Value Mail

Value Mail

Valpak finds itself at a crossroads

with a likely new owner, a new plant and the impact of online coupons.

companies by Dave Szymanski | Tampa Bay Editor

About a year after it completed its $200 million production plant in St. Petersburg, Valpak, the 40-year-old Largo company that produces the blue envelopes filled with coupons, found out its parent company wanted to sell Valpak.

Atlanta-based Cox Enterprises, hired Goldman Sachs to find a buyer. Goldman people have been to Florida to tour the new 470,000-square-foot plant, which can fit 13 Boeing 747s.

This does not surprise Bill Disbrow, 52, Valpak's chief executive officer and a certified CPA.

"Cox is a $15 billion company and Valpak has $270 million in revenues," Disbrow says. "We're the only business they have that is like this. Plus, we are such a small piece of the overall pie, it doesn't make sense to remain as we are."

While a sale is in its future, Disbrow and his staff are tending to the daily operation of Valpak, improving its performance, figuring out the role of digital coupons and migrating the final 20% of production to the new plant.

Disbrow was born in Detroit and grew up in Atlanta. He served as vice president of the newspaper division at Cox before coming to Largo to be president of Valpak in 1991. In 1997, he became CEO.

Revenues have grown each year. Despite the rise of the Internet, direct mail remains viable because customers still respond to it, Disbrow says. "The whole field of direct marketing has been growing a lot and we've been a beneficiary of that," he says.

The strategy

Valpak's strategy is to focus on customer responses and continue to hone its effectiveness as a lead-generation tool through its paper coupons and electronic coupons at Valpak.com. It also provides online coupons through Google Maps.

"We really have to understand the return on investment," Disbrow says.

Its biggest challenge to date has been its new production plant. Starting with a blank paper, Valpak has come up with a manufacturing facility that allows the company to double its volume and cut its costs significantly. It is about three-quarters of the way through that implementation.

Its second challenge, going forward, is figuring out how direct mail and the Internet work together.

Customers can print coupons off of Valpak.com. As business communication goes more mobile, that will also have an effect on large national players, and eventually, local businesses.

"We need to make sure we're positioned to help them use local Internet better," Disbrow says.

The greatest lesson Disbrow has learned at Valpak is listening - to employees, customers and suppliers.

"There's a lot you can learn from your folks," Disbrow says. "For me, I'm getting better at communicating. The CEO needs to be as clear as possible so folks can understand what we are trying to accomplish. If I miss that opportunity, I won't do a good job."

Targeting customers

Valpak is a franchised organization, with about 200 franchisees across the country. That gives it a local direct-marketing sales force, which can also sell other products that are digitally based.

It has a number of competitors including large coupon distributors such as Red Plum and Valassis, plus a lot of mom-and-pop competitors as well as coupon magazines.

Valpak relies partly on its experience as a guide. The company estimates that at least 90% of the adults getting its envelopes open them. It works with more than 65,000 national and local advertisers.

"We are 40 years old, so there is a lot of industry knowledge in what does and doesn't work," Disbrow says.

Valpak buys marketing data and lists from companies such as Simmons and Scarbourough, overlaying it with its own information. It reaches more than 45 million households a month. About 10,000 households equal a neighborhood trade area.

It takes demographic information, such as home values and ethnicity, and compares markets so it can tell if a neighborhood in Sarasota should get some of the same coupons as one in Iowa.

The return on investment for clients is predicated on how much their customers will spend with them. Many times, they may involve big-ticket items, but sometimes it can be as inexpensive as pizza, especially if the target customer orders it a lot.

"Pizza places consider a customer loyal if he orders pizza from their shop four out of 10 times," Disbrow says.

Valpak can print four different coupons with four different phone numbers, to see which one drew the best.

"The business is all about accountability, what worked, what didn't work," Disbrow says. "There's always a continuum of testing. Clients adjust their offer a little bit. It's a process, not an event."

The future

One year from now, the future of Valpak, which has had three owners since its founding in 1968, will likely be as a lone company again. Cox bought it in 1991.

"One year from now, we'll be an independent company, if I'm a betting man," Disbrow says. "Having the same parent for 17 years is a long time."

The impact of digital information will also be a constant trend for the company and the industry. The determining factor will be how cost effective the coupon campaigns are and how many customers the different approaches attract. Email is convenient. But spam clogs computers. And people aren't always online.

"No doubt, things are going more to the Internet," Disbrow says. "Mass media started with papers, then radio, then TV. Each time we added a medium, another media didn't go away."

Valpak expects to put coupons on mobile telephones and PDAs and develop search engine marketing products, too.

Someday, a customer may use his cell phone to find a map, find a local pizza restaurant and find a Valpak coupon. He then will go into the pizza parlor, show the cashier the digital coupon, which the cashier will scan into the checkout computer, Disbrow says.

The effectiveness of advertising and coupons is measureable and Disbrow believes that despite the Internet's global influence, it will not gobble up all couponing. The industry will change, though.

"We have to look at it from the advertisers' perspective," Disbrow says. "I don't care where it's coming from, as long as the people are coming in the door."

REVIEW SUMMARY

Company: Valpak

Industry: Direct mail marketing

Key: Offer coupons to the right customers through U.S. mail and online.

Beyond meetings

Valpak is not unlike other large Gulf Coast businesses. Once a month, the CEO gathers his managers, supervisor level and above, for an update.

There is the CEO speech and the question-and-answer session. But do all the questions really get asked? Valpak CEO Bill Disbrow knows they do not.

Why? Not because there isn't time. Because people don't want to look uninformed in front of their peers.

"In those meetings, I don't think real communication does happen," Disbrow says. "I don't go in there expecting all questions will be asked. When you have 100 people in a room, you never get open communication. If all you do is one big meeting a month, you miss the boat."

That's why Disbrow walks around the company's Largo headquarters and St. Petersburg plant, trying to see all 1,400 employees. Communication does not mean scheduled meetings. "We tend to be pretty informal," Disbrow says.

In 2001, when anthrax envelope contamination issues came to light, Valpak started the monthly managers meetings. "It was a scary time," he says.

The managers meetings are really for letting the employees hear what Disbrow is saying and getting more comfortable with him. That way, they are more comfortable to approach him one-on-one or in a smaller group.

"I want people to be very comfortable, to see that this guy puts his pants on the same way as they do," he says. "People don't ask questions. They may send an email."

"I better have my butt around talking to people," Disbrow adds. "You know the open door policy at some companies? About 70% of the people aren't going to walk in."