Postal reform: a rate hike every May

Apr 01, 2008 9:30 PM  By

The postal reform bill passed in late 2006 does mean that rate hikes should be much more manageable, since they are tied to the CPI (Consumer Price Index). The 1% average postal rate increase for Standard Mail Flats — the category affecting most catalogers — scheduled for next month is proof of that.

But according to a recent postal Webinar, reform also means that there will be a rate change every May; mailers should not expect the lighter increase on flats to be a trend; and the U.S. Postal Service is interested in any NSA (negotiated service agreement) proposals, encouraging mailers to think “outside the box.”

Jerry Cerasale, the Direct Marketing Association’s senior vice president for government affairs, says he expected annual increases since the CPI cap is an annual one. “With the rates rising in May, an every May increase is not a surprise. We did push hard to have a late spring/early summer date due to the mailing patterns of our members.”

The Postal Service will be adjusting prices annually “because the new law requires predictable price changes,” says Michael K. Plunkett, USPS’s manager of pricing strategy. “Annual price changes that take place the same time each year give our customers that predictability.”

This will result in generally smaller annual price changes that enable the agency’s business customers to better plan and budget for their mailings, Plunkett says. “We are moving toward the industry standard. Most other shipping companies adjust their prices every year.”

Why will the annual postal increases hit each May? “Not long after the passage of the new postal law, we queried many of our customers and other industry stakeholders regarding the best time for price adjustments,” Plunkett says. “While there was a range of responses, many customers indicated that May was a favorable time. It avoids having to make changes during the fall mailing season or the holiday period.”

What’s more, he adds, the law requires the Postal Service to give only 45 days notice of price changes for mailing services (market dominant) products. “We are committed to providing twice that notice each year — 90 days notice. So customers can expect us to make an announcement every February about how prices will change in May.”

After last May’s average 20%-40% postal increase for catalogers, the USPS announced Feb. 11 that rate hikes for Standard Mail Flats would stay below the CPI. While the scheduled increase for Standard Mail Flats as a whole is about 1.67%, for the non-carrier-route flats — the category that experienced the largest increase last year — the hike is less than 1%, or 0.86%.

With Standard Mail flats, the Postal Service considers a number of factors when determining the appropriate price adjustments, Plunkett notes. These include impact on customers, postal costs, compliance with regulations, and volume effects.