The direct marketing industry took notice last week when the Postal Service filed its 2017 postage rate case with the Postal Regulatory Commission (PRC). The PRC will now review the rates to ensure they are within the legally-mandated inflation-based rate cap. The PRC’s ruling is expected in about six weeks – probably just before Thanksgiving.
Before we get into the proposed 2017 postage rates, it’s important to remember the inflation-based price cap that controls rate increases is applied at the class level. This means that although the average increase for Standard Mail is 0.895% and 0.78% for First-Class Mail, individual rate cells within each class can see changes at a significant variance to the average as long as the result is within the rate cap when they are averaged with all other mail in that class.
For the past few rate cases, commercial letter mail has fared pretty well, with rate increases at or slightly below the class averages. This will again be the case for First-Class Mail this year. However, coming into this rate case, the Postal Service took a close look at destination entry discounts for Standard Mail letters and determined they had been overestimating the cost savings that destination entry provides for letter mail. The agency has begun to realign the relationship between SCF-, NDC- and origin-entered mail, in many cases, raising rates for SCF-entered mail while lowering rates for origin-entered mail.
2017 Postage Rates for Drop-Shipped Standard Mail Letter Mailings Expected to Increase 2.5%
Don’t get me wrong – finely-sorted, drop-shipped mail still provides the most advantageous postage prices, but mailers who are already taking advantage of these savings will see higher than average postage increases for this efficient mail. Both SCF-entry and NDC-entry discounts have been reduced by about $10/M, which based on our preliminary analysis, will drive an increase of about 2.5% for Standard Mail letter mailings whether they achieve walk-sequence carrier route savings or are simply commingled to the 5-digit level.
Even with this above average increase, 2017 postage rates for drop-shipped Standard Mail letters remain about 1.5% below where they were earlier this year when the exigent surcharge was in place.
As well as the rates themselves, several other changes were proposed as part of the 2017 rate case. They include:
- Standard Mail will be renamed “USPS Marketing Mail” to better represent it as part of multichannel marketing campaigns.
- 3-digit and AADC tiers have been combined into a single AADC tier for both First-Class and Marketing (Standard) Mail letters. (Prices have been the same for these tiers for the last several years, so this is really just a structural clean-up.)
- The 3-digit tier still exists for flats in both classes.
- The piece/pound rate for heavy Marketing (Standard) Mail letters will become a thing of the past. All letters up to 3.5 oz. will be mailed at the piece price.
- Marketing (Standard) Mail flats will receive the same price for pieces up to 4 oz. Pieces over 4 oz. would still be priced at the piece/pound rate.
- Commercial First-Class letters will no longer have prices that increase with each ounce. What started as “Second Ounce Free” will be expanded, so all pieces up to 3.5 oz. mail at the same price.
- First-Class flats and single-piece letters will continue to be charged by the ounce.
Your IWCO Direct account team can help you take a closer look at how the proposed 2017 rates may affect your postage budget. Ask them for an analysis today.
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