Four Pointers on Postal Pricing
By now, it’s common knowledge that the USPS is going to adjust postal rates again come this May. But before you go into a tailspin about another draconian increase, here are some facts behind the new rates—to help you understand and apply the new postal pricing to your business model.
The law has changed. This rate adjustment is the first one to be carried out under the new Postal Accountability and Enhancement Act, passed in December 2006. Last year, when the USPS hiked rates considerably and created shaped-based pricing, it was operating under the old rate-setting system. Now, the PAEA puts a cap on the amount the USPS can elevate rates and gives the Postal Regulatory Commission more authority to determine whether adjustments are not only legal, but fair.
Predictability is key. The new law is intended to create more predictable annual pricing, announced every February and implemented every May, in tune with general market practices. “Many of our business customers have told us of the problems they experienced with how we operated under the old law, where we would go several years without any price changes and then all of the sudden they’d be hit with a large increase, which made it difficult for them to plan their mailing budgets. So, it’s a benefit to our business customers that they know every year that prices will be adjusted, and they can keep track of what that will be by keeping track of what the Consumer Price Index is,” says Dave Partenheimer, a spokesperson for the USPS.
A cap to safeguard marketing budgets. The PAEA introduces the CPI as the limit for average increases. “Increases are capped by the rate of inflation as measured by the CPI, and right now the CPI is 2.9 percent,” Partenheimer says. “Average increases are kept at the class level. So, for instance, in the First Class mail category, you could have an average increase that’s lower than the CPI, and within First Class mail, you could have a lower increase for a First Class letter rate and a higher increase for postcards,” he explains.