Tuesday, October 20, 2009

No Postal Increase In 2010

Hot News!

Launch the balloons…pop the corks…give your BFF a sincere fist bump.

The USPS announced late last week that there would be no postal increase for “market dominant products” in 2010.

Mailers everywhere should be celebrating. First Class, Standard, Non-Profit, Periodicals and Single-Piece Parcel Post rates are all on the sacrosanct “do not touch” list.

USPS management is still weighing options on “competitive products” like Priority Mail, Express Mail, Parcel Select and most international mail; they hope to have an announcement on these classes/products in mid-November.

This postage price freeze is the best news direct mail marketing has heard in quite a while. In a year that saw dramatic mail volume declines due to the most miserable economy since 1929, widely reported housing foreclosures, rampant retail failures, and general market skittishness, the USPS lost a huge amount of money. Yet clearheaded USPS management realized that to increase postage would only drive more people out of the mail.

So USPS management did a gut check, and decided that inflicting pain on themselves today would mean more mail and less pain in the years ahead. And they were spot on with that counter-intuitive decision. Let the bubbly flow.

But wait! Now I get truly “inside the Beltway.” If you’re not a policy wonk, stop reading right here, and start celebrating. You’ve been warned.

Of course, the story behind the story is a bit more complex. Postal increases are now tied by law to the CPI—Consumer Price Index. Whatever the CPI does in a year (and it has historically gone UP each year) is what the postal system can increase postage rates by.

No one on Capitol Hill foresaw a situation where the CPI would go into deflation mode. But that is exactly what has happened in 2009. The CPI has actually dropped by 4.3%.

No one at the Post Office or on Capitol Hill could conceive of a situation where the USPS would (or could!) reduce rates by 4.3%. The system is simply not geared for deflation—an historical anomaly.

So USPS did the next best thing: it announced 3 months early that it was not going to raise rates.

USPS looks like a hero, but in reality they are pocketing that 4.3%.

If the CPI is to be believed, the USPS—as well as you and I—are now paying 4.3% less for gasoline, 4.3% less for clothing, 4.3% less for vehicle maintenance, 4.3% less for utilities, etc than we did the year before. So even though USPS management has decided not to raise prices, they are still ahead by 4.3%.

Got it? A brilliant decision, mandated by the times and economy, maintaining the status quo on postage rates was a PR coup—and a long-awaited win/win for the Post Office.

OK, the Post Office deserves a win every once in a while. And so do mailers.

Let’s drink a collective toast of that uncorked bubbly. Cheers to the USPS for its maybe not-so-difficult, but imminently practical (and correct!) decision.

Thank you, USPS.

Now if I could only find out where my 4.3% has gone missing…

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