In the Same Boat
Affordable mail service depends on marketers and the USPS rowing in the same direction
March 2008 By Hallie Mummert
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LR: Direct mail isn’t singled out in the PAEA or related regulations, but will be affected as part of the overall mailstream and as part of the complete package of USPS products and services.
As the largest class of mail, anything the agency does to achieve its objectives will be significant to Standard mail and those who pay for and produce it. And, whatever those actions are, they likely will raise preparation costs aside from postage.
For example, the implementation of the Intelligent Mail Barcode next January is forcing mail preparers to acquire new equipment and software—and to revise their processes and systems. The industry is not objecting to the basic concepts and goals behind the barcode change, such as greater processing efficiency, better mailstream visibility, and less tedious mail verification and acceptance processes. But there’s considerable push-back over the pace at which the Postal Service wants to move and its seeming indifference to serious doubts over whether it and its systems can do what needs to be done—and answer the industry questions that need to be answered—to meet the Jan. 1, 2009, deadline.
The Postal Service has linked the adoption of the IMB to its ability to properly observe and measure the mailstream and, in turn, report on its performance vis-à-vis the service standards it’s published as required by the PAEA. So, as I said, even though the law didn’t directly specify much about direct mail … the secondary consequences of what the law mandated are a little easier to see.
As everyone gets more experienced at living under the PAEA, we’ll see the need for the industry and the Postal Service to work together more than in the past. In many ways, the industry drove development of the PAEA—maybe not in the form that was enacted, but it now has to live with the result just the same. As competitors, the Internet, the economy, the postal unions and political meddling by Congress continue to influence the Postal Service, it needs to work with its customer and supplier base to ensure the postal system remains viable and affordable. That will require more cooperation than some on both sides might like, but it will be essential just the same.
TM: What role will the index rate cap play in future rate cases—especially with overall mail volume down?
LR: The cap will be a challenge, to say the least. Aside from that, however, the loss of volume reprises the greater challenge of eking out more money through higher prices without offsetting any new revenue by driving away even more volume. Of course, this conflict is neither new nor limited to the Postal Service.
But the Postal Service isn’t free to open a logistics business or expand into freight shipping—as its competitors have done—to offset losses in its core business or fixed expenses tied to a public service obligation. Even if volume shrinks 3 percent or 13 percent, the Postal Service is constrained in how much it can cut costs. Carriers have to walk the same routes with a little mail or a lot, mail processing facilities and machines remain in place whether used for a full tour of operation or for only 6.5 hours, and local post offices are open whether anyone is buying stamps or not. The postal unions, Congress and local citizens resist efforts to downsize the workforce or the processing and retail infrastructures; so even if mail volume shrinks, the Postal Service is inhibited from shrinking with it.
In turn, this means [that] relatively fixed USPS costs must be supported by less mail, and the resulting rate hikes only further exacerbate the problem. And doing this while living within a CPI cap makes the exercise even more tricky.
TM: What postal technologies should mailers be preparing for?
LR: As I mentioned above, the implementation of the IMB is the biggest current challenge facing both the Postal Service and its customers. Doing this involves more than simply printing a new barcode, however, as the Postal Service is using the IMB rollout as the occasion to introduce or implement other changes, such as electronic payment and document submission and electronic mail deposit scheduling.
Mailers need to be aware of this in its broadest context. The linkage of internal Postal Service processes and systems is maturing sufficiently to make a mailer’s inability to operate and communicate in harmony with those systems a real problem. No
one wants to be a dial phone in a touch-tone world, so no mailer should want to be unable to process and produce mailing data electronically—or otherwise be unable to fully participate in the mailing environment that is being introduced through IMB implementation.
Similarly, mailers that continue to fail to recognize the need for producing efficient mail, and for using and supporting quality addresses, are sleeping through their opportunity to be prepared for the demands of the postal world in the near future. They—or their clients—may have to pay for that fault, literally.
TM: To ensure a healthy direct mail channel, how should direct marketers be getting involved?
LR: There are a number of things direct marketers and their suppliers should do:
• Pay attention to postal developments. Designing a clever mail piece and selecting an appropriate target audience are important, but failing to recognize the needs of the delivery system can be expensive or worse.
• Use the medium wisely. There are growing and aggressive opponents to direct mail, and they use the results of poor industry practices to legitimize anti-mail arguments. Use of “green” materials and mail production practices, careful list selection and targeting, and scrupulous address management can ensure that direct mail isn’t being wasteful or intrusive. Regardless, the mailing industry needs to get more active in its own defense if the misinformation spread by supporters of do-not-mail proposals is to be overcome. The Mail Moves America coalition is working to develop and coordinate the industry’s response, but it can be only as successful as the industry’s support makes possible.
• Join an association. This may sound like a plug, but the fact is that trying to deal with the postal world alone—while running a business—is a chore that no smart mailer should attempt. There are resources available to inform and to help, but they’re there only for those who choose to use them.
As the largest class of mail, anything the agency does to achieve its objectives will be significant to Standard mail and those who pay for and produce it. And, whatever those actions are, they likely will raise preparation costs aside from postage.
For example, the implementation of the Intelligent Mail Barcode next January is forcing mail preparers to acquire new equipment and software—and to revise their processes and systems. The industry is not objecting to the basic concepts and goals behind the barcode change, such as greater processing efficiency, better mailstream visibility, and less tedious mail verification and acceptance processes. But there’s considerable push-back over the pace at which the Postal Service wants to move and its seeming indifference to serious doubts over whether it and its systems can do what needs to be done—and answer the industry questions that need to be answered—to meet the Jan. 1, 2009, deadline.
The Postal Service has linked the adoption of the IMB to its ability to properly observe and measure the mailstream and, in turn, report on its performance vis-à-vis the service standards it’s published as required by the PAEA. So, as I said, even though the law didn’t directly specify much about direct mail … the secondary consequences of what the law mandated are a little easier to see.
As everyone gets more experienced at living under the PAEA, we’ll see the need for the industry and the Postal Service to work together more than in the past. In many ways, the industry drove development of the PAEA—maybe not in the form that was enacted, but it now has to live with the result just the same. As competitors, the Internet, the economy, the postal unions and political meddling by Congress continue to influence the Postal Service, it needs to work with its customer and supplier base to ensure the postal system remains viable and affordable. That will require more cooperation than some on both sides might like, but it will be essential just the same.
TM: What role will the index rate cap play in future rate cases—especially with overall mail volume down?
LR: The cap will be a challenge, to say the least. Aside from that, however, the loss of volume reprises the greater challenge of eking out more money through higher prices without offsetting any new revenue by driving away even more volume. Of course, this conflict is neither new nor limited to the Postal Service.
But the Postal Service isn’t free to open a logistics business or expand into freight shipping—as its competitors have done—to offset losses in its core business or fixed expenses tied to a public service obligation. Even if volume shrinks 3 percent or 13 percent, the Postal Service is constrained in how much it can cut costs. Carriers have to walk the same routes with a little mail or a lot, mail processing facilities and machines remain in place whether used for a full tour of operation or for only 6.5 hours, and local post offices are open whether anyone is buying stamps or not. The postal unions, Congress and local citizens resist efforts to downsize the workforce or the processing and retail infrastructures; so even if mail volume shrinks, the Postal Service is inhibited from shrinking with it.
In turn, this means [that] relatively fixed USPS costs must be supported by less mail, and the resulting rate hikes only further exacerbate the problem. And doing this while living within a CPI cap makes the exercise even more tricky.
TM: What postal technologies should mailers be preparing for?
LR: As I mentioned above, the implementation of the IMB is the biggest current challenge facing both the Postal Service and its customers. Doing this involves more than simply printing a new barcode, however, as the Postal Service is using the IMB rollout as the occasion to introduce or implement other changes, such as electronic payment and document submission and electronic mail deposit scheduling.
Mailers need to be aware of this in its broadest context. The linkage of internal Postal Service processes and systems is maturing sufficiently to make a mailer’s inability to operate and communicate in harmony with those systems a real problem. No
one wants to be a dial phone in a touch-tone world, so no mailer should want to be unable to process and produce mailing data electronically—or otherwise be unable to fully participate in the mailing environment that is being introduced through IMB implementation.
Similarly, mailers that continue to fail to recognize the need for producing efficient mail, and for using and supporting quality addresses, are sleeping through their opportunity to be prepared for the demands of the postal world in the near future. They—or their clients—may have to pay for that fault, literally.
TM: To ensure a healthy direct mail channel, how should direct marketers be getting involved?
LR: There are a number of things direct marketers and their suppliers should do:
• Pay attention to postal developments. Designing a clever mail piece and selecting an appropriate target audience are important, but failing to recognize the needs of the delivery system can be expensive or worse.
• Use the medium wisely. There are growing and aggressive opponents to direct mail, and they use the results of poor industry practices to legitimize anti-mail arguments. Use of “green” materials and mail production practices, careful list selection and targeting, and scrupulous address management can ensure that direct mail isn’t being wasteful or intrusive. Regardless, the mailing industry needs to get more active in its own defense if the misinformation spread by supporters of do-not-mail proposals is to be overcome. The Mail Moves America coalition is working to develop and coordinate the industry’s response, but it can be only as successful as the industry’s support makes possible.
• Join an association. This may sound like a plug, but the fact is that trying to deal with the postal world alone—while running a business—is a chore that no smart mailer should attempt. There are resources available to inform and to help, but they’re there only for those who choose to use them.
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