Navigating the New USPS

"We're in a deep financial crisis today because we have a business model that's tied to the past," Patrick Donahoe, USPS postmaster general, told The New York Times. "Our business model is fundamentally inflexible. It prevents the postal service from solving its problems." "The fact is, there are many options to cut costs and expand revenue while preserving service," said U.S. Senator Susan Collins (R-Maine). "The Postal Service needs a comprehensive solution, not more tinkering around the edges," said Senator Tom Carper (D-Del). "Postal reform requires hard choices … the financial condition of USPS grows more precarious with each passing day," said Senator Scott Brown (R-Mass). These statements tell the story. While reports and predictions continue to run rampant, what we do know is that throughout 2012 and 2013, the USPS will undertake the most widespread changes ever attempted in the history of the organization. Postage rate increases, new mail piece specifications and a significant reduction in the delivery network will result in significant cost savings for the USPS and big changes for marketers. For direct mail to continue to be a profitable marketing channel, businesses and organizations must identify the most cost effective solutions for their marketing programs in light of this coming USPS transformation. Getting up to speed on these regulations and the impact on mail programs is critical to success. 1. New Postage Rates for Folded Self MailersWhile the actual rate increase percentage varies by product and service, the overall average rate increase across all classes of mail is capped at 2.1 percent. Several common mail formats are considered "folded self mailers" (FSM) and currently mail at standard automated letter rates. The 2013 FSM specification changes now categorize these campaigns into a higher postage rate tier. In addition to altering package size, such as moving from flats or oversized packages to letter-size packages, paper modifications also can offset the impact of postage rate changes on folded self mailers and unenveloped mail pieces. Additionally, marketers mailing First-Class Presort now can mail a second ounce free for automation and presorted letters. A thorough understanding of all specification changes will allow marketers to modify and test formats that comply with the new regulations without losing any of the impact. Partners who offer comprehensive postage analyses can help marketers make an informed decision about the optimal designs of mail programs. 2. Mail File OptimizationMany campaign budgets have already been impacted by annual postal rate increases. To avoid additional costs associated with undeliverable mail, marketers must be diligent about database maintenance and list file preparation. Eliminating undeliverable addresses and updating customer information can reduce costs. Further, modeling and analytics can identify your most lucrative prospects, responders and customers. Understanding these audiences will drive gains in responses and improved campaign results. In addition, entering the database into an established digital tool, such as third-party proprietary models, can help define the optimal postage rate and shipping methodology to get your mail to the intended recipients on time and on budget. 3. Understanding Production and Postal LogisticsOnce an optimal mail format is created and data files are clean, marketers must execute their mail campaigns on time and on budget. Working backward from desired in-home dates will enable marketers to determine the In Facility dates—based on USPS Delivery Standards—that their campaigns must arrive at the various USPS facilities around the country. These In Facility dates also drive production scheduling, from manufacturing start and stop dates to artwork and data file due dates and even material ordering dates, creating additional efficiencies. In order to achieve competitive postal and delivery costs of finished pieces, marketers must find ways to move mail pieces further downstream in the USPS delivery system. Several options can be considered, including: • Presorting: Arranges the mail file according to USPS-sanctioned delivery schemes by ZIP code.Benefit: Determines overall campaign postage rate and cost. • Destination Entry: Often referred to as "drop ship," this involves shipping pallets of prepared mail directly to the USPS sectional center facility (SCF).Benefit: Provides discounts for moving the mail further downstream in the USPS network and possibly improved in-home dates. • Co-palletization: The process of combining trays of mail going to the same entry points on the same skids (or pallets). They are then organized and loaded in drop shipment order.Benefit: Similar to destination entry, "co-pal" offers discounts for moving the mail further downstream in the USPS network and possibly improved in-home dates. • Comingling: Groups together pieces of mail from multiple clients/customers or one client's multiple mailers.Benefit: Affords businesses and organizations even lower postage rates through deeper penetration of high-volume mail into the delivery system. • Logistics Planning: Determines the best load and delivery patterns.Benefit: Optimizes transportation costs. In addition, marketers can hold onto their postage funds longer with drop ship management systems—USPS-authorized electronic systems used by mailers to consolidate palletized loads and monitor all mail movement. This process applies to plant-verified drop ship loads and full electronic documentation is required, however it ultimately gains marketers valuable days before it's necessary to release postage funds. 4. Facility Closures and Network RealignmentRoughly 50 percent of USPS facilities face closure through 2015, part of an effort to cut more than $22 billion in costs by 2015. According to postal figures, letter carriers delivered 202.8 billion pieces of mail a decade ago, compared with only 168 billion mailed last year. As the Postal Service moves forward with plans to close hundreds of mail distribution centers and an even greater number of post offices, marketers' understanding of the timing and impact of individual facility closures is critical. Routing a direct mail campaign to the wrong location will result in major delivery delays. As the USPS continues to cope with real changes and possible outcomes, direct marketers must stay focused on finding postage, processing and logistics savings to maximize delivery and boost ROI. This is achievable through a deep understanding the "new" USPS, coupled with optimized mail piece design, mail file processing and effective delivery strategies.yy Mark Bosler is senior vice president sales at Baltimore-based provider of targeted advertising and marketing solutions Vertis Communications. Reach him at mbosler@vertisinc.com.

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