Magazine article Marketing

Direct Marketing: Competition Winners

Magazine article Marketing

Direct Marketing: Competition Winners

Article excerpt

Postal deregulation has hit Royal Mail hard, but its rivals - and clients - are reaping the rewards, writes Bill Britt.

Not so long ago, the biggest consideration for those using business post was ensuring that the franking machine was set correctly. But since postal services were deregulated in January 2006, removing Royal Mail's monopoly, companies have a lot more to think about, with a range of mail handlers to choose from.

Major players such as TNT Post, UK Mail and DHL have picked up a significant amount of business from firms that send bulk mailings, which sees them collect, sort and deliver the post to Royal Mail centres for 'final mile' delivery. According to Royal Mail, these so-called 'access deliveries' account for 25% of the bulk-mail category, and 12% of the pounds 4.7bn overall postal market. Chief executive Adam Crozier has reportedly said that Royal Mail will have lost 40% of its corporate business by the end of the year.

The big advertisers have realised that they can make hefty savings on mailing costs, be they regular transactional mailings, such as bank statements, or one-off direct marketing campaigns. 'Competition in the postal market has helped put mail on the agenda. It's often a very big cost to an organisation and, typically, has had little attention paid to it,' says Derek Fairhurst, managing director of PostalAudits, an independent agency that works with some of the UK's biggest mailers, including Tesco and Yell.

The private sector has been quick off the mark. Royal Bank of Scotland is believed to be saving pounds 5m a year as the result of moving responsibility for the 200m items it sends annually to UK Mail, while BT has shifted its pounds 30m account, covering 170m items of transactional mail, to TNT Post. Even Whitehall has woken up to the potential savings Late last year the National Audit Office estimated that the public sector, which sends out 2.5bn items of addressed mail a year, could save pounds 31m by more efficient use of post. The Department for Work and Pensions shaved pounds 1.7m off its annual pounds 70m mailing bill by moving a third of its postal business to UK Mail.

Brand considerations

Price has played a major role in the success of Royal Mail's competitors. However, none of the parties involved is willing to attribute the shift in the balance of power solely to costs. Better service in terms of flexibility in collections, deliveries, tracking and account management are cited as factors too.

Royal Mail's director of sector marketing, Thierry Saada, admits that the pace of change has been surprising. 'Quite a significant share of the market has gone over to the competition and has been gaining momentum, much quicker than our regulator (Postcomm) and we thought it would,' he says.

Saada attributes this to the ability of Royal Mail's competitors to pick and choose business and clients, while Royal Mail must deliver all mail, both business and social. 'They have been targeting the easiest parts of the business. The regulatory environment doesn't help us,' he adds.

Last July, Royal Mail attempted to redress this by asking Postcomm to allow it to introduce zonal pricing, which would enable it to cut charges for bulk deliveries to city centres, while raising those for less accessible delivery destinations, such as rural areas and central London. …

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