Are Postage Rates on the Way Up?

Are Postage Rates on the Way Up?

Summary: 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.

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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!

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13 comments
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  • RE: Are Postage Rates on the Way Up?

    Eliminate Saturday delivery? But I get so many important bills on Saturday that I need to meditate on, so that I will have proper motivation to get up early on Monday and go back to work.<br><br>Seriously, I get very little mail that is of any immediate need for delivery. I pay most time-sensitive bills on line, anyway, where I also see the statements.<br><br>I advocate they go to home delivery every other day. One route is MWF, the other is TRSa. They already seem to not have any urgency in picking up incoming mail. Even when I go to the post office to deposit in person, in by 2 PM and the next pickup is 6 am! If some mail is really URGENT, the sender pays an extra dollar, and the mailman drives up and rings your doorbell on whatever day they get it. <br><br>This would cut labor costs by 30-40% (my estimate), and I'll bet that labor is 80-90% of their operating cost. (Of course, maybe they could also cut back on both their advertising and their Hawaiian executive conferences.) I'd wager that there is little marginal return in their TV advertising. Just include more of their circulars with the junk mail they are already delivering.
    phendrick
    • RE: Are Postage Rates on the Way Up?

      Further, I agree with "Doc": They need to find ways to lower their costs, so they can LOWER their rates, not raise them. How about "3 for 2" Tuesdays? Every third letter is free.
      phendrick
  • I like Saturday Delivery - it's one of life's pleasures

    I like getting mail on Saturdays. It's a service I am willing to pay for. I also, in general, like getting mail rather than 'service company' deliveries that are great for business, but don't work for home delivery very well. Which is right where the P.O. takes it in the belly. You know, I got to live my dream once, right out of Eurdora Welty's short story, and I lived in a Post Office. Perhaps the most magnificent years of my life.
    jakazar
  • RE: Are Postage Rates on the Way Up?

    It seems like USPS is only looking at cutting expenses... they should also be looking for ways to INCREASE REVENUE.

    In 1981, USPS "owned" the overnight delivery market, Express Mail. Over the years, they've given it away to FedEx and UPS, and in many areas no long even offer Sunday or holiday delivery, once a major selling point.

    My opinion is that USPS should restore Express Mail to the standard it set in 1981, add real time tracking, not the end of business day snapshot they offer now, and raise the price up to compete with FedEx and UPS.

    Further, they should make Priority Mail a guaranteed two- or three-day service, include real time tracking as part of the program, and price it to compete (maybe slightly lower) with FedEx's two and three day guaranteed service.

    Full Disclosure: I worked for USPS for over 30 years and now own a pack and ship store which offers FedEx and USPS services... my FedEx sales are 2-3 times that of my USPS sales, in part because of the date certain delivery guarantee on FedEx shipments and the real time tracking. People want to be able to track their letters and packages!
    LateNightLar
    • RE: Are Postage Rates on the Way Up?

      @LateNightLar --- All Excellent suggestions from someone with experience in the matter.
      I'd make one more - when the "Postal Rate Commission" is taking testimony UPS, FedEx, and other "competitors" of the USPS should not be allowed to testify. Seems like they're always getting the Commission to approve rates that will secure THEIR position as "lower cost" competitors to the USPS. Nothing is going to secure the position of the USPS as a "price competitive" pre-eminent "package delivery" service while FedEx and UPS are able to get by with treating their delivery-people as "captive" ( independent ??? ) contractors while the USPS has "true" employees.
      IAFarm2
  • RE: Are Postage Rates on the Way Up?

    What other direction might they be headed?
    DrDale
  • RE: Are Postage Rates on the Way Up?

    Raise cost of bulk mail. My congressman can send constituent letters for something like 6 cents in postage. Bulk mail is way too cheap to account for what it must cost when compared to first class. I don't believe there is that much savings, about 30-35 cents, for pre-sorting the items. No way. And if there were less bulk mail, is there a problem with that?
    john_sullivan@...
  • Recognize a bargain when you see one.

    Our postal rates are the lowest in the civilized world and our system is the most reliable considering the size and extent of the covered area. If you look at the benefits to the general public vs. the cost, you would realize that the US Mail is one of the greatest bargains we have.

    That said, the USPS still needs to invest and look for ways to modernize and gain efficiency. They have done a great job considering they get no tax money but still have to kowtow to the politicians by doing things like building Post Offices in places like Moose Knuckle, Idaho and Old Dime Box, Texas.
    terry flores
  • RE: Are Postage Rates on the Way Up?

    do away with week day delivery and have every thing delivered on saturday & sunday
    redlandscv
  • RE: Are Postage Rates on the Way Up?

    I have been using less and less of the post office because of the past rate hikes. The only things I mail are those that for some reason or another cannot be faxed or emailed. They may raise rates but that does not mean they will increase revenue. My guess is that will make them lose more money because of all the people who quit sending mail.
    web30guy
  • Postage rates

    The postal rates should not exceed 2 to 3 percent. More over they should effectively communicate with their vendors to lower the prices of goods and services by 2 to 3 percent.
    kritik1
  • RE: Are Postage Rates on the Way Up?

    Every time Doc posts something on the U. S. Postal Service he gets many thoughtful comments. It seems there is a lot of concern out there about eliminating Saturday delivery, and several people agree that the USPS should concentrate on raising revenue, not just cutting costs. But Doc knows they are doing that as best they can ??? there have been some "specials" for bulk mailers in recent months. Every business has to weigh supply and demand. Seems like maybe the USPS could do a little better job on that front. Maybe it's time to take off some of the rate regulations imposed by Congress and let the USPS stand on its own, free to set its own prices. Then the market would ultimately decide the value of the service.
    DocuMentor (Doc)
  • Look Globally

    First class postage in Japan has been about $1.00 for a long time US rates are under global averages.
    hinkel@...