Why a repackage won’t save the PO

The Post Office’s appointment of design agency Marketplace to carry out a major rebranding exercise (MW last week) follows Government criticism that the organisation is backward-looking and inefficient.

A Cabinet Office report published in July says the Post Office “has been slow to modernise in the face of a rapidly changing business environment…The Post Office needs to improve the efficient running of the network.”

The report, Counter Revolution, contains proposals for the Post Office’s future and recommends it diversify into new lines of business. It underlines the urgency of the task facing the Post Office, as dark clouds are gathering that could severely undermine the organisation’s financial base.

In 2003, the Post Office faces a double whammy. European postal services will be liberalised by the European Union, meaning the PO’s Royal Mail division will face postal competition for the first time.

Meanwhile the Government will end the Post Office’s monopoly on cashing state benefits. And other government clients, such as the Driver & Vehicle Licence Agency, are looking at “innovative ways” of allowing people to renew their vehicle licence tax – that bypass the Post Office.

In 1998/99, 76 per cent of the Post Office Group’s &£7.3bn turnover came from Royal Mail, with a turnover of &£5.57bn; seven per cent came from Parcelforce Worldwide, with &£474m.

The Post Office’s high-street presence (which used to be called Post Office Counters) accounted for 16 per cent of turnover at &£1.15bn. Of this, the cashing of benefits – which will be phased out by 2003 – accounted for 36 per cent, while payment for handling mail made up 23 per cent.

Clearly the clouds gathering in 2003 could severely affect the organisation, and damage its ability to fulfil its social role at the heart of rural communities.

Against this background, the Post Office is embarking on one of the biggest rebranding exercises in its history.

Head of marketing Deborah Maxwell, who is overseeing the brand review, says: “We are so big, we are invisible… Our problem is that we are very well loved but we haven’t been positioned as a brand. My job is to change that.”

Maxwell joined the Post Office earlier this summer from former building society Woolwich, where she was marketing services manager helping to rebrand the bank. Before that, she worked at the Automobile Association.

She says Marketplace will review the Post Office’s brand image. Much will rest on the use of the “lozenge” which carries the PO logo. The whole chain cannot be rebranded in one go, as there are some 18,500 outlets, 97 per cent of them run by sub-postmasters who have to pay for the cost of rebranding.

But Maxwell believes that it is possible to change perceptions in a more cost-efficient manner. Initially, 1,000 new and refurbished Post Offices will be given a new look.

The new image is still being considered, but it will include an open-plan layout without glass security barriers but with new, unobtrusive security systems instead.

There are plans to develop different formats for outlets, an approach already tried by supermarkets as they seek to segment their portfolios. Marketplace will also look at the PO’s website design.

Maxwell says an advertising agency may be sought to create an above-the-line campaign.

John Simmons, a director at branding consultants Interbrand, Newell & Sorrell, which worked on the PO’s last redesign in 1994, says: “There is a lot of goodwill towards the Post Office, but you don’t regard the Post Office as a brand for this century. If it has any brand perception, it is downmarket. The Post Office needs to become a commercial brand and develop a more commercial streak. What it is planning is radical and it will not be an easy ride. I can only describe it as aspirational.”

Interbrand’s format has not yet been fitted into all Post Office outlets – and it looks like it may be superseded before it has been completed. “Implementation is a real problem for the PO,” says Simmons. “It doesn’t have the money. The village shops that are still waiting for the new design can’t afford to pay for the new signage.”

Counter Revolution says the Post Office should make up for the demise of benefits payments by setting up a Universal Bank aimed at the 15 per cent of the population who do not have a bank account. It would be jointly owned by the Post Office, high-street banks and other financial institutions.

Tony Benn, the trade and industry secretary in Harold Wilson’s Labour government during the Sixties launched Girobank with a similar remit, but it failed to attract enough accounts to make it worthwhile and was eventually sold to the Alliance & Leicester.

A&L has been one of the first to attack the plans for the Universal Bank. But the Universal Bank would be different to Girobank, as it would automatically have some 4 million benefits customers.

Other recommendations include making post offices act as e-commerce distribution centres, becoming one-stop shops for government information and acting as Internet learning and access points.

But the most serious threat to the Post Office Group comes from the European Union’s decision to liberalise postal services, enabling the likes of the German and French post offices to tout for direct mail business.

Yet, instead of encouraging its existing direct mail clients to remain loyal, Royal Mail stands accused of alienating them by setting itself up as a media owner. To many, its proposed Postal Preference Service is the final insult.

The existing scheme, the Mail Preference Service, is an independent service which, on request, removes consumers’ names from lifestyle databases so they don’t receive unsolicited direct mail.

Robert Mayes, communications director at WWAV Rapp Collins, says: “We are one of the biggest users of direct mail in the UK. But instead of courting us, the Royal Mail is alienating us by setting up services in direct competition.”

It seems unlikely that branding alone will save the Post Office. It is becoming more commercial – as its forays into currency exchange, travel insurance and membership of the Camelot National Lottery consortium indicate.

And it is profitable if the costs of project Horizon, which aims to automate the entire network, are stripped out.

But the Post Office’s diminishing income in the future mean it will require plenty of government backing if it is to continue to play a central role in the UK’s rural and urban communities.