It’s Final: No Reprieve on Postal Rate Hike

Catalog mailers can kiss any dreams of a postal rake hike reprieve goodbye. The U.S. Postal Service’s Board of Governors (BOG) on June 19 rejected the Postal Regulatory Commission’s temporary rate reduction. That means catalogers, who were hit hardest when the new pricing structure took effect May 14, will have to live with the postage increases of 20%-25%, and as high as 40%.

The PRC had less than one month ago recommended to the BOG a temporary rate reduction of $0.03 in its reconsideration of rates for Standard Mail flats–the category affecting most catalogers. The PRC recommended the temporary lower rates last through Sept. 29, before fiscal year 2008 begins for the USPS on Oct. 1.

No dice, said the BOG: “We appreciate the commission’s thorough review of this matter and its creative recommendations to implement temporary rate reductions for mailers of Standard Mail flats. We are concerned, however, that approving those recommendations would not be legally sound or practically prudent.” The BOG had asked the PRC to consider whether “some rebalancing between Standard Mail letter and flat rates might be appropriate.”

By recommending temporary rate reductions that would expire before the test year (the postal fiscal year 2008 that runs from Oct. 1, 2007 through Sept. 30, 2008) begins, the BOG says the PRC “devised an approach that would avoid any direct financial consequences in the test year.” The PRC failed to address the BOG’s request to rebalance the pricing between flats and letters, the decision says. As postal rate cases are a zero-sum game, the BOG says lower rates for some must be offset by higher rates for others. “As the commission estimates, the financial cost to the Postal Service would be on order of $100 million. That amount of money is substantial and its financial effect cannot be discounted even though the effect comes before the test year, rather than during the test year.”

The BOG also said the temporary rate reduction for Standard Mail flats would be difficult to implement. “Given the amount of lead time necessary to develop the software changes required to support these rate changes, the actual number of weeks in which the reduced rates might be in effect would be minimal,” according to the decision. “Such a short timeframe of relief, during the low mailing season of a catalog industry that makes plans months in advance, is not likely to mitigate rate shock significantly.”

Others disagree. Mark Lee, who owns the Charlottesville, VA-based catalog consulting firm Mark Lee Group, says the majority of damage to catalogers was already inflicted on May 14. But he adds that “Its abruptness and severity is sending a shock wave throughout the catalog industry, and some companies probably won’t survive it. The $0.03 temporary reduction would have eased the pain a bit, since it represents a 5% – 6% reduction in the overall cost of a typical catalog. Given the length of the planning cycle, most firms could have altered the course of one catalog as a result of the reduction.”

Dana Springfield, the general manager of consumer direct for South Deerfield, MA-based scented candles manufacturer/marketer Yankee Candle, says “a favorable ruling would have allowed us to increase circulation in August-September and drive more growth in our business. Now we are forced to employ a conservative growth strategy in the face of this cost increase.”

Indeed, in a June 20 release, DMA President John A. Greco Jr. warned that the BOG’s rejection of any rate reduction for flat-shaped mail would have a severe impact on the mailing community. “America’s mailers sent a clear message to postal officials that the surprisingly high increases in flat mail rates will lead to significant cuts in mailing volumes, and a long-term downward spiral in postal revenues,” he said. “The Postal Governors made a bad call yesterday. It was a bad decision in February when the PRC made its recommendations for rates far in excess of what the Postal Service originally requested. Now by refusing to make the much-needed corrections, the Governors have all but assured a decrease in mail volume that will be felt for years to come.”

It’s not just the catalogers that are going to feel the pain, warns the DMA’s senior vice president, government affairs Jerry Cerasale. “Paper companies are dropping production of coated papers in anticipation of lower demand caused by these high postal rates,” Cerasale says. “This is only the beginning.”

It’s All in the Approach

Being a supervisor in a fast-paced distribution center is a lot like being an airline pilot: Success is all in the approach.

Let’s take a look at the parallel nature of airline pilots and logistics supervisors:

Good landings begin early – with a good preflight inspection
Pilots do not like surprises when they are in the air. Leaking fuel lines, brake fittings, and oxygen valves are just some of the many things they look for before they even start the engines. They want to make sure the flight begins under the best of circumstances.

Warehouse supervisors need to look for their leaks too. For example: What volume of work is anticipated for the shift? Is my projected headcount appropriate? Do I have the right people with the right skills plugged into each work area? Will I be able to provide them with good working equipment to do their jobs? Do I have any other potential barriers to my success, such as congested aisles or poor employee motivation? Supervisors should not expect good results at the end of the shift if their preparation is bad.

A well-built aircraft will practically fly itself
Aviators really appreciate aircraft that are easy to fly. It’s quite exhausting to fly an aircraft that has not been properly trimmed for flight. And if the flight is a lengthy one, it is a huge relief to pilots to have a functioning autopilot system that will handle much of the workload.

Unfortunately, supervisors in warehousing and distribution have their hands full throughout their entire shift – they don’t have an autopilot system they can turn on. One of the reasons supervisors are so heavily loaded is because they typically don’t have well-trained, motivated employees. As a result, a lot of the supervisor’s time and attention is spent keeping those employees on track. It is imperative that supervisors receive focused management training on how to build a core group of skilled and dedicated associates.

Aircraft can often fly much faster than they should
When an aircraft is late getting off the gate at an airport terminal, you might hear the pilot say something like “Well, folks we got a late push-back off the gate, so we’ll try to pick up some time in the air.” Question: If they can push the throttles forward a little and get more speed, why don’t they always do that? Why fly slow when you can fly fast? The answer, of course, lies in safety. The pilot has to maintain certain distances from other aircraft to avoid mishaps, and he also has to navigate around weather. There is never a guarantee that pilots can go faster, so they don’t advertise it. Furthermore, they have to consider how much more fuel it takes to run the engines “wide open.” It is a costly decision to fly faster, since it eats more fuel, and fuel is not cheap.

Logistics supervisors have many of the same things to consider. For example, even if an associate can operate at a much faster pace, is it advisable for him to do so? Is quality compromised at an excessively fast pace? Is safety jeopardized for that person or the employees nearby? What about exhaustion? Will the associate become overly fatigued early in the shift and become unproductive later on? How well a supervisor manages the pace of his employees is a key factor in producing a successful outcome.

Response time is critical
When things go wrong in a flight, they go from bad to worse pretty fast if the pilot doesn’t respond quickly. Pilots are trained (and evaluated) over and over and over again so they know how to (1) recognize a problem, (2) react quickly and isolate the problem so that it doesn’t cause further problems, and (3) resolve it by restoring the systems functionality or finding a suitable manner in which to overcome the system failure – finding a work-around solution.

What happens if a supervisor isn’t trained to recognize a problem? Well, the answer is obvious: The problem will continue and will likely cause significantly more trouble. If associates in one work area are underperforming for even a short period of time, for instance, they could cause huge workflow problems in other related work areas. The supervisor needs to react quickly to avoid a serious backup that could take hours to overcome. Can the problem be isolated to a person or a group of people? What can be done to restore the flow? Supervisors must be trained and evaluated regularly so they can avoid costly management mistakes.

Sometimes one has to declare an emergency
Occasionally a pilot gets into a situation that requires him to declare an emergency. Such a declaration does not remove the danger of the situation – it merely advises people on the ground of the circumstances the pilot is facing. Sometimes ground personnel can offer verbal assistance, but in the end, the pilot is still very much responsible for handling the situation.

Like an airline pilot, a logistics supervisor must know when a situation has reached a point where he must alert a senior supervisor or a site manager. While it is possible that the supervisor could receive some advice from his senior about what to do, the outcome still falls squarely on the supervisor’s shoulders. Communicating urgent issues early will minimize the shock factor and will provide senior leadership with the information needed to make crucial business decisions.

Every airline pilot has a first officer to assist
Flying the airplane, monitoring the flight and engine instruments, communicating with the air traffic controllers: There are a lot of things to do and a lot of decisions to be made when piloting a large aircraft. Aviators don’t try to do everything themselves; they have a well-qualified colleague sitting next to them to share the work load and to collaborate with when tough decisions need to be made.

Warehouse and distribution supervisors don’t usually have the “luxury” of having a colleague alongside them to share the load. They typically have to tackle it all themselves. That said, well-trained supervisors know how to tap all the resources available to them so that they can make the most informed decisions. Supervisors should not overlook the fact that someone in leadership, typically someone within telephone range, has probably faced a situation similar to the one they are experiencing right now, and the benefit of their experience could be helpful. Network, network, network.

To sum it up, good pilots and good logistics supervisors have a lot in common – they have been very well trained for the task, they know their environment, they pay close attention to detail, they communicate well, and they collaborate with their peers. Remember, whether you are looking to land an aircraft or supervise a team of associates in a fact-paced distribution center, your success is determined by the things you do every step of the way. Success does not just come down to the last minutes; it’s all in the approach.

Michael Droske is director of training for Long Grove, IL-based consultancy Tom Zosel Associates.

It’s Good to Be the King

You may think it goes without saying that it’s good to come in first, but nothing in the search industry goes with saying, or measuring either. That’s why a recent survey conducted by Jupiter Media for search engine marketing firm iProspect set out to discover exactly what benefits there are to coming in first, or at least within the first few results pages for a keyword search.

The answer: Quite a few, mostly in volume of response from search users. According to the iProspect “Search Engine User Behavior Study”, which was released last week, 90% of users click on a search result they find in the first three pages, and 62% click on a result from the very first search page. Only 10% of searchers now click past the third results page for an average search.

And since iProspect has sponsored roughly the same user study twice before in the last four years, these findings can be trended to show the growing importance of turning up high in search results. The proportion of subjects who clicked on a first page result in 2004 was 60%, two percentage points lower than today; in 2002, it was only 48%. Conversely, in 2002 19% of users were willing to look deeper than the third results page to find the link they wanted, and in 2004 13% would do so.

At what point do searchers decide that a search they’re performing isn’t working? In the iProspect report, 41% of the respondents who failed at a search and revised it did so after reviewing the first page. That proportion is comparable to 2004, but it’s larger than in 2002, when only 28% said they judged their search a success or a failure on the basis of the first results page.

“Searchers are growing a little bit more fickle, in that they want to find what they want from their search right away,” says Rob Murray, president if iProspect. “If they don’t find it, they’re going to change something.” That makes it all the more important that companies optimize their Web pages to appear in a prominent position on the relevant keyword searches. (The survey didn’t examine the relative importance of appearing “above the fold”—that is, on the first screen of results, before the user has to scroll down the page.)

But increasingly, they’re changing their queries rather than changing search engines. Eighty-two percent of users who revise a failed search do so by putting longer or more complex terms into the same engine. By contrast, only 13% of respondents said they try the same failed keywords on a different search engine.

So four out of five users today believe that the answer to an unsuccessful search—however they define it, and knowing that most of them make that assessment on the first page– is a more complex and specific one on the same engine.

That’s another trend that has grown. In the 2002 study, only 68% said they would respond to a failed search by entering more keywords into the same query box. (At that time, more than one in four said they would bail and use the same term on another search engine.)

“So what this study is saying is that marketers need to be found at the top of the search results, but they also need to be found on a broad array of terms,” Murray says. “You can’t know what specific terms people are going to be searching on. Marketers need to get beyond optimizing for single-word generic terms.” It’s a vindication of the “long tail” approach to search, as applied to organic rather than sponsored results.

The iProspect search behavior study holds out one particular bit of good news for small marketers trying to grow their brands on the Web. According to the report, more than one third of users believe that seeing a company Web site with a high organic ranking in a search result means that company must be one of the top brands in its category. This brand lift is even truer among the 25-44 demographic, where 40% ascribe brand prominence to a company with a top-ranked Web site.

“There really is a brand halo effect at work in Internet search,” says Murray. “It suggests that brands that have never been mainstream because they’ve failed to do traditional advertising can become major brands just by doing organic search well.”

Murray says in light of these results, Webmasters and online marketers should be in a state of continual search optimization. “Here we are in 2006, people are probably on their fourth or fifth version of their Web sites and have spent tens of millions of dollars,” he says. “Spending that much money and not having an aggressive search optimization strategy is amazing to me. With query volumes growing monthly, your customers are either going to find you, or they’re going to find your competitors.”

It’s Unanimous: Senate Passes Postal Reform Bill

On Feb. 9 the Senate voted to pass postal reform bill S.662. Passed by “unanimous consent”–not a unanimous vote but instead a voting methodology that the Senate often uses that recognizes each senator’s willingness to allow the bill to go to conference—the bill is just another step on the long road to reform.

But it’s an important step – as are the steps to come, says Bob McLean, executive director of the Arlington, VA-based Mailers Council. “Mailers out there must participate in these upcoming debates,” McLean says, referring to the required conference committee where S.662 and its sister bill, H.R.22, will be reevaluated as one. “We need grassroots pressure from mailers that will encourage Congress not only to convene quickly but to ultimately produce a decision.”

When the conference committee will convene is still anyone’s guess. Congress began debating a highly contentious asbestos bill this past Monday, and McLean is concerned that it will delay Congress’s ability to convene a committee for the reform bills. But Gene Del Polito, president of the Arlington, VA-based Association for Postal Commerce, believes that it could be as early next month, which could affect the Postal Service’s next rate case.

The USPS is expected to file for another rate case by midyear. Del Polito, however, says the agency would be wise to hold off filing the case until there is a clearer idea of what changes, if anything, the proposed legislation would bring. “It’s all a matter of when you want to start the 12-month clock,” he says, referring to the minimum amount of time it takes for a rate proposal to be considered. “The new rules are to be classified by the new Postal Rate Commission. Since those rules are not yet written, if they were to go forward with the rate case they have now, they’d never get the chance to see what options they might have had under the new system.”

Another factor to consider is the White House’s objective to keep things “budget neutral.” The House and Senate reform bills both call for shifting liability for military service time of postal employees’ retirement payments from the USPS to the U.S. Treasury and for eliminating an escrow account. The Bush administration, however, opposes the provision because it would add to the budget deficit.

“It’s important to remember that budget-neutral postal legislation is a White House objective–not a mandate,” says Ben Cooper, president of the lobbying group Committee for a 21st Century Postal Service. “But I suspect an effort to adjust the bill in terms of overall budget concerns will be considered.”

It also remains to be seen how the Postal Service itself will factor in the ongoing legislative process–if at all. With its Jan. 24 letter to the Senate opposing S.662 (see “USPS ‘Officially’ Opposes Senate Reform Bill–but Does That Matter?”), Cooper says, “they all but closed the door to the negotiating room and locked the door behind them.”

Mailers, though, need to be proactive, McLean says. “Some issues get to conference committee and are never heard from again,” he warns. “If everyone just sits back and waits, then postal reform dies…it’s that simple.”

It’s Getting Lonelier at the Top: Fewer Execs Want to Be CEOs

If you never really wanted to be a CEO, you’re in luck. In a post-Enron corporate environment, the corner office is no longer a prize, reports a new study from Burson-Marsteller, a communications consulting firm. In a survey of 150 executives from Fortune 1000 companies, conducted by WirthlinWorldwide for BM, 60% of the respondents said they didn’t want to be chief executive officers. Only 27% gave this answer in the 2001 survey. Just 35% of the executives polled wanted to be CEOs, down from 47% three years ago.

BM’s earlier research shows that the reluctance to be top dog has been building for a long time. Back in December 2003, a BM survey on the reputation of CEOs showed that a hefty 73% of them had entertained the thought of quitting their posts—a 35% jump from 2000. The 2003 research surveyed CEOs, senior executives, financial analysts, institutional investors, business media, and government officials.

This time around, the vast majority of respondents are certain about whether they want to be CEO or not. In 2001, a sizable 26% were unsure; this year, only 5% haven’t made up their minds. The research also found that respondents who had worked at a company that had experienced a crisis were more likely to decline the CEO position than those who had never worked at such an organization (64% versus 52%).

Shortened CEO tenure and intense public scrutiny have made executives wary of the top spot, according to Patrick Ford, chair of B-M’s corporate/financial practice. “The economy depends on continuing to rebuild trust in the corner office among our next generation of leaders,” he said in a statement released to the press.

Surprisingly, though, executives today have more confidence in CEOs than they did before. In the BM study, 87% of the respondents indicated confidence in CEOs, compared to 77% last year. Says Dr. Leslie Gaines-Ross, BM’s chief knowledge and research officer and director of the study, “This is a great vote of confidence for CEOs. Executives believe that the vast majority of CEOs are honest, hard-working individuals. The growing confidence in today’s CEOs indicates that the corporate crises of yesteryear might just be fading in people’s minds.”

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It’s July–Do You Know Where Postal Reform Is?

The chances of the Postal Accountability and Enhancement Act (H.R. 4341) being passed before the end of this session of Congress are slim. But they do exist.

“There’s still the possibility of getting this reform bill through and on the president’s desk this year,” says Jerry Cerasale, senior vice president, government affairs, for the Direct Marketing Association. “And with a lame duck session of Congress, that will greatly improve its chances.” Members of Congress, particularly those who won’t be retaining their seats after the election, typically come back to work after election day to try to close out unfinished business.

The bill was unanimously approved out of the House Committee on Government Reform in May. The Senate version of the bill (S. 2468) on June 2 was also unanimously approved out of the Senate Governmental Affairs Committee. The Senate bill included a four-year time limit proposal for postal discounts so that they don’t undercut true savings made by the Postal Service.

Even if postal reform doesn’t reach the president’s desk this year, “we’ll push it early on from where we left off next year, rather than going back to the beginning,” Cerasale says. “So if we don’t get it this year, we’re not giving up. But then we haven’t given up on this year yet—we’ll keep working on it.”

It’s Bliss for Starwood

White Plains, NY-based Starwood Hotels & Resorts acquired $40 million spa chain/cataloger Bliss from LVMH Moet Hennessy Louis Vuitton. As part of the acquisition, Starwood plans to launch Bliss spas in its W Hotels. The first Bliss spa designed for W Hotels is expected to debut at the W New York later this year. Bliss currently has two spas in New York and one in London.

Bliss’s experience publishing its monthly catalog of upscale health and beauty products will no doubt benefit Starwood as well, now that the hotelier—whose properties include Sheraton and Westin hotels—is launching a W catalog. In addition to selling the same quality sheets, towels, and room accessories used in W Hotels, the 90-page catalog offers gifts ranging from sterling-silver bracelets to teddy bears.