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DMA Study: Privacy Legislation Could Lead to Postal Rate Increase

The Direct Marketing Association yesterday released an economic impact study showing that the steady increase in commercial mail volume experienced by the U.S. Postal Service over the past 15 years would be crippled if Congress passes stringent data restrictions.

The study found that rapid advances in computing, communications and database marketing technologies over the past 15 years have helped make mail a relatively efficient medium for targeted direct marketing. The study said information is the key component of effective targeting.

But without access to robust consumer information, mail becomes less cost-efficient as a marketing medium. In addition, the study found that direct marketers, which spent almost $45 billion in direct mail advertising in 2000, will migrate their ad spending to other media in response to privacy legislation.

The USPS cannot expect to survive if major marketers abandon the mail system for more cost-effective and reliable measures to reach their customers, the study concluded.

“We are concerned because the USPS is in a dogfight just to remain competitive and relevant, as it is,” said H. Robert Wientzen, president/CEO of the Direct Marketing Association. “The last thing the postal service needs is another legislative nail in its coffin that will drive away its biggest customers.”

If commercial mail volume decreases because of new legislative and regulatory burdens that restrict the use of marketing information, the USPS would have to find another way to finance its costs. Under the current 31-year-old law that governs the USPS, its principal method for raising cash is raising rates.

“If an opt-in-style privacy bill were to become law, it would force companies to redirect limited advertising revenue away from the USPS,” said Michael Turner, executive director of the Information Services Executive Council, an arm of the DMA that conducted the study. “Rather than market their wares through the mail, these companies will get their message out through alternate channels like cable television and print media, such as newspapers and magazines.”

Other looming trends, such as the rapid erosion of prompt postal delivery and a series of additional postal rate hikes, also would cut into commercial mail volume, the study found.

“These 'supply-side shocks' diminish the role that the postal service can play as a marketing tool,” Turner said.

The study was titled “The Likely Impact on USPS of Restrictions on Free Flow of Information.”

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