4 Postal Trends that Will Impact Mailers in 2021, 4 Ways to Cut Postage Costs
Uncertainty is the enemy of successful business planning. Yet for mailers in 2021, the rocky financial state of the U.S. Postal Service (USPS), the unpredictability of rate increases, and the move toward digital raise uncertainty to an uncomfortable level.
Today I’ll discuss four elements that will impact mailers in 2021, followed by four ways to cut postage costs.
1. New Postal Requirements, Moving to Seamless
The USPS has announced that all mailers with an authorized detached mail unit need to enroll in the Seamless Acceptance Program by May 1, 2021. The requirement to verify all BMEU entered full-service mailings using only automated sampling and verification processes begins July 1, 2021.
These requirements will increase costs to mailers adopting, managing, and maintaining the new standards. Note that the latest USPS proposed rate increases offer a $0.001 incentive to encourage mailers to move to Seamless, which could help to defray some of the costs.
Today, 55% of full-service mail is going out as seamless – the output of the largest 10% of mailers. Still, that leaves 45% to go. Smaller mailers have work to do, and even some of the nation’s largest have yet to move to seamless.
2. Rising Postage Rates
Postal rates have risen steeply in the past couple of decades. Because postage cost can be the lion’s share of total mailing costs – as high as 80% – rate increases have a strong, direct effect on total cost outlay. It has become increasingly important for mailers to look for ways to minimize postage expenses.
3. Risk and Predictability
The lack of predictability, particularly of rates, increases concern and uncertainty for mailers. The current proposed Postal Regulatory Commission (PRC) ruling for the ten-year rate review could add as much as 5% over and above the allowed CPI-U increase.
One of the factors that make it difficult for the USPS to contain costs is the Universal Service Obligation, the mandate to deliver to every address – all 153,000,000 of them, plus 170,000 new ones per year. Competitors, such as FedEx and Amazon, take advantage of this, minimizing their costs to rural America by using USPS to deliver “the last mile.” The current PRC proposal rule, from a mandated 10-year review of the law, will allow rate increases as/when overall volumes drop. Understandably, mailing associations have described this approach as a death spiral.
Postal reform is needed, possibly increasing the private-public partnership through additional workshare opportunities and eliminating unreasonable mandates; right now, businesses are bearing most of the burden of funding the Postal Service. But this is a complex topic, suitable for a separate article.
Yet the USPS is seen by many as part of the fabric of the nation – so much so that, in its highly popular merchandise shop, the USPS’ most popular shirt has been sold out for weeks. The take-away? USPS-related political elements are one of the biggest unpredictability factors that challenge US mailers.
4. Service delivery problems
As with every real-life, human service, the pandemic has impacted delivery. While larger mailers bypass many of the processing steps that slow delivery, smaller mailers cannot. Generally, mailers are paying more and getting less, evidenced by the conflict over mail-in ballots. The new Postmaster General, Louis DeJoy, has only been in office since June; it remains to be seen how he will address this pressing concern.
Four Ways to Cut Postal Costs
All of the above makes for a high degree of uncertainty. To address that uncertainty, here are four strategies to take advantage of today’s postal opportunities and minimize costs, listed in order of potential impact:
- Every way you can, move to digital
Work to discover the 20% of choices in moving to digital communication that will give you 80% of the value. Consumers are increasingly ready: a recent Broadridge study learned that the number who “always go paperless” is up 35% just since the start of the pandemic. By offering multiple ways to communicate with you, a true omni-channel experience, you’ll open additional opportunities.
- Evaluate outsourcing
Consider letting a third-party expert be accountable for applying barcodes, handling presort … all the way up to managing full-service mail and Seamless Acceptance. The costs of not being up to date, technology-wise and USPS-requirement-wise, are often underestimated. Mail Service Providers may seem expensive only because true internal costs are underestimated.
- Take advantage of USPS Promotions
It’s certainly worth considering to run major efforts around USPS promotions. The typical savings earned from a promotion is 2% of the postage, which can be a considerable amount.
- Be aware of the cost of errors
Costs of errors are often buried under other categories. Focus on the errors that cause return mail, where you may end up paying three times to send one item. Implement measures to ensure you use complete addresses to earn cheaper automation rates. Also, note that not all Move Update methods are created equal; find the one that best answers your needs at the best price point. Avoid postage assessments for being out of compliance!
In my role at Broadridge, overseeing five billion pieces mailed annually, and as president of a major mailers’ association, I enjoy driving productive change. Despite the uncertainties, digital breakthroughs and the support of outside providers offer mailers opportunities to take advantage of the physical connection of mail within a broader communication strategy.