For fans of European integration and free-market policy, the liberalisation of the Royal Mail must have seemed like a great idea. By dismantling the mono-poly and allowing other players to enter the UK postal sector, competition would ensure an ever-improving service and greater choice for consumers and businesses.
Well, that was the theory. In fact, liberalisation has been nothing short of a disaster for the Royal Mail and many of its customers. Certainly, rival European postal operators have entered the market, but they have merely cherry-picked the most profitable parts, such as business delivery.
The Royal Mail, however, has remained hamstrung by its commitment to the loss-making universal postal service. It is based on the 150-year-old theory that British residents should be able to pay the same price to send a letter to whomever they want in the country, wherever they live.
However, in order to honour its dedication to providing this service, Royal Mail has been forced to slash costs by closing branches and cutting the frequency of postal deliveries.
This surely is the ultimate irony of the European Commission's diktat. The 'universal' principle is severely under threat, leaving the Royal Mail brand, through no fault of its own, looking rather tarnished.
An independent review, published last month, warned that changes are essential because of a 'substantial threat to Royal Mail's financial stability', in particular due to the lack of investment in modernisation. Shortly after, the business announced that it made an operating loss of £279m last year, of which the universal service accounted for £100m - its first ever deficit, bearing out the report's dismal warning. Just days later, its marketing director, Alex Batchelor, left the organisation.
In an attempt to fight back, the Royal Mail has argued that it wants more of its services to be exempt from the universal service and that the terms on which it grants access to its delivery networks to rivals reviewed.
While this might help its financial grounding, there is little doubt that the brand itself is in need of some serious attention. But where to start? We asked Kate Cox, strategy director at MPG, and Mike Welsh, chief executive of Craik Jones Watson Mitchell Voelkel, who used to work on the account, for their advice.
Diagnosis 1
Kate Cox strategy director, MPG
We asked our con-sumer panel of 100 households, which we access via a blog, what they thought of the Royal Mail and how it could improve its service.
The vast majority of respondents had issues surrounding the non-delivery of items. It stirred up huge passions among our group, with complaints including the following: 'not being able to get a redelivery of perishable goods within 48 hours of a failed attempt'; 'queuing for an hour to be given a direct mail shot with inadequate postage'; 'calling the Royal Mail to track a recorded delivery, but both times they couldn't help me'.
Turning the negative perceptions created by non-delivery into a positive could be an effective solution for the Royal Mail. It should also try to differentiate its service from its competition, as it has an in-built advantage in this area - it can send non-delivered items to be collected to local sorting offices and not to vast warehouses miles away.
It would also do well to improve local collection points by smartening them up and ensuring that queues are shorter.
Remedy
- Royal Mail should see every touchpoint with a customer as a way of building its brand.
- Non-delivery notes put through the letter box should move beyond the functional and be more human and engaging.
- Royal Mail could invest in customer-facing digital tracking for any non-delivered parcels, so customers can see who sent the parcel and where it currently is.
Diagnosis 2
Mike Welsh chief executive, Craik Jones Watson Mitchell Voelkel
The issues facing Royal Mail are old news to most people, let alone industry insiders. Battling the steady rise of private-sector competition, a stubbornly unionised workforce and the pressures of declining volumes, it has a lot on its plate.
Add to this recent rows over executives' pay, the awkward transition to pricing in proportion and growing concerns about the quality of its service, and the situation looks tricky from every angle.
However, there are opportunities. Online retailers have created a huge additional need for fulfilment, from big international brands through to small businesses. EBay entrepreneurs, who are well catered for in the US, are also overlooked in the UK. Collectively, they represent a healthy sector, and are well worth courting more effectively. Likewise, the direct-mail industry would surely welcome greater insight into the medium's impact, particularly the extent to which mail moves targets along the purchase funnel.
Ultimately, though, the challenge is to deliver a competitive, reliable service, and this remains a conundrum for Royal Mail.
Remedy
- Provide eBay entrepreneurs with tools to make their lives easier and build loyalty.
- Non-responders to direct mail are ignored. With falling response rates, information about these people becomes more valuable. Royal Mail can shed critical light.
- Royal Mail must continue to challenge preconceptions about direct mail.
- The institution must work with the unions to help improve the image of its workforce and its brand.
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