Best practices in business development

1. Best practices in business development Fighting for relevancy…

2. The good news • USPS vs. top US companies • The Forbes 100 1917 to 1987 • 61 Dead • 21 survived but fell off the list • 18 still part of the top 100 • 2 outperformed the market • GE 7.8 % CGAR • Kodak: 7.6% CGAR • USPS during the same period • 1917: 290 million • 1987: 29.6 billion CGAR: 6.7% • That’s not bad ! Growth Rates: 1917 - 1987

3. The perils of good management • Good management is the most powerful reason [these firms] failed to stay atop their industries… • [because] … they carefully studied market trends and systematically allocated capital to innovations that promised the best returns they lost their positions of leadership… • Clayton Christensen • The Innovators Dilemma • They were too risk adverse.. • They didn’t make a new future for themselves • I believe the Posts need to find a new future

4. Back to the Postal worldA decline in volume/share growth rates • USPS Growth rates Sources: DMA factbook 2003, WARC (note Total ad spending different than DMA estimates !)

5. Relevancy is a real issueFor Consumers And Advertisers (Response rates) • In a 1982 Gallup poll consumers were asked: "what is the event you most look forward to your daily life?"63% said getting and reading the daily mail. • Today 39% of consumers believe their next bundle of mail will have no value • People not opening advertising mail has doubled since 1987 (18% 2003 vs. 9% in 1987) • Mail volumes continue to increase and the percentage of interesting mail continues to fall. This has led to dramatic declines in response rates in many categories Average Credit Card MailingResponse rates by year Sources: DMA factbook 2003

6. Doing what you do well better.. will not be enough • At the turn of the century, streets were lighted with gas lamps, when electricity came they innovated… cut costs by up to 50%, but they died anyways ! • We’re moving from a world where uncertainty can be managed to a world of ambiguity • Uncertainty: Is about predicting and planning/ Expected returns/ forecasting. Eg. how can we manage expected labor cost increases and reduce headcounts • Ambiguity: Who will be using mail in 10 years and why, will we still be delivering it, who really cares except for us UncertaintyAmbiguity You know something We don’t know enough But not everything to know if we are even Change can be managed asking the right questions !

7. The world is moving quicker • “If you don’t like change you are going to like irrelevance even less” • Eric Shinseki (US Army)

8. What are best practices ? • A focus on direct mail (where companies have a choice) • My Criteria: delivering relevancy • Services companies are excited about and willing to pay for • Ideas / services that make the media more relevant • Today • 3 examples of best practices • 3 challenges to deliver relevancy • What will be best practices in the future

9. Selling Direct Mail: Royal Mail • The issue • Direct mail was growing, but not keepingpace with other media • Lack of support for the media • The Solution • Taking responsibility for promoting direct mail • Creation of the Media Marketing Division • Advertising to change consumer and advertiser perceptions. • A new media centre was set up to promote and sell direct mail • Regular training and industry events • Other investment in the growth of DM Growth Rates: 1999 – 2004(Estimates)

10. Working with customers: Tagespost Germany • The issue as expressed by customers • We can’t afford to do as much direct mail • Rates too high • We need better ways to target consumers • Talking together they found • The groups that advertisers need to reach are the people that are receiving mail already. (Mail active consumers) • Tagespost • A new system reaching consumers already receiving mail • Lowest price 50€/1000 vs. 80€ thousand • Better mail out results • Savings for Deutsche Post Identified by leading direct mailers as the best way to attract new clients after member gets member activities Costs Response Rates Profitability

11. Starting where clients startUK, Denmark, Australia • What is the first question advertisers ask when • deciding how many mailings they will send How many addresses do we have ? • The Solution: • Asking consumers what mail they want and don’t want for hundreds of advertisers at the same time. • Results: • Mailing response rates up 40-400% • Consumer/ advertiser approval ratings over 90% • Each address collected generating +/- 30-40 more mailings per year For perspective, in the UK this represents Over 100 millionextra mail pieces/year United Kingdom

12. 3 challenges for the future

13. Challenge 1: Investing in Relevancy • What is in the mail now ? • Personal letters are becoming a thing of the past • We’re left with bills and advertising mail • Where is the value??? I recently met a man on a plane. He set up internet billings, and then stopped his mail deliveries while he was in Europe. He didn’t miss it… and never went to get his mail. After 6 months his Post Office called and said he needed to pick it up. His reply : “ You can keep it”How can you make the mail relevant to him ?

14. The solution is content management… • Content management is not about taking the “junk out of direct mail.” If you only take out the junk, there will just be less junk • Content management is about: • Adding content that consumers will find interesting • Increasing the percentage of mail relevant to consumer interests • Changing consumer experiences with the mail

15. Challenge 2: Getting ready for real change • Postal operators around the world are operations driven • Huge progress has been made taking inefficiency out of mail deliveries • However, the basics of the business haven’t changed in years • Beware of the tyranny of making SmallChanges to SmallThings. Rather, make BigChanges to BigThings.” • —Roger Enrico, former Chairman, PepsiCo

16. Challenge 3: Making room for change… • Some food for thought… Ninety percentof what we call ‘management’ consists of making it difficult for people to get things done.” – Peter Drucker “The Bottleneck is at the Top of the Bottle”“Where are you likely to find people with the least diversity of experience, the largest investment in the past, and the greatest reverence for industry dogma?At the top!”Gary Hamel/“Strategy or Revolution”/Harvard Business Review

17. Words for the future

18. The future is about relevancy … • Taking action • Accepting failure is sometimes the price of success • Developing and selling real benefits • Doing things that really matter to your customers and consumers • Final words of Wisdom… • Alan Leighton: (Royal Mail) If it is not good for consumers or customers you shouldn’t be doing it • That’s good advice…

19. Contact Information • Postal Solutions is specialized in helping the national postal services with the development of products and services to build the direct mail volumes. • Our core expertise is in creating consumer data programs. Members of the Postal Solutions team were responsible for the start-up of the following companies: The Preference Service, Consodata UK and Pin-Point Marketing. • For more information on our services visit “http://www.postal-solutions.com” • or send us an e-mail: “consulting@postal-solutions.com” • Postal Solutions • Beekstraat 19A • 8550 Zwevegem • Belgium • Tel: 32-56-324-688, Fax: 32-2-706-5213