How You Can Help Avert Another Rate Hike Disaster
Just about all catalog merchants in America should have gotten more than their fill of news, comments and opinions on the meaning, impact and consequences of the 2006-2007 postal rate case. If you have no idea what I’m referring to, perhaps you’d be better off finding a new career.
By now, you should’ve learned how to adjust your business marketing practices to accommodate the recent round of horrendous catalog postage increases. If you haven’t, then you’re about to learn some difficult, unforgiving lessons in trying to make a living in a hotly competitive marketplace.
Your focus now must be on the future. Not the future of five to 10 years from today, but the future of what’s likely to happen over the next 12 months.
The Postal Service already has learned a “novel” lesson from this last round of rate increases. The postal chieftains have discovered that the punitive rates assigned to those who mail larger than letter-size (flat) mail pieces has sorely affected flat-mail volume. The volume of flat mail now reportedly is at a level that was last seen immediately after the anthrax crisis.
This shouldn’t surprise anyone. PostCom and others warned the Postal Service that double-digit rate increases would have a deleterious effect, so much so that USPS estimates of flat-mail volumes and revenues should have been considered without merit by the Postal Regulatory Commission (PRC).
So what does lie ahead for catalogers? Plenty.
New Rate-making Schema
First, catalogers should be keenly aware that the PRC is well into the process of seeking public comments on a new, proposed rate-making schema. Some of your fellow catalog marketing colleagues have stepped up to the challenge and have provided the commission with some excellent comments.
In particular, James West, director of marketing development for multititle housewares cataloger Williams-Sonoma, deserves kudos for his excellent testimony at a recent PRC field hearing. West briefed the commission on the changing nature of catalog/multichannel marketing, how marketers make their decisions regarding media alternatives and the key factors that determine the look and feel of a finished, printed product.
Second, you should know that the Postal Service already is making noise about needing another billion dollars to accommodate some expenses that have flowed from the new postal law — the Postal Accountability and Enhancement Act of 2006 (PAEA) — which went into effect at the beginning of this year. In a nutshell, postal officials say it’s essential that the USPS have “one more bite at the apple” to set appropriate postal rates and classification baselines before stepping into the brave new world of living within the constraints of an inflation-based price cap.
And how does the Postal Service intend to raise this new booty? Two options:
1. File one more old-style, cost-of-service rate case, which the new postal law permits provided the request is filed before Dec. 20, 2007.
2. Request a rate change under the class-based inflation cap provided by the new postal law.
There’s no doubt in the mind of any rational postal representative that mailers should strive to avoid, at all costs, having the Postal Service request a billion dollars in new rates under the old cost-of-service, rate-making rules. Recent history should have provided more than sufficient proof of the perils associated with giving the PRC another crack at second-guessing the USPS’ business judgment (even if that judgment was somewhat short-sighted). If a revenue increase is really needed, then the Postal Service and the PRC should be urged to effect any rate change under provisions envisioned by the new postal law.
Discretion on Rate Categories
The PAEA inflation-based pricing limit pertains to revenues derived from mail aggregated at the class level. Under PAEA, the Postal Service will have considerable discretion as to how rate increases are to be applied at the rate category and subclass levels. So what, in fact, is an inflation cap on rates calculated on the class as a whole may actually be reflected in rates that might be above or below cumulative inflation when viewed from a rate category or subclass perspective.
If catalogers and multichannel marketers truly believe in their ability to exercise policy-making clout, which they certainly should, now’s the time to show it. It’s not that complicated to send the USPS Board of Governors and the PRC a loud and clear message that one more cost-of-service rate case must not be considered. The cry should be to start working under the new law — or nothing.
Catalogers still will have to step up to the challenge to educate the governors and the commissioners on what catalog marketing is all about. You simply need to explain the questions and decisions that you as catalog marketers must make in determining the media through which you expend your marketing and advertising dollars. Also explain the market-based intelligence that goes into the decision on how a mail marketing piece should look when mail is chosen as a primary marketing channel.
This past rate case should be evidence enough that those who are empowered by government to regulate one of the key channels through which you do business haven’t a clue as to why you do what you do. This ignorance needs to be expunged. Those who’ll be most significantly affected by future rate hikes need to be willing to educate postal policy makers about the realities of catalog life.
Don’t presume for a minute that any public officials know even an iota about your business. If, however, you don’t get them to know what they need to know to ensure that postal policy and regulation will do no harm, then someone else will. Unfortunately, that someone else may have an entirely different view of the postal world than you do.
Gene Del Polito is president of the Association for Postal Commerce, a trade group serving the interests of advertising mail marketers. You can reach him at (703) 524-0096 or genedp@postcom.org.
