Borrell’s Blog

by Kip Cassino

The rapid increase of online advertising has taken its toll on most legacy media. Newspapers have seen classified volume plummet. TV audiences continue to decline, and the upfront is no longer the happy time it once was. Directories continue to shrink as local businesses reconsider their historic dependence, and magazines rush to develop online solutions to shore up steadily declining revenues.
Through all of this, direct mail has continued to grow as a marketing force. This year, direct mail expenditures are expected to hit a new high. The 2008 elections promise to bring in even higher levels next year. But all is not rosy in the world of list and stamp. There are major trends building which – by the end of this decade – have the potential to end direct mail’s growth and even reduce expenditures considerably.
Direct mail’s growth is inexorably tied to the Postal Service. By giving volume mailers substantial postage discounts for doing their work for them, the Postal Service has underwritten mail as a marketing channel. A look at historic trends will show that, as the volume of direct mail has increased, the cost of postage for everybody has grown apace. This is because the money not collected from direct mailers is subsidized by the rates charged to the rest of us – the consumers, who pay the highest rates for our letters, postcards, and payments.
The volume of private party “snail mail” has fallen rapidly since the mid ‘90’s. Now that long distance calls cost pennies and more than two of every three US households own computers that send and get e-mail, there’s less reason every year to sit down and write that letter. Most people still pay some or all of their monthly bills by mail, but even this is changing. As online banking popularity grows, postage revenue drops more quickly yet. At what point will the ratio of personal mail to “spam” diminish to the point where the Postal Service has become, virtually, a full-time ad medium?
Some state legislatures believe the time has come already. More than 40 different “do not mail” laws are under consideration across the nation, and the number continues to grow. Eventually, has was the case with telemarketing, these separate voices will gain a national hearing.
In the meantime, postal rates continue to rise. Entire lines of the Postal Service’s complex and expensive OCR sorting equipment have been taken offline as mail volume diminishes, but the heavily unionized workforce is much slower to shrink. What will the outcome of all these converging negatives be?
We believe that, by 2010, the combination of decreased mail volume, increasing postal rates, declining discounts for mass mailings, and “do not mail” legislation will cause many direct mailers to find other ways to get their message to consumers. Many will opt for an online solution, bringing their catalogs and offers online. Catalogs remaining in print will be delivered by newspaper, or as inserts to magazines. The decline in direct mail will be rapid.