The mailing industry is discussing a possible U.S. Postal Service proposal in the next rate case that would allow bulk First-Class mailers, such as banks and insurance companies, to send direct marketing mail or invoices with drop-ship discounts.
While this has not been officially announced, Barry Brennan, vice president of postal affairs at the Mail Advertising Service Association, Alexandria, VA, said the USPS has hired management consultancy PricewaterhouseCoopers in Washington to conduct a study on the matter. PricewaterhouseCoopers is asking mailers whether they would take advantage of a drop-ship discount for First-Class mail entered at Sectional Center Facilities and how much mail they would enter into an SCF under two possible discount scenarios: a 0.4 cent or a 1 cent discount.
While there are some bulk-rate discounts for First-Class mailers, there are no drop-ship discounts for this group because of its distribution method: First-Class mail is deposited into the mailstream wherever the mailer resides and then is sent via airplane to its final destination. Standard-A mail, on the other hand, is drop-shipped by trucks to USPS’ distribution facilities and moved throughout the mailstream until it ends up in the recipients’ hands.
The proposed plan would give mailers “better control over the delivery of the mail since the mailer would have to take care of the transportation,” Brennan said. “But, it’s a question of how the discount structure would work.”
Brennan said with Standard-A and Standard-B mail, there is a discount allowed based on transportation costs paid by the mailer, “but with First-Class mail, it would be a lot different. What kind of cost-avoidance [this model] will bring the USPS is unclear, but this will drive what kind of discount mailers will get and whether it is cost-effective for mailers to buy a leg of transportation in the air to get to destinations around the country.”
While some First-Class presort mailers are backing the discount because they say it would help stem the movement of transaction mail to the Internet, others say they are not certain they will save overall by paying the transportation costs.
“In Standard-A mail, because delivery times are so extended, worksharing discounts makes sense,” said Laine Ropson, national postal services manager at Moore Business Communication Services, Vernon Hills, IL, a mailing services firm. “But, First-Class mailers only have a standard three-day delivery window; and if I spend a day [transporting] mail someplace else [to get the discount], I have to decide whether the discount will enhance my delivery, have a detrimental effect on it, and, most importantly, cost too much. It’s not as cut and dried as Standard-A mail.”
The USPS did not say how it plans to build the discount structure for First-Class drop-shipping, and while there has been some discussion that the next rate case may include a proposal for it, Brennan said, “I don’t know if that is going to happen or not.” Currently, insiders are saying the next rate case will be filed in November 1999 or January 2000.
First-Class direct mailers are able to cut costs without waiting for this proposal to pass, however. According to sources, bulk First-Class mailers – which traditionally send their direct marketing offers via First-Class mail because of better USPS service and response rates are sending more mail at Standard-A mail rates because of the cheaper costs.
While mailers are often concerned that Standard-A mail will not arrive at a customer’s home quickly, and the mail may not be perceived as valuable by the consumer if it’s not sent First-Class, this is not true, according to Robert Lindsay, former vice president of postal affairs at printer World Color Direct, Norcross, GA.
“You can use Standard-A mail and, with a fair amount of accuracy, pinpoint when mail will arrive inhouse,” he said. “And, the chances that a consumer will go to the trouble of checking the corner of an envelope to see if it says ‘bulk,’ and if it does, throw it out [are slim to none.]”
Standard-A mailers also are now using a better-looking indicia. According to Perry Fernandes, vice president at Fala Direct Marketing Inc., a mailing house in Melville, NY, more mailers find this indicia more attractive than the former bulk-mail indicia.
Lindsay said shifting to Standard-A mail could be a key cost-cutting measure for First-Class mailers.
“We did a 2 million or 3 million piece mailing at World Color once that was going to go First-Class vs. Standard-A, and there was a $750,000 difference in postage,” he said. n