Southeastern Advertising Publishers Association

Successful Publishing Begins Here...

POSTAL PRICING PROPOSALS COULD BE "GOOD NEWS" FOR FREE PAPER PUBLISHERS

Donna E. Hanbery, Executive Director

Saturation Mailers Coalition

33 South 6th Street, Suite 4160

Minneapolis, MN 55402

(612) 340-9350 Direct Line

(612) 340-9446 Fax

hanbery@hnclaw.com

Mailers rarely look forward to Postal Service price adjustments.  But the 2017 Postal Service rate adjustment could bring good news for free paper publishers that use Standard Enhanced Carrier Route Saturation Mail to distribute their papers.

For more than three decades, the price structure for Standard Mail has had a piece/pound rate formula.  There is a fixed piece rate, up to 3.3 ounces.  For pieces heavier than 3.3 ounces, the rate includes the piece rate plus additional postage charges based on the "pound" rate.  The actual rate the mailer pays will depend on where mail is entered.  For most free paper publishers, and other shared mail programs, mail is drop shipped deep into the system to both achieve the lowest rate, by earning the highest drop ship discount possible, and to better control delivery service.  Most free paper publishers, and shared mail programs, work with local advertisers that demand consistent, weekly in-home date delivery windows for their advertising pieces.

The Saturation Mailers Coalition (SMC) has been working with individual mailers for years to dialog with the Postal Service about our members' concerns on pricing and service, and to advocate for the best rates and service possible.  One of SMC's agenda items has been to urge the Postal Service to reduce the pound rate, or to otherwise reduce the price for saturation program mailings,  to allow our members to compete more effectively with other print media and to attract and retain advertisers into our mail programs.

SMC, and other leaders in the industry, have shown that as pieces get heavier postal rates have gone up by a significant amount.  But postal costs are not similarly increased as package weight increases.  In some studies, increases in package weight actually make the mail more efficient, and less costly, to delivery.  Most importantly for our members, and the Postal Service in terms of retaining and growing this business, non-postal alternatives, including print products delivered by private carrier or on demand, do not have a high, fixed cost, disadvantage of distribution costs increasing steeply as the weight of the piece increases.

Dialog between Postal Service leaders on marketing, pricing, and costing, has taken place for years.  During its July 2016 MTAC meetings, and in discussions SMC has had with Postal Service pricing personnel thereafter, the Postal Service has confirmed that it intends to raise the allowable weight, by increasing the Standard Mail flat piece price weight break, from 3.3 ounces to 4 ounces.

All initial pricing proposals and structure considerations must be considered preliminary, as they are still under consideration and pending before USPS senior leadership and, final prices and product decisions are within the sole authority of the Postal Board of Governors and approval by the Postal Regulatory Commission.   But as your association leader, and a person who tries to be a cheerleader for our members and mail distribution, I would urge all mailed publishers to start thinking about what you could do with .7 more ounces of "space" to sell, at a price that will be at the same piece rate you are paying today, plus whatever annual "CPI" adjustment is imposed in the rate filing to be done at the end of the year.  (The present CPI increase is anticipated to be relatively small, around 1%.  If postal legislation was passed, considered a long shot by many, this could increase by an additional 2.1%).

For free papers that already have pieces exceeding 3.3 ounces, this price change will be an "instant windfall."  But for many free paper publishers, and mailers that have areas or zones that are lighter weight, or have distribution that includes both postal and other distribution methods like private carrier or rack, this pricing change makes Saturation Mail distribution a much more attractive alternative.

In my decades of working with the industry, a chief complaint about postal pricing is how it "punishes" papers and publishers that become more successful.  In some markets, the heaviest, most profitable papers, are the first papers to convert to private carrier distribution.  In other circumstances, publishers and mailers find that they are turning down opportunities to distribute insert advertising, and pieces that are heavier or on better quality paper stock, for fear of being "overweight."  This pricing change gives mailers an exciting opportunity to rethink your marketing and sales opportunities.  Publishers and shared mailers may be able to go after advertisers that have done heavier pieces, and different categories of advertisers, with more "real estate" to sell in your package.

In announcing the proposed price structure considerations, the Postal Service made it clear that it wants to be more transparent with industry.  it is inviting comment and feedback as it does not want unintended consequences or harm to occur by its changes.  The USPS wants to make pricing and structure changes that simplify pricing and products, encourage mail retention and growth.

As an association leader, I have been taking to people at the Postal Service about an increase in the breakpoint, or otherwise lowering the cost for Saturation Mail and/or the cost for heavier pieces, for as long as I can remember.  This proposed change in the piece weight break from 3.3 ounces to 4 ounces, without a change in how the pound rate is applied, and without other disruptive changes or increases in the "piece price" is very welcome news!  It will help free papers that mail expand their product offerings and increase circulation coverage.

SMC wants to thank and acknowledge the efforts of Postal Service senior leadership, including Chief Marketing Officer, Jim Cochrane, USPS Vice President of Pricing and Costing, Sharon Owens, and the hard working Pricing and Costing staff that had to run and rerun the numbers to show and support that these adjustments would be beneficial for the Postal Service and its customers.