As expected, the United States Postal Service filed their proposed 2017 price changes in October. There is a lot of buzz surrounding some of the changes, specifically the change in the “second ounce free” being up to 3.5 oz.
Simplification in this case is a good thing for mailers and should help continue to drive more trans-promotional opportunities.
There was also a major change in drop-ship discounts for standard mail letters (now called marketing mail), as the discount for drop-shipment from the origin site to the Sectional Center Facility (SCF) decreased by over 22 percent. In addition, the spread in the discount between the Network Distribution Center (NDC) and the SCF decreased by 11 percent. There is a small off-set to this in that the proposed rates increase the discount for automation sorting.
But no one seems to be talking about the postage decrease for next year. The industry understood that as the exigent rate increase expired, postage rates would be reduced. But in these newly-proposed rates there’s another postage decrease that’s not related to outside factors like a great recession, and that’s good news for many first-class mailers.
The proposed price for a first-class letter sorted to the five-digit actually decreases by 0.8 percent or $0.003 from the current rate of $0.376 to $0.373. And while the rates for the Automated Area Distribution Center (AADC) and the Mixed Automated Area Distribution Center (MXD AADC) increased by $0.004, the incentive to mailers to find that additional five-digit discount is significant. The United States Postal Service proposed increasing the spread in discount between the AADC (the three-digit finally goes away) and five-digit sortation increases from $0.023 to $0.030. That’s an additional 30 percent in discount for that five-digit. For example, if a typical mid-sized first class transactional mailing specialist creating 3 million pieces a month, went from three digits to five, it would save $90,000 a month. That’s more than $1 million annually.
If these proposed rates are implemented, the incentive will be in place for mailers of all sizes to maximize that five-digit penetration on first-class mail. Customers who’ve invested in merging print streams through a digital process, material process or comingle process are well suited to take advantage of these rates.
Likewise, customers who haven’t moved down these paths because it didn’t make financial sense, or the effort wasn’t worth the savings, will be well motivated to find a partner solution that allows them to take advantage of next year’s postage decrease.