Postal Jeopardy

Production Solutions

The answer: 31%. The category: Direct Mail. The question: What percentage of nonprofit fundraising appeals get tossed away unread? This stat as reported by the Postal Inspector General report ‘Modes of Delivery and Customer Engagement with Advertising Mail’ and referenced in The Agitator blog of May 6th : “Direct Mail Quiz..,,And Longer-Term Puzzle”. Perhaps this statistic is not shocking but future USPS changes to cut costs may cause the percentage of ‘tossed unread’ mail to ‘soar dramatically’ says Roger Craver. That is if the USPS has their way and moves to cluster box delivery. You’ll see cluster mailboxes grouped together in high density communities – apartment building and townhome complexes.
At first glance, the cluster box delivery strategy may be a more efficient, cost saving approach but at what cost to mailers? The same report from the Postal Inspector General indicates ‘read and response rates’ of just 4% for cluster box delivered mail. Slower delivery, increased costs and now a suggestion that will further impact response rates negatively? What’s the USPS thinking?
Roger reached out to Production Solutions experts for the latest ‘behind the scenes’ postal news and spoke with Ben Harris, Senior Vice President and Darin Marks, Procurement and Postal Solutions Director. Ben explained: “The worry about cluster boxes vs. door and curbside delivery comes down to trash cans…most apartment complexes and other cluster locations have garbage cans right next to the mailboxes. Thus the concern over ‘toss before reading’.”   Darin added “the USPS seems pretty intent on moving to the cluster box concept as soon as quickly as possible.” Darin is also the ADFRCO representative at the Association for Postal Commerce where he gathers first hand news of USPS initiatives and mailer concerns.
Darin recently attended a 3 day Postal Conference hosted by Quad Graphics at which a gamut of postal related subject matters – of mailers and mail owners – were discussed but 3 main topics were on everyone’s agenda: Postal rates, service and standards and the future of the Postal Service. More details from this event:

If you haven’t been following all of the rate fuss, below is a quick recap:

  • January 2014 – PRC approved a 4.3% Exigent Increase to cover the losses the USPS incurred from the Great Recession (2008-2011). Surcharge is to last 2 years or until losses are covered.
  • January 2014 – USPS appeals PRC ruling that the Exigent Increase should be a temporary surcharge.
    • Filed with the U.S. Court of Appeals. (no ruling as of May 4th)
  • January 2015 – USPS files for a CPI increase.
  • March 2015 – PRC remands the CPI filing (First-Class pricing approved)
  • March 2015 – USPS submits revised CPI filing
  • March 2015 – PRC remands second CPI filing
  • April 2015 – USPS submits revised CPI filing
  • May 2015 – PRC approves final rates to be implemented on May 31st.

Clearly, rates have been unpredictable over the last 18 months. Although we have a postage increase on the books as of June, there is still a lack of clarity in many areas. We can only hope for some rate relief on issue #1 soon:

  1. U.S. Court of Appeals still has not ruled on the Exigent Case
    1. Denial or No Ruling: Exigent (4.3%) would be removed in late Summer
    2. Partial Approval: Exigent increase is kept in partial
    3. Full Approval: Exigent is removed in full by late Summer
  1. Interpreting the USPS rates and processing requirements for Flats and Periodicals: The increase for these categories ranges from 2-16% based on saturation levels, processing facility type, weight, advertising content, editorial content, etc. The rules and requirements are so complex that even the best data modelers are having a difficult time making educated estimates on future mailing costs.
  1. Postal Reform: Congress has still yet to take action on Postal Reform. The overall problem is writing legislation that benefits the four big parties involved: mailing industry (predicable rates & service), union workers (salary & benefits), American people (postal service in general) and future retirees (pre-funding the retirement account).

As rates increase, the industry would assume that service standards (delivery time) would be consistent or even improve. However, service has decreased over the last 3-6 months. Linda Malone, VP Network Operations USPS, addressed these concerns with the following explanations:

  • Severe weather throughout the country during the winter months;
  • Reconfiguration of certain facilities with new processes and moving some types of mail from one facility to another (moving flat mail from certain facilities to others to equal out capacity loads). This caused some delays as facilities had to adjust to new capacity levels;
  • Load Leveling, implemented in May 2014, increased delivery on average by 1 day for some types of mail at particular facilities who were over capacity;
  • Changing the critical entry time (time when mail has to be delivered to the USPS to start the processing clock). It used to be 5:00PM and mail was processed overnight. Then moved to 2:00PM to allow more processing time (afternoon & overnight). It was recently changed to 8:00AM to allow for full day and overnight processing.

Linda went on to note that April showed an increase in service standards and that the industry should start to see an incline in service from this point forward.
Hopefully over the next few weeks/months the status of the exigent surcharge will be resolved. Postal Reform is probably not likely any time soon, but one can only hope considering we are on our 3rd Congress that has yet to take action! As for service standards, we will see next quarter if targets are hit.