Ask Randy: 2021 Mid-Year Postal Update

The economic recovery is welcomed yet things remain quite volatile for the direct mail industry and the USPS. While making progress, the summary points below describe a postal organization very much still in transition. The most important three words to both guide and protect your direct mail marketing strategy through 2021 should be: PLAN FURTHER AHEAD.

SPC remains ready to work with you to ensure your programs execute as planned.

Summary outline of the Ask Randy 2021 Mid-Year Postal Update presented on June 17th.

USPS 10-Year Plan Progress

Part 1: Work in Progress
  • Preserves affordable, six-day mail and expands seven-day package delivery
  • Generates $24 billion in net revenue
    • In part from enhanced package delivery services for business customers, including same-day, one-day and two-day delivery offerings
  • With congressional support accelerates move to an electric delivery vehicle fleet
  • Improves cash flow to allow for investment of $40 billion
  • Stabilizes workforce
    • With a goal of cutting non-career employee turnover in half and creating more opportunity for growth including more predictable progression into career workforce
  • Requests repeal of the retiree health benefit pre-funding mandate and to maximize future retiree participation in Medicare
Part 2: It’s Happening
  • Adjusts select delivery standards to improve efficiency and reliability
  • Aligns pricing to reflect market dynamics effective August 29th, 2021

SPC is seeing for First Class Mail delivering in-home in the same cadence as previous; typically 3 – 5 days with occasional localized delivery issues.

August 29th Rate Increase

How did we get here?—The Postal Route
  • Postal Accountability and Enhancement Act (PAEA) of 2006
    • Mandated the Postal Regulatory Commission conduct a review in 10 years of the newly in-place USPS pricing system.  This review was to determine if the rate system was achieving the objectives of PAEA. 
  • PAEA rate setting system NOT achieving all objectives
    • Not achieving all objectives; in particular maintaining financial health of the USPS.  
    • PRC Proposes Significant Changes to USPS Rate System
    • Maintains CPI based pricing standard as it creates stability and predictability
    • Provides the USPS with “discrete amounts of additional rate authority
    • Additional Performance Based Rate Authority
    • Additional Price Adjustments for “Underwater” Products
  • PRC Proposes Significant Changes to USPS Rate System
    • Additional Performance Based Rate Authority:
      • PRC proposes an additional 1% per calendar year of which .75% is based on achieving certain operational efficiency requirements.  The remaining .25% is based on maintaining service standards.
    • Additional Price Adjustments for “Underwater” Products:
      • This portion of the PRC ruling proposes that when the USPS files a price adjustment request for any product, the USPS will be required to increase the rate for products not covering cost by a minimum of 2% above the increase.
  • CPI has increased by 2.7% since January’s last USPS price increase
Strategies and Notes to Mitigate this Increase
  • Postage and Post Mailing actions should be considered to be in the same bucket
    • The best way to attack this is to shoot for the lowest possible rate of the combined figure.  Commingle and Copal should definitely be considered. SPC can provide an analysis to create the best solution for you.
  • Keep the 5-digit mail together. Nth select test cells or version cells by Zip codes not by name
  • Reduce Versioning by using SPC’s production methods to four color variable digital print, 4 color inkjet technology incorporated on our inline web presses, and 4 color inkjet technology for imaging on the outside of envelopes. All of these options can create the testing and versioning while keeping in a single postal stream. Imaging in single color such as black or a PMS is also available.
  • Consult with SPC on your best option to fit your program, every program might have a unique solution.

What about next year? The USPS currently has expressed that they prefer mid-year postage adjustments but reserves the opportunity for a January increase. The 2022 increase is projected to be anywhere between 3% to 7%.

Work with your SPC contact to plan ahead on your mail campaigns to allow time for us to strategize with the mills and suppliers to mitigate the increases.

Randy Weiler
Senior Director of Postal Affairs, Logistics & Strategy

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