Direct Marketing Association's Jerry Cerasale on the U.S. Postal Service's Explosive Proposed Rate Hike
They still look, for example at, say, the Jerry Cerasale Company, and say, "OK you send out parcels, so you're a parcel mailer. And you send out advertisements, you're a Standard mailer. And you send out bills, so you're a First Class mailer." They treat me as three different silos, instead of looking at the customer and all the uses of the Postal Service to work with that customer to create some kind of program and services the customer needs. They haven't done that. ... They're the same Postal Service that they were three years ago. They have a few less employees, but they are still the same Postal Service that can deliver 300 billion pieces of mail a year when we only need a Postal Service that can deliver 170 billion pieces.
TM: Reports indicate the USPS likely has overpaid its Civil Service Retirement System contributions to the tune of about $50 billion. Could this money be the solution or will only a fundamental business change lead to viability?
JC: I think they need a fundamental business change. But I would not tell them not to look for an overpayment. Remember, if there's an overpayment to the Civil Service Retirement System, it was an overpayment by the mailers because they were paying all the bills.
[The USPS] should look at and push that [issue]. And DMA will be working to try and get that money shifted to the retiree health benefits [fund], therefore saving some immediate cash for the USPS. That will help them in the mid-term—at least give them time to change the business model. ... The mailers can't afford to keep up the model the way it is now.
TM: The USPS projects it will raise $2.3 billion in the first year with this rate case. Is it adjusting for the drop-off in volume that raising postal rates in this economy will effect?
JC: I think it has some adjustment in it, but they're using historical elasticity model—trying to say: "If you raise the price 10 percent, what's the effect going to be on volume?" I think the recession, electronic commerce becoming more mature and non-baby boomers coming more into the marketplace who are at ease using electronic channels [are major environmental shifts] ... so we believe the elasticity models are probably too old and don't reflect the new reality.