1. B2C International – Current possibilities for DM-based distance selling Direct Marketing Conference – Budapest, 9 th Nov. 2006.

2.  International Business Unit – at a glance  The International Business Unit has been created in the year 2004 as a business unit of the Hungarian Post Office Ltd. and is responsible for all international inbound and outbound mail activities in Hungary and abroad  40 Million pieces of mail handled in 2004  375 staff members  Turnover of 35 Million EUR in 2004  REIMS membership since January 2005  Continuing growth by  Partners abroad  Proactive sales activity Presented at the 1 st DM-conference 2005, Budapest

3. Source; McKinsey analysis Production era Sales era Marketing era Relationship era  "A good product will sell itself!"  "Make them buy!"  "The customer is king. : Find a need and fill it!"  „Must know the Customer!"  WW I  WW II  Today Direct Mail : key in developing relationship  Increased demand for targeting of customers

4.  Goals of Magyar Posta’s International Business Unit GOALS :  To promote the growth of Direct Mail in Hungary  To increase the Direct Mail participation in the Advertising Market  To increase the contribution of Direct Mail to the Postal Business  To offer complete and integrated service solutions

5. Modul 1  4 modules (M4) for developing DM activity Development of DM products -Unaddressed DM -Addressed DM Development of distribution logistics for DM - Direct Entry (bilateral agreements) - Co-operation agreements (sales & distribution channels) Development of inbound DM - Sales co- operations - Direct sales (mail order companies) Development of outbound DM - Direct Sales - CEE Competence Center (international mail & DM ) - Alternative sales & distribution channels (local presence ) Modul 2 Modul 3Modul 4 2005 - 20062007

6.  IDM (standard product) & DM (personalized product)  Minimum Volume requirements is 500 items per mail shot, per customer and per destination country  The items should have the same sender, weight dimension and content and being addressed to different receivers  There is no maximum volume required  There is no pre-sorting requirement  Maximum weight per item 2000 grams Deliverable into the REIMS-countries Based on the cooperation with Swiss Post International Magyar Posta is present with DM products in 17 countries among them USA !

7.  Target markets of active Direct Entry service Magyar Posta Active in Cooperation with PPOs in AT, CZ, DE, IT, PL, SI, SK, Cooperation with SPI (Swiss Post International) in : AT, DE, CH, UK, USA and REIMS countries Planned inHR, RO, BG, Magyar Posta’s European target markets are beside AT, CH, DE and IT the Vishegrad-countries : CZ, PL, SI and SK, and new EU-candidates : RO + BG.

8. Direct Entry PPOs Letter International (TDs) Direct Entry Alternative  Extension of the existing Sales & Distribution Channels Direct Access / Direct Entry

9.  Criteria for DM companies Cross Border Mail Order Business  Market size  Level of economic wealth  Economic growth rate  Legal conditions  Consumption habits  Development of DM  Reliably delivery service (cost and quality)  Response rate  Availability of addresses  Reliable payment service

10.  Market size (mio. inhabitants) and trend of urbanization An average of 60-75% of the population is living in urban areas - excepting Romania, where the partition lies by 50% to 50%. COUNTRYPOPULATION Bulgaria7’700’000 Czech Republic10’200’000 Hungary10’000’000 Poland38’200’000 Romania21’700’000 Slovakia5’400’000 Slovenia1’990’000 TOTAL95’190’000 source: Study from PriceWaterHouseCooper, 2005

11.  Demographical surrounding While the habitants are getting averaged older, the birth-rate is slightly declining, which will lead to obsolescence in the near future. % of population199820032008 0 – 14 years old18.5 %16.3 %14.6 % 15 – 64 years old68.1 %69.5 %70.6 % over 64 years old13.4 %14.2 %14.8 %

12.  Socio-economical factors While the rural population still lives in traditional manner, the urban population are geared to the western European lifestyle. Wealth is mainly found in urban areas. On the country side people often can’t afford more than they need for a living.

13.  Reliable payment service Country Mode of paymentMoney transfer in days PolandCash on delivery3 - 5 Czech RepublicCash on delivery2 - 3 HungaryCash on delivery2 - 3 Slovak RepublicCash on delivery2 - 3 SloveniaCash on delivery2 - 3

14.  Reliably delivery service (cost and quality)

15.  Availability of addresses CountryData protection law Data protection law in Eastern Europe Business addresses / Quality Private addresses / Quality Lifestyle addresses / Quality PolandYESVery strict YES / good Czech RepublicYESStrict YES / good YES / --- HungaryYESVery strict YES / goodYES / badYES / --- Slovak RepublicYESStrict YES /goodYES / badYES / --- SloveniaYESStrict YES / goodYES / badNO

16.  Attitude toward unaddressed DM of the Hungarian population First place : Rate of acceptance of the unaddressed DM sent by different FMCG- warehouses is of 58 % Second place : Different advertisement newspapers have 52 % rate of acceptance. Source : Gfk Hungária

17.  Rate of efficiency of the received unaddressed DM No. receivedNo. read Activating for purchase Average FMCG warehouses (N=942) 10,155,571,67 Advertisement newspapers (N=835) 5,663,120,61 Other newspapers (N=579) 2,091,30X Flyers (N=820) 7,523,720,71 Efficiency received/ read Activating effect read/induced purchase Efficiency received/ induced purchase (%) FMCG warehouses (N=942)55%30%16% Advertisement newspapers (N=835) 55%20%11% Other newspapers (N=579)62%XX Flyers (N=820)49%19%9% 61% of the population has made a purchase induced by an unaddressed DM source : Gfk Hungária

18.  Attitude toward addressed DM of the Hungarian population 2,31 1,59 1,94 0% 2% 27% 61% 36% 25% 18% 34% 38% 21% 24% 10% 0% 3% 0%20%40%60%80%100% Postai (N=476) E-mail (N=72) SMS (N=88) NT/NVegyáltalán nem kedveli (1)nem kedveli (2)kedveli (3)nagyon kedveli (4) ÁTLAG 48% 48 % of the Hungarian population is accepting DM placed in their postbox 32 % of the population consider the DM as a source of information Why ?

19.  Rate of efficiency of the received DM Efficiency received/ read Activating effect read/induced purchase Efficiency received/indu ced purchase (%) Post (N=476)69%34%24% E-mail (N=72)31%10%3% SMS (N=88)84%16%13% The most efficient Direct Mail is considered that delivered by received by post. 69% from receivers are reading the DM, and 34 % from those who have read the DM are purchasing the advertised service / product. rate of efficiency = 24 % Source : Gfk Hungária,

20.  Target group for DM – Hungarian market potential buying power traditional orientated westward orientated urban population rural population Target population Hungary: 2 137 540 Market volume: 513 000 females (considering the 24 % response rate) Target group  Sex : female  Age: 30 – 59 years old  Education: medium to high  Personal stance: open minded, westward orientated  Living household of more than 3 persons  Location: City and agglomeration  Buying power: medium to high According to the analysis, those who have bought something on influence of DM – the following target-group is overrepresented : Group of agesfemale 30 – 39681 228 40 - 591 456312 Total2 137 540 Source: Hungarian statistical Almanac, 2005

21.  Advantages through International Direct Mail  Faster entry to new markets.  Lower market entry and market entry barriers (local look).  Lower cost vs. Local presence.  Central and Eastern European people have a positive attitude towards DM.  DM in Central and Eastern Europe grows yearly in the two-digit area.

22. We are ready. You are ready ?

23.  Modul no. 4 Modul 4 2007 It will be presented at the 3 rd DM-conference 2007, Budapest Development of outbound DM - Direct Sales - CEE Competence Center (international mail & DM ) - Alternative sales & distribution channels (local presence )

24.  Thank you for your kind attention ! LEVENTE LÁSZLÓ Hungarian Post Office Limited Sales Executive International International Business Unit H-1540 Budapest, XII.,Krisztina krt. 6-8 Phone : + 36 – 1 – 487 – 1775 Mobile : +36 – 70 – 466 -1468 Fax : +36 – 1 487 – 1835 E-mail : Laszlo.Levente@posta.hu