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Transcript of Confidential Property of US Postal Service Mailing and Shipping Services MTAC Revenue Generation...
Confidential Property of US Postal Service
Mailing and Shipping Services
MTAC
Revenue Generation Update
Bob BernstockPresident Mailing and Shipping Services
May 19, 2010
Confidential Property of US Postal Service2
M & S S Agenda
1. BCG Study Results
2. McKinsey Recommendation
3. Role of Mailing and Shipping Services
4. M&SS Business Initiatives
Confidential Property of US Postal Service3
M & S S Three of the Best Projected USPS Future
Revenue diversification research
Volume forecast
Examined revenue diversification pursued by foreign posts
Prepared volume and revenue projections of the USPS core mailing and shipping business
Integrated the BCG and Accenture work with USPS data
▪ Forecast baseline and scenario profitability
▪ Assessed a comprehensive list of revenue and cost options
Integrated business forecast
Confidential Property of US Postal Service4
M & S S
COST TRENDSREVENUE TRENDS
Four trends are increasing pressure on USPS
VolumeVolumeUniversal Service Universal Service
ObligationObligation
Declining steadily Large fixed cost base
Rising but capped Rising cost per hour
PricePrice Workforce CostsWorkforce Costs
Confidential Property of US Postal Service5
M & S S Closing the Gap
Net income$ Billions
2005
0
20202009
-5
-35
-30
-25
-20
-15
-10
Actual5
10
Base case without product, service or productivity actions
Actions within USPS
control $125 billion
Remaining Cumulative loss 2010-2020 $115 billion
Forecast
Confidential Property of US Postal Service6
M & S S Options Outside Control Reduce the 2020 gap by $15 B
2010-20202010-2020Cumulative Gap Cumulative Gap
~ $ 115 B~ $ 115 BGovernment Government supportsupport
Products Products
and and servicesservices
PricingPricing
Service levelsService levels
WorkforceWorkforce
Confidential Property of US Postal Service7
M & S S Actions within Control Reduce the 2020 Gap by $18 B
Net profit benefit in 2020$ Billions
~ 2.0Product and service actions1
~ 10.0Productivity improvements2
~ 0.5 Workforce flexibility improvements 3
Total ~ $ 18 B
~ 5.0Avoided interest due to reduced debt
~ 0.5Purchasing savings4
Cumulative impact 2010-2020 ~ $ 125 B
Confidential Property of US Postal Service8
M & S S
1. GOAL: Remain a vital driver of the American economy far into the future
2. SOLUTION: a balanced approach to fundamental change
Pricing Products and Services Expanded Access (Service Level) Delivery Frequency (Service Level) Workforce Retiree Health Benefits Prefunding (Govt. support) Oversight (Govt. support)
Role of Mailing & Shipping Services
Mailing & Shipping Services Focus
Confidential Property of US Postal Service9
M & S S
Assess feasibility and impact on the gap
Existing USPS ideas
Foreign post examples from Accenture
Other ideas from McKinsey
~60+ initiatives
McKinsey Recommendation
Same list of ideas
Helped analyze the revenue and profit potential
Source of ideas
Examples of foreign post and other ideas include…
Financial services (e.g., Banking, Insurance)
Transportation services (e.g., 3PL, warehousing)
Business and government services
Asset commercialization (e.g., truck advertising)
New mail products
Retail products (e.g., vending)
Ideas with low profit impact or low feasibility
McKinsey Vetted Options and Supported Initiatives
Confidential Property of US Postal Service10
M & S S Initiatives by Business Group
Group Project1 Integrated Campaign for Flat Rate Box2 Priority Mail Contracts
3 Ground Shipping Grow Parcel Select and Returns4 Standard Mail Incentives5 Grow Direct Mail (small business)6 Grow Direct Mail (Saturation Mail)7 New Sampling Products 8 First Class Fall Incentive9 Intelligent Mail barcode applications
10 Consumer Products at retail11 PO Box Campaign12 Expanded Access Program13 Passport/Enrollment14 Change of Address/MoverSource15 Hybrid Mail (digital solutions)
16 Multi-Channel integration project
17 Sales Customer Partnership/ Sales Reorganization
Expedited Shipping
Retail
Digital Solutions
Marketing Mail
First Class / Marketing Mail
Confidential Property of US Postal Service11
M & S S
Group Project
1 Integrated Campaign for Flat Rate Box2 Priority Mail Contracts
3 Ground Shipping Grow Parcel Select and Returns*4 Standard Mail Incentives
5 Grow Direct Mail (Small and Medium Enterprises)
6 Grow Direct Mail (Saturation Mail)7 New Sampling Products 8 Intelligent Mail barcode apps9 First Class Fall Incentive
10 Consumer Products at retail11 PO Box Campaign12 Expanded Access Program13 Passport/Enrollment14 Change of Address/MoverSource15 Hybrid Mail (digital solutions)16 Multi-Channel integration project
17 Sales Customer Partnership/ Sales Reorganization
Expedited Shipping
Retail
Digital Solutions
Marketing Mail
First Class / Marketing Mail
Initiatives by Business Group
Confidential Property of US Postal Service12
M & S S Overview
Today we will review three of our high priority projects
a. Joyce Carrier on Priority Mail Integrated Campaign
b. Joe Adams on Mobile Apps and Web-site (Phoenix)
c. Marc McCrery on Sample Showcase
Confidential Property of US Postal Service
Mailing and Shipping Services
Priority Mail Integrated Campaign
Joyce CarrierManager, Media Planning and Advertising
May 19, 2010
Confidential Property of US Postal Service14
M & S S
Communications Planning & Execution ProcessA Rigorous Approach to Achieving Measureable Results
Understand Business Situation
Understand Business Situation
Quantify the OpportunitiesQuantify the
Opportunities
Define Target Market
Define Target Market
Test Promise
Statements
Test Promise
Statements
Develop Business/ Marketing
Plan
Develop Business/ Marketing
Plan
• Objectives• Promise statements• Creative brief• Preliminary architecture• Develop measurement plan
Develop Campaign Strategy
Develop Campaign Strategy
Finalize Brand/
Campaign Contract
Finalize Brand/
Campaign Contract
ApprovalTo
Proceed
ApprovalTo
Proceed
Develop Media Plan &
Finalize Forecast
Develop Media Plan &
Finalize Forecast
Measure Success & Optimize
Campaign
Measure Success & Optimize
Campaign
Develop, Test & Finalize
Campaign Ideas
Develop, Test & Finalize
Campaign Ideas
• Financial Performance
• Market Share• Growth Trends• Competitive
Situation• Product
profitability • Etc.
ApprovalTo
Proceed
ApprovalTo
ProceedIdeationIdeation LaunchLaunch
5-7 MonthsOngoing
2-8 Weeks 8 Weeks 12 Weeks
Confidential Property of US Postal Service15
M & S S How Do We Measure Success?
Marketplace Results
Industry Awards
Confidential Property of US Postal Service16
M & S S Measuring Success – Marketplace Results
Total FRB & Priority Mail Revenue by Month
Source: RPW Monthly Extracts
Campaign Start19-May
-3%
98%
82%
-15%
14%
- 40%
-20%
0%
20%
40%
60%
80%
100%
120%
Oct-09 Nov-09 Dec-09 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-10 Nov-10 Dec-10 Jan-10 Feb-10 Mar-10
FY2009 FY2010
Perc
ent C
hang
e vs
SPL
Y by
Mon
th
FRB Total Priority Mail
Confidential Property of US Postal Service17
M & S S Industry Awards
Confidential Property of US Postal Service18
M & S S Measuring Success – Industry Awards - Retail
U.S. Postal Service EPS Display: Gold Medal Winner for Permanent Display by a Specialty Retailer
Confidential Property of US Postal Service19
M & S SMeasuring Success –
Industry Awards – usps.com
LIA Silver in Digital Innovation
Hive Web App Award
DC ADDY Silver & Gold for Micro or Mini Site Best of Interactive Work (in the running for National ADDY)
Confidential Property of US Postal Service20
M & S S Measuring Success Industry Awards – Overall Campaign
Winner – The Grand Ogilvy
Finalist – The EffieWinner will be announced in June
Greg Whiteman accepting the Grand Ogilvy
Confidential Property of US Postal Service21
M & S S Measuring Success – Interest from Brand Leaders
Partnership with Disney/Pixar
Toy Story 3 – Opens June 18th
:30 second TV Ad, usps.com, in-store, Direct Mail
Confidential Property of US Postal Service22
M & S S
Confidential Property of US Postal Service23
M & S S Toy Story 3 – Retail Integration
Ready Post Shipping Products
Point of Purchase Displays
A new way to access Postal Services for consumers and small businesses
Project Phoenix Update April, 2010
Current mindset:
Go to the Post Office
Future…more choices:
• Online• Mobile app• etc.
Create such great experiences that typical customers prefer to use the website, mobile, and other lower cost channels
Demand for online is already apparent
USPS.com revenue equivalent to:
• 132 highest volume retail units
• 18,295 lowest volume retail units
35th largest ecommerce site
•Above Home Depot, ToysRUS, Barnes and Noble, Blockbuster
•60th most visited website in US
A leading business app for Apple iPhone and iTouch
Online Revenue Will Accelerate
$0
$500
$1,000
$1,500
$2,000
$2,500
FY05 FY06 FY07 FY08 FY09 FY10(p)
FY11(p)
FY 12(p)
FY13(p)
FY 14(p)
FY 15(p)
FY 16(p)
Convenient
at their location
on their schedule
Quick and easy
Helpful, always up-to-date
Same data online, in call center and at retail
New, useful products and services
Simple. Simple. Simple.
Medium-Term Vision
“Access my account”
• Registration & Login
• Transactions
• Service Inquiries, help
• New services
Mobile
Smartphone Apps
Find USPS locations
Lookup zip
Track package
Next: Rate Calculator
USPS Mobile ™ Website(Any connected mobile device)
1Million visits per month!
5x expectations
World Class Web Design
Goals
• Simple to navigate
• Simple to create label
• Simple to buy merchandise
• Simple to see history, tracking, and get help
• Simplify IT architecture for all channels
Project Timing
• Mobile website and iPhone app Fall, 2009
• Updated USPS.com & key IT architectureend 2010
• New Call Center Agent desktop end 2010 (module 1)
• Remaining USPS services 2011
…but we’re not waiting for the new website to create great online promotions
35
Contract Pricing ProcessStatus Report
Mailers’ Technical Advisory Committee
May 19, 2010
Sample Showcase
36
Sampling Market-Overview
Sampling is a nearly $4 billion dollar business, and interviews reveal that consumer products goods (CPGs) companies prefer to have products sampled at home.
There is now a significant amount of performance data around sampling, and the practice is driven almost entirely by conversions and ROI.
As marketers get smarter, targeting versus broad based sampling becomes more important.
The economy has impacted product sampling strategies. With more consumers staying closer to home, in home sampling has become more popular. Post Foods Facebook Survey
58% would try via sampling
Customers rate sampling as a key way to get them to
try a product!!
37
The consumer promotions market is valued at $46B, and the product sampling market is valued at ~ $4B.
Sample Market Size
Sources: Veronis Suhler Stevenson Communications Industry Forecast 2008-2012, CPG and sample packaging manufacturer benchmarks.
Consumer Promotion Spending ($B)
20.3 22.1 24.2
6.46.6
6.8
6.36.5
5.75.8
6.03.84.2
4.61.91.9
1.9
6.1
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
$55.0
2007 2009 2011
Premiums
Point of Purchase
Coupons
PromoLicensing
Loyalty Prog
Sampling
Games/Sweeps
46.449.2
52.4
** 2009 and 2011 are forecasted
2.12.3
2.5
38
Sampling Market Size ($B)
0.5 0.5 0.5
1.4 1.5 1.7
0.70.8
0.9
1.21.3
1.4
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
2007 2009 2011
In-Store
Direct Mail
All other
Venue
Sample Market Size
3.84.2
4.6
Sources: Veronis Suhler Stevenson Communications Industry Forecast 2008-2012, CPG and sample packaging manufacturer benchmarks.
** 2009 and 2011 are forecasted
There is potential to re-allocate sampling and overall consumer promotion spend if the right offer is created.
“All Other” includes samples in newspapers, samples bundled with products, door hangers, coupons for free samples, etc.
The spend on product sampling is large and growing at 7% CAGR
39
The Co-op Box has compelling economics and presents a viable business model for USPS, partners, and brands based on thorough work-to-date and our lead market expectations.
Sample Showcase
1) Rigorous market assessment to-date
2) Compelling economics and viable business models for all stakeholders
3) Learnings from the lead market will improve the execution at larger scale
Extensive Industry Research Frequent Customer and Consumer Interaction Input from Leading Sample Vendor Detailed Financial Analyses
Already confirmed “Core” brands’ interest Refine the optimal product mix Refine the marketing strategy and sell story via
actual response and conversion rates Validate the optimal price point Refine process prior to national roll-out
Sample Market is large ($4B) and growing at 7% Brands: Favorable cost/conversion vs. alternatives Partners: Profitable at 40¢ avg. price/sample USPS in yr 5: $64MM revenue, $22MM margin Re-invigorates samples by mail Minimal cannibalization
40
Additional Benefits
Creates a very noticeable and marketable launching pad for reinvigorating the sampling business.
Helps to change to brand perception of the Postal Service. Improves the mailbox moment and helps validate that good things come in the mail. It can help change the perception that mail is only used to get people to act while
other media is used to get people to change how they feel about a brand.
In addition to box-specific economics, the Co-op Box has several other benefits.
41
Market Research Learnings
There will be three rounds of surveys intended to understand the impact on brands and the perception of recipients.
Market Research Phase
Expected Learnings
Pre-Survey Brand awareness, prior purchase
Box Survey Recipient reaction of the box and what they did with it
Product Survey Brand awareness lift, purchase intent, actual purchase
42
Co-op Box: Direct Mail
Front of card
Back of card
Consumers received a direct mail card one week prior to Co-op box drop date.
The card received a 5.8% response rate!!
43
Q6 - Please indicate which of the following words or phrases best describes your own reactions to the Sample Showcase Box. Choose as many words or phrases as apply:
People chose exclusively positive attributes to describe their reactions to the box. On average people chose ~5 descriptors. Leading terms were “Wanted to open it” (82%), “Grabbed my
Attention” (75%), “Made me curious” (65%), “Exciting” (61%), and “Interesting” (61%).
Topline results, Box Survey
44
Q7 Please rate your level of agreement with each of the following statements. Five (5) point agree / disagree scale used. Results above are “Agree Completely”
People’s level of agreement with statements used to describe the box was quite high as well. These reactions suggest that the Sample Showcase box provided a very strong delivery platform
for participating brands.
Topline results, Box Survey
45
Q8 - How likely would you be to recommend the Sample Showcase Box program to your friends or family?
On a seven point scale, 95% of respondents would Definitely or are Very Likely to recommend the Sample Showcase box to their friends or family. Here again this suggests the Sample Showcase program has the potential to provide a very strong platform for brands who are seeking to engage
people with their brands.
Topline results, Box Survey
46
Q9 - When you do recommend the Sample Showcase Box, how many people do you think you would tell about the Sample Showcase?
People who said they would recommend the program were asked to indicate how many people they thought they would tell about it. By applying simple conservative math*; the Sample Showcase
program generates at least 5 times the impact of box distribution footprint with over 1 million consumers reached in total with some news about the Sample Showcase program.
*Using 90% of Sample Showcase recipients recommending and using calculation “mid-points “of (2, 5, 8 and 11) the math results in 1,097,856 people touched!
Topline results, Box Survey
47
We expect people will like this … a lot
Consumer comments will appear in social media sites, these happened on the first day of delivery. These people ordered their boxes online ….
48
Questions????