How to prepare for the 2007 postal rate increase

Over 500 mailers attended PCC Day at Lambeau Field in Green Bay. Postmaster General, Jack Potter addressed them via closed circuit TV displayed on the stadium’s big screen.

The U.S. Postal Service has proposed a postage rate increase for 2007. This proposal was driven by their rising fuel and healthcare costs. The USPS operates a fleet of over 260,000 vehicles and their healthcare costs rose $437 million in the past year.

The new rate structure would force mailers to reevaluate all of their mailing and address quality practices. Increases for difficult to handle mailpieces will be dramatic.The new rates will be more sensitive to shape and weight of the mailpiece, as well as address quality.

The average increase for First Class mail will be 7.1%. The Standard Mail rate will increase 9% on average. Non-machinable and non-barcoded mail will increase even more. If approved by the Board of Governors the rate change would go into effect in May of 2007.

There are many ways you can minimize the increase by starting to plan now. You could save money by drop shipping or commingling your mail. Designing your mailpieces into shapes that reduce processing costs can earn higher postal discounts. Also, you should be taking a hard look at list hygiene. The penalty for mailing to undeliverable addresses will be higher than they were in the past.

Drop Shipping – The USPS encourages “work sharing.” When a mailer provides the shipping to a Bulk Mail Center (BMC) or Sectional Center Facility (SCF) additional postal discounts are earned. List analysis is required to determine if any discounts would apply. Mailings with high geographic saturation or volume of over 100,000 pieces have the best potential for this service. A mail house experienced in postal logistics can help reduce your postage by as much as $0.02 per piece.

Commingling – This is a “work sharing” service that sorts many different mailings together before being entered at the post office. Sorting machines batch your mail with other mailings by zip code. The margins between the proposed new rates and what can be saved through commingling will be widened in 2007. This service works best with smaller national mailings or those with multiple versions.

Reconfigured Mail – The shape of the mailpiece will take on more importance with the new rate system. Pricing incentives will create an adjustable rate structure for mailpieces that configure to easily processed shapes. A First Class Flat that is folded to lettersize can reduce your postage substantially under the new rates.

List Hygiene – Last year there were 45 million address changes nationwide. Postmaster General Jack Potter announced at the annual Postal Customer Council in September, “I want us to cut by 50% the amount of undeliverable as addressed (UAA) mail.” This is a $2 billion a year problem that the USPS wants to improve. That’s the cost associated with forwarding, returning and disposing of UAA. The cost for Address Correction Services will go up. Improving your house database through NCOA and Fast Forward services will help offset that cost of UAA mail and improve your ROI.

Potter also announced the new Delivery Point Validation for First Class mail. This service will provide tracking of bulk mailings through the postal system.

The proposed rates for 2007 include some entirely new categories of mail. The USPS website does show some side-by-side comparisons. Go to http://www.usps.com/ratecase/.

Need help with the rate case? Consult your A.M. rep or call us at 608-884-3452.