2018 USPS Rates


In this video, I talk a fair amount about the dramatic shift in USPS rates that happened in 2017.  To revisit the 2017 USPS rate increase video, click here.

What You Can Learn From Wells Fargo

Note: I’m not implying you’re doing anything illegal or wrong. The point is in the thinking behind the actions, not the actions themselves.

In case you’ve sworn off the news and haven’t heard, Wells Fargo recently had to pay $185 million in fines and let 5,300 employees go.  They are accused of opening accounts without the knowledge or approval of the customers involved.

Long-term research in the banking industry supports the notion that the more accounts a consumer has with a savings institution, the more loyal they become.  And the more likely they will turn to the bank for additional, more profitable services like a mortgage.  So, in this case, the trailing indicator (more loyalty) was driven by the leading indicator of more accounts.  You see the number of accounts go up and increased loyalty is sure to follow.  Based on this, strict quotas and penalties were put in place to ensure employees were generating a high number of new accounts day after day.

In the end, over 2 million unauthorized deposit and credit card accounts alone were created.  They are not counting debit card or online banking accounts, as there are no fees or negative impact on the consumer.  Who knows how many of them were created on top of this.

Incentivizing a leading indicator will get you gamed nearly every time.  Stephen Covey had a name for it – Malicious Obedience.  “I will do exactly as you’ve told me to do, knowing it won’t produce the outcome you’re hoping for.”

Consider trying to incent weight loss.  The goal, or trailing indicator, is to weigh less.  The leading indicators, which should lead to weight loss, include being more active and eating less, or eating better.  Let’s say you were to offer incentives for certain activities like running or lifting weights, or reducing calories.  One could easily game this by going for long walks and coming home to eat a large pizza, for example.  Collect the bonus for walking and possibly gain weight in the process.

Newspapers believe there is a cause-and-effect relationship between the number of active accounts a newspaper runs and the resulting revenue generated.  Actives being the leading indicator, and increased revenue the trailing indicator.  By incentivizing, or in the case of Wells Fargo, demanding, an intense focus on a leading indicator (more active accounts), you believe that revenue has to go up.  While it may seem logical that forcing leading indicators, like call counts and number of actives, will lead to success with the trailing indicator, this is not often the case.

Having analyzed the transaction details at over 150 newspapers, we can tell you that the opposite is true.  Activities and products built to attract ‘new actives’ rarely are designed to bring in clients prepared to rely on you for their ongoing marketing.  They’re designed to sell something to as many people as possible (so they are usually as inexpensive as you can make them).

The most obvious metrics we see that support this conclusion are these:

  • On average, the bottom 50% of active accounts make up only 2.96% of total revenue.
  • For newly acquired accounts, 80% are gone after 30 days.
  • 90% are gone after 60 days

Considering that prospecting is obviously (by definition) focused on bringing in new accounts, we would conservatively estimate that over 60 to 70% of sales activity is producing less than 5% of revenues.  Even if there is a sales process designed to generate loyal accounts that might spend, say,  $5,000-$10,000 a year, the pressure to drive call counts and actives pulls sales activity away from that process.

How Not to Fix This:

We’ve seen various efforts to fix the problem of way too many really small accounts.  The challenge is that the presence of these accounts is not usually the problem – it’s a symptom.  The real problem is the mindset that the number of actives supports revenue growth.  That drives the creation of products designed to appeal to one-off small dollar sales.  The thought process is built around driving a leading indicator as a standalone predictor of success.  This often results in designing tactics to attack the symptom.  Such as:

  • Using Inside Sales to Handle These Really Small Accounts: This can miss the point on several levels.  Your main goal has to move from “How can I bring in actives/revenue?” to “How can I help more local businesses successfully market their business?”  The presence of these accounts is driven by the former.  Using another asset to support the same mindset doesn’t address the problem.

This also presumes that the current, or outside, reps will be able to take the time they were using to chase actives and redirect it to a process designed to attract longer-term clients.  This supposes a new mindset, and skill-set, that is unlikely to be present in the current reps.

  • Creating 60 or 90 Day Bundles: Where this is effective or not depends entirely on your motivation for doing it.  If it’s put together to realistically drive ROI for the new clients, it could not only be the catalyst to get away from the one-and-done-sales beginning; it could also be the beginning of a new nucleus of high-retention moderate-spending local businesses.  You’d be amazed how much impact an accumulation of $3,000 a year clients could have, even at good-sized properties.

On the other hand, if the bundle consists of small-space ROP ads, online banners at full retail ($10-$12 CPM), etc. designed to improve your 30 and 60-day retention numbers and initial spend, it’s unlikely that this will impact your trailing indicator of real revenue growth over time.  It may impact any number of leading indicators you might choose to focus on without producing the outcome you expect.

Resist the urge to do things that tweak the leading indicators without a realistic expectation of that tweak addressing an underlying problem that directly impacts the trailing indicator, which really needs to be the main focus.

I realize that it’s not fair for me to just share with you how NOT to fix this.

Click this link to be invited to an upcoming webinar on “The New Metrics: What You Really Need to Focus On to Impact Revenue”

80/20 or 20/120 – The Distribution of Revenue and Profits

The 80/20 rule has become almost a cliche, but our Revenue Retention analysis reports we’ve been running for newspapers really opened my eyes to some of the ‘ripple effects’ of what 80/20 means in our industry.

Click the button below to get updates on our new blog posts. As a free bonus, I’ll send our free report “Revenue Retention Benchmarks for Newspapers”, which goes into greater detail about the Retention Analysis reports discussed in the video.

Click Here for our Free Report – Revenue Retention Benchmarks For Newspapers

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