Keep the Faith

I was chatting recently with a colleague, who has teenagers at home, and I was struck by a comment he made as we discussed the woeful state of the economy. “I keep telling my kids, ‘Pay attention. Your grandchildren are going to want to know what it was like to live through these years,’” he said, shaking his head at the historic nature of the times we live in. It is hard to exaggerate just how extraordinary each new day seems. The mortgage crisis in the United States may have provided the spark, but the floor of the world’s economic forest was already jammed with dry tinder: too much debt, too many banks carrying too much risk, too little savings and too many imbalances throughout the global economic system.

The global conflagration underway is the inevitable outcome of these combined forces. Iconic brands have vanished. The financial systems of entire nations have been deeply strained. Millions are unemployed. More than a trillion dollars are flowing from governments worldwide into prostrate banks and insurance companies. For any American under the age of 80, the global severity of this downturn is a totally new and unnerving experience.

Equally unprecedented are the economic implications for the direct mail industry. Banks and credit card companies have long been among the most prolific direct mailers, but have scaled back their operations as the economy has waned. Many other mailers are pulling back as well, evidence that economic conditions are curtailing marketing plans across a wide range of industries.

This development is especially troubling for direct mailers because, unlike previous recessions, the media landscape open to advertisers has vastly expanded their range of choices. During the last severe recession in 1980 to 1982, mail volumes actually grew more than 7 percent. The Internet or mobile marketing in those days didn’t exist to drain away marketing dollars that might otherwise go into mail, or to compete for these dollars when the economy starts to recover.

I am a perpetual optimist. Even though direct mailers–many of whom are our customers–are facing tremendous challenges, there are ways to turn this crisis into an opportunity. These ideas are not rocket science; in fact, smart direct mailers already are moving forward along these lines. These leaders can show the way for others to follow, so that those who survive this turmoil can emerge as stronger, better and smarter companies.

Have faith in the multi-channel model. The recession underway worldwide feels like it could rewrite economic history and bring about changes in behavior that we cannot now predict. Will America become a nation of savers instead of spenders? Will Americans make permanent changes in their energy habits? How will the surplus of homes on the market affect buying patterns? What will the effects be of a bankruptcy in the automotive industry?

But this uncertainty does not apply to all issues across the board. What will not change are certain fundamental truths about how people in advanced Western societies handle their multi-channel environment.

Mobile is becoming a more important channel as cell phones and smart phones grow increasingly sophisticated. Newspapers are working to redefine their role. The Internet appears to have hit a plateau, awaiting the next major technology breakthrough or a viable competitor to Google. Online retail sales fell 3 percent in the fourth quarter of 2008, according to comScore, and Neilsen Online reported a similar 3 percent drop in online advertising in Jan. 2009.

E-mail is a massive tug-of-war between marketers who want to send messages, and the spam filters that want to intercept them. Television and radio each have their niche and are relatively stable. Collectively, consumers are very comfortable at this point juggling all of these alternatives.

Mail will continue to have a place in this mix. Unlike any of these other channels, mail delivers a combination of convenience, privacy and physicality able to introduce, or reinforce, messages that consumers also are receiving elsewhere. A recent consumer survey, for example, found that Americans are examining their mail even more closely today than they were six months ago, searching for discount offers or promotions that can help see them through these difficult days.

Another recent report found that mail solicitations for homeowners’ insurance have increased in the past year. Is there something these insurance marketers know that the rest of us are missing? There is a targeting, a flexibility and a convenience in the mail channel that no other medium can replicate, recession or not.

Accept reality, and act on it. I admire executives who are realistic. The most successful executives over the long-term are those who make decisions based on the actual facts in front of them and the logical implications of those facts. Leaders in the direct mail industry need to champion this discipline.

In today’s climate, as revenues are falling, companies must cut their costs at an even faster rate or face more serious challenges. Smart executives in the mailing industry are taking rigorous looks at their product lines and moving decisively to pare back the “nice to-do” projects that have longer payback periods, lower margins or less obvious strategic relevance to their companies’ plans.

Across-the-board cuts are the easiest to dictate, but these avoid the difficult conversations that are at the heart of management’s responsibilities. They also can carelessly damage a project that, properly funded, could accelerate the company’s growth when the downturn ends. There is no substitute for clear, fact-based, rigorous decision-making at this time.

Focus on enduring value. We don’t know yet when the recession will end, but we know that it will. Cars age and need to be replaced; clothing wears out and goes out of style; business assets depreciate or become obsolete; and people and companies still need things. The question to answer right now is: What will consumers and businesses value when they are ready to resume spending?

The recession is changing consumer needs in a lasting way. The consumer who emerges from this recession will be more cautious, more humble and less impulsive. The psychological impact of diminished wealth—whether measured in smaller home values, investment portfolios or retirement plans—will play a significant role in future purchasing decisions. We can expect a period of financial post-traumatic stress syndrome.

This truth will complicate lives for direct mailers because it adds an important new dimension to the direct mailer’s thinking. Consumers were already letting mailers know they want better targeting and more relevance in their mail. They also want less waste. It annoys them to have to recycle useless mail, and they think that wasteful mailers don’t care about the environment. The newfound thriftiness, born during the recession, will be layered in between these other needs that mailers must account for.

The solution is to take a completely fresh look at what constitutes “value” in the mind of the person receiving direct mail. To name just one possible dimension for defining value, some consumers may simply be looking for the best deal available on a particular product, regardless of brand. Others may be more open to entering into a longer-term relationship with a business, counting on loyalty rewards and other perks to create overall value in the long run. Mailers must monitor these perceptions constantly, because the ones who get it right more often than their competitors will be best positioned to capitalize on the inevitable economic rebound.

A Test of Ingenuity

Mailers face a tremendous challenge, but it is not an impossible one. Others before us have met similar circumstances, and have been invigorated by the opportunities presented. No one ever embarked on a business career thinking it was going to be the easy way out. This recession is our greatest test, and will summon from us our greatest levels of ingenuity. Mailers, by having faith in mail’s role in multi-channel communications, by focusing on enduring value and by keeping a close eye on costs, can see through this current trouble and prepare themselves for the better future that is on the horizon. PPR

About the Author:
Murray D. Martin is chairman, president and chief executive officer of Pitney Bowes Inc. During his 20-year career with Pitney Bowes, Martin has held a variety of senior management positions, including his election to president and chief executive officer in May 2007 and as chairman in January 2009. He has been the architect of more than 65 acquisitions, expanding the company’s reach throughout all segments of the mailstream, including mail services and work sharing with the acquisition of PSI, software with the acquisition of Group 1, and marketing services with the acquisition of Imagitas and AAS/PMH.