USPS Delivers a New Discount

Based on talks that took place late last week, the Direct Marketing Association (DMA) has unveiled today plans for a United States Postal Service (USPS) "Summer Sale" -- a 20 percent to 30 percent discount in some commerical postage costs during the upcoming summer months, during what has historically been a slower mailing period. Full details have yet to be released, and the deal still requires approval from the Postal Regulatory Commission (PRC), but DMA executives say postal officials are ready to move ahead with the plan, which would grant a mailer using the USPS "Standard" class a discount for any mail volume exceeding its year-ago volume. 

"The USPS wanted us to spread this information before it was filed [with the PRC] so mailers would have time to think about [their mailing strategy]," explains Jerry Cerasale, senior vice president of government affairs at the DMA. The USPS plans to boost overall mail volume during its summer doldrums by motivating marketers to shake up old habits. The discount will only be applied to incremental mailings made during the summer period currently slated to begin June 15 and run through September 15.

According to Cerasale, the motivations for this "stimulus" are obvious: In the first quarter of 2009, the USPS reports that Standard mail has dropped 22 percent from the same period a year ago. Moreover, the postal service expects total mail volume to drop by 15 billion pieces from fiscal year 2008 to 2009, a drop that could cause the postal service to potentially lose $6 billion in fiscal year 2009.

The advertising world's ongoing shift from print to digital media may be a factor, the DMA says, but the economy is taking a far greater toll. Across the industry, from catalog retailers to banks, the usual suspects that had traditionally sent a lot of mail are all tapering spend. Given the dropoff in volume and the tough economic times, the USPS hopes to capitalize on the pricing flexibility afforded by 2006's Postal Accountability and Enhancement Act (PAEA) to boost mailings.

But not every USPS customer will benefit. Because of the tight deadline, the USPS only has the administrative resources to extend the discount offer to the top 4,000 largest Standard mailers, which account for 80 percent of Standard mail, according to Cerasale. The USPS will evaluate each mailer based on its past (i.e., June 15 to September 15, 2008) mailing pattern and assign a base metric, Cerasale says. Only additional mailings above that baseline will be discounted. The DMA is pushing for the USPS to establish the summer discount as soon as possible for 2010.

The DMA is encouraging eligible marketers to view the summer sale as a way to acquire new customers. "The lower postage would be an inducement to look for prospects," Cerasale says. "Marketers cannot rely upon existing customers solely.... This stimulus might start that search [for new customers] sooner, to the benefit of marketer[s] and the Postal Service." July and August tend to be slower months for mailings, Cerasale says, a trend he attributes to the fact that consumers are typically away on vacation. Other than a traditional uptick during the end of August for back-to-school mailings, peak mailing periods have typically been during the holiday months (i.e., October to December). Customers have grown accustomed to receiving a higher volume of mail during the holiday periods, but a boost in summer mailings may reach a new audience, Cerasale suggests. This, he adds, is an opportunity for marketers to "test new things [and] try to get new customers."

Critics argue that a summertime burst of mailings may lead to an autumnal dropoff but Cerasale doesn't see that happening. "There are certain mail-and-response patterns by customers during the holiday season and I don't think marketers will tinker with that," he says. As for concerns that the postal service may lose money during this sale, Cerasale says that the plan will not require the USPS to slash prices and deliver mail to the extent that it will lose money. Even the discounted rates more than cover the costs, he says.

(Marketers may be the only ones able to take advantage of the Summer Sale, but consumers can still enjoy a discount-mailing option of sorts: the USPS's Forever Stamps. The First-Class Mail offering, which debuted in April 2007, features an image of the Liberty Bell, and is intended to "ease the transition during price changes," according to the USPS Web site. These stamps are always sold at the current price of a regular First-Class Mail stamp, but can be used to mail a one-ounce letter regardless of when the stamps are used. For instance, Forever Stamps are currently sold for 42 cents but may still be used even after the postage rate jumps to 44 cents on May 11th.)

Since 2007, the DMA has been in discussions with the USPS about implementing variable pricing, going so far as to urge different rates to balance out the peaks and lows during any given week. Tuesday, for instance, is a particularly slow mail day. The discount would give marketers an incentive to redistribute their mailings, enabling the USPS to better handle the workload. There have even been suggestions of extending the six-day mail week to a seven-day delivery schedule, but Cerasale doesn't anticipate that happening anytime soon. (In fact, quite the contrary: There has been recent talk by the USPS of cutting out existing Saturday delivery, for budgetary reasons.) In any case, the summer sale shows some positive momentum. "We're glad [the discount appears to have] come to fruition in 2009," he says. "Let's hope that there's a modicum of success with it so we can go forward from here."

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