USPS Losses Raise Postal Rate Concerns

By | November 14, 2008

The USPS has just announced the loss of some $2.8 billion over the fiscal year that ended on September 30. This loss occurred despite a decline in mail volume of some 9.5 billion pieces and substantial efforts to trim costs and operate more efficiently. To be sure, the spike in fuel costs had an impact, but somehow I don’t think that was the tipping point that led to the loss. What this all but ensures is a possibly significant postage rate increase in 2009.

Depending on its size, this increase could have a profound effect on many mailers –and their customers. A bank mailing out a million statements every month is spending over $350,000 a month on postage, so any CFO worth his country club membership is going to be looking at that as place of potential cost reductions. In fact, many if not most, banks, utilities and credit card companies are already encouraging customers to shift to electronic statements. Some banks are making electronic statements the default choice for new accounts and charging a fee if the new customer wants to get theirs in the mail. While it would be a marketing and public relations disaster to force all customers to shift to electronic delivery, I think institutions are likely to begin charging people who prefer receiving hard copies, especially given the state of banking these days. That’s one approach.

The other is to make a statement more useful as a customer touch-point and increase its relevancy to the customer beyond being merely a bill. The knee-jerk reaction is TransPromo, the idea of putting marketing offers on bills. This seems, at least for now, to work best in relatively limited ways, but give it time. The real estate on a statement, though, is every bit as effective for informing and educating customers about products and services, providing advice and information, announce changes in policies, and generally building relationships. Every organization that sends out bills and statements has plenty of other information to communicate and that monthly envelope that’s sure to be opened is one of the cheapest and most effective ways of reaching every customer. The cost of printing and sending out the statement is still there, but when it does more than just being a transactional document it can be money well spent.

There are a lot of layers to this and there is very definitely no one-size-fits-all solution. How do you see postage costs affecting the transactional market? How do you think statements can be used to be more than just a revenue collection medium? Mailers are all looking for answers, and more than a few of them read this blog. Let’s talk!

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5 thoughts on “USPS Losses Raise Postal Rate Concerns

  1. Michael Josefowicz

    My 2 cents,
    I think it points to the long term unavoidable reality of less mass mailings. If you think it can’t happen, take a look at GM, or closer to home, every major newspaper in the US.

    Transpromo will help, but it’s a shrinking market. If you are not either 1, 2 or 3 in your part of the mass mailing business, the alternatives are to be bought, to buy, to grow into the 1,2 or 3 supplier in that part of the market.

    Another approach is to move downstream as fast as possible.

    Customized short runs for niche and more protected markets. Use mailing expertise and flexible production processes to find new markets that need the security of envelopes, and/or the intelligence of managing mailing lists. Non profits. Schools. Health organizations. Government. Local community organizations.

  2. Michael Josefowicz

    One more cent…

    So suppose a mailer defines themselves as a part of the message delivery logistics system who today mails stuff/bits. The defensible kernel of value going forward are the people and the earned knowledge of alternatives, methods of delivery and postal regulations.

    Then suppose the mailer doesn’t fight the trend to e messages to customers of large organization, but instead presents a value prop that says “Let me help you make the transition and find just the right balance for you of bits and bytes.”

    If they don’t have the talent in house, do a joint venture with an outfit that does. Learn by doing with experts, then decide to partner, buy or build that capability in house.

  3. Heidi Tolliver-Nigro

    I agree that the idea of moving into digital print driven markets is a natural consequence of postal increases, but I don’t necessarily agree that it’s to find niche markets. The logical progression, it seems to me, is to begin slicing and dicing databases to make the mailings more effective. If the budget is shrinking, mail only to the top 10% of your database by profitability, for example, or only to inactive customers to re-build that relationship. Although this requires some database savvy on the part of printers, it doesn’t require THAT much savvy. It’s database basics. They just need to shift into the mentality of selling this way. When a customer says, “I don’t have the budget for a large mailing,” this needs to be the checkered flag for the printer that says, “Sell smaller, more targeted mailings — GO!” There are too few printers thinking this way these days, but the higher the postal rate go, perhaps the more this transition will occur.

  4. Michael Josefowicz

    Heidi-

    We actually agree. I used an fuzzy term for niche. Thanks for clarifying one part of it. As for printers getting database savy, I think that mostly that’s not going to happen. Unless they already have mailing intelligence. What’s more likely are mailers to go into the print business.

    Real database savy is hard. Meanwhile printing has actually become pretty easy.
    Database basics is easy. But exactly because it’s easy there is less value. Less value created means more price pressure.

    So..maybe a more practical approach would be for printers to collaborate and/or network with a good mail house that they trust. Of course the great “who owns the customer?” problem will have to be overcome. But they do say that the prospect of one’s hanging, focuses the mind.

  5. Michael Josefowicz

    I just found the following over at WTT.com. I think it shows the build it, buy it or partner it strategy. The big guys can afford the buy it. The rest of have build it or partner it available.

    MONTREAL, Nov. 18 – Transcontinental ( Web Site Executives Related Articles Google) today announced it has acquired Redwood Custom Communications, a North American leader in custom communications headquartered in Toronto. Redwood is a full service marketing and communications company and creates turn-key custom publishing and branded content solutions for both print and digital platforms.

    Redwood’s offering includes data sciences, research and measurement, database marketing, variable printing, photo studio and premedia tools. This makes it an attractive complement to the services offered by Transcontinental’s newly created Marketing Communications Sector, such as database analytics, premedia, email marketing, one-to-one marketing and the printing of marketing products.

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