2. Direct Mail

Direct mail is a significant source of revenue for the Postal Service and is an important direct marketing medium. Direct mail consists mostly of items sent by Standard Mail, but also includes some items sent by First-Class Mail. The Postal Service estimates that 10 percent of the First-Class Mail volume is direct mail advertising. According to the Direct Marketing Association, direct mail expenditures garnered a 19.4 percent share of the total direct-response advertising market in the United States in 2003 and generated $17.17 billion. A large and important portion of Standard Mail revenues is derived from catalog mailings.

Direct mail is a content-rich advertising medium that is appreciated by direct marketers for its effectiveness, particularly in the areas of targetability and measurability. Direct mail's response rates and return on investments are among the highest of all advertising media. This effectiveness is even higher when direct mail advertising is sent using First-Class Mail service.

To strengthen the market position of direct mail further, the Postal Service has introduced and continues to support and promote several innovative new products:

a. Repositionable Notes

Repositionable Notes give direct mail an extra edge by allowing direct marketers to apply specialized sticky notes on the front of mailpieces to communicate highly targeted and actionable messages to consumers. The note then can be repositioned on a refrigerator, computer, or near a telephone to serve as a handy reminder of the promotion, information, or offer. Launched in April 2003, Repositionable Notes can be used on automation-compatible letters.

b. Customized MarketMail

Customized MarketMail (CMM) service is dimensional direct mail that enables direct marketers to utilize unique mail formats to achieve superior customer awareness and response rates. CMM service was introduced in August 2003, and advertisers tested its creative possibilities throughout 2004. Enhancements added to CMM service in March 2004 allow mailers to include Standard Mail attachments and utilize standard addressing.

c. The Ride-Along

The Ride-Along service is a separate promotional piece, such as a product sample or multimedia CD, in a polywrap with a host periodical piece. Advertisers can use Ride-Along service to add a new dimension to advertising and customize messages by industry or subscriber interests.

d. Direct Mail Promotion and Research

To promote direct mail the Postal Service is actively engaged in raising awareness about the medium with advertising agencies. An integrated advertising campaign targeting national advertisers was launched in 2004 to promote direct mail's strengths. A direct mail promotion also was conducted with advertising professionals touting the creative possibilities available through CMM service. Additionally, the Postal Service is engaged continuously in market research to better understand consumer behavior and market dynamics. Every two years the Postal Service conducts a market research project called "The Mail Moment" that reveals consumer experiences as they interact with the mail. Other relevant market research studies include the Small Business Tracking Study to understand issues and challenges small businesses have with direct mail and the Multi-Channel Catalog Study, which highlights Web-based consumer shopping experiences tied to catalogs received in the mail.

Finally, in combination with area office Marketing and Operations functions, quarterly Standard Mail focus group meetings are conducted with industry representatives to discuss direct mail issues. Attendees describe these meetings as some of the best industry-focused information exchanges held by the Postal Service to identify opportunities.

3. Special Services

Special services add value in four primary ways:

• Providing security and accountability with a variety of services that permit customers to verify receipt and delivery of mail, obtain signatures, insure mail contents, and register mail for additional security.

• Allowing customers to track letters and flats.

• Providing convenience through Collect On Delivery (COD) services.

• Providing alternative ways and places to receive mail through the Post Office Box service.