October 21, 2020

Market Dominant Mail rates are going up on January 24, 2021

We notified our members and sponsors with an Alliance Alert on October 9, when USPS filed its monopoly mail price increases for 2021.  With a Consumer Price Index cap of 1.458 percent, plus some “banked” cap space, USPS announced these average hikes by class of mail:

• First-Class Mail 1.836%
• USPS Marketing Mail 1.509%
• Periodicals 1.456%
• Package Services 1.460%
• Special Services 1.458%

The single-piece First-Class letter rate, important to many nonprofits, stays the same at 55 cents.  Two years ago, the Postal Service took the misguided step of raising this rate by 10 percent, from 50 to 55 cents, thinking that the public prefers rates in five cent increments.

Like the last two years, it now is forced to contort other elements of First-Class in order to achieve the dubious goal within the price cap.  Additional ounces for letters go up from 15 to 20 cents, after dropping from 21 to 15 cents two years ago.  Flats additional ounces stay pat at 20 cents, now the same as letters. Metered mail goes from 50 to 51 cents, and cards from 35 to 36 cents.

One interesting price reduction is on Share Mail, which some nonprofits have found effective for fundraising.  It enables your recipient to send on a letter or card to a friend or family member, possibly expanding your reach.  The Share Mail letter rate will drop 15 percent from 60 to 51 cents, and cards 20 percent from 45 to 36 cents.  Very low usage of this product is the reason for its price cut.  The Postal Service is also recognizing in its pricing the multiplier effect of Share Mail, which it also should do with business reply envelopes in Marketing Mail and Periodicals.

For both First-Class and Marketing Mail, USPS is retaining its 3 cents discount for Full Service Intelligent Mail Barcodes, and adding a new 1/10^th of a cent discount for Seamless Acceptance, payable to the eDoc submitting permit holder.

Within Marketing Mail, certain categories that USPS says do not cover their cost will get larger than average increases:  high density letters, 5.4 percent; flats, 3.6 percent; carrier route flats, 3.5 percent; high density flats, 3.6 percent.  The large increase for carrier route flats is novel as they no longer cover USPS costs.  Marketing Mail parcels, used by many nonprofits, will go up 16.8 percent, reflecting lack of cost coverage and general increases in all package prices.

Within the 1.456 percent Periodicals average increase, larger nonprofit publications should be in the range of 0.8 percent to 1.2 percent.  Smaller-circulation publications may see above-average increases around 6 percent or more due to less presorting, lighter-weight pieces, and a higher percentage of non-machinable pieces.

Within Package Services, there will be no increase in Bound Printed Matter, which some nonprofits use, while Media and Library mail will increase 3.58 percent.

As every year, mailers need to check with their service providers to determine the exact impact of the rate increases on their mail, as well as any mitigation alternatives.  As an example, Alliance sponsor Quad provided these initial budgeting estimates in a webinar for clients:

Nonprofit Marketing Mail Letters

• Average: 2%
• Range: 0-8%
• Commingle range: 1.2-2%
• Lower end of range is all SAT entered into SCF: .06-.5%
• Higher end of range can be heavy HD: 3-7%
• Highest end of range is non-auto/non-machinable3 digit-mixed ADC no drop-ship: 6-8%

The Postal Service expects a PRC ruling on November 12, which would enable implementation 75 days later on January 24, 2021.

As a reminder from our previous Alliance Report, “Ten things you need to know about 2021 postage increases”:

• There is a better than 50 percent probability that the PRC will order new surcharges for USPS to impose sometime in 2021, pursuant to the ten-year rate review we have been involved in for a few years now.  The amount and timing of surcharges are very uncertain, both what the PRC will order and what the USPS will chose to implement.

• Mailers budgeting for 2021 postage costs should consider a contingency of 3 percent to 5 percent above the regular CPI increase.  This is based on the latest set of surcharges proposed by the PRC.

Postal pricing professionals have been given a Sisyphean task, trying to cover costs with a price cap and little to no cost reduction.  The PRC proposed solution to roll the rock on top of current mailers would be a debacle by comparison.