On April 26, Quad hosted a Postal Solutions Summit to review the USPS rate increases planned for July, present strategies to offset the impact of those rate hikes on business mailers and offered early guidance on what to expect from the USPS in 2024.
Quad Chairman and CEO Joel Quadracci opened the summit with a “state of the industry” overview. He noted that the cost of direct mail used to consist of one-third postage, one-third paper and one-third manufacturing/printing, but that has changed dramatically due to steep hikes in postal rates, on top of rate increases linked to inflation, over the past couple years.
“Now manufacturing is less than 17% and postage is 70% and going north. It defies business logic,” he told the audience of business mailers.
The purpose of the Summit, Quadracci said, “is to help you manage where you can get customers . . . Print works because it generates response, but there has to be the right balance between cost and response rate.”
Sharon Owens, vice president of pricing & costing for the USPS, put herself in the hotseat by appearing at the Summit.
“Joel never wants to see me,” she quipped at the start of her presentation on the latest round of postage increases coming in July, referring to Quad CEO Joel Quadracci. “It’s always bad news.”
Owens, a 28-year USPS veteran, explained the case for the rate hikes, noting the lack of investment in the postal service over years and praised Postmaster General Louis DeJoy for taking hard but necessary steps to modernize the service. This includes expanding automation, reducing dependence on air transport and optimizing the ground network.
“Postmaster General DeJoy is trying to do the right thing for the American public. Unfortunately, the biggest bucket [he can tap] is pricing,” Owens said. “The Postmaster General wants volume, but he also wants revenue (to overhaul the network.)”
She said that the biannual price changes have offset the rise in inflation and volume reductions, but added that the USPS “will be asking ourselves at the highest level the hard questions” about pricing/volume.
Click here for a summary chart of the rate increases and guidance for 2024.
Following Owens’ presentation, Quad’s Executive Director of Postal Solutions Jeff Henke and Director of Postal Affairs Bob Schimek presented a rate impact analysis covering the different mail categories, as well as a look forward into what mailers can expect in 2024. (See presentation here.)
The second half of the Summit was devoted to what mailers can do to make the rate increases less painful. The first thing is to take full advantage of the promotions the USPS offers, which can save 3% to 6% in total costs. They include two new promotions, Reply Mail IMbA™ and Retargeting, as well as:
- Tactile, Sensory and Interactive
- Emerging Technology, which now includes mobile shopping
- Informed Delivery®
“Last year there was $50 million available in savings and Quad clients took $27 million of that,” Henke noted. Mailers must register on the USPS Business Customer Gateway for each promotion they want to use, but only once. The same promotion can be used for multiple mailings.
Quad postal optimization strategies are a second path to savings. They include retail delivery strategies like TMC and selective saturation; a net cost strategy for letters involving merged mail and commingle; another net cost strategy for flats; and shared mail.
This option combines different pieces of mail like magazines destined for the same address in a poly bag. Bags that contain a single class of mail can be delivered by the USPS. An innovative Quad program, DoorFront Direct, takes this approach a step further. It combines different mail formats into a bag that’s delivered to a consumer’s front door by a private service.
Quad customer service and sales account managers have been trained and are open for individual analysis requests to help determine which promotions and strategies are best.
What’s the right solution to the challenges facing mailers? “Generally speaking there isn’t just one answer. You have to look at all the various components to put together the optimal solution,” Henke said.
Catch up on the 2023 Postal Solutions Summit content here: