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USPS Postage Increase and Direct Marketing: A Silver Lining

Feb 12, 2014, 10:21:22 AM

Postage rate increases went into effect on January 26, which affect the price of a number of mail pieces. Across the board, rates increased 6 – 7%, making this the largest postal increase in over a decade.

This recent hike in rates is known as an exigent increase, which the United States Postal Service proposed last year in an attempt to offset staggering losses the agency has faced in recent years. First-class mail volume has seen a significant decrease since consumers upped their usage of electronic statements and bill pay. The country’s economic downturn has also contributed, though more notably to standard mail volume, which began to drop as marketing budgets were slashed. In addition to these factors, a significant part of why the USPS has faced such financial suffrage is due to a congressional mandate for the agency to pay $5 billion annually to fund health benefits for future retirees.

The Postal Regulatory Commission has ruled that this increase can only take effect for two years, during which the USPS can expect to gain $2.8 billion from the postage hikes. The Commission says this duration of time is adequate to help the service recover from losses due to the recession. In other words, any suffrage faced due to consumers increasing their Internet usage for mailing alternatives is not acknowledged as being a justifiable reason to increase postage prices permanently.

Of course, any businesses in the publishing industry as well as direct mail marketing are impacted in one way or another by these increases. But is this really a negative thing?Noah_Webster_United_States_postage_stamp_1958

The answer is no, for a variety of reasons. Because direct marketers rely heavily on the USPS to operate their direct mail businesses, USPS solvency is a necessity. It’s not as though those in the industry can just go elsewhere to reap the same services offered by the USPS. That’s not an option. At the root of this, the fact stands that direct marketing professionals are long-term business partners with the postal service, so the latter’s stabilization, in the inevitable form of the recent postage increases, is to the industry’s benefit.

After all, the USPS and direct mail are still alive and well, and we want to keep it that way. If the question of the postal service’s viability has been clouded with any doubt, a look at recent figures should dispel that uncertainty. For instance, in 2012, 160 billion pieces were mailed, 65 billion dollars in revenue were generated, and 40% of the world’s mail volume was handled by the USPS. In an average day, 22 million mail pieces are processed each hour (that’s 366,000 by the minute), and 528 million pieces of mail are processed and delivered during the entire day—262.4 million of those being advertising mail pieces. On the web, each day 1 million people visit usps.com, and about $809,210 in online stamp and retail sales are generated on the site daily.

So we can take comfort in knowing that the USPS isn’t going anywhere anytime soon. The question now, is how do you work with the cost increases, which will undoubtedly impact mailing volume and strategy, so it won’t negatively impact your bottom line? The answer lies in improved efficiency, and a further refinement of the target-specific approach.

For direct mail marketers, this is a golden opportunity to freshen up content and improve analytics. You have to be smarter about the way you segment your mail. Invest your marketing dollars only on your best performing segments. If you don’t know those yet (and even if you do), be sure to perform testing to determine your sweet spot. If you employ this method, you may not need to mail as large of a volume, but you will see equal or better results, and a stronger ROI.

So although nobody enjoys experiencing rate increases, when you take everything into consideration, there is a silver lining here for direct marketers. You not only get to maintain your relationship with a tried and true mail partner as they now have the realistic ability to sustain their services, you also simultaneously uncover the opportunity to run your business in an even more efficient, innovative fashion.

 

Nadia Dahdouh

Written by Nadia Dahdouh

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