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USPS and Direct Mail Customer Churn

Posted by Brian Berg Google+


Historically, the United States Postal Service has survived the rising cost of its services by hedging on the ever increasing number of postal delivery points.  Though more and more delivery stops mean higher overall costs, more businesses can mail to this universe audience.  Theoretically, this controls costs. The USPS managed this way for the years with success, but in the most recent years, this fiscal strategy has been a challenge.  With 2010 first quarter losses at over $2.5 billion, the USPS must take aggressive steps to change in cutting costs and improving efficiencies, and teach mailers how to mail smarter. In a struggling economy, it’s easy to blame the internet. Many small businesses will test new advertising mediums to promote their business, especially if they can see a savings. 


But the fact is, online advertising isn’t a proven better medium.  For every successful Google Adwords customer, there are many unsuccessful ones.  Just as in postal direct mail, the smaller, inexperienced advertisers are sold services, whether they will be successful or not.  And once the budget is used up, the business stops buying.  There is likely little left for a direct mail campaign.  And whether you’re a postal mail service provider or an online advertising service provider, you’ll promote, sell, and take money from any business in the market to test your medium, whether you know it will work or not.  This is churn. It’s an ugly, costly, and short-term profit focused strategy.


A lesson to learn


Online service providers (all businesses who offer online advertising services) will eventually face the same challenges that the USPS is now suffering.  If you don’t teach small businesses how to properly use this relatively new medium, you’ll eventually lose these customers forever. To avoid “churning” customers, service providers must do two things.  First, they must say no to customers who simply will not have success in this form of advertising, no matter how well the campaign is planned.  As an example, if an author wants to attempt to sell his/her book via postal direct mail to potential readers, the service provider should explain that direct mail will never yield enough sales to make it a profitable investment. 


The potential profit per new customer must be direct mail friendly. The higher the profit per customer, the lower the response breakeven point will be.  Selling advertising services to those businesses that will ultimately fail is churn, and a business model based on churn distracts the attention needed to properly serve ‘eligible’ customers.  And two, marketing service providers should intimately understand how to help those ‘eligible’ customers use their advertising.  Few businesses can stomach more than one poorly executed campaign. 


Poor results will likely result in that business searching for a different provider or all together different medium. If you’d like help is assessing if your business is worthy of a direct mail test, give us a call for a no obligation consultation.