direct mail, Economics, Government, Media, USPS

USPS: A Six-Month Stagger Into 2019

What can you say about a cursory glance at the most recent USPS Revenues Pieces and Weights report other than “CURSES!!” ?

What else can one say? They raised their rates around 2.5% last January, and six months later, revenues, pieces and weights are down.

SPOILER ALERT: This is all about numbers, which mean little, unless you are thinking about money.

You can see the details for yourself, but a cautionary word: the official RPW report above covers 9 months, from October 1 to June 30.   I have extracted the numbers below to cover from January to June, 2019.

 

In First Class Mail, which is all about bills, statements, cards and letters to mom and the folks, volume was off 3.2%– 904,000,000 pieces less than 2018.

Marketing Mail– direct mail was off 4.9%, — down 1,839,000,000 pieces from a year ago. Even more disturbing, the weight of those direct mail pieces also shrank about 2% from 1.49 ounces in 2018 to 1.46 ounces in 2019.

Leavened economics: 4 for $8.00 or 1 for $3.50?

The lesson here is that when you raise prices, despite your dominant position in the marketplace, people will buy less. We experienced a similar phenomenon at our favorite bakery when they raised the price of a cinnamon bun from $2.00 to $3.50. We used to buy 4, for $8. Now we buy one. Who’s happy?

The only bright light in the USPS tunnel to perdition is the package volume. Thanks to Internet orders, parcel shipments are still growing revenues, up 3.6%, though pieces and weights are off 1.7% and 3.3% respectively.

For wholly different reasons, magazine volume is also continuing its slide. Pieces are off 7.7% to 2,345,000,000 total delivered to as many as 159 million addresses in each of the past 6 months. If these magazines are all monthlies, there are approximately 391 million subscriptions in effect. About 2.4 for every household in America. While that may seem like plenty, just 5 years ago, the USPS delivered just over 3 billion periodicals, honoring approximately 502 million contracts, or 3.2 for every household.  But face it: if it wasn’t for the waiting rooms outside doctors’ offices, lube shops and office lobbies, the count would be less.

None of these figures should surprise you.  We all know the effect of the Internet on hard copy, paper, ink, and postal delivery.  Still, it is distressing to see a vital communications channel slowly price itself into a retreat, fulfilling a prophecy of irrelevance.

USS Ronald Reagan, a meager 110,000 tons.

But it’s not irrelevant.  Total mail volume in the fiscal year 2018 was 146 billion pieces.  That weighed 12.3 million tons. For those of you who are counting, that’s 108 USS Ronald Reagan aircraft carriers, soaking wet.

I have said it several times before, that the USPS, as an independent government agency has lots to be proud of, starting with its relatively minuscule cost to the US taxpayer.  Its 2017-2018 annual report showed an operating loss of $3.9 billion.  Sounds like a lot!  It’s 0.095% of the total U.S budget.   Less than one tenth of a percent.

The reality is, the USPS is still the bargain of all the media choices: it’s part of our lives, 6 days a week, with door-to-door pick-up and delivery, costing the taxpayer household about $23 per year, plus stamps.  Beat that, Amazon Prime.

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Culture, Media, Thank You, Thanks, USPS

Will You Write Me?

Back in Delhi, my home town, everyone got their mail at the post office.   Built in the 40s, this was the largest civic building in a small tobacco town of 3,000.  We climbed, what seemed at the time, a grand set of concrete steps, and entered by a glass and steel door into the lobby which held a vault of perhaps a thousand burnished steel postal boxes, secured by brass key locks.  The vault had a permanent pungent fragrance of paper, and marble floor cleaner.

I took those steps two at a time for several years through my early teens, hopefully opening our PO box #580 in search of letters for me.  The trick was to get them before the folks got there, because these letters were my first tentative steps into romance, and I couldn’t stand the investigatory barrage I would endure, had someone else seen them before me.  Worst of all, my brother, who might be on a letter quest of his own.

What’s the power manifested in these testaments of our youth?  To clutch the page that had been in the hands of someone special, reading over the words they had written bravely, carefully, giddily, for our entertainment and contentment.  I treasured every one.  And I wrote back in kind.

I just reviewed the latest report from the United States Postal Service wherein it reports that ‘single-piece first-class letter mail’ is down 7.3% from a year ago and 48% since 2009.  Now granted, the category includes small business invoices, bill payments and volumes of responses to direct mail. But among that steadily disappearing tide of mail, swept out to the depths of a dark, unforgiving and wordless ocean, there is a loss too profound to ignore, and that is the personal letter.

The post office reported that post cards are down 11.4% from a year ago. 67% since 2009. What clearer evidence can there be that we no longer send picture post cards from a remote station at the edge of Grand Canyon, or outside a cabana in Puerto Vallarta?  Maybe off a log boom in Vancouver?  Now, it’s Facebook, Instagram, IMs and Twitter all the way.

The reality we are ignoring is that hard copy has staying power.   Despite the pervasiveness of social media imagery, if we want to leave a trail for others to study years from now, we will have to rely upon the impulsive selfies we posted as the core sample of our achievements. There will be no words to explain.

Wise beyond his ten years, my grandson cautioned me not to commit stories to email. “That’s technology. It’s gonna disappear. You need to write it out, so that it’s saved.”

Smart kid.  Long live the printed book.

But more than the written word is lost. We received a letter from a long-missed friend a few weeks ago. In it, she recounted the routine of her days, the status of her children,  and their families, her health, the current politics of their village, and what to wear to a party.

While the news touched many levels of importance and substance–both high and low– it was the actual writing of these items that made the impact. Putting it all down on paper was a commitment to her personal history. Had she merely emailed, the missive would be digested and eliminated. Instead, her letter is saved, rubber-banded with others.

All our parents wrote, and frequently.  Last summer I took the time to read and absorb about 100 letters that my mother wrote to her dad in New York City. From 1943-1945, she was a newly married war bride, making a home in England while the war continued.  By 1948 she had moved to Delhi, and to a new world.  Her tale is all on paper.

Thank goodness she hadn’t emailed her stories, or they would not exist.  I learned more from those letters than I would have otherwise, even if she had told me face to face.

Letter writing isn’t difficult.  Once you start, it just flows.  The challenge is getting paper, stamps and envelope, and time.

Time is the premium resource.  It takes time to sit and consider what to say.  Why?  Because you know that your written word will be received, read, re-read and pondered upon.  Unlike a text, a two-line email, a photographic burst on Instagram or a re-post of someone’s pithy life motto, your written letter is a physical fact, and it will be read carefully.

It’s a shame really we squander our thoughts on slippery social media choices, only to find they are misinterpreted at the receiver’s end.  ‘Would to God I never wrote that!’ is a common remorseful statement following a late-night email that really did not come out right.

If you do consider taking up the pen, a good place to start is with a simple thanks. We keep an inventory of greeting cards–blank inside– which we use simply to thank people.  Thanks for the gift, the visit, the letter, the phone call, the gesture.  Thanks for just being there.

Some would call this just good etiquette.  And old fashioned.  But that again shows how much we have fallen when even ‘thanks’ is relegated to a text.

Meanwhile I still recall the adrenalin, the blush, the quiet excitement of opening that mailbox and seeing an envelope for me.  Irreplaceable, even today.

I hope you find the time to write!

“Well I got my mail, late last night, a letter from my girl who found the time to write…”

~Gord Lightfoot, “Big Steel Rail Blues”

“I read again between the lines upon the page, the words of love you sent me,”

~Gord Lightfoot, “Song For A Winter’s Night”

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Culture, direct mail, Marketing, Media, USPS

More Change In The Mail

For you marketers, the latest USPS Revenues, Pieces and Weights was just released. It is a good indicator of the health of the economy, but also reveals just how we count on the post office in a different way than what Ben Franklin had in mind.

First off, the USPS jiggles their year-end to March 31, so the numbers I show you here have been adjusted to report a full normal calendar year, January – December, 2018 and 2017.

First Class mail continues its slow descent, losing 4% of its volume over the past 12 months. That is, we mailed 2.2 billion less pieces. The big drop is again in business and financial mailings, as more and more consumers opt for email statements and invoices. Anyway, First Class mail shrank by 119,000,000 pounds, or nearly 60,000 tons.

The USS Ronald Reagan: 103,000 tons.

Marketing Mail, otherwise known as Standard, grew by 258,000,000 pieces. The percentage growth is negligible, which is mind-boggling, but considering the minimal, steady slide over the last few years, this is a big deal. Direct marketers put more money into mail. Remarkably, piece-weights are down.   Down 133,000 tons in fact. Hard to grasp?  It is a lot. Let me remind you, the USS Ronald Reagan only weighs 103,000 tons.

Periodicals, fell 7% year over year, representing 363,000,000 fewer magazines and newspapers. Put into terms you may relate to, that’s equivalent to 30 million monthly subscriptions, cancelled.  While page counts are hard to calculate, the average weight of a single magazine shrank by 0.178 ounces, too.

The rising success in postal delivery however is packages and competitive parcel services. Overall, thanks to Internet, catalog and direct mail order, the USPS volume grew 8% in 2018, by 477,000,000 pieces, or just over 1 billion pounds. That’s 530,000 tons, or for you navy folks: five USS Ronald Reagans.

Conclusions:

We are always pointing to the USPS as a struggling giant.  But it is a terrific barometer and thermometer for consumer behavior.  Why? Because it is the only organ in the U.S. that still takes the pulse of over 150 million business and consumer addresses every day.  It does not sample and extrapolate.  It measures the whole body of the nation.

Understanding that, we see the real change in ourselves: we write fewer letters and cards to one another, and prefer to get our important mail electronically: email and website.  We also shun the retail experience in favor of direct order over the Internet, and through catalog and direct mail.  Lastly, we are steadily running away from browsing the printed page for news. Instead, we go to a screen or tablet.  Still Benjamin Franklin watches.

Thanks for reading!  If you would like to see the entire USPS report for October-December 2018, check it out here: Revenues, Pieces and Weights.

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direct mail, Economics, Marketing, USPS

Geez, Wally, What Are We Gonna Do Now?

Did you ever have a little brother, or sister, look up to you, and ask how to get out of the latest jam some misadventure brought upon them?

We might wonder how the latest USPS postal increase jams up direct marketers. Bottom line, it comes down to cost per response, or indirectly, response rates. There’s a formula you need to apply now, and it’s coming up shortly.

First off, the added cost of postage is somewhere around 2.4% to 3.0%, depending upon postal densities. So if you used to pay as much as 30 cents per piece for a mail drop, effective January 27th you will fork out as much as 30.8 cents. Not insurmountable, but that heavily laden camel is looking nervously for any straw piles nearby.

But what counts in the direct marketing arena is ROI. What does the postal rate do to returns on investment?

Just because postal rates go up, say, 2.7% doesn’t mean your mailing costs go up 2.7%. The total in-the-mail-cost includes creative, art, print, list, letter shop, freight and postage. For the basic #10 kit with letter, flyer, reply form and BRE, you may be paying $450-$600/m. It’s shocking to think that half of that cost is postage, but there it is.

A USPS 2.7% increase adds $8 to a $300 postal bill. But that is $8 added to a total in-mail cost of $450, or an 1.8% increase in total cost.

Your figures will vary from this. If you are mailing simple post cards, the increase in total cost is more significant. If you are mailing expensive, feature-rich, multi-component, highly customized mail, the increase is not as noticeable.

Still, you will experience a hike in cost, and that means you will see an increase in cost per response. That means if you used to have a $450/m cost, and a 2% response, your historical cost per response is $22.50 each, ($450/20=$22.50) Add in an $8/m postal hike, and your cost per response has grown to $22.90. The 40-cent increase doesn’t seem like a deal breaker, but the accountants will point out that your entire business functions on controlling cost.

So what do you do?

Calculate what higher response rate is now needed to mitigate the effect of the postal increase:

(New in-mail cost) divided by (Old in-mail cost) times current response rate.

($458/$450) x 2.00 = 2.0355…..2.036% response.

Where you used to get 20 responses per thousand, you now need 20.36.

So now, we have a target, what do we do?

Go back to the basics: list, offer, format, copy.

Examine your list to remove low propensity response groups, ensure addressing is current, and at the same time consider list increases if higher densities will lower postage. Optimize delivery, too. Are you commingling and co-palletizing mail for maximum cost reductions?

Does your offer optimize pricing?  Do you include an incentive premium?  Is there an incentive with deadline?  What can you add to the offer for free?

Format changes can boost response.  Change your envelope shape and color.  Add in additional pieces: buckslip, lift note, testimonial letter, freemium, sample, cards, labels, personalization, variable graphics. Remember anything up to 3.5 ounces costs the same, so don’t be bashful.

What about your copy?  Is there another theme to test?  A letter change?  New outer envelope copy?

Your opportunities to kick up your response rates never evaporate.  There’s always more to test.  Quantum leaps in response are uncommon, but still, a simple postal increase is cause for finding those drivers that will deliver the increases you need to keep up with the USPS.

Lastly, isn’t it great to have a little brother or sister asking for advice, or better yet, to be one?  Enjoy your holidays with family!

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Marketing, Media, direct mail, Fundraising, USPS

USPS Cuts To The Chase

USPS pops you an email of today’s delivery.

140 billion images per year, some right to your smartphone.

Have you noticed what’s arriving in your mailbox these days? For many of us, getting Informed Delivery Service saves us from a trip down an icy driveway.

Over a year ago, we signed up for Informed Delivery, and I told you about it.  It’s like X-Ray vision, or electronic surveillance, though that sounds ominous.

American Girl’s catalog and URL are displayed in your email.

Their catalog arrives the same day.

The email alert provides a URL that takes you directly to their website.

The USPS emails you hours before delivery, sending a set of pictures of today’s mail.

In case you have forgotten, the USPS scans over 140 billion letters a year.

The Heifer letter follows their email.

Each of those scans creates a jpg file.  Because of the Intelligent Mail Bar code on the envelope, it tracks that mail to you.   When you sign up, they take your email address, and voila: you have x-ray vision, kind of.

What is really cool, and smart of the post office, is that they have now introduced a URL hyperlink service for advertisers to catch you at your computer, laptop, mobile phone.  Rather than wait for the hike to the mailbox, you can open the piece on line.

Hammacher is America’s oldest catalog company, and also a memorable tongue twister.

USPS knows a multi channel approach includes direct mail, email and web.

And that’s what people are doing.  Advertisers like Flemings Steakhouse, American Girl, Soft Surroundings, Heifer International, Hammacher Schlemmer are taking advantage of the USPS service to get into your heads, if not your hands, as rapidly as possible.

Soft Surroundings invites you into their catalog.

If you haven’t signed up for Informed Delivery at home, you should.  Not only does it tell you what’s coming, you are also on alert for when something does not arrive, like a paycheck, or a bill.

So: you can just wait for the mail, and pursue your daily rituals of fetching for it, or, cut to the chase, and see it now.

 

Thanks for reading!  No, I am not a shill for the USPS, but I do believe that it is taking the right steps to be relevant in a changing world.

 

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Culture, direct mail, Government, Marketing, Media, USPS

Somehow, The Mail Still Goes Through

Since we last looked, in August, the USPS has broken through another quarter, and published its latest report on Revenues, Pieces and Weights. For you marketers and mailers, here are some stats, and following that, another look at the USPS’s ironic, weird situation.

The good news: direct mail was up by 337,627,000 pieces, a 1.8% increase over Q4 a year ago.  The surge was due to the mid-term election mail, and if you are counting, in the last three months it delivered one additional piece of mail to every addressable soul living in the country.

The Princess Diamond..lost?

The bad news: full year direct mail was down 1.4%, or missing by 1,066,486,000 pieces.  In fact, the shortfall totaled 115,925 tons of mail.  That’s the equivalent of losing the Princess Cruise Lines’ Diamond, which by the way carries 2,760 passengers.  Imagine if it had gone missing.

The bright spot on the USPS horizon however is the growth of parcel delivery.  Package service mail and parcel delivery revenues are up 12% for the year, a happy indication of the robust growth of online ordering.

“Just leave it in between the doors.”

But just when you are feeling that the USPS has a rosy future in parcel delivery, be warned that companies like Amazon, Walmart and Target, the post office’s largest three customers, are now researching ways to do their own “last mile” deliveries.  Watch out, a robot may drop through your roof sometime soon.

Indeed, the parcel delivery business has its own costs, not the least of which are fuel, trucks, planes and drivers.  Did you know that there is a shortage of truck drivers?  USPS transportation costs in the past year were up 8.6% , or by $623,000,000.

Overall, the USPS reported nearly $71 billion in revenues from operations, placing it just behind Target (#39 on the Fortune 500 with $71.8B) as a business enterprise.  As the media enthusiastically reports, the post office missed its bottom line by nearly $4 billion, half of which is owing to pensions and health benefits accruals.

Which is a major source of consternation at the USPS.  Indeed much of the company’s 10K discusses the burdens of pre-funding according to federal government department rules, much different than the private sector.  As a result, it takes the expense on the books, keeps the cash, and adds it to its liabilities.  To date, the USPS must pre-fund $67 billion to employees’ and retirees’ health and pension benefit funds.

For your information, there are 497,000 career employees and 600,000 retirees to provide for. The USPS is the #3 employer in the United States, right behind Amazon, USPS #1 customer, which had 589,000 on the payroll.  The country’s top employer: Walmart, #2 USPS customer, with 2,300,000.

The bigger irony of the USPS is that it is a business, run by business people, but by government rules.  By law, it cannot make changes in products, pricing or service without federal approval.  Its wages, health and pension obligations are modeled on federal department standards.   And isn’t it rich then, that its Board of Governors is subject to Senate approval, and has been short four governors since 2014, the last time the Senate voted to approve them.  It cannot raise a quorum.

In return for federal oversight, it is granted monopoly rights to make door-to-door delivery of mail.  Only recently has its parcel service entered the competitive arena, where it is growing nicely.

Remarkably, despite the USPS financial shortfall of $4 billion, it receives no tax dollars.  Compare that to 18 Federal departments which are entirely tax-funded.  In terms of tax-funded budget, the USPS’s closest federal cousin would be the EPA with a budget of $5.7 billion….nowhere near the Departments of Education $68B, Energy $28B, Homeland Security $44B or Health & Human Services $65B.

Compared to these budgeted costs, it is distressing to see the public criticism the post office endures.    Fortunately, the White House has taken initiative to turn the situation around.

Still, the business continues to grow and manage.  Last year it added 1.2 million new addresses to its rounds, and processed 37 million address changes. It delivered, and picked up 148 billion pieces of mail, six days a week. All in, it drives and walks by 157 million addresses every day.

At a supposed cost of $4 billion, that’s not bad!

 

 

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Culture, direct mail, Economics, Government, Marketing, USPS

USPS: Hidden Good Fortunes

Every quarter the USPS publishes their Revenues, Pieces and Weights Report. For the numerical savants out there, this is a feast of numbers beyond one sitting, for sure.

But the big story is, the USPS continues to perform in a stellar fashion, despite the ravaging onset of online displacement of hard copy as we know it.

If you think the post office is in trouble? Have another think.

Q3 YTD Results–9 Months Only
~The bad news– and what is publicly perceived, First Class revenues have fallen from $22.7 billion in 2013 to $19.9 in 2018. (off $2.7B or -12%).

~In the same 5 years, Magazines and Periodicals dropped from $1.3 billion to $984 million. (off $276M or -22%)

These two categories accounted for a $3 billion shortfall in revenue.

~Direct Mail, which includes catalogs, has ceded $294 million over the past 5 years. (off -2%) to $12.5 billion in the first three quarters of fiscal 2018.

Now for the good news.

In 2018, competitive Parcel and Package delivery has grown from $9.8 billion in 2013 to $16.9 billion. That’s a $7.1 billion growth, or 73%!

So we can certainly see how internet and digital media have blasted the legacy paper and ink communications business to smithereens.

What we did not see however was that online commerce has grown so rapidly that the USPS has found its newest niche: order delivery.

Year to date, 9 months, FY 2018, the USPS has delivered 4.2 billion pieces. Compare that to 2.3 billion, 5 years ago.

The USPS has another interesting report available, entitled Public Cost and Revenue Analysis, Fiscal Year 2017.

I like this report because it tells you how well it covers its costs of operation.  For instance, First Class Mail has a cost coverage of 210%.  Basically, its revenues are double its costs.

Direct Mail cost coverage is 153%.  Magazines and Periodicals, only 69%.  But the Package and Parcel delivery business, in the competitive markets, cost coverage is 155%.

Overall revenues for 9 months are $53.8 billion, up 5% from $51.2B 5 years ago.

These numbers indicate the ebb and flow of the door-to-door, pick-up-and-delivery business, and how the USPS is responding to America’s choices in communications.  True, the numbers do not account for front office costs, and legacy benefit and pension challenges, where there is a different story to tell.

But for making their daily appointed rounds, no one does it better than the USPS.

 

Thanks for reading!  If you would like to see these reports for yourself, have at it!

Click here: Fiscal year 2018 Q3 Revenues Pieces and Weights

and here: Public Cost and Revenue Analysis 2017

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