When it comes to the recently announced postage increase for 2019, those of us in the mailing industry thought we were getting vanilla, but what the Postal Service served up was rocky road. Depending on the specific rates a given mailer relies on, that road can look pretty rocky, indeed.
The rate adjustment filed by the Postal Service with the Postal Regulatory Commission (PRC) on October 4 calls for an average rate increase of about 2.5% for both First-Class and Marketing Mail. We expect the PRC to rule on the proposal by November 13. Assuming the PRC approves it, the proposal will take effect on January 27.
Without a Board of Governors for most of the year, all indications were that when Governors were appointed, Postal Service management would ask them to approve a “vanilla” across-the-board increase in which all rate cells would increase at about the overall average. Instead, what was sent to the PRC for approval was a much more nuanced pricing proposal with a broad variation in increases across rate cells. Here’s what letter mailers can expect in January.
Commercial First-Class Mail Sees Moderate Rate Increase
For those using commercial First-Class rates, the news is actually pretty good. Most of the rate cap for First-Class Mail was absorbed by a nickel increase in the single-piece stamp rate to 55¢. This means automation rates for letters are only going up about 1%, while the postcard rate remains unchanged. Another piece of good news for First Class Mail is that the additional ounce rate that applies to flats, single-piece letters, and presort letters weighing more than an ounce will be dropped from the current 21¢ to 15¢. (As has been true for the past several years, automation rate letters weighing up to 3.5 ounces all mail for the same price.)
Marketing Mail Letters Could See Significant Rate Increases
Unfortunately, rates for Marketing Mail letters are a different story. One complicating factor is that several years ago, the Postal Service discovered it had been calculating destination entry discounts for letters incorrectly. Since then, these discounts have been shrinking year-over-year, with these proposed rates dropping the current discount of about $28/M for SCF entry to about $22/M in next year’s rate structure. This difference means SCF-entry rates are rising above the class average and faster than rates for NDC- or origin-entry.
In addition, the Postal Service has determined High Density (HD) and High Density Plus (HD+) walk sequence carrier route preparation isn’t as valuable to them as previously thought. Therefore, these rates are being increased by above average percentages as well, with the combination of these two factors driving significant increases for SCF-entered HD and HD+ mail.
Bottom Line: What Mailers Can Expect from 2019 Postage Rate Increases
Based on analyses we have run on mail files for current jobs, we are projecting postage increases in the 2.5%–2.7% range for mailings that are predominantly SCF-entered 5-digit mail and the 4.2%–4.7% range for jobs that are heavily HD and HD+ SCF-entered mail. Increases will vary based on the make-up of each mailing list, the level of presort qualification, and the pattern of entry to postal processing facilities.
To find out how you can minimize the impact of the proposed rate increase on your marketing programs, or to receive a postage analysis for your unique mail files, reach out to your IWCO Direct account team. We are ready to help.
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