Pushing the envelope

ANY MARKETER WORTH HIS or her salt knows that direct marketing (DM) is one of the most cost effective ways to spend their budget. With the deregulation of the postal market, the case for DM, and in particular direct mail, is set to get even more persuasive.
The move, announced by the Postal Services Commission (Postcomm) in January this year, aims to reduce Consignia’s monopoly in the UK postal market. Final details of the changes are due to be made public this month, although Consignia is currently lobbying hard for the proposed changes to he postponed.
The story for consumers has been mired in controversy over whether the price of stamps will rise. But the news is much better for business, where there are several companies keen to leap in with new services.
Not only should more competition for Consignia s letter-delivery division, Royal Mail, spell cheaper mailing costs for businesses. hut the benefits should be shared with small and medium-sized enterprises.
The initial proposals are aimed at encouraging new competition in the large mailing categorv. But the Commission also aims to introduce licences for companies called consolidators — to pick up, sort, and theoretically deliver mail from smaller business customers. Postcomm has already granted an interim consolidators licence to UKMaiI (part of the Business Post Group) to pick up and sort mail in certain postcode areas in 12 major cities from this month. They will then pass the sorted
mail on to Royal Mail for delivery, claiming a bulk discount and passing part of this on to their small business customers,

Mail’s pace
A variety of companies are thought to be interested in bidding for the new licences — including TNT, Deutsche Post, La l’oste and Hays — but all are still chewing over the detail of licences before they decide what to hid for. “If it is possible to do profitable business, we will certainly bid,” says a spokesman for Deutsche Post, which already operates parcel delivery firms Securicor Omega Express and DHL in the UK,
David Robottom, director of development and postal affairs at the Direct Marketing Association, believes that most of the new mail entrants will hid to only collect and sort mail. “These other companies — even distribution companies like Deutsche Post and TNT — have
limited distribution networks. Only Royal Mail has what we call the ‘final mile’ capability.”
But even if, following the UKMaiI model, the new companies only hid for partial post services, it is still likely that the Cost of direct mail will fall, says Robottom. Not only does competition mean new services undercutting Royal Mail, it also means that Royal Mail itself is sharpening up its offering.
Until now, volume discounts have only been available to business mail users who sent out an average of 4,000 items per mailing. But Royal Mail is planning to offer new services to smaller direct-mail users, tailored to their particular needs. The aim is to make buying direct mail as straightforward a process as booking an ad in a newspaper.
Developments like these can only aid users such as First Capital Cash Flow, a live month-old company offering outsourced sales-ledger
management services. Sales and marketing direckr ( cam lla Hughes-H hint says she has found direct mail to he the hest way to pick up new customers. But as the company sends out just under 4,000 mailings per month, it doesn’t qualify for any volume discounts from Royal Mail. th postal costs accounting for around a quarter of the cost of a standard mailing. any tall will have a sign! f ica nt impact on total c sts of the mailing.
e have no choice at the
moment, we have to pay the going rate for post. But if the price were to fall I would certainly consider bigger mailings," says H ughes-H hint.

A suitable mail
But deregulation may not necessarily be all good news t’or direct-mail marketers. Some in the I DM community are worried
j that the new post al providers will cherry -pick licences in profitable urban areas, leaving
Royal Mail with the more costly—to-operate rural areas. The net result of this could he that the post market sinks into a two—tier system — with prices falling to target people in cities. hut rising in other areas. Th is. says Julia Phipps, client services
director at direct marketing agency E HSBrann, could he had or companies such as catalogue retailers, who rely on direct mail to target their many Customers living in outlying districts.
"We would he concerned it it became harder to target consumers living in rural districts. Royal Mail isn’t making much of a profit delivering to these areas now —
how would it be able to guarantee a decent service once its best markets have been lost to competitors’?”
Consignia, facing sudden competition on 30 per cent of its revenue, is understandably keen to underline this issue, "If you are an SMF in one of the major conurbations, then perhaps you will see some savings,” says a spokesman. "But if voure outside a major city, then you may find that an affordable postal system just won’t exist.”
But a spokesman for the Postal Services commission is adamant the market won’t develop in this way. “There’s no question that there’ll ever he a €2 stamp to send mail to the Shetlands. for example. The univ ersal price is protected by law and will remain that way.”
As H ughes-H lunt adds, the factor most likely to encourage more extensive use of direct mail would he better quality lists, But cheaper postal rates would do nicely for now.