Postal Rate Crisis: What You Need to Do

Industry associations are urging their members to fax the U.S. Postal Service’s Board of Governors (BOG) this week letters urging the board not to approve of the recommendations of the Postal Regulatory Commission (PRC) regarding the pending postal rate changes.

Because the BOG can make its decision as early as March 8, time is of the essence. And the BOG does not always simply “rubber-stamp” the PRC’s recommendations, particularly if the governors are made aware of how some of those recommendations may lead to a decline in mail volume. Therefore, your letters to the BOG can make a difference.

Why the need?
When the PRC issued its recommendations last week, a review of the summary suggested that its changes to the rate case introduced in May 2006 would benefit most mailers. The PRC called for an average rate increase of 7.6%, less than the Postal Service’s proposed 8.1% hike. It also suggested raising the price of a First Class stamp by two cents rather than three.

But once trade groups and suppliers managed to wade through the complete 700-page PRC recommendation, they realized that, as Direct Marketing Association president/CEO John Greco Jr. said in a release, “this is a case where the devil really did prove to be in the details.” The PRC’s price recommendations for flats, for example—the category affecting most catalogers—is appreciably higher than the increase originally proposed by the Postal Service, according to the DMA. For flats weighing less than 3.3 oz., the PRC is recommending an increase of roughly 20%, instead of the originally proposed 9%-12%.

In a letter to members of the Association for Postal Commerce (PostCom), president Gene Del Polito noted, “Those who mail flats, particularly flats that qualify for the minimum per-piece rate, have taken it on the chin. Those who mail what are now going to be called Not Flat-Machinables are getting killed.” Not Flat-Machinables (NFMs) are Standard mail pieces that can’t be run on USPS flat machines and so don’t qualify for automation discounts. But some pieces that do currently qualify as automatable flats will be reclassified into this new, costly category.

What to do
PostCom, the New England Mail Order Association (NEMOA), and the DMA suggest faxing letters to:

The Honorable James C. Miller III
Chairman, Board of Governors
United States Postal Service
Fax: 202-268-5472

The DMA also suggests faxing a copy to:

The Honorable Dan G. Blair
Chairman, Postal Regulatory Commission
Fax: 202-789-6886

And NEMOA advises e-mailing copies to:

Postal Chairman Miller’s secretary at wendy.a.hocking@usps.gov

Postmaster General Jack Potter at jpotter@usps.gov.

In his letter to PostCom members, Del Polito advised, “Whatever you do, DON’T tell the Governors that you’re just upset about being asked to pay more postage. Make the impact on your business clear. Be sure to explain that since the recommended increases are substantially higher than even the Postal Service proposed, you are going to take steps to reduce your use of the mail. You don’t want to talk about percentage rate increases. You want to talk about dollar increases in cost per thousand.”

A sample letter
In an e-mail to its members, NEMOA included a template for a letter:

Honorable Chairman Miller,

I am contacting you to outline how the new Standard Mail rates recommended by the Postal Regulatory Commission will hurt both my company and the USPS. The recommended rates are almost double what we expected, and the new increase will require that we reexamine our catalog circulation with the objective of cutting postage costs. I expect that these new rates will cause us to cut our budgeted circulation, and the net effect will be less revenue for the Postal Service. I am asking that you consider the impact of these rates on catalog mail volume and reduce the increase on Standard Mail Flats.

We mailed XXX catalogs in 2006 and paid $XXX in postage. We expected to increase our circulation by XX% in 2007. Our 2007 postage budget is based on the Standard Mail rates proposed in May 2006, and this was a _X% [you can use whatever percentage you planned on – should be around 10%] increase over current rates. Our budget calls for postage to increase $XX this year. Under the rates proposed by the PRC our postage is now expected to increase X% [you can put in the percentage that your printer will help you calculate, or look at the new rate increases in the press and estimate – the percentage increase should be somewhere around 20%], so our postage would increase by $XX in 2007. The proposed PRC rates are such a large and unexpected increase that we will be forced to reexamine our circulation and I expect that some of our marginally profitable catalogs will now fall below breakeven. As a rough estimate at this early date, I expect to cut our budgeted circulation by XX% [make your best guess here] if these new rates are implemented.

The rates proposed by the PRC are more than five times the rate of inflation, about twice the rates proposed by the USPS, and are being proposed well after our budget has been set. They will make some of our planned circulation unprofitable, so we have no choice but to cut out those unprofitable catalogs. The net effect will be a loss of volume for the USPS, and the loss of volume will only grow worse as the full effects of the rates are felt in 2008 and beyond, along with any new rate increases. I expect the proposed rates to reduce mailing volume throughout the catalog industry, resulting in less prospecting names for 2008, and the risk of a downward spiral in Standard Mail volume for the USPS. In addition to negatively impacting our catalog circulation, this postal increase will significantly affect our company’s profitability and future employment levels.

It is critical that you take action on this matter and reduce the increase on Standard Mail Flats.

Sincerely,

Tools for you
MULTICHANNEL MERCHANT produced two Webinars that look at the effects of the pending postal changes on mailers. You can access those Webinars for free, on demand, at multichannelmerchant.com/events/webinars/rate_update/ and multichannelmerchant.com/events/webinars/rate_case_2006/.

Marketing agency Marketsmith has created a postal calculator to help direct marketers in calculating their postal costs should the rate case be approved. You can access it at www.marketsmithinc.com/postal_calculator.php.

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