March 28, 2016 (RARC-WP-16-006)
- Advertising mail, an important tool for businesses and nonprofit organizations, is critically important to the U.S. Postal Service’s bottom line, generating $19.4 billion in revenue in FY 2015.
- Most ad mail is sent as Standard Mail, which declined 20 percent in volume during the Great Recession and has not fully rebounded, unlike before when it kept pace with growth in Gross Domestic Product (GDP).
- Both general economic factors and digital deflation (the pressure for lower prices driven by low-cost technologies) have adversely affected ad mail. However, ad mail itself offers many strengths and some areas of opportunity for the Postal Service.
Ad mail is one of the Postal Service’s most important and profitable products, especially considering the decline of First-Class Mail correspondence and transactions mail. Spending on ad mail has decreased as a share of GDP since the Great Recession of 2007 – 2009, and ad mail is failing to track with GDP as it had in the past. Our white paper, Advertising Mail: Past and Present, examines why this is the case, looking at ad mail revenues and trends since 1980 in the face of significant societal and economic changes, as well as the changing dynamics of the overall ad market itself.
Some decline in the size of ad mail’s market share relates to macroeconomic factors such as lower median household income, which lowers potential consumer spending. Other factors include lower ad prices driven by digital technology and the growth of nontraditional advertising such as social media, which is virtually free.
Finally, advertising itself may be more effective today than in the past because of improved analytics. Ironically, this phenomenon parallels the computer technology boom in the 1980s which, along with worksharing, helped spur the initial growth of ad mail to 9.8 percent per year between 1980 and 1988. Computer technology allowed fine-tuning of mailing lists and more sophisticated targeting than had been possible in prior years.
The paper suggests five strategies for ad mail in the context of growing digital advertising and omnichannel marketing. These strategies are detailed in the full report, which includes a comprehensive study from postal econometrics experts RCF Economics and Financial Consulting.
Household Diary Study Data (Microsoft Excel Spreadsheet)
Historrical Standard Mail Volume (Microsoft Excel Spreadsheet)