With most businesses Doc's been involved in, when sales go down you make every effort to lower your prices to try to get the volume back up. Combining a decrease in volume with price increases is often a fatal mistake.
That's why Doc is concerned about the United States Postal Service and its plan to raise postage rates in response to a lower volume of mail. Higher postage rates will more than likely translate into even lower sales as magazines, catalogers, and other direct-mail users look for ways to cut back on expenses. It surely isn't a given that volume will remain constant.
Here's a small preview of what the USPS is proposing:
- A 2-cent increase in the price of a First-Class stamp to 46 cents.
- A 2-cent increase in the price of a postcard to 30 cents.
- An 8% increase in mailing costs for periodicals, a 5.1% increase for catalogs, a 23% increase in for standard mail parcels, and a 7% increase for media/library mail.
- The introduction of a Reply Rides Free incentive to encourage the use of bill and statement mailings for marketing messages. For qualifying customers, a 1.2-ounce piece will be charged the 1-ounce price if a reply envelope or card is included in the mailing.
- The introduction of a Saturation Mail/High Density incentive program to provide rebates for volume growth for standard mail and nonprofit mail letters and flats.
Doc's glad to see a few incentives in the proposal to reward large-volume mailers, but there is no denying that for most companies the net result of all these new rates will be an increase for the same volume of mailings.
You may call me a dreamer, but in many businesses when sales go down you find a way to cut costs, not raise prices. And the USPS is, in fairness, also looking to cut costs, mostly by eliminating Saturday mail delivery.
But is that really going far enough? If mail volume is down as much as the USPS is claiming, there may be a systemic problem that eventually has to be addressed: the drop is permanent and volume may not come back.
One thing for certain – if prices go up enough, then volume will drop even more and the whole cycle will repeat itself over and over again until only those who absolutely have to will be using the mail as a marketing and communications vehicle.
So let's be careful not to price direct mail so high that moving to electronic communications is the only viable option. Doc prefers choice in the marketplace and encourages the USPS to consider the competition very carefully before raising rates as the solution to a budget shortfall. Maybe now is the time to have a big sale!