Direct Marketing Association's Jerry Cerasale on the Proposed USPS 'Summer Sale'
After a decrease of 5.2 billion pieces of mail for its first quarter of FY2009, its eighth consecutive quarter with decline in volume, and the anticipation of an equally devastating second quarter, the U.S. Postal Service recently announced its desire to offer mailers a carrot instead of a stick to get volume going. If the proposed program gets enacted, the top 4,000 U.S. mailers will be eligible for a 20 percent to 30 percent discount on their postage bills for mail volume between June 15 and Sept. 15 that exceeds the baselines established by the Postal Service. These baselines will be determined using each mailer's volume from the June 15 to Sept. 15 period last year, and then adjusting "downward by the current mail trends for that mailer during the first two quarters of Fiscal Year 2009," according to the Direct Marketing Association (DMA).
This week, Target Marketing Tipline spoke with Jerry Cerasale, senior vice president of government affairs at the DMA, to get the insider scoop on when this proposal might go from idea to actuality, and what value it has for all mailers.
Target Marketing: What's the anticipated timeline for final approvals on the proposed summer rate reduction program?
Jerry Cerasale: First, the Postal Service has to file a request with the Postal Regulatory Commission [PRC]. We think it will be within the next two weeks ... It's been a week since we've known about [this proposal] and maybe even a little less than that. And then the PRC has 45 days to come out with a decision. We've actually spoken with the PRC, and there are a lot of due process issues—issues where people who might oppose or have different thoughts have to have an opportunity to say their peace—so it is highly likely that the PRC will take, if not all, a fairly significant portion of those 45 days.
TM: While it's been noted that likely just the top 4,000 mailers will be eligible for this special rate cut, does the development of such a program provide any indirect benefits to all mailers?
JC: Yes, I think so. This is actually the second attempt from the Postal Service to do something to grow volume. The first will start on May 11 for saturation mailers; those who will mail more than they did last year ... will have a lower rate.
This [proposal] is an attempt by the Postal Service again to grow volume in a slow period, in a period where they believe that they have some excess capacity. If this works, our view is that it will continue.
This is a test for the Postal Service and the Postal Regulatory Commission: Can they do this? Can they get it done? Can they get it done quickly? And then it's a little bit of a test to mailers: Will it grow some volume? I think the Postal Service is aware of the fact that this is late in the game for planning purposes for mailing and, of course, with the time lag of the PRC decision, also creates issues as to how much mailers will respond.
So, this is important for all mailers to get behind. The reason [the Postal Service] picked the top 4,000 mailers is because they have to do a baseline for each individual mailer to figure out if they're putting out more volume than they did last year. And that will take some time administratively. Our hope is that this works OK, and then we'll get greater notice on this [program] ... The Postal Service will have more time administratively to create baselines, and it will be open to all mailers.
TM: Is the U.S. Postal Service assuming any risk of decreased revenues with this discount?
JC: I think there is a small amount of risk on a shift [of mail drops]. But as you look at a lot of Standard mailers—at least those selling goods—their big time of the year is the holiday season. And I'm not sure they're going to shift—which is why the USPS doesn't have the sale extended beyond September—mail from October, November back to September because that could mess up response rates on holiday mailings. So there is a risk, but I don't think it's as great as some might initially think. I'm positive there will be some mail that will be shifted from October to September, but not a lot. And there might even be some mailers that delay mailings from early June into July. While there is some risk for decreased revenues, you also have the offset if it works. If it grows volume, you're going to have increased revenues. I think this is a relatively low-risk trial.
TM: Could this "summer sale" be the first in a line of overtures from the USPS to work with mailers to hold on to their business?
JC: We hope so. We encourage the USPS to not make this the first and the last, but to make this the first in a long line of [efforts].