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Can the U.S. Postal Service Market Itself to Success?

Forget rain, Sleet, snow and gloom of night. The postal service now Faces something FAR worse: competition. With everybody from FedEx to the Internet bleeding its former monopoly, the agency is trying to reinvent itself with flashy ads and high-tech services.

December 22, 1996|MICHAEL A. GOLDSTEIN | Michael A. Goldstein writes about marketing for New York and Business Week magazines

The postal service's most dramatic image make-over has been a hard-hitting campaign for Priority Mail that cost more than $50 million in 1995 alone. You've seen the TV ads: FedEx at $12 is a good deal; UPS at $6 is a better deal; Priority Mail at $3 is the best deal. They've worked. Since these ads first aired, Priority Mail has doubled its growth rate to 16%, more than paying for the campaign. "Members of Congress have told me they love this ad," Runyon says. Smith, formerly of Citibank and Colgate-Palmolive, declares, "In my 36 years of making advertising, I can't recall a campaign which has elicited such uniformly positive response."

Almost uniformly positive. Competitors have cried foul. "The ads are very misleading," says Gina Ellrich, spokeswoman for UPS. "They compare Priority Mail to UPS 2nd Day Air, which is apples and oranges: Their service isn't guaranteed or tracked."

David Showenfeld, vice president of North American marketing for Federal Express, which has dropped some rates by 35% in a move widely perceived as driven by the postal service ad campaign, is also on the attack. He cites a print ad that claims, "Priority Mail gives you Saturday delivery at no extra charge. FedEx doesn't and UPS doesn't." The statement is only true in a limited sense: If Priority Mail happens to show up on a Saturday, the mail carrier delivers it for no additional fee. "We at FedEx will commit to delivering it on a Saturday," Showenfeld says. "The ad compares commitment versus happenstance."

The larger issue is, according to Ellrich: "Is the postal service a public service or a business? We want them to focus on their mandate of delivering the mail. Or if they want to compete, fine, just give up their tax-free and monopoly status." The postal service, after all, has trucks that don't need license plates or registration and don't incur parking fines. It is not subject to customs regulations. It doesn't have to pay shareholder dividends. "We're not afraid of any fair competition," says Showenfeld. "This isn't fair."

Smith notes that while the postal service doesn't pay taxes it does have other high costs. "I doubt that FedEx or UPS pays $28 an hour for clerks. Look, UPS has a good campaign, a good product, and at the moment they are technologically ahead. But they're spending more to advertise express mail. [UPS CEO] Oz Nelson just spent $40 million sponsoring the Olympics. We didn't. And we started the express mail business, back in 1971. What would Nelson like us to do, just sit back and give him volume?"

Well, yes. Rival companies don't complain about ads that aren't working. The problem for the postal service is that while executives usually can only sniff about their competitors' ads--Coke can't do much to stop Pepsi's commercials--UPS and FedEx have enough political clout to make Congress take notice. This backlash against the postal service's aggressive advertising was compounded by its attempt to underwrite both the Democratic and Republican 1996 national conventions. For half a million dollars apiece, the agency would have a chance to showcase its new "with-it" image. While the postal service figured it was politically safe by sponsoring both parties--and had even secured an informal go-ahead from Alaska Sen. Ted Stevens, the most powerful politician on postal issues--media reaction was hostile, fanned by postal service enemies. The plan was quickly axed. But the public relations damage was done. Once again, some commentators seized on the plan as yet another example of a lumbering, bumbling postal service, this time trying to buy off reform-minded politicians.

The postal service's Board of Governors, a traditionally stodgy bunch, was furious at what it saw as a pattern: too much, too fast, too sloppily. The board was already concerned that the new advertising was too aggressive and the sums were too large (the $230 million spent on ads last year was more than $90 million above what had been officially approved). Meanwhile, Mail Boxes Etc., which happens to be 17% owned by UPS (them again), Parcel Pak and others formed the Coalition Against Unfair USPS Competition. Its mission: To prevent the postal service from encroaching on its turf. Again, in trying to solve a business problem--stemming the loss of revenue to e-mail and fax machines--the postal service had created a political problem.

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