reeling from it and we are facing further postal increases next month.

The ACMA is late into the game, but they have opened up the lines of communication between catalogers and the Post Office. The Post Office does not understand the business of cataloging, BUT they want to. I was impressed with Hamilton Davison and his ability to keep the room fully engaged. I was impressed with the desire of each individual representative of the Post Office in the meeting to want to understand, learn and communicate their challenges. In that meeting I saw hope for the future of our industry.

The opinions in this piece are mine and mine alone based on what I saw at the meeting. I do not represent the ACMA, nor do I consider myself intimately involved in the underbelly of the United States Post Office. Here is my summation of the meeting:

First, I think it is fair to say that there will be a postal increase every year moving forward.
Second, there will not be a universal rollback of the increase for catalogers. The Post Office will lose an estimated billion dollars this year from their business mistake. However, fixing what they broke would take someone to admit that they made a mistake and there are too many well entrenched industries with high powered lobbyists that will ensure nothing changes. The fact is that the Post Office needs income and if it does not come from one group, they will get it from another.
Third, the only change that can happen for the best is for catalogers to do what they can to create their own relationship with the Post Office. The Direct Marketing Association, I think, has lost its way and lacks leadership. Now that might be a ledge for me to stand out on, but the bottom line is the Association is being run by those who do not understand the business model of direct mail (that is only emphasized by their own marketing where we see our mailbox is flooded by out of date and wrong contacts indicating a poorly maintained database). And it appears that the association is insular, not opening opportunities for a younger generation of multichannel marketers to join the leadership of their committees, boards, councils and educational offerings.
Catalogers do have some options to pursue to help circumvent the dramatic increases they face, but they have to take action. I learned early on that if you want to protect your business and grow your Brand you can either wait till someone knocks on your door (which has never happened to me), or you can change your course by not waiting for a crowd.
What you want to do is establish a relationship with the Post Office based, on not one transaction, but a series of transactions that shows commitment and past history. It would be a relationship owned and managed no differently than relationships with your largest service providers, where a relationship is valued for a win/win on both sides.
The Post Office spoke of wanting to work directly with catalogers to understand their business model and their market strategy. I was impressed with their desire to help lower costs, especially in areas of prospecting, and to find ways to help companies grow again. The Post Office spoke about the financial pain incurred by 5% to 7% of all 3rd class mail being undeliverable and I suggested they could give an incentive to give mailers who show continuous improvement in lowering their percentage of undeliverable mail.

When Hamilton and I prepared for the meeting we pulled three out of the many case studies showing the impact on catalogers with different business realities: Catalogers struggling beforehand, catalogers doing well and catalogers in between. We showed the Post Office the impact on revenue, contribution per order and circulation sizes. When sharing these different realities the Post Office recognized the only real way to make this work is to create a direct relationship with the cataloger. I see three possible ways to create that relationship:

ACMA becomes the rally force for the catalog industry and they move at the speed of light to get an organized consortium that comes together to negotiate pricing as a group for their collective mailings. The ACMA has the ability to make this happen because I think their relationship with the Post Office is clearly evident and Davison has shown he knows both sides of the aisle well.
Individual catalogers come to Marketsmith, their printer or ACMA and get help creating Negotiated Service Agreements (NSA's) with the Post Office. These agreements offer volume discounts to the negotiating party(ies).
That the catalog industry finds itself a spokesperson and advocate who rallies for change, has great existing relationships with the Post Office and PRC and can educate through the DMA/NEMOA and various regional Councils to reach catalogers who want to be in this industry long term. Find someone and get him/her to be the Guru, the "go to" person, the Postal evangelist and ultimately the saving grace needed.

Our focus here at Marketsmith is going to be creating and delivering value to companies that want an ongoing reduced cost to contact. We understand the Post Office perspective and workings; we understand the opportunities in digital press; we understand the content relevant communication needed on the web to convert 15% of circulation to internet; and finally, we understand clearly that the Post Office or PRC will not wake up and say "We have made a terrible mistake, we delivered a fateful blow with no warning and no understanding of impact to you, your Brand, your employees or your town. Therefore we repeal the increase, effective immediately." However, you need to move forward and I am not sure there are many companies that want to or can navigate it for you. So you will need to find the right resources, the right Associations and take action now.

We at Marketsmith have not only stated our perspective strongly, we have taken constructive action for the industry as a whole. Instead of just complaining or hoping, we built a postal calculator a year ago to help those navigate the pending storm and it was used on average 100 times a day for months. We did not collect one name or charge one company for its use; we wanted to provide a need service and clarity to the industry and I have no regrets. We have updated both our postal calculator (http://www.marketsmithinc.com/postal_calculator.php) and our nonprofit calculator (http://www.marketsmithinc.com/nonprofit_postal_calculator.php) to reflect the increases beginning May 12.

Instead of writing about the establishment, I am expending Marketsmith resources to understand what the industry can do to make a difference. We will continue to move forward using our services and articles to educate; this article is an example. Call me to talk about how we can help you navigate a better relationship with the Post Office. It is no longer about representation; it is now about survival of the fittest and the smartest.