How Postal Rate Hikes Impact Print and Mail Providers

It’s been hard to avoid the conversation around postal rates in the commercial and direct mail printing industry during the past few years. As Postmaster General Louis DeJoy has made aggressive moves to bring the U.S. Postal Service (USPS) into profitability after the requirement to pre-pay the organization’s pension fund was finally relaxed, printers have borne the brunt of those rising prices. Print buyers have started pushing back when it comes to higher mailing costs, especially as the costs of everything from the inks, to the paper, to the labor running the presses have also been on the rise.

But what does the actual landscape look like for print providers on the postal rate front? And how are they managing the increases?

John Miglautsch, founder of Miglautsch Marketing and long-time direct mail advocate for the industry, points out that a major catalog job he ran in 1982 was about 62 cents per piece, compared to a similar catalog job in 2018 that came in around 67 cents. “In 40 years,” he notes, “the price [to mail] a catalog hasn’t changed as much as the price of eggs in just the last few years.”

Unfortunately, the bulk of those increases seems to have come rapidly during the past couple of years, leaving commercial/direct mail printers and print buyers alike scrambling to compensate for costs that are significantly higher. A few cents per piece spread out across thousands — if not hundreds of thousands — of pieces adds up fast, after all, and can take a huge chunk out of the direct marketing budget before anyone can blink. And that impact is being felt as buyers pull back on the number of pieces they’re mailing to compensate for those higher costs.

Jeff Henke, executive director of postal solutions at Quad, notes that “Rising postal rates have had an impact on volume for sure. It’s not just last year’s postage increases, but a compounding factor of twice a year increases over a three-year period.”

Leo Raymond, managing director for Mailers Hub, says the proof of the impact is in the decline of overall mail volumes. “Volumes compared to different periods were down by double digits,” he points out, “and it is the opinion of most people in the mailing industry that the primary factor impacting that is the rapidly increasing prices on mail in general, and direct mail specifically. The Postmaster General denies it — he says it’s just a general decline — but even if that is true, it is being worsened by significant increases that have been imposed on mail.”

And those increases aren’t slowing down. Right now, the aggressive increases are expected to continue through 2026, until the USPS can break even with its operating costs. But, Raymond contends, “numbers are saying they can’t paddle fast enough to go against the dropping volumes.”

Henke is, in fact, already preparing for 2024 postal rate hikes and their continuing impact on the number of pieces produced and mailed, noting, “there will be impacts as rates will rise double digits again in 2024 between the January and July rate cases. From a budgetary standpoint, it will definitely have an impact on volume, which is why it’s so critical to optimize postage and the marketing piece itself.”

“Mail equals math,” explains Scott Harvey, who handles direct marketing solutions at Quad, and is the company’s vice president of enterprise solutions. “Mail is such a great channel as it’s very measurable, which allows customers to forecast a response. As cost elements increase, clients react by scaling back and prioritizing more viable responders. This results in lower responders being removed from the mail files. So, postal increases most certainly lead to a reduction in volume — not because direct mail is ineffective, but rather as a reaction to the responsive curve. Direct mail remains a time proven and effective media channel.”

Solutions, Not Problems

While you might be tempted to throw up your hands and say there’s nothing you can do about the USPS raising rates, that is not true. There are a number of things printers can be doing to help mitigate the rising postal costs and help drive home the fact that even with those costs, print is still one of the most economical — and effective — vehicles for marketing across the board.

“Clients still need to understand the value of mail and the need to market to the customer base. Mail is still a critical component to their business, so it’s vital to optimize mail and their marketing pieces to be more effective,” Henke says.

He goes on to note that Quad, in particular, has a fairly robust process for keeping their clients in the know when it comes to things like postal rate increases. “We hold multiple webinars on the USPS rate cases and their impact on mail, and we get great turnouts at these virtual events with roughly 500 attendees. There, we discuss solutions to help offset some of the increases by using all the solutions available to them as a mailer. We also have an annual Postal Conference where clients come in and hear directly from the USPS, industry experts, and our Quad postal team to garner insight and strategies on how to move forward. Additionally, we communicate to clients and the public at large via our Paper, Postal and Logistics updates [on our website].”

Strong communication is something Raymond agrees with, noting that “all you can do is tell the truth. The USPS is like any vendor when they increase prices — there is only so much you can do to absorb those costs. You have to talk to your clients, and they have to make decisions between the value and results of direct mail, and what the Postal Service is charging for it.”

Miglautsch notes that there are a number of actions printers could be taking, price increases or not. Things like lighter paper stocks and better list hygiene, he notes, will all help improve the profitability of direct mail, and aren’t things printers should ignore when times are good. “I’m not saying get comfortable — increases do force you to re-examine things, and you should be doing that. But rate increases will always keep coming,” he says.

Miglautsch also urges printers to make the comparison to the price increases in digital marketing vehicles when they’re having that conversation with clients. “The price of digital ads has skyrocketed,”
he notes. “Meta’s cost per thousand increased by 61% year-over-year from 2021 to 2022 — that’s 10 times the postal increase in a single year. The price of Google’s programmatic ads were up 75%. The price of TikTok was up 185% year-over-year in 2022.”

So when customers are upset over the increases in the price of postage, make sure you know how your increases compare with the other marketing channels they are utilizing, since there is a better-than-good chance print is still going to be the most economical option of the bunch.

“In addition to being very transparent with clients, Quad’s goal is to be part of the solution,” Harvey says. “Through open communication with clients we can identify their pain points and determine the best solution, which may include merged mail, shared mail, commingling or saturation strategies. … The USPS increases have led to a state of disruption for the last several years and, with more price hikes, this disruption will continue. Clients must be willing to engage in the disruption to solve this.”

Beyond just good communication, however, there are quite a few programs offered by the USPS that can help reduce postage rates. Printers doing any type of mailing should make sure they are familiar with these discount programs, and know how to work them to their customers’ advantage.

“Look at the current set of promos and incentives being offered by the USPS — this time of year most of them have their own sets of criteria,” according to Raymond. “These programs can offer a percentage discount, which can take off a good chunk of what the client would otherwise be paying.”

Testing and refining mail pieces is another strategy print providers should be pushing hard — even when postal rates aren’t a factor. Miglautsch, in particular, is a huge proponent of testing, citing one case study where he convinced a print buyer who was spending more than $500,000 every month on Google placements to pause that spending for a single week, taking that allocated budget and putting it toward mail instead. “I told him he doesn’t even have to cut back, just pause for a week.” And the results were an influx of more engaged buyers, which in turn lead to higher sales, proving the power of direct mail catalogs, in this case.

Even within a mail campaign, Miglautsch stresses, the art of traditional A/B testing seems to have been lost. But taking the time to test variations and see what works can help refine campaigns and, in turn, make those marketing dollars allocated to print that much more effective.

Testing goes beyond the individual piece or message, as well. Henke notes, “Customers who aren’t willing to test new solutions and change are the ones that take the brunt of the hit on postal increases.

Partnering on mailing with other mailers and sharing in the cost of postage really has a significant impact on postage. Co-mail and commingle solutions, while relatively recent to the market, provide tremendous opportunity. Enhancements in data cleanse, in-line co-mail offerings, and shared mail offerings all combine to reduce postage. It’s key to have solutions that integrate into an overall optimization strategy and a direct mailer who is willing to take advantage of that model. In most cases today, it’s about enhancing your work share solutions and optimizing that 10% or 20% additionally.”

So what does all of this mean for the average commercial printer? The idea here is that rising postal rates don’t have to mean the direct mail operation takes a hit — it just means being smarter about mail. Staying on top of the wide range of discounts and programs the USPS offers, working with customers to refine messages, reducing costs on things like paper stock, using best practices to keep a clean mail list, and even using advanced finishing techniques thoughtfully, can all ensure direct mail continues to outperform every other channel, making it a bigger bang for the marketing buck, no matter how much postage rates increase this year.