DMA Comments on USPS Rate Case

Washington, DC, May 3, 2006 – Once again the US Postal Service has filed a request to raise postage rates for the nation’s consumer, business and nonprofit mailers. The proposed 8.5 percent average increase (9.0 percent for standard mail) comes on top of the 5.4 percent increase that went into effect in January.

“Postal rate increases are never good news for organizations that rely on the mail to get their messages and packages out, and this latest increase would mean millions of extra dollars in costs for commercial mailers and nonprofit organizations,” said Jerry Cerasale, DMA’s Senior Vice President for Government Affairs.

In announcing today’s rate case filing at the Postal Rate Commission, the Postal Service stressed a movement to give business mailers incentives to create more efficient mail pieces, based on weight and shape. “While DMA supports providing discounts for organizations that use the mail more efficiently, this latest proposed increase is quite complex and demands close scrutiny by mailers,” said Cerasale. “The devil could be in the details with substantially higher rates for some categories of mail. For example, the Postal Service noted a 90 percent increase for the price of mailing a two-ounce First-Class parcel.”

The USPS also indicated its intention to move to an annual cycle for rate adjustments. DMA supports the goal of annual, predictable rate adjustments, but emphasizes that increases should, in general, be tied to the overall inflation rate. “Today’s proposed increases, and the ones that went into effect in January, are far higher than the current rate of inflation,” added Cerasale. “Moreover, with annual increases, there is no need for a contingency provision, which in today’s filing is approximately $700 million.” However, in announcing plans for a “forever stamp,” Cerasale noted that DMA is pleased that the Postal Service is thinking about how to reduce the burden of annual rate changes for individual mailers.

Faced with continued costly price increases that far exceed the rate of inflation, DMA warns that many business and nonprofit mailers will ultimately be forced to limit mailing campaigns and seek less expensive ways of communicating with current and potential customers. Cutting back on mailings will not only affect downstream industries, such as paper and printing, but will also further reduce Postal Service revenues, necessitating additional rate increases or even service cuts in order to keep the USPS afloat.

“This proposed increase highlights the desperate need for postal reform,” said Cerasale. “These frequent rate increases are just temporary fixes on a system that needs serious repair. Postal reform legislation would significantly reduce the impact of the USPS escrow payment. If the current House or Senate bills were in effect today, the proposed rate increase would be less than half of what the Postal Service is asking for.”

“These higher costs also come at a time of rising energy costs, which is unfortunate,” added Cerasale. “Even though the Postal Service must deal with higher fuel prices just like the rest of us, direct mail actually helps in a small way to keep energy costs down.”

According to a USPS study direct mail offers “car pool shopping” that reduces the amount of pollution emitted by automobiles and the amount of gasoline consumed by individuals. Based on a conservative assumption that single shopping trip would replace three direct orders, 111.3 million shopping trips were replaced by catalog purchases in 2004. By that same assumption, at an average round trip distance of 14.9 miles per shipping trip, catalog mail reduced the number of miles driven in 2004 by 1.7 billion miles. This equates to a reduction in carbon dioxide emissions of more than 35,000 tons, and a reduction in gasoline used of 75.9 million gallons. Even at a 2004 average price of $1.90 per gallon, this represents an annual savings of $144 million.

DMA Nonprofit Federation (DMANF) also expressed concern about the proposed rate hike for nonprofit mailings. "The increasing costs for mailing are difficult for charities that are working so hard to keep overhead costs to a minimum," said DMANF Executive Director Senny Boone.

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About DMA

The Direct Marketing Association (www.the-dma.org) is the leading global trade association of business and nonprofit organizations using and supporting multichannel direct marketing tools and techniques. DMA advocates industry standards for responsible marketing, promotes relevance as the key to reaching consumers with desirable offers, and provides cutting-edge research, education, and networking opportunities to improve results throughout the entire direct marketing process. Founded in 1917, DMA today has more than 4,800 corporate, affiliate, and chapter members from the US and 46 other nations, including 55 companies listed on the Fortune 100.

In 2005, companies will spend more than $161 billion on direct marketing in the United States. Measured against total US sales, these advertising expenditures are expected to generate $1.85 trillion in increased sales in 2005, or 7% of the $26 trillion in total sales in the US economy (which includes intermediate sales). All together, direct marketing will account for 10.3% of total US GDP in 2005.

The Power of Direct: Relevance. Responsibility. Results.

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