The U.S. Postal Service—despite its promise to “apply judicious and prudent strategies” in the use of additional rate authority it recently acquired from the Postal Regulatory Commission (PRC)— has proposed a postage rate increase averaging 6.8% for First-Class and Marketing Mail, which if approved will take effect August 29. This represents the full amount of the new rate authority granted by the PRC to offset declines in delivery density (pieces/delivery) and retiree healthcare costs, plus the CPI-based authority that has accrued since the January price change.
As in most rate cases, increases vary by rate tier. In Marketing Mail 5-digit automated letters will increase 6.5%, while high-density enhanced carrier route letters will increase 9.3%. Despite that difference, high-density remains an attractive presort tier, costing 3.6¢ per piece less than 5-digit. First-Class automation letters will see an increase of just over 7%. One bit of good news for Marketing Mail letters is that drop shipment discounts will be slightly deeper ($2/M) than they have been in recent years.
Although mailing industry associations have appealed the additional rate authority granted by the PRC to the Circuit Court for the District of Columbia, that case is unlikely to be resolved before this 2021 postage rate increase takes effect. As we noted in March, we believe the USPS ten-year strategic plan, Delivering for America, relies too much on above-inflation price increases that will only reduce mail volume. While we view the current rate case as neither judicious nor prudent, it is what we as direct marketers are left to make the best of, at least for now.
Minimizing the Impact of the 2021 Postage Rate Increase on Your Marketing Budget
IWCO Direct is always working to optimize our clients’ postal strategies, and we are looking at solutions to help offset the impact of this increase on our clients’ marketing budgets. We are analyzing the proposed new price structure and determining how best to fine-tune our postal optimization strategies to ensure our clients are paying the lowest possible postage rates. By working with IWCO Direct, clients are already taking advantage of many opportunities for postage savings:
- Almost all mail we produce qualifies for the Full-Service discount of $0.003 per piece.
- 99% of the Marketing Mail we produce takes advantage of destination entry discounts, with 98.6% of drop-shipped mail going directly to the destination sectional center facility (DSCF).
- In 2020, we commingled 548 million pieces of mail from small mailstreams to enhance presort qualification and expedite drop shipping this mail as deeply into the USPS processing network as possible.
- Leveraging our industry-leading full-color digital print platform, we achieved High-Density and other Walk Sequence Carrier Route discounts for more than half of our Marketing Mail in 2020 by combining multiple tests and lines of business into single mailstreams that not only drive lower postage rates, but also improve production efficiencies.
In addition, IWCO Direct’s data and marketing strategists work with clients to make direct mail work harder through more precise targeting and integration into multichannel campaigns that can drive more robust response than any single-channel campaign.
IWCO Direct Can Help
While this is an evolving issue , your IWCO Direct account team is available to take a deeper dive with you into the details of the proposed postage rates and provide analysis of the impact of these rates on your existing mail programs. We’re also ready to work with you to ensure your direct mail programs are taking advantage of all available postage discounts to achieve maximum postage savings. Contact me or your IWCO Direct account team today to find out how IWCO Direct can help you optimize your direct mail programs to drive best-in-class postage while measurably improving return on your marketing investments.
