EGRO achieved an ROI 8 years earlier than planned, but how?
Based in Frankfurt, Germany, EGRO is a private company distributing advertising leaflets and newspapers, with a coverage of 1.4 million households across Hessen.
Established over 50 years ago, the company is part of a group covering Berlin, north Baden-Württemberg & Nordrhein-Westfalen which reaches over 5 million households, and has over 140 employees and 7,000 delivery staff. Another wholly-owned geomarketing company based in Bochum provides the data for advertisers to accurately target their unaddressed mail campaigns.
From Manual to Automated Collation
In 2013 EGRO decided to move away from collating sets manually, by investing in its first Duplo Esper Collator, in order to increase the quality and service of its distribution. Three years later and EGRO has three complete Duplo lines, with one machine as back-up, which together collate 380,000 sets/week. The machine has to be fast to set up and change over from one set combination to the other, since in an average week EGRO handles 600 different set combinations and up to 200 different types of documents.
The percentage of sets produced on Esper Collators v sets collated manually, increased from 30-45% in 2015 to around 60% in 2016, producing an overall increase in the set integrity/quality of its total distribution.
Production Flexibility is Key to Success
60% of EGRO’s business comes from national advertisers, and 40% from local businesses. A typical set can consist of up to 21 different documents, but the average is about 7. One of the documents is always used as a wraparound, which holds the set together and makes it easy for the deliverer to distinguish between each set. Ideally EGRO uses its own newspaper as the wraparound.
The order in which sets are produced is either dictated to by set type (long runs only) or more commonly, by route. Each week production starts on Wednesday afternoon and runs throughout the night, sometimes finishing as late as 6.00am Sunday. Although EGRO purchased an “off-the-shelf” IT system, which they then developed and customised to suit their business in order to optimise the order in which jobs are produced, production plans often have to be changed during the week because documents from some advertisers can arrive only one day before delivery to households. Consequently it is the Duplo Esper Collator’s quick set-up time which gives EGRO its production flexibility, and consequently its competitive advantage.
Faster ROI Than Planned Fuels Further Investment
The average net productivity per Duplo line is 2,500 sets/hour, and gross productivity can be as high as 4,000. EGRO employs nine production teams in total, usually consisting of 4 operators per team, mostly women.
At the end of 2016 one of the group’s newspapers, which carries advertising leaflets inside, ceased circulation, so in order to take up the shortfall EGRO had to increase weekly production on the Esper Collators to 480,000 sets. To achieve this they recently ordered a fourth complete Duplo line, which started production in January.
How Advertisers Were Persuaded to Accept One Delivery Per Week
EGRO used to offer advertisers delivery on any day of the week, and consequently could visit the same households up to 3 times a week. However, the introduction of the minimum wage in 2015, and stricter government rules on how data on employees’ activities is collected, meant that this was no longer cost effective. Thus advertisers were given the choice to either be part of a set delivered once a week at the weekend, or pay a premium price (2.5 times more expensive) for delivery on a particular day, which EGRO would then outsource. In the end virtually all advertisers accepted the weekend delivery, and today EGRO employs 1,500 deliverers to cover the Frankfurt area.
When to Collate Automatically v Manually
EGRO uses several factors to determine whether it is best to collate automatically or manually:
- Some documents always arrive too late eg the Darmstadt newspaper, so collating must be done manually by the deliverers themselves.
- There are too many documents per set for the deliverer to collate manually in time, prior to delivery to households, so these sets must be collated automatically on the Duplo Esper Collators.
- It is logistically too difficult for the deliverer to collate manually eg he/she lives in a high rise building.
- The deliverers’ hourly rate is too high to cover the cost of the extra hours spent collating manually.
- Set integrity is too important, to trust the deliverer to collate sets manually.
Managing Director Martin Jacobi believes his door-drop distribution business will continue long term, despite the growth in digital media.
“Unaddressed mail volumes in Germany have remained constant over the last few years, and demand from households continues to be high. Indeed, they are a strong influence in purchasing decisions, particularly in rural areas where the population is older and more frugal, and has more time to make purchasing decisions, and retail outlets are further away from households, which requires greater planning. Advertisers who have abandoned unaddressed mail in the past in favour of digital media, have eventually returned, after they witness a decline in sales.”
In fact Mr Jacobi believes digital media is driven by print media. Meanwhile like many other European markets, he forecasts that unaddressed mail documents in Germany will become thicker, and continue the trend of using more lightweight paper stocks, and the business will become more seasonal.Image
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