You wouldn’t really want to be the Royal Mail right now. It’s a business that needs a full control-alt-delete. From an out-of-date infrastructure that needs a total overhaul to a changing environment where digital comms are much more prevalent, to a cost of living crisis that is pushing all prices and costs up.
It’s a business that doesn’t have to seek its problems. And that’s without the natural association people make with the Post Office and all the problems they are going through right now.
However, continually increasing prices is not the answer. There are lots of arguments to be made from a consumer perspective, on being competitive on the delivery of parcels and home shopping but I am going to focus on an area closer to my heart – direct mail.
Direct mail in itself has had a bit of a resurgence recently. After years of a steady decline in volume, mainly driven by a movement of budget into social and digital media, lockdown created an opportunity. With people at home more, and budget not being spent on areas like sponsorship and outdoor media, a few brands “had a go” at direct mail.
And guess what, it worked! When well targeted, engaging and relevant, it still has a place in the media mix and lots of brands started moving budget into direct mail, partially addressed mail (PAM) and door-drops. And not just in charity where the longer content pieces really cut through, but also areas like retail, financial services and telco. Direct mail was back on the up and lots of people, including Royal Mail, were pleased.
However, in the past 18 months two problems have hit the channel and volumes are in decline again. Firstly, the cost of paper went through the roof, and even availability suffered. That seems to be rectifying now and prices are coming back down. And then the price rises started. I have been in a few meetings recently where clients have said that the postage is now the most expensive part of the campaign, and with more price rises expected in July, I am genuinely worried that this will stop people from using and testing in the channel.
The reality is that price rises don’t generate more money for Royal Mail, all that happens is that volumes decline. The budget is set and stays the same, the money is just split differently. The cost of data, creative and print doesn’t change. But with increasing prices on postage, the overall volumes go down to keep the budget the same and printers, data companies and agencies lose out. Royal Mail are not just cutting off their own nose, they are bloodying the nose of their alleged “partners” at the same time.
Sure, there are incentives, but they are hard to access and hard to understand. A simple price cut for direct mail and an overall backing of the channel would have much more impact.
Scott Logie is chief commercial officer at data solutions experts Sagacity
