Planned postal rate hike hits marketers, but many remain loyal to mail medium

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Planned postal rate hike hits marketers, but many remain loyal to mail medium
Planned postal rate hike hits marketers, but many remain loyal to mail medium

The postal rate increase coming this spring is not expected to have a significant effect on direct mail marketing plans this year, thanks to its size and timing. 


However, the fact that the increase is even smaller than the US Postal Service had initially proposed is not much comfort to marketers, say industry observers. As with any cost increase, they point out higher postal rates continue to erode marketers' use of direct mail. 


"Any cost increase to the mailer is a factor," says Stephen Lett, president of Lett Direct, a consulting company. "I don't care how small it is; 
it's not good." 


Robert Nachman, VP of design and marketing at Steuben Glass, notes that the glassmaker's first-quarter mailings are already planned and priced. He also says that he doesn't plan to make any changes to the April catalog he is working on due to the rate increase.


"It wasn't as drastic as it could have been, so it's not going to have as large an effect. But certainly, budgets are budgets," Nachman says. "We're pretty much staying the way we'd planned, but we will certainly take a look at it and maybe make a few tweaks." 


Most marketers had already set their budgets when the US Postal Service filed its plans to increase rates January 13, because the Postal Regulatory Commission denied a much larger rate increase last September. 


ZenithOptimedia forecast US direct mail spending would rise 2.9% this year as the recession recedes, and it is sticking with that estimate, says Jonathan Barnard, head of forecasting at ZenithOptimedia. 


However, Barnard noted that an increase higher than inflation would accelerate marketers' move from mail to cheaper direct response media. 


The new rates were set within a cap based on the rate of inflation, raising the cost of standard flats by 0.8%, high-density flats by 0.4% and presort first-class mail by 1.8%. 
"Certainly smaller, more predictable postal rate increases are more manageable with respect to forecasting future costs," says Robert Croce, director of government relations at Valassis 
Communications.


Meta Brophy, director of publishing operations at Consumers Union, says it will stick with the "robust mailing year" it has planned. The parent of Consumer Reports doesn't plan to reduce or increase its mailing schedule on account of the rate changes, 
says Brophy.


The fact that the rate hike is smaller than the one initially proposed is not expected to boost mailings. A hike is a hike, and there are too many other factors to consider when the consumer economy remains unclear including inventories and response rates, according to observers. 


"It's a timing issue that's really timed to customer response," adds Brophy. "The response outweighs any of the games of moving mail around to 
accommodate prices."


For catalog mailers, changing mailing schedules can raise issues with inventory, notes Jerry Cerasale, SVP of government affairs at the Direct Marketing Association. Changing catalog drops could leave shoppers unable to find the items they want in stock.


It's also unlikely that marketers will move up mailings due to go out in late April to beat the rate hike. With the rate increase being smaller, there is even less to gain by making the 
shift, he adds. 


Cerasale says one long-term benefit to direct marketers is more manageable rates in the future.


"The Postal Service has come out and said, 'Yes, we're going to go forward and keep the increases at the rate of inflation,'" he says. "That's 
one positive thing the industry gets out of it."

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