This past Friday, the Postal Service filed 2018 postage rate proposals with the Postal Regulatory Commission (PRC) for both its Market Dominant and Competitive products, which will take effect on January 21, 2018 (assuming PRC approval). The PRC will now review the Market Dominant rates to ensure they are within the legally mandated inflation-based rate cap. The PRC will also review the Competitive rates to confirm they cover the costs of those products. The PRC’s ruling is expected in about six weeks—probably just before Thanksgiving. Let’s explore what this all means and how it may impact your 2018 direct mail budgets.
Impact on Competitive Products
Competitive postal products include expedited services like Priority Mail, parcel shipping services, and international mail options such as International Priority Airmail (IPA) and International Surface Air Lift (ISAL). These products will generally see a 3.9% price increase, with the Postal Service’s bulk ground shipping products Parcel Select (4.9%) and Parcel Select Lightweight (7%) seeing the highest increases.
2018 Postage Rates for Market Dominant Products
Market dominant postal products include First-Class Mail, USPS Marketing Mail (formerly known as Standard Mail), as well as Periodicals, and are the rates most often used by marketers. Increases in these rates are controlled by an inflation-based price cap applied at the class level. This means that although the average increase for both Marketing Mail and First-Class Mail is about 1.9%, individual rate cells within each class can see changes that vary from the average as long as the result is within the rate cap when they are combined with all other mail in that class.
The 2018 postage rate proposals are relatively simple compared to the 2017 changes, reflecting the empty seats on the Postal Service’s Board of Governors. The last remaining presidentially appointed governor approved a January 2018 rate increase before he left office in December 2016. Given the time lag between that approval and the effective date of the increase, the approval was simply for a within-the-cap increase without any changes to the rate structure.
Looking More Closely at Letter Mail
First-Class Mail commercial letter rates are increasing about 1.25%, while single-piece rates are up a little over 2%. The number that will be in the news is that a Forever Stamp will now cost 50¢.
Marketing Mail letters are more of a mixed bag. The Postal Service announced last year it had been overestimating the cost savings that destination entry provides for letter mail. For this reason, it continues to realign the relationship between SCF-, NDC- and origin-entered mail. Destination entry discounts for SCF-entered letters are currently $31–$34/M, depending on tier. The 2018 proposed rates cuts discount to $28–$31/M. Marketing Mail letters commingled to the 5-digit level and entered at the SCF will see an increase of 1.4%, slightly below the class average, with NDC- and origin-entered mail seeing smaller increases.
SCF-entered walk-sequence carrier route Marketing Mail letters will see higher than average increases of 2.0%–2.4%, with NDC- and origin-entered mail again seeing smaller increases.
Nevertheless, keep in mind finely-sorted, drop-shipped mail still provides the most advantageous postage prices, even if some of the relationships between tiers is changing. In addition, 2018 postage rates for many tiers of drop-shipped Marketing Mail letters and commercial First-Class Mail letters remain below the level of corresponding rates in early 2016 when the exigent surcharge was in place.
Your IWCO Direct account team can help you take a closer look at how the proposed 2018 postage rates may affect your marketing budget. Ask them for an analysis today.
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