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Let me start by saying that this is not about hybrid mail technology. This is not about the latest technological developments, the latest vendors, the latest postal adopters. This is about re-envisioning what postal systems do, or should do, in the international mail business. But we do need to define our terms a little bit, and set up a hypothetical

to think about. Actually, you can have a form of hybrid mail experience by visiting the Universal Postal Union booth downstairs where you can participate in testing the Global Monitoring System, GMS.

Now, the phrase "hybrid mail" is not a technical and agreed term. For our purposes let us call hybrid mail that portion of the postal transmission process which is electronic and which begins as an electronic input from a sender which he intends will be a physical output in the hands of the receiver. In addition, one could provide the sender and recipient a choice of the form of the delivered message – physical or electronic, and this requires more complexity in the system.

So, let’s suppose that I'm a big insurance company which every quarter prepares an account statement for each customer which I must transmit to each customer. I need to minimize the cost and maximize the accuracy of that transmission and the arrival of the document in a physical form at my customer's address. Ideally I would like to give my customer a choice as to whether he receives paper or an electronic message. But, despite my efforts to convert them, for the most part they insist on paper.

I am not talking about what is basically digital content management on a local/domestic basis which is sold as a cost-saving service. That’s mail generation and dispatch outsourcing, an alternative to having staff printing a letter, addressing an envelope, inserting, maybe franking, and walking it to the mailroom which walks it to the Post, or the Post comes for it. In this simpler scenario, you compose it, email it to a vendor, and he prints it off, puts it in an envelope and walks it to the

http://hybrid‐mail.org/ 

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Post. Ideally, this post office is very close to the destination address, to optimize the delivery rate and minimize the delivery, ie. the post’s expenses.

And that’s fine. It results in efficiencies. I use Click2Mail in the US, myself, and since I’m a one-man office and my post office is a 3-mile drive away, it’s a boon to me. But, it has more to do with the mail generation process than with the mail process.

Here’s a mail process: My insurance company has 250,000 letters/statements to send to clients in

15 different countries. All on a file, or multiple files. Here are the headaches: getting it printed with “correct” addresses, sorted (maybe), bundled, tendered to the post, shipped abroad to different countries, customs cleared, re-entered, re-sorted, and delivered, maybe.

Now the Post says, “We can do that, but you know we lose sight of it when we put it on the airplane. This will take maybe 3 to 5 days for delivery in the industrialized countries, maybe 10 days in the rest of the world, and some number of those letters will not be deliverable because the address is wrong, addressees move, die, etc. What do you want done with those?”

“Well, bring them back to us and I’ll have someone change the database. When do I get undeliverables? ” In this country, 2 weeks, in other countries, 3 months if you’re lucky. Never, if you’re not lucky. ”

And here are two examples of the

non-hybrid mail process, by the way, one of which, the lower one, is by a company referring to itself as a hybrid vendor, and maybe it is if it was printed near the input point in California. But the sad thing here is both envelopes are returned undeliverable, long, long after they were mailed. Whatever happened to the promise of the intelligent mail barcode?

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So, this is pretty much how mail has been handled internationally since even before the UPU was formed in the 19th century. The only difference between the 19th century and now is use of the airplane. But the problem now is that the posts have competition and need to rethink their business.

Let’s look at what is happening. It’s not entirely digital substitution – that’s the wrong focus, and a view that causes potential dead-end policy choices. What’s happening is that the postal business is undergoing something that is not unprecedented – consumer acquisition of the power of choice. It’s just happening so late because the technological challenge is new.

There is an excellent book, Satisfaction Guaranteed, by the social historian Susan Strasser, which describes the growth of marketing as a discipline in the United States in the late 19th and early 20th centuries. I commend it to you. She documents the invention of marketing tactics by companies – packaging, factory tours, premiums, product positioning, street signs, sampling. And, she documents a powerful growth in consumer power. Before the industrial era and electricity, industrial food production, and packaging, the consumer had few or no choices.

You could have anything, as long as the store owner stocked it. And he decided what that would be.

Ms. Strasser argues that the brand was invented by product producers first as a competitive necessity, to distinguish one can of corn from another, for example. So, not unexpectedly, the brand became a powerful market lever for… the housewife. She could tell the oldest child to go to the corner store and buy Trader Joe’s branded canned corn, “And don’t let old Smith give you that other junk.” The housewife now had the power of choice to literally bypass the monopoly on

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final distribution of this guy - the shopkeeper. He still owned the shelf, but he had lost the power of choice as to what to put on it. All because of something called a “brand”.

Now, the digital “revolution” is like the development of brands. It empowers the consumers, which includes businesses, who now have “brand” choices. And of course that new brand on the block is digital communication through the Internet.

And what was the response of the shopkeeper? Well, he combined with other shopkeepers to form chains of stores to acquire purchasing power vis-à-vis the manufacturers and market presence, but not necessarily power vis-à-vis the consumer. He had to give the consumer what she wanted-choice.

A similar power shift has taken place with the creation of digital communications. The communications choice given consumers and businesses is no less important than the power shift created on the development of brands when applied to consumer goods. The brand struggle for access to the merchant’s shelf required they give the consumer the ability to demand a product. The merchant no longer decided what would be on his shelves; the consumer did. As a consequence, stores had to multiply available products and choices, necessarily becoming more complex and varied in their offerings. “You have plenty of choices. Mine or none.” was no longer acceptable in the retail world.

Many posts haven’t fully absorbed that lesson. The USPS has done so but unfortunately the Congress has not. It has been traumatic for the postal systems to learn. The lesson is that you have to listen to customers and give them what they want, because if you do not your competitor will.

And the competitors are giving the posts real competition, as we all know. But competition doing what? Remember what the shop-keepers did? They turned to selling space and marketing capability. The posts who have figured this out continue, of course, to carry letters, but they carry digital letters, also. They now are no longer only carrying letters…..they focus on carrying messages and managing messaging technology.

And this is a second lesson to us from this old shopkeeper. The shopkeepers who survived finally figured out that they were not selling cans of corn, they were

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actually selling advertising, display and temporary storage space where the manufacturers would give the consumer choices.

As regards the posts, consumers and businesses don’t want the post to carry letters, they want them to carry messages – which need not be on paper for their entire lives. The posts have to carry messages, in whatever form, and manage messaging technology, although they needn’t manage all of it. That’s the digital change here.

Vince Cerf, one of the developers of the Internet, famously said, “If it can be digital, it will be digital.” There is need for paper communication only if required by law or the law of the consumer’s desire. My wife and I both insist on monthly paper bills from the telephone and utility companies and banks.

And so the need for the Post to accommodate people who communicate in writing, to send messages that involve a written record, will not go away. But if the posts want to carry a substantial percentage of the messages people are indifferent about being physical or digital, they must develop the capability to do so.

So, what is the prognosis of future volumes? What’s the status of

development of hybrid mail services?

Internationally there is both danger and promise, as the data shows. This projection of volumes among International Post Corporation members shows that two expert panels suggest there is still a healthy business to be done delivering letters across borders, although smaller. I think these are probably over-pessimistic because the panels did not account for increases in the number of households,

which is certain to occur, and increasing wealth, which historically has meant more mail. IPC says the physical mail volume globally is still 337 billion pieces per year.

This graph from the Adrenale work for the UPU shows that international

mail volumes have fallen, but there is a base, and note down here that during that

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period direct mail volumes across borders increased by 17%. Hybrid mail is an ideal messaging medium for hybrid mail, combining as it does the physical mail piece and the ability to execute campaigns in a manner highly targeted as to place and time.

This graph is a more granular view of the same data, and it shows the deterioration in everything except direct mail since 1998 – and again that alone is an important distinction. I take comfort in it because much of this cross-border volume may well be e-commerce related – new invoices, new offers, promotions, catalogues. And, I believe that the growth in e-commerce parcel delivery will be

accompanied by increasing mail volumes – new offers to these customers, invoices, and catalogues.

Commercial direct mail volumes in the US, UK and other countries have

continued to be healthy and in some cases continue to increase year-on-year. Why? Because it works.

Over the last year or so, Google

has done massive mailings of this constructed piece in the US/Canada, UK, Brazil and perhaps elsewhere. I believe that in one month Google was the USPS’s largest mailer.

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Finally, from the looks of this Adrenale slide of cross-border volumes of designated operators and other operators, we see the posts may well have been losing more to the competition than to technology, but we do know that both have suffered over the last 4 years. And note the difference in letter mail, a slight deterioration, and the important growth in the lower left in the express

and parcel volumes. Much of that is probably e-commerce growing dramatically, but, some portion of this traffic, the express mail traffic, would no doubt fit nicely into a hybrid mail product.

We and the posts need to rethink

what is the purpose here – deliver paper, or deliver messages. There is going to be plenty of paper around available to become digital! In 2010 there were 4.8 billion items! Take this as a point of departure and let’s look at a typical international mail example.

In the 21st century the

conversation with the client we started with should continue along these lines:

“But wait,” says the modern post. “We’ve got a better service for you because we studied what you want and applied contemporary technology and customer-oriented international relationship thinking to your shipment.”

Which is to say that a new era has started. The digital era. The “dot.Post”

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era of digital communication and secure electronic international postal business. The post now says, “Don’t print. Give us the files, data, addresses, names.

We’ll send it to Post B who will have it printed. Or, or you can use a licensed vendor here to manage the files; they can also manage entry here if you wish. The electronic transmission goes through our secure international system managed by the UPU, called dot Post, to Post B or your vendor over there, as you wish. Before printing, the Post or your vendor will apply the up-to-date change of address/gone-away/deceased files to your data, correct the addresses, print, forward, or tell you it’s a problem and deliver the rest. You can expect delivery in 24 hours if you get it to us by 9AM . And, by the way, it’s cheaper than letters, and it is more environmentally friendly. Each of the printed letters sent from here would create 20grams of carbon.”

Now, that’s the future. All we have to talk about is what is getting in the way

of it coming to be. Where are we in development?

Hybrid mail has had significant development in a number of countries. But, interestingly, not where the mail volumes are the greatest, and not much in the international realm, which in any case would be expected. Historically in the 90s many posts experimented with hybrid mail and a few, such as Sweden, Denmark, Italy, Portugal, Germany, and France have continued to provide services. Something like 60% of all invoices in Portugal are hybrid mail.

The UPU's recent excellent book showing the results of their survey of the electronic services offered by the posts around the world gives us a picture, if only a partial picture, of the developmental situation with hybrid mail.

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This table summarizes the responses the UPU received to its questionnaire to member posts on what electronic services they offered. It’s an excellent work, although of course dependent on its members’ responding, which they do not always do. It shows there is room for growth.

Interestingly hybrid mail is pretty well-developed in certain developing

countries, such as in Africa, where it is used internally, often because road transport is difficult. However, you will note that of the 93 countries responding only 34 provide hybrid mail with physical delivery, and 20 provide electronic delivery, or “reverse hybrid mail” and most of those 20 duplicate the list of the 34. Do the customers insist on receiving paper, or is the technology not quite affordable yet to justify reverse hybrid mail? Or, is it the posts’ mailers who insist they want paper delivered? The Russian Post has a newspaper print product, Cyberpress, for newspaper subscribers without Internet access. The vaunted electronic mailbox, on which companies such as Zumbox pegged their fate, has seen a relatively slow pickup, even in tech-savvy Switzerland.

So, the hybrid mail service of accepting physical messages and rendering

them into electronic form is the least widely developed. Of course it is also the most expensive service to provide.

With respect to “international

hybrid mail”, the UPU indicates that only 7% of developing countries, or 6 of 78, and 25% or 4 of 16 industrialized countries have international service.

And here is the list of those countries which I was able to collect from the

UPU data, together with recent volumes. In many respects quite surprising. The

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data collected was for 2011, and if none was reported yet, I have inserted “ND” for “no data” and put in the 2010 volumes. Clearly, Italy is a major player with a long tradition of hybrid mail, but the volume amount is really quite small, and the size of the volume reported by Cyprus is quite noteworthy, as is that of the US Postal Service, which I did not know provided hybrid mail service.

So, to date, the digitalization of international letter communication, has not been met by the UPU system with the attention it merits. No one knows for sure how much there is, because those numbers were only what passed from post to post. but you can be sure there most certainly will be more, otherwise we wouldn’t have all these companies offering the service or the equipment central to providing it. A work group at the UPU struggled with this subject for 4 years from 2004 to 2008 when some progress was made and work stopped due to personnel changes. Much of the problem was discussion of terminal dues and avoiding diversion of letter-based terminal dues to hybrid mail terminal dues. However, the terminal dues system rests on the assumption that all mail is still created and delivered in paper form by 19th Century bulk methods and with 20th century logistical costs, and assuming physical delivery work from a port of entry that is as far across the country as possible from the delivery address. The danger isn’t diversion to the new messaging medium, it is complete loss of mail volume to hybrid mail which will remain completely outside the UPU system as direct entry.

With the launch of dot Post, there is a secure, global environment for deployment of tomorrow’s letter mail - faster, more secure, cheaper to manage,

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flexible, and environmentally friendly. Dot Post and hybrid mail are perfect together.

The UPU settlement system has not adapted to the electronic delivery of correspondence and other mail which can be digitized or printed on paper anywhere in the world, across any border, with the

push of a button. New compensation models, that is terminal dues, must be created to account for these new messaging forms. And we need new standards, regulations, and compensation models.

I think existing domestic hybrid mail volumes definitely show that users want to use hybrid mail in the international environment, and to use the UPU system for electronic messaging, which they currently can not do. The faster dispatch and reply possibilities, and possible additional address correction and return services create a very attractive proposition for mailers. But, these messages are now and will continue to multiply outside the system unless the UPU acts soon. Customers want this capability, they want to buy the corn from the supermarket that is the Post, but they’ll go elsewhere if the Post doesn’t carry the product.

It is to carry forward the work of bringing the hybrid mail choice into the UPU system that the International Hybrid Mail Coalition was formed. We’d welcome new allies and you can learn more about our work at booth 1125, the DDM booth, or by contacting either myself or Enrico at the contact points indicated here.

© Charles Prescott, 2012 www.hybrid-mail.org

http://hybrid‐mail.org/