Catalogers, List Firms Expect to Prospect Less

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Catalogers, DMers and list companies aren't particularly happy with this week's recommendation by the Postal Rate Commission to raise postal rates an average of 8.8 percent, even though the U.S. Postal Service originally called for a 9.4 percent increase.

"At first blush, I am disappointed," said Michael Sherman, president of Fingerhut Cos. Inc., Minnetonka, MN. "If the [USPS'] Board of Governors accepts the PRC's decision, it will make it tougher for catalogers to compete."

Sherman also expressed concern about the decrease in First-Class mail volume that is causing the USPS to "put more of a burden on catalogers despite the fact that on the catalog side, we are a critical, critical part of the volume of the postal service. They don't quite understand the impact that this is going to have on our industry."

Sherman said this case also makes it obvious that it is now time for postal reform.

"Fingerhut is one of the largest users of the post office," he said. "We have a lot of respect for the post office, but this rate structure is not a good thing for the future."

As for whether Fingerhut will send fewer catalogs and less direct mail, Sherman said, "it will be that much harder to mail names because ultimately [the rate increase] will increase the bar of what you have to do to be profitable."

Meanwhile, list professionals are bracing for a drop in list rental circulation from their catalog clients.

"It doesn't paint a pretty picture for 2001 as far as catalog growth," said Mike Hayden, senior vice president of the catalog list brokerage division at Millard Group Inc., Peterborough, NH. "We're probably going to see mailers start to cut back on the more marginal lists that they were originally planning on mailing."

Also, catalogers will probably be less aggressive in their testing and won't test into areas outside their market niches, he said.

Even so, some brokers noted that catalogers knew the increase was coming and are not making rash decisions, especially with early spring drops already planned.

"Two things we have not seen yet are reductions in spring circulation plans -- last year was a very healthy spring -- or a mad scramble to get out there before the rate hike," said Steve Tamke, senior vice president at list brokerage Mokrynski & Associates Inc., Hackensack, NJ.

In addition, many brokers doubt that catalogers will replace postal circulation with e-mail names.

"I don't believe that there is a fair e-mail pricing structure in place, and response rates have not been all that phenomenal," Hayden said.

In general, Charles Dall'Acqua, president of marketing services at Harte-Hanks, Baltimore, said direct marketers should prepare for the rate increase by "paying closer attention to their databases, list hygiene and mail preparation methods." In doing so, they will be able to identify their best prospects and customers and eliminate waste.

"By doing better list hygiene, they can eliminate nondeliverable addresses," he said, "and by doing better mail sortation and mail planning, they can get their mail sorted down to better-discounted sortation levels."

Sherman said Fingerhut already is "building into its business model what the impact of the postal increase will be." He also said the decision will drive catalogers to look at alternative delivery systems.

"If catalogers are not going to have a postal service that will be able to offer them a reliable price and service, they are going to look elsewhere," he said. "There have been [companies] that have looked at alternative ways to deliver catalogs, but no one has done it successfully. Maybe this will push private enterprise to deliver new ways to deliver catalogs."

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