Postal Webcast Recap: Even With Postage Increases, Customers Have Options

October 28, 2020

Sharon Owens, the United States Postal Service’s Vice President of Pricing & Costing, joined Quad’s third Postal Webcast on October 15, less than a week after USPS released next year’s proposed pricing increases. Discussion focused on helping customers budget for 2021 mailings.

Sharon was transparent and presented how much thought and work goes into major USPS decisions. Watch this session, or our first two postal webcasts on the USPS State of Affairs, on demand here.

Here are three important takeaways discussed during this hour-long pricing conversation.

USPS pricing is a balancing act

We get the same question every year — why doesn’t the USPS price its products and services like a regular business?

Short answer is, the Postal Service is a government monopoly, not a business. It’s a department of the federal government that receives no tax dollars. The USPS focuses on maximizing the amount of revenue it can generate from the limited CPI cap on price increases.

That leaves the USPS in a tough spot. It’s accountable to customers, legislators and regulators — each group with very different expectations.

USPS does have some discretion and flexibility for extraordinary circumstances. But even during an extremely challenging year, leadership notably did not invoke a clause to raise prices more than the cap allows.

Increased parcel volumes kept losses lower than USPS projections. But losses are still significant and larger legislative reform is still needed. Pricing adjustments keep losses from becoming catastrophic.

Prices are a starting point — mailers have some control

The USPS proposes straightforward price changes to classes of mail. Not all customers should or have to plan for that simple rate, though — promotions and discounts offer flexibility.

Quad’s data shows a range of new prices for mailers. Rates depend on number of pieces, co-mail participation, format, drop-shipping options and other factors.

Media companies can decide to publish periodicals less frequently. Retailers could send more catalogs by adding qualified names in a zip code to get high-density discounts. Everyone has options and control over pricing. And over cost.

Postage, after all, is just one component of mail costs. Design changes the price of a piece. Marketers can balance coupons and discounts for maximum profit. Content of mailings can have critical impact on overall response.

Quad’s Postal Solutions works with brands to optimize campaigns and predict the real price for each piece, beyond postage — we factor the total cost to mail.

USPS prioritizes what’s underwater

Simply stated, the USPS isn’t covering costs in several areas. Sharon cited multiple categories that are “underwater.” New proposed pricing directly addresses this on two parallel paths. The categories where revenue doesn’t offset operational costs will go up. And more popular ways to mail also get a price increase to generate more revenue.

Sharon acknowledged that the USPS is aware that price increases could mean customers pull back on how much is mailed. But historically, raising prices does generate more income for the Postal Service.

These are tough times for both the USPS and its customers. No matter the circumstances, though, mail remains an important and profitable investment in multichannel marketing mixes.

More change will certainly come after the election and through the holiday season. But now is the time to start optimizing your 2021 mailing strategy.