Good Question: Why Is The Postal Service Spending Money On Ads?
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MINNEAPOLIS (WCCO) – Times are tough for the U.S. Postal Service.
A Congressional mandate to pre-fund 100 percent the pension plan for 75 years of employees has the agency in a serious hole (the law requires a $5.6 billion contribution this year, a pension funding plan unlike any other governmental agency), and email is certainly slowly killing off the First Class Letter.
“This has been bugging me for a couple weeks,” said Cyndy Dorken, a viewer who emailed Good Question. “The Postal Service is struggling, talking cutbacks, layoffs.”
“Why advertise?” asked Joyce Olson. “I know where the post offices are. I know what they do. I know what they sell.”
The Postal Service’s auditor said it spent $147 million in advertising in 2011, about $108 million of that was on the Priority Mail campaign.
Is that a significant amount of money?
“No, it’s a drop in the bucket,” said Doug Spong, the president of Carmichael Lynch Spong, a Minneapolis marketing and advertising firm.
“The fact is the Postal Service makes most of their money shipping priority or express,” Spong said.
In fact, the Postal Service says the package business is up 10 percent over the past two years.
In order to get small and mid-sized companies’ business, they have to compete. In 2011 — when the Postal Service spent $147 million — FedEx spent $375 million on ads.
“Both [UPS and FedEx] actually spend two or three times what the Postal Service spends in media,” Spong said.
Other major corporations spend even more, he pointed out.
“Look at State Farm, they spend $900 million a year in advertising. Even locally, Target spends $1.6 billion,” he said.
What would happen if the Postal Service stopped advertising entirely?
“That would kill their small and mid-sized business,” Spong said.
What about the now-controversial decision for the Postal Service to sponsor Lance Armstrong’s cycling team?
“At the time, when the Postal Service did the deal with Lance, he was a hot commodity,” Spong said.
According to Slate.com it started with a small, $1 million deal in 1996 with the cycling team. It got controversial when that swelled to $30 million between 2001 and 2004. The Postal Service’s auditor questioned that deal, arguing it was impossible to know if the money was paying off.
The bottom line is that the Postal Service has a path to profitability, according to Spong. And to achieve growth in the package sales category, the Postal Service has to compete – and that means spending money on ads.