Key steps to DM/postal services: Time to deliver

Deregulation has brought a raft of postal services suppliers that are challenging the dominance of Royal Mail. But what are the benefits of switching? asks Robert Gray.

Although Royal Mail still dominates the UK's postal services market, deregulation has triggered strong growth in competition. Private operators have signed access agreements to allow mail they have collected and sorted to be fed into Royal Mail's network for delivery.

Royal Mail made 1.2 billion access deliveries in the past year, compared to just 87 million the year before. In the five months to August 2006, access volumes continued to swell, and the latest figures from regulator Postcomm show that access deliveries now account for 10.5 per cent of Royal Mail's total letters volume.

Royal Mail's launch on 21 August of its Pricing in Proportion charging structure, reflecting that size and not just weight will determine a mailing's delivery costs, has given companies further food for thought. For those considering a switch from Royal Mail to a rival access operator, there are now many more issues to consider. And there is certainly some confusion.

"In my experience, the big mailers aren't confused because they have experts in their business who understand it, and can look at a new player when it comes along," says Triangle Management Services' associate director of mail Geoff Lambert. "But once you come down below the top 100 or 200 mailers, it's true that people haven't quite been able to understand what's going on because they don't have the expertise in-house."

So what, if any, are the advantages of switching to another mail partner? How do you pick the right one? What length of contract should you sign with them? And how do you ensure you get a cost effective, yet high quality, service?
"Switching suppliers must be carefully considered and there are many factors that may form part of the final decision," says Derek Fairhurst, managing director of PostalAudits, whose clients include Tesco, Fidelity Investments, Liverpool Victoria, Saga and BBC. "Often great strides forward can be made through more judicious use of Royal Mail services but, on the other hand, there are often some good financial and service incentives to make the change. Careful analysis of the pros and cons is required, and every organisation is different.

"Another vital part of the consideration is the strength of the relationship and commercial dialogue with the service providers' account management teams. This really can make all the difference in deciding whether or not it is worth making a change."

Currently, there is some debate as to whether it makes more sense for companies to sign an agreement committing themselves to a single partner or to work with a number of partners, picking the most appropriate for each mailing.

Graham Cooper is managing director of Postal Choices, which trades as OnePost, and offers software that can help companies decide on which option best suits their situation. "If you are a medium-sized player, we'd suggest that you don't sign up with a single operator," he says, adding that the largest players may be better off signing up with an exclusive partner to benefit from the economies of scale.

Triangle's Lambert believes the market is too "volatile" for firms to sign up partners for longer than 12 months. He also feels that, for the next few years, those firms that switched will still need to use Royal Mail occasionally.
D&S Consultants director David Robottom says it is time for clients to talk to potential postal partners about their service needs and be blunt about questions such as their costs and the benefits they can deliver.

It is important to ensure that a partner offers a solid account management structure, so that you always know the right person to deal with and can contact them easily if necessary. Accessing to top-notch tracking systems is also essential. Make sure the operator has web-based, real-time management information systems that facilitate easy and detailed tracking of mail, enabling electronic transmission of data, prompt discrepancy reporting and proof of delivery management and control (POD).

So far, the deregulated environment appears to be working well and most mailers seem happy with the service they are getting from the new players.
"Reliability of delivery is as good as Royal Mail," explains Lambert. "Because you can track and trace it all the way over to Royal Mail, people feel comfortable and the evidence from Royal Mail is that it is getting down to the inward mail centre and being delivered the next day."

There has been lots of speculation about operators mounting an ambitious challenge to Royal Mail by introducing a 'final mile' delivery service of their own. Both DHL and TNT Post have been weighing this up, with the latter conducting trials.

"It is part of our stated ambition to create a real competitor to Royal Mail," says TNT Post chief executive Nick Wells. "You probably will see orange (TNT's corporate colour) postmen in the street. We haven't delivered a letter end-to-end yet but you can rest assured that we won't replicate what Royal Mail does. They've had a head start of over 300 years. We'll be a bit smart about what we do in this area."

It seems clear that TNT Post will not look to match the scale and frequency of Royal Mail's service, as the cost would be prohibitive. However, a smaller, more flexible operation may well suit many clients. Even those who choose to stay with Royal Mail have little doubt that the competition has energised the postal market.

POWER POINTS
– Today, 10.5 per cent of Royal Mail's deliveries are carried out on behalf of its competitors
– Smaller mailers should avoid signing up with an exclusive mail partner
– The market may be too volatile for any client to sign up with a partner for more than one year.

CASE STUDY – WHY NPOWER SWITCHED ITS POSTAL DELIVERY SUPPLIER Client: Npower Brief: To provide postal delivery of npower's transactional and direct mail Supplier: TNT Post

Energy company npower is a major mailer, sending out around 250,000 items of transactional and direct mail every day. In September 2005, with a view to cutting costs, it appointed TNT Post as its consumer postal services partner.
"We were aware that we could make substantial savings on our postal costs, which was the initial driver for making a switch," explains npower logistics manager Hilary O'Grady. "But price wasn't the only factor. We felt TNT ticked all the boxes and had the right culture for working with us."

Npower involved its two fulfilment houses in the tendering process so that any shortcomings could be identified and addressed before the move. The switch was phased, at npower's request, because it has inherited different mail systems from the various companies it has acquired over the years.

O'Grady says he is "very pleased" with the service. All the benefits promised by TNT have materialised and the quality targets npower set have been surpassed. A clear account-handling structure has made it easy for O'Grady to contact the right person to talk to about any issues.

"It used to be that when we handed mail over to Royal Mail it disappeared into a black hole. Now we have traceability into inward mail centres and we know where the mail is much further down the line," says O'Grady.

NEED TO KNOW – WHAT TO ASK A NEW B2C POSTAL SERVICE PROVIDER
– What capabilities do they have? What is the size and scope of their organisation? Can they cope with your demands? How flexible can they be? Would they, for example, be able to cope with the fluctuating demands of your marketing programmes? Must all the mail you give them be machine readable?
– What is the provider's track record? What is their recorded quality of service? What delivery guarantees can they give? How good are their tracking systems?
– Who are their clients and what services do they provide them with? Ask for client testimonials and try to speak to several of these clients yourself.
– How sophisticated is their account management structure? Will you always be able to contact someone knowledgeable without delay?
– Will your relationship be a genuine partnership? Will the provider negotiate with you and work to jointly develop the right solutions?