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| POSTAL REFORM |
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| We are all aware that due to the advent and iterations of communication devices, particularly email, the 21st century has brought with it an ever decreasing amount of snail mail. According to the DMA’s Talking Points on Postal Reform, we learn that because of this ongoing decline, the USPS will lose somewhere around $17 billion on first class mail volume, which represents 27% of its revenue. In 1999, the New York Times reported that more than 2 billion email messages are sent throughout the US annually, which is more than half the number of pieces of mail the USPS handles. |
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| As resilient Americans, we are not unfamiliar with postal reform or becoming ever more sophisticated with the technology we create. In 1970, we experienced the Postal Reorganization Act of 1970, which was a major overhaul of the entire postal system on a national level. We have been experiencing double digit postal rate increases since the 1980’s, and have recently been occupied with the passing and signing of the Postal Reform Bill, H.R. 6407, in December 2006. |
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| Senators Susan Collins, Joseph Lieberman, and Tom Carper, and Representatives Tom Davis, Henry Waxman, John McHugh, and Danny Davis championed the postal reform bill and are largely responsible for it being passed in both the House of Representatives and the Senate. They understood the implications of postal reform and the affect it will have on the 9 million jobs and $90 million in commerce dependant on a viable postal service. Postal reform will play a critical role in ensuring that the USPS is able to deliver the reliable cost effective service vital to our community. |
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| March 2007 is slated for a final decision on proposed rates. May 2007 will see BOG approval and approximately one month later, we will see implementation of a new rate structure. |
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| Let’s take a look at what the new reform means to the direct marketing community: |
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 | There is now a rate increase cap that ties future postage increases to the rate of inflation. |
| There are more strict criteria regarding conditions for emergency increases. |
| The current proposed rate increase (average 5% - standard mail 43%, package services 86%) will not be affected by the new bill, and is still expected to go into effect this spring, not before May 6, 2007). |
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| Current proposed rate increases are expected to go into effect this spring. Marketsmith has anticipated these changes and has created a Piece Rate Calculator and a Piece/Pound Rate Calculator with which you may project the impact of the proposed rate increase on your mailing costs. Maximize the profitability of your catalog and/or other mailing pieces by recalculating the effect of higher postage, thus redefining the demand required for a page/list/mailing to breakeven. These simplification tools incorporate two additional presort levels: ADC (added to the current Mixed ADC) and the current 3/5 digit level, which will be split into 3 and 5 digits. Using the Circulation and Pre-Sort Levels Chart, the two calculators enable you to arrive at the overall impact the postal increase will have on your next year’s and future budgets. Go to www.marketsmithinc.com/postal_calculator.php. |
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| The biggest impact will be felt by catalogs with smaller circulations. They have fewer opportunities to achieve discounts in the presort levels under the current proposed new rate structure. Catalogs already mailing in the piece plus pound rate should not feel the increase as much with the per pound rates decreasing. |
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| Marketsmith suggests a few ways to experience less of an impact from the rate hike: |
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| Hone in on customers that purchase only from the web, but also those with purchase history not necessarily driven by a recent mailing. |
| Replace marginal web buyers with an email broadcast. Clearance items and inventory reduction/overstock sales usually work best with these customers. |
| Concentrate increased circulation during peak seasons/months which yield higher concentration of pre-sort (ADC/BMC) mail. |
| Postage is expected to rise from .$39 to $.42 per letter. This includes small numbers of order confirmations, sold outs, backorders and any other customer contacts made currently using a 1st class letter. Make all efforts to capture, with accuracy, email addresses, even if only for order confirmations. |
| Analyze marginal pages as usual. However, if you are already at the 3.3 oz. limit, there is a reduction in the pound rate surcharge. If you are over the limit, it might be worthwhile to analyze profitability by product and page. |
| If your most popular items are heavy, make sure you do not need to add additional flat fees to certain heavy or hard-to-ship items. |
| If your average product sold is less than 3 pounds and you ship a large percentage via USPS Priority Mail, consider reviewing your S&H charges prior to printing your next catalog. Consider slight increases based on where your average order size splits to achieve the highest gain. |
| Eliminate non-codeable addresses due to high probability they aren’t deliverable due to a missing element from the address. Perhaps your mail house could group them by value of the name. Examples: 0-6 month, 7-12 month, 0-12 month, multi’s or certain dollar purchase amount. |
| Open up a dialogue with your mail house about how they plan to handle the rate hike. We know from prior rate cases that not much time is given between the BOG approval and the implementation. Some mail houses do not receive necessary software in time due to lead times required. |
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| We suggest additional attention be paid to the following areas: |
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| Identify address or data entry problem(s) that cause the largest percentage of names to be non-codeable. Find the source and take measures to correct and make sure you have visibility to edits, drops and/or non-codeables on a list level. |
| Conversion problems when sent to mail house. |
| In-house or outsourced call center misunderstandings or need for additional training. |
| Website checkout page (name and address fields) or importing, versus in-house database limitations could be conflicting. |
| Make sure call center associates are taking time to verify current address for phone orders. |
| Ensure you are utilizing NCOA (National Change of Address) effectively so the address that is mailed is identical to the one on your database. |
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| Every mailer is different and every brand, unique. Marketsmith hopes the suggestions contained in this article, as well as our postage calculators, make life a bit easier in the days of postal reform. If you have questions about how the new postal reform will affect your business, or how we might help you maximize your marketing dollars, we are certainly at your service- please contact your Marketsmith representative at 973-889-0006. You may also ask the postal expert, Jerry Cerasale, Senior Vice President, Government Affairs of the DMA, who is directly in charge of the DMA’s contact with the Congress, all Federal Agencies and state and local governments. http://www.the-dma.org/cgi/mtsesdisp?session=CCT01070008 |
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| PRC REVERSES THE USPS’S POSITION |
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