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Postal News
FOR IMMEDIATE RELEASE
October 22, 2002
Contact: (202) 268-2155
Release No. 02-079A
REMARKS BY POSTMASTER GENERAL JOHN E. POTTER
DIRECT MARKETING ASSOCIATION ANNUAL CONFERENCE
OCTOBER 22, 2002
SAN FRANCISCO, CA

Thank you Mike (Sherman). And thank you for the invitation to speak to you about our unique partnership. First of all, congratulations to DMA on its 85th anniversary, and congratulations for the work DMA and its members have done over the years to build the nation's mailing industry. I hope you have another successful 85 years!

I am pleased to be here to celebrate the relationship that the Postal Service and the DMA have enjoyed for so many years. While we may not have agreed on every issue, one thing's for certain: we have supported each other -- and together -- we've helped this industry grow and prosper.

That's what I want to talk about this morning: the outlook I see for the direct mail community and the Postal Service's role in helping you reach your customers.

The relationship between our two organizations is 85 years old. We know where we're going and how to get there. We will continue to have opportunities for success in the future.

Although some said hard copy mail would fade away, I am here to tell you today that hard copy mail remains relevant, that companies and organizations are developing new uses for it, and that mail remains an important part of the fabric of America.

In the aftermath of September 11th, the subsequent anthrax attacks, and pipe bombs in the Midwest, the people and businesses of this country never lost confidence in their post office.

They wanted their mail. That came through loud and clear, and we kept delivering, day in and day out. We kept our commitment to deliver your mail to all Americans - your customers -- regardless of where they live, where they do business and regardless of their economic status.

America's trust in the Postal Service and the mail remains a cornerstone of our industry. Together, direct marketers and the Postal Service play an important role in developing innovative ways to reach new customers - be they in the mail order business, the financial industry, the retail industry, the e-commerce market, in fund-raising, or in simply bringing Americans information about issues important to them.

Direct mail works! It worked for Sears and Roebuck. And now it's working for other mail order giants like L. L. Bean and Lands End.

I'm here today to tell you direct mail will continue to work for you and for your stakeholders in the years ahead.

Indeed, I believe there is every indication that as the economy improves we will see continued growth in direct mail.

Americans view mail as a welcome daily event. Mail is opened, every day. And mail is read and acted upon.

It produces results.

Don't take my word for it: It's all right there in the new DMA Statistical Fact Book.

Direct mail is still the number one direct marketing method, preferred by 72 percent of marketers today.

And that's because it produces results.

Last year, direct marketers spent more than $46 billion on direct mail promotion. That's more than direct marketers spent on newspapers, magazines, network television and cable TV combined. Hard to believe but true! It came right out of your Fact Book!

More important to you and to us is that when 2002 is over, direct mail sales will have generated more than $625 billion in business, up $50 billion over 2001.

By 2006, revenue from direct mail sales will continue to grow, reaching $880 billion. That's an annual growth rate of 8.6 percent.

In recent years, some have doubted the long term prospects for catalog mail. However, I am convinced the prospects for that direct marketing segment are just as bright. We see it in our consumer studies. You see it in your business.

DMA's new Fact Book agrees: 40 percent of consumer respondents purchase products through catalogs. And over the next four years, catalog sales will climb from $126 billion this year to over $163 billion by 2006.

Certainly, if you look closely at the data, you'll see a projected shift in transactions from paper catalogs to websites over the next few years. Some suggest that means a decline in the value of catalogs in the marketplace.

I don't see it that way. I see a direct linkage between direct mail and Web sales. For me, it's simple: consumers will open and read catalogs and other direct mail pieces, and then move to the Web to complete the transaction.

My point is, direct mail can help move the so-called "new economy" forward.

Why? Because direct mail gives your customers the information they need to make choices. Direct mail affords your customers the convenience of shopping at home. And it gives them a convenient way to buy merchandise and return it if necessary.

It's all in the mailbox. People go to their mail box every day, not to every website every day. Direct mail should be a major component of your multi-channel marketing mix. If it's not, you're missing out on potential sales.

As optimistic as I am for the short-term future of the direct mail community, I want to alert you to the long-term needs of our industry.

For us to continue to provide affordable postal services in the long term and to reach every American every day, there must be change. We in the Postal Service must modernize.

We have to approach our business model in the same way your companies and organizations do: making smart business decisions that are in the nation's interest.

It also means working closer with direct marketers like you to bring new value to our products and services.

It means managing our finances. It means delivering better service.

And that's where we're heading with our Transformation Plan.

Last spring we developed a blueprint for modernizing the Postal Service with a lot of help from you in the mailing industry.

I'm especially grateful to the Direct Marketing Association and to Bob Weintzen and Jerry Ceresale for sharing their vision and recommendations for the future. They and many other leaders in the industry told us we needed to chart a course for changing every aspect of the way we do business. And we listened.

The Transformation Plan reflects what you need from us to keep the mailing industry healthy for the long term. The mandate we heard from our stakeholders was simple and clear: Focus on the core business, focus on processing and delivering America's mail.

My vision for the Postal Service - one that is shared by our governing Board - is that we aim to be America's hard copy and package delivery organization.

With that resolve, we set about last year to accomplish four short-term goals:

And we realized we needed help from the mailing industry, too.

Last year, with the recession, anthrax and the resulting drop in volume.

Fortunately for us, you were there when we needed you most.

Last fall, you realized the time had come to set aside individual interests and negotiate a rate settlement that would help restore the Postal Service to health.

Bob Weintzen and other leaders in the industry deserve thanks for their courage and foresight. They had to make some very tough decisions. And they made them.

The Postal Service realized some $1 billion in additional revenues in Fiscal Year 2002 as a result of the settlement. Thank you for your support and help.

I also want to thank the Bush Administration and the Congress for recognizing the need to defray the cost impact of the anthrax attacks on us. The $750 million appropriated to us is earmarked specifically for detection and filtration equipment, the safety of our employees, and facility decontamination efforts.

Once again, the DMA was there. Your support with the Administration and on Capital Hill was instrumental in making the requested appropriation a reality.

Your support spurred us on. We tackled costs. First, we reduced career employees by 23,000. We realigned our field management structure and reduced staffing. We cut back on expenses across the board. We froze capital expenditures.

Our employees and managers rose to the challenge and delivered a positive total factor productivity for the year as well as a 1.9 percent increase in labor productivity.

The net effect was that we pulled $2.9 billion in costs out of our bottom line in fiscal year 2002.

What does your support and all our cost reductions mean? For the Postal Service, it means we will have a net income for Fiscal Year 2003. For you, that means there will be no rate hike until well into 2004.

This past year, our focus on service paid dividends for our customers across the nation. Last fall's attacks on America required major realignments in our transportation system and major adjustments to our national processing networks.

As a result, service rebounded in quarter three and by quarter four, we had reached record levels of service performance.

My vision for the near term is consistent with our record of success this past year. We intend to continue to reduce costs, increase productivity, while keeping our commitment to service.

We will also keep our commitment to continue efforts to bring about progressive changes in the ratemaking process.

For example, I'd like to see us replicate the negotiated rate settlement you helped us reach last year. That way, none of us will have to wait 10 to 18 months for the outcome.

Today, you can plan your holiday season budget for 2003. My goal is to enable you to accurately plan your holiday mailing budgets for 2004 and 2005.

Over the next few months, I want to begin discussing within the industry the notion of phased rates. Some of you may recall the rate summit we convened last spring with the Postal Rate Commission.

What we heard over and over again was the need for rate predictability. We heard that when we hit customers with a single, large rate increase, it causes havoc in your business-planning-cycle and impacts your ability to reach new customers.

One of the proposals discussed at the summit would give the Postal Service greater flexibility to introduce more predictable price changes - phased rates that would be smaller and spaced out over predictable time periods.

Perhaps phased rates is a notion whose time has come.

Let me assure you, we are not waiting for change to come to us. As one direct marketing executive put it the other day, the Postal Service is trying to work within the limits of the current legislation, but it's also learning to think outside the box.

Case in point: negotiated service agreements that tie discounts to volume growth. For years we had discussed the concept of negotiated service agreements. But we had never taken the step -- until last month when we moved on that idea and filed a proposal with the Postal Rate Commission.

We are hopeful that the PRC will concur with our recommendation that the proposed negotiated service agreement serves both Capital One and the Postal Service well. Capital One is our largest end-user of First-Class Mail, and we hope that the negotiated service agreement will stimulate growth in their business and ours.

Importantly, for everyone here, we stand ready to negotiate NSAs with mailers of all classes of mail, including Standard Mail.

Last month, we filed another "outside the box" idea with the PRC. The filing offers small-circulation periodicals a way to achieve work sharing discounts that are common with larger, mass-circulation periodical mailers.

Here again, our hope is to offer similar commingling discounts for catalogs and Standard Mail pieces.

All of these initiatives - and others - are in our Transformation Plan.

When industry executives ask me about where the Postal Service is headed, I tell them it's all in our Transformation Plan. We are actively moving the Plan forward.

The Transformation Plan compels postal managers to think differently - to look at the business and customers with a fresh perspective. I encourage you to read the Transformation Plan.

You can find the full plan on the Web. We also have several hundred copies of the executive summary available at this convention for you.

As long as I am Postmaster General, you will see us moving forward with the elements in the Transformation Plan.

A key element of the Plan is to enhance our products, helping you grow your business and helping us generate revenue that we can use to maintain our affordable universal delivery network.

Last month, we implemented Confirm on a subscription basis after several years of testing with hundreds of customers.

For those of you not familiar with this service, it uses Web-based technology to enable major mailers to know the status of their mailings as they go through our processing systems.

Customers using Confirm tell us they're able to monitor delivery performance, predict precisely when their mailings will be delivered, and match other promotions to boost sales activity.

I am convinced that the key to growing our industry is innovation - being open to new ideas, new ways of moving the mail more efficiently. That's the direction we're moving toward. And we need your help.

We've found that some of the best ideas come from you, the people in our industry whose business depends on the mail.

Last year, for instance, a joint industry and Postal Service work group came up with a set of Readability Guidelines designed to boost readability of flat-sized mail pieces.

What they did was to borrow some of the best practices already in use in the printing and publishing industry.

The pay off is a set of voluntary guidelines that will help increase read rates on our new automated flats sorters to almost 100 percent and help you reduce costs.

But we've also taken a page from the direct mail industry to help us look at innovative ways to resolve the age-old tension between efficiency and creativity.

We know, for instance, that you need to design mail pieces that have more appeal and impact for your customers.

Right now, we're working on ways to give direct mailers more flexibility to design irregularly shaped, high-impact direct mail pieces.

The idea is to allow these pieces to by-pass our processing operations and still ensure efficiency and affordability for you.

When we were approached with the idea of adding stick-on messages to First-Class and Standard Mail, we immediately saw the value to you. And working with the industry, our processing and engineering managers have been able to make that concept work.

We are currently in the second half of a one-year test to see if the stick-ons (or Repositionable Notes, as they are called) have a true future.

These and other innovative ideas are helping us find short term solutions. But we also need to keep our focus on solutions to meet the long term. We can not ignore the fact that the Postal Service continues to operate within a fundamentally flawed business model - a model that no longer gives us the flexibility we need to meet the changing needs of our customers.

We worked hard with Congress this year, and we succeeded in engaging more and more Members of Congress and U.S. Senators into the debate about the future of the Postal Service.

Here again, I want to thank the mailing industry as a whole. The progress we made in building understanding on Capitol Hill is due in large measure to your work and commitment.

I'm also grateful to the DMA for supporting the notion of a Presidential Commission to explore ways to move us closer to legislative reform. We need all the help we can get to bring about long-term change.

As far as I'm concerned there are many ways to effect change. How we get there isn't the issue. The goal is to effect progressive and constructive change.

So thank you for helping us transform the Postal Service and for helping us keep our commitment to provide universal service to our customers.

Ladies and gentlemen, the Postal Service and the direct mail community are going to be around for a long time to come. You can count on us to help you build your business and our industry. We've come a long way together these past 85 years.

But it's just the beginning. With your help, with your active participation, we'll not only transform the Postal Service, we'll also transform the mailing industry. Thank you for your support. And thank you for your 85 years of partnership.



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