Check’s in the Mail

In a sport measured by a stopwatch, scrutiny of the deal between Lance Armstrong’s team in the Tour de France and the U.S. Postal Service could be the result of poor timing.

On June 30, the Postal Service instituted a three-cent first-class stamp increase for only the second time in its 227-year history, raising the price to 37 cents. Six days later, three-time champion Armstrong and his eight teammates started pedaling in the Tour, essentially starting the second year of the Postal Service’s $25-million, four-year sponsorship of the team.

“I don’t know how this deal will help them climb out from nearly $13 billion in debt, and they won’t tell us what they are getting back from this,” said Tom Schatz, president of Citizens Against Government Waste. “This has nothing to do with their mission of delivering first-class mail.”

The agreement, which extended a relationship between the Postal Service and the team that began in 1997, was negotiated between Gail Sonnenberg, the Postal Service’s now-retired vice president of sales, and Mark Gorski, the San Francisco-based chief executive of Tailwind Sports’ 21-rider pro cycling team.

With 900,000 employees, the Postal Service generated nearly $66 billion in revenue with postage, products and services in 2001. The agency spent $67.6 billion to operate last year, including $146 million on advertising/sponsorship that included the cycling agreement.

Monica Hand, a spokeswoman for the Postal Service, said the agency’s 2002 advertising budget is not expected to dramatically increase from its 2001 total. Designating $6.25 million annually for Armstrong’s team is a significant change from the 1997 deal that required only $1 million a year. The contract is a reflection of the rider’s international popularity generated by his comeback from testicular cancer and string of three consecutive Tour de France victories.

By striking the four-year deal, the Postal Service has guaranteed a link to Armstrong should he find himself contending for an unprecedented sixth consecutive Tour de France championship in 2004. The Postal Service team’s annual budget ranks second among all Tour teams, behind the Italian Mapei-Quick team’s $10 million costs.

Armstrong started today’s 91.14-mile 10th stage from Bazas to Pau second in the Tour, 26 seconds behind Igor Gonzalez de Galdeano.

“We were confident we’d renew with the U.S. Postal Service, but there were other sponsors emerging,” said Cindy Sisson-Hensley, Tailwind Sports’ managing director.

Said Hand: “I don’t have dollar figures to identify how much our revenue has increased since our association with the team, but there are a lot of ways to talk about the value of this deal outside of revenues.”

Hand points to increased brand awareness of the Postal Service’s Global Express Guaranteed international service in foreign markets, prominent national media coverage of Armstrong’s 20-stage pursuit to a Tour title and employee unity as the primary factors that led to a contract that exceeds the annual value of Staples Center’s naming rights agreement.

“We’re leveraging the sponsorship, defining Lance’s success because of perseverance and tenacity and signaling those same traits in Postal Service workers,” Hand said. “How a bike team works--this handing off, the group supporting the one--is what universal postal service is all about: that no matter where you live and no matter what economic background you come from, you still get your mail.”

Schatz said there’s too much cash involved in the deal to become touchy-feely. He said his group has called for an outside company to audit the Postal Service, particularly to uncover the exact financial benefit of multi-million-dollar decisions such as the cycling venture.

“This isn’t the time for the Postal Service to be throwing money around, not when so many people in this country have opted for other services, including electronic mail, and created losses the Postal Services cannot recover,” Schatz said. “This is when you need to look at reducing expenditures, and a lot of other businesses have cut back on marketing and promotion. This is not an event that’s widely popular in the U.S. Plus, who doesn’t know the post office?”

Joe Mowe, an Upland executive who said his business mails 25 to 30 envelopes daily through the Upland Post Office, said he was aware of the three-cent stamp increase, but unaware of the $25-million agreement for Armstrong and a Tour team that consists of six foreign riders.

“Well, why are they doing that?” Mowe asked. “In my own business, we can’t do that. We can’t go the government and ask them for extra money. If we’re in debt, we need to stop doing some things. How can [the Postal Service] go out and spend that? To me, it boils down to wanting to take the competition out of business.”

In an informal survey of 10 customers at the Claremont Post Office, nine said they knew Armstrong, but only three could identify the Postal Service as his major sponsor. None of the 10 criticized the magnitude of the deal.

“A three-cent increase doesn’t bother me, and if they are allocating their money correctly, that’s fine with me,” said Sergio Martinez, a contractor.

Tony Raynor, a native of England and a jeweler in Claremont, said Armstrong’s respected reputation as a courageous, strong family man is worth such an investment.

“I’m personally not bothered by this deal at all,” Raynor said. “I’m still going to mail my letters. To me, this is like having a beer in a pub in England. I might have to pay a little more to have my beer in a carpeted lounge, but I choose to be comfortable. I don’t think about the small amount of extra money it’s costing me. Who cares?”

The Postal Service’s strongest competitors, Federal Express and United Parcel Service, are involved in sports sponsorship. FedEx sponsors the CART series, the PGA Tour, French Open and has naming rights agreements in place with the NFL’s Washington Redskins and NBA’s Memphis Grizzlies. UPS sponsors NASCAR driver Dale Jarrett’s No. 88 car.

“UPS continues to believe the Postal Service should focus on its mission of getting its financial house in order, but this seems to be a deal that counteracts that,” UPS spokeswoman Susan Rosenberg said. “Their core mission is universal service. Marketing these other services, we believe, allows them to compete unfairly with private industry.”

Hiking the prices of stamps, postcards (from 21 cents to 23 cents) and priority mail (from $3.50 to $3.85 per pound) was approved on a recommendation of the Postal Rate Commission by the governors of the Postal Service on April 8. The Postal Service, which reported $11.3 billion in debt after 2001 and projected $12.9 billion at the end of this year, estimated the postage price changes would cost each American household 45 cents a month.

The increases, expected to provide a $1-billion annual boost in revenue, were said to be necessary because of the nation’s economic downturn, a substantial drop in mail advertising and terrorism safeguards, including a $300-million anthrax cleanup. In a third-quarter report, the agency reported it lost $281 million as mail volume shrunk by 1.2 billion pieces from the 2001 third quarter. The government has required since 1971 that the U.S. Postal Service operate self-sufficiently.

Dean Bonham, president of the sports marketing consultant firm The Bonham Group, said, “Anyone in the consuming business who believes the U.S. Postal Service doesn’t need to market is completely clueless. There may be the question of: How can they cut the fat? Marketing is not fat. Marketing is part of the solution to creating more revenue. Anybody that understands Business 101 understands that.”

Bonham and Rick Burton, another expert in sports marketing from the University of Oregon’s Warsaw School of Marketing, said their concern regarding the deal is why the Postal Service has been slow to implement activation spending on consumer promotions, advertising and hospitality opportunities that will more effectively call attention to their link to Armstrong. Bonham said the industry standard for activation spending is $1 to $3 for every dollar spent on the deal.

“That point is a legitimate question,” Bonham said. “But, traditionally, companies that invest in cycling with a well-thought-out strategic plan get a strong return on their money.”

Said Burton: “I don’t have a sense they’re misusing the public’s trust. The Army, the Air Force and the Marines market themselves too.”

Burton is not privy to the Postal Service’s own analysis of this deal, but he said television coverage, magazine and newspaper photos and mention of the team in stories indicates, “the chances are they are getting enormous return from this deal.”

Said Burton: “I think someone concluded that if the Postal Service didn’t start marketing itself more effectively, a lot of civil servants’ jobs were going to go away. So the Postal Service has aligned itself with everyone’s All-American. To the question are they getting a good deal, my answer is yes.”

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Tour de France Stages

Prologue--Luxembourg, individual time trial, 4.34 miles (stage: Lance Armstrong, United States; overall: Armstrong)

Stage 1--Luxembourg to Luxembourg, 119.35 (Rubens Bertogliati, Switzerland; Bertogliati)

Stage 2--Luxembourg to Saarbruecken, Germany, 112.22 (Oscar Freire, Spain; Bertogliati)

Stage 3--Metz to Reims, 108.19 (Robbie McEwen, Australia; Erik Zabel, Germany)

Stage 4--Epernay to Chateau-Thierry, team time trial, 41.85 (Once; Igor Gonzalez de Galdeano, Spain)

Stage 5--Soissons to Rouen, 120.9 (Jaan Kirsipuu, Estonia; Gonzalez de Galdeano)

Stage 6--Forges-les-Eaux to Alencon, 123.69 (Zabel; Gonzalez de Galdeano)

Stage 7--Bagnoles-de-L’Orne to Avranches, 109.12 (Bradley McGee, Australia; Gonzalez de Galdeano)

Stage 8--Saint-Martin-de-Landelles to Plouay, 134.85 (Karsten Kroon, Netherlands; Gonzalez de Galdeano)

Stage 9--Lanester to Lorient, individual time trial, 32.24 (Santiago Botero, Colombia; Gonzalez de Galdeano)

July 16--Rest day, Transfer from Lorient to Bordeaux

Today--Stage 10, Bazas to Pau, 91.14

Thursday--Stage 11, Pau to La Mongie, 97.96

Friday--Stage 12, Lannemezan to Plateau de Beille, 123.69

Saturday--Stage 13, Lavelanet to Beziers, 106.02

Sunday--Stage 14, Lodeve to Mount Ventoux, 137.02

Monday--Rest day, Transfer from Mount Ventoux to Vaison-La-Romaine

Tuesday--Stage 15, Vaison-la-Romaine to Les Deux-Alpes, 140.43

July 24--Stage 16, Les Deux-Alpes to La Plagne, 111.29

July 25--Stage 17, Aime to Cluses, 88.04

July 26--Stage 18, Cluses to Bourg-en-Bresse, 109.43

July 27--Stage 19, Regnie-Durette to Macon, individual time trial, 31

July 28--Stage 20, Melun to Paris, Champs-Elysees, 89.28