Outlook 2020: Mail and the New Marketing Economy - Jonathan Margulies, Managing Partner - UPU
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Outlook 2020:
Mail and the New Marketing Economy
Jonathan Margulies, Managing Partner
19 February 2020 Universal Postal Union, Berne
1
About Winterberry Group
• A specialized management consultancy
with deep intersecting experience in
advertising, marketing, data,
technology and commerce
• Helps brands, publishers, marketing
service providers, technology
developers, information companies and
financial investors understand
emerging opportunities, create
actionable strategies and grow their
impact and value
2
Outlook 2020: Mail and the
New Marketing Economy
The State of Marketing
Mail
The Obstacles Ahead
The Opportunities to Unlock
3
In the U.S., Direct Mail Continues to Represent One of the
Largest “Traditional” Advertising/Marketing Channels
2019 U.S. Advertising/Marketing Expenditures, By Channel (US$BB)
$64.31
$47.02
$41.24
$17.33
$13.84 $12.94 $10.83 $8.59
Experiential/
Linear TV Direct Mail Shopper Marketing Radio Newspaper Magazine Traditional Outdoor
Sponsorship
4
Mail’s Resilience Is Grounded in Several Intersecting
Factors
Highly effective in supporting new customer acquisition—particularly when scale
of response is important
Deep understanding/familiarity with the channel in marketing departments
General embrace of data-driven targeting, which has served to reinforce interest in
all addressable channels (especially those where audience insight is plentiful)
Proximity to the e-commerce delivery point, reinforcing consumers’ likelihood to
regularly check mailboxes
Supportive demographic shifts; seniors rely on mail and represent growing share of
population; millennials more likely to be “surprised and delighted” by unexpected deliveries
5
Nevertheless, Direct Mail Volumes and Spending Are in
Secular Decline
Direct Mail in the United States:
Volume (BB of Pieces) and Expenditures (US$BB),
Spend CAGR: 2015-2020E Volume CAGR
-1.52% -1.74%
Volume Spend
88.00 $50.00
86.00
85.53 $49.00
83.82 $48.00
82.29
84.00
81.18
$47.00
82.00
$45.05
$46.00
$44.79
80.00
$45.00
78.00
76.20 76.78 $44.00
$42.52 $42.69
76.00
$43.00
$41.48
74.00
$41.24
$42.00
72.00
$41.00
70.00 $40.00
2015 2016 2017 2018 2019 2020E
6
Many Factors Have Contributed to DM’s Decline;
“E‐substitution” Represents Only a Modest Concern
The growth and proliferation of competing digital channels, particularly with
respect to retention, loyalty, cross-promotional and transactional communications
High upfront costs associated with DM deployment (coupled with slow response
cycles and disjointed attribution methodologies)
Growing sophistication with respect to use of data/targeting serving to help brands
cut back on volume that would otherwise perform poorly (or be undeliverable)
General sense that “mail is dead” (even though it’s not)
7
Questions from Brands, Investors Mirror Those of the
Mail Community; Answers Remain Unclear
How do we How long will Why should we How long
make mail mail remain trust that should we
“digital”? relevant as a younger expect mail to
marketing consumers will continue
channel? engage with a delivering the
channel they ROI that it does
have not come now?
to rely on?
8
Outlook 2020: Mail and the
New Marketing Economy
The State of Marketing
Mail
The Obstacles Ahead
The Opportunities to Unlock
9
Competition From Digital Media May Threaten DM’s
Primacy in Supporting “Targeting at Scale”
U.S. Direct Mail vs. Digital Advertising/Marketing Expenditures1, 2016-2020E (US$BB)
Digital
CAGR: $166.40
21.71% $145.28
$122.02
$96.72
$75.84
DM CAGR:
-2.04%
$45.05 $42.52 $42.69 $41.24 $41.48
2016 2017 2018 2019 2020E
Direct Mail Expenditures Digital Advertising/Marketing Expenditures
Note: 1) U.S. Digital Advertising/Marketing Expenditure includes marketer spend on Email/SMS, Display, Search, Digital-Out-of-Home, Digital Audio (Radio/Podcasts), Digital Video (OTT/Streaming, beginning in 2018), Paid
10
Social and Influencer (beginning in 2018)One Looming Threat: The Coming of Advanced TV/Video
What might marketers find attractive
about OTT platforms, streaming services
and other advanced TV applications?
Access to audiences of scale
Rich, compelling content
Potential ability to segment
audiences and target with rich
granularity
11The U.S. Direct Mail Services Ecosystem is Also Under
Significant Stress, Owing To…
Labor challenges stemming from a Financial struggles of largest service
robust U.S. economy providers, grounded primarily in
challenges associated with their non-
• Low unemployment and higher
mail commercial printing businesses
minimum wage standards
• Intensified competition for labor
from new industries (e.g. cannabis)
12The U.S. Direct Mail Services Ecosystem is Also Under
Significant Stress, Owing To… (cont’d)
Intense competition for Poisonous political climate that punishes
investment capital— efforts at cross-border collaboration/
particularly with respect to manufacturing and sourcing
supporting technology—from
higher-margin digital media "Our international footprint was a benefit at
one time, but perceptions of a crisis made it
difficult and a challenge over the past couple
of years [to maintain Mexican operations]“*
— Rob Herman, former President, NAC
13 *Source: Printing Impressions (2019)Mailers Are Closely Monitoring the USPS and Its
“Unsustainable Financial Condition”
“Since 2007, we have suffered 13 years of
consecutive net losses, totaling $77.8 billion. Our
financial challenges reflect the simple dynamic that
our largely fixed and mandated costs continue to
rise at a faster rate than the revenues we are able
to generate in the competitive marketplace… the
combination of unfavorable market dynamics,
legal restrictions on price increases and cost
reductions, an expanding universal service
requirement and growing employee pension and
health benefit funding requirements have put the
Postal Service in an unsustainable financial
condition.”
— United States Postal Service, 2020
14 Source: United States Postal Service Five-Year Strategic Plan (2020)The Central Dilemma: Low Postage Is Key to DM’s High
ROI, But Are Current Rates Financially Sustainable?
Cost of Postage for a Domestic Standard Letter—Adjusted for Purchasing Power Parity1 ($US)
Implied
EBT Margin2 Gain (Loss)
Per Piece3
France $1.03 3.0% $0.03
United Kingdom $0.79 3.7% $0.03
Germany $0.79 3.7% $0.03
Canada $0.75 1.5% $0.01
Australia $0.70 (0.1%) ($0.00)
United States $0.55 (6.6%) ($0.03)
Any material rise in postage rates could decimate the ROI of many DM programs,
accelerating a shift in spend to competing channels
Source: United States Postal Service Five-Year Strategic Plan (2020)
15 Note: 1) Exchange rates as of 5/10/19; PPP adjustment from International Monetary Fund indexed to USD; 2) EBT margin is presented on a 5-year trailing average basis; 3) Implied contribution to pre-tax earnings per piece of
mail, calculated as postage rate multiplied by 5-year average EBT marginOutlook 2020: Mail and the
New Marketing Economy
The State of Marketing
Mail
The Obstacles Ahead
The Opportunities to Unlock
16Industry‐Driven Tools Emerging to Support Alignment of
Mail With Digital, Other Consumer Touchpoints
New commercial solutions offer potential to
”retarget” consumers using direct mail,
based upon observed online behaviors
Most of these tools have yet to
establish large-scale proof-of-
concept/profitability, but interest
levels are growing
Will these tools gain critical mass?
Will they be viable in a world of heightened data privacy regulation?
17Post‐Driven Products Could Help Commercial Customers
Better Link “Awareness” to Action
Informed Grow use cases of Products that Products that
Delivery linked to centralized provide for more expand support
mailer landing portals for bill predictable in- for unique
pages payment, home dates formats
government
services, etc.
Will these products help drive commercial outcomes?
What will posts have to do to drive consumer adoption?
18Mail’s Basic Appeal to Marketers is Rooted in Elements
That Shouldn’t be Reconsidered…
Tactility “Element of Proximity to
Surprise” Ecommerce
Delivery Points
19… Though Incremental Improvement is Always Welcome
What mailers seek:
Solutions to help
better attribute the
value and efficacy of
Measurability their DM efforts
(ideally integrated
with other
measurement tools)
20For the First Time in Years, Mail May Be Well Positioned
to Capitalize on Threats to Digital Media Deployment
Established best practices with Marketer concerns about the
respect to data collection, usage dominance and outsize influence
and sharing of digital “Walled Gardens” such
• Particularly important as data privacy as Google and Facebook
regulation plays a more prominent role in
dictating how digital marketing
communications are orchestrated
21Ultimately, Mail’s Role in an Evolving Marketing Economy
Will Be Grounded in Most Important Intangible Asset: Trust
Consumers are highly familiar with the channel
Despite challenges, still supported by a well-
established and (generally) trustworthy
mailing industry/supply chain
22.
Thank you.
Jonathan Margulies, Managing Partner
jmargulies@winterberrygroup.com
+1 (212) 842 – 6031
winterberrygroup.com
115 Broadway, 5th Floor
New York, NY 10006 USA
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