The Demotion of the Open Rate

For years, marketers have been tracking open rates and using this stat for everything from choosing the best time to send to validating the deliverability of a particular email-automation vendor; and well, everything in between. With more and more email being opened on mobile devices, Gmail caching images, and fewer recipients choosing to download images (perhaps accounting for as much as 40 percent of your audience), the open rate simply isn’t what it used to be—not that it was ever all that accurate

For years, marketers have been tracking open rates and using this stat for everything from choosing the best time to send to validating the deliverability of a particular email-automation vendor; and well, everything in between. With more and more email being opened on mobile devices, Gmail caching images, and fewer recipients choosing to download images (perhaps accounting for as much as 40 percent of your audience), the open rate simply isn’t what it used to be—not that it was ever all that accurate.

Charting a high open rate does not necessarily equate to clicks or conversions, but this has always been true. You might have written the most fabulous or enticing subject line and enjoyed a very high open rate, only to have failed to deliver the message and lost in the long run.

The Mobile Effect
Mobile devices are lowering the dependability of the open rate for some analysis, too. Most people scan emails on their devices and save only those they wish to read or act upon later. Emails that don’t answer an immediate need, or that are not relevant, may be deleted prematurely and without much recipient consideration. Even with responsive designs, the recipient is less likely to take advantage of an offer on a smartphone than on a tablet or desktop device, it’s simply easier to engage on a bigger screen.

Open Rate Increases
Gmail’s new image caching system automatically downloads images, and, for those recipients using Gmail or Google Apps, this can further affect your open rate tracking—your open rate will likely increase. The first open will be tracked correctly by most ESPs, but subsequent (repeat) opens by the same recipient will likely decrease. Unique opens, like opens, will become more accurate.

As with Gmail and Google Apps, iPhone and iPad devices download images by default. If you’re tracking your stats year over year, this increase in open rates by Gmail and iOS users will affect your ability to accurately assess your campaigns.

You may find that your open rates increase, but click-through rates do not, resulting in lower click-to-open rates.

Best Time to Send
Some email automation systems, such as Variant4, are able to send messages at the same time as the last open from the recipient, and this can be useful, but determining the right time to send based upon open rates alone will be misleading for the reasons stated earlier. When possible, opt for the previous engagement time, since if the open occurred on a mobile device, the click or conversion may have taken place later from a desktop device and that actually represents the better time for future sends.

Ensuring your content is on the mark is more important than ever as this is the driving force behind clicks and conversions (and not opens). Getting your audience to engage will gain you future priority placement in the inbox rather than a continued relegation to the promotion tab of Gmail.

Still Some Value
As undependable as the open rate has become, it does still represent some value—especially for segmentation and A/B testing of subject lines, for instance. Show caution when basing your conclusions on open rate alone and take the necessary steps to validate your finding through other supporting metrics.

Design Wins
As more email providers download images by default, we as marketers make a major win in the design arena. No longer will we have to design text formats and forfeit brand recognition. Our emails will be displayed in the manner in which we had intended all along.

USPS Exigency Becomes a Political Toss – and a Punishing Farce

With the sole exception of Sen. Tammy Baldwin (D-WI) swinging for the United States Postal Service ratepayer (you and me), January 2014 was a dismal month for those who advocate direct mail in the marketing mix … and in February, I’m definitely looking for some love. Will we find it?

With the sole exception of Sen. Tammy Baldwin (D-WI) swinging for the United States Postal Service ratepayer (you and me), January 2014 was a dismal month for those who advocate direct mail in the marketing mix … and in February, I’m definitely looking for some love. Will we find it?

First, there was January 26 … the day new postal rates took effect, full-on. “The 6.0 percent postage increase—three times the rate of inflation—will not help the Postal Service shore up its financial base,” said Peggy Hudson, senior vice president, government affairs, Direct Marketing Association, part of a coalition which filed a court appeal to halt the exigency portion of the rate hike, 4.3 percent. “It will simply drive mail from the system, which harms the financial viability of both the Postal Service and its business customers. It is a lose-lose proposition.”

Then, there is an unpalatable compromise brewing in the Senate Homeland Security and Governmental Affairs Committee. (Compromise always deals with some distaste, or else it wouldn’t be a compromise.) On our behalf, Sen. Baldwin was attempting to strip “offensive” Section 301 from the legislation, which would have abandoned the inflation consumer-price-index peg for annual postal rate increases, and replace it with a new CPI+1 percent index—adding potentially 10-percent higher rates over a decade than would happen under existing law.

Last week, one of the primary sponsors of the current postal reform bill—Committee Chairman Sen. Tom Carper (D-DE)—offered a deal: Essentially, Carper would keep the CPI index mailers crave in place but, in return, the exigency (4.3 percent hike) would be included in the baseline for future annual hikes—thereby removing the 2-year limit on the exigency imposed by the Postal Regulatory Commission in its oversight of the rate hike and making the exigency permanent. Further, the PRC’s oversight role on postal rate changes would be kept intact—something the current language of the bill is attempting to strip. Sen. Baldwin asked for a mark-up delay, no doubt to consider the offer with her constituents.

What a farce: An exigency made permanent? Now that’s a paradox—and an audacious one at that. We can see the Postal Service getting much of the would-be CPI+1 back over the next 10 years, assuming there’s no more crises forcing USPS management, the mailing community or both clamoring for another postal reform bill within 10 years’ time.

Is keeping the CPI index so important to us now that we’ll hold our noses on this compromise? A mark-up on the bill—a Committee vote—has been moved to February 6 As of January 31, DMA is still asking its members to weigh in here to get Section 301 tossed.

There is a disturbing pattern here. The Postal Service is our business partner, for sure—and there’s nearly universal support for that partnership across the board. But if it (USPS management, USPS labor, and the both of them) keeps fighting its customers with higher postal rates, and running to Congress with mock exigencies or new rate-setting formulae that undermine fiscal discipline, then the financial reality of that partnership gets sadder by the day. Lose-lose ignites a dying cycle.

Mailers have suffered through recession. Marketers deal with digital migration. They have had to endure cost-cutting, price-cutting and layoffs to make it to 2014—and they’ve relied on invention to survive and thrive. What they have not been able to do is take their customers for granted, by passing along hardships in higher prices.

“Business-like” USPS policy and operations remain marred in politics—exigency is another sadly perfect example.

Mail-to-Email Conversions

Most studies agree that your email list will suffer an annual 30 percent attrition rate. If you hope to grow your list by, say, 20 percent a year, added with attrition, you now need a lead generation program that will net you 50 percent new names per year. We are all looking for innovative and creative paths to growing our lists, and our best efforts have consistently included direct mail

Most studies agree that your email list will suffer an annual 30 percent attrition rate. If you hope to grow your list by, say, 20 percent a year, added with attrition, you now need a lead generation program that will net you 50 percent new names per year. We are all looking for innovative and creative paths to growing our lists, and while we’ve published a few eBooks on the topic with myriad fodder, our best efforts have consistently come from those that include direct mail.

As most of you know, renting, purchasing, borrowing and partnering in order to email clients in a lead generation effort is fraught with risks ranging from simply annoying your customers to losing sending privileges through your ESP. Though many claim that a mailbox full of junk mail is akin to an inbox full of spam, the effort it takes to remove oneself from a direct-mail list just seems too burdensome for most of us and we will continue to allow a company to burn through paper and postage despite our complete lack of interest in their message well beyond our initial feelings of annoyance. Whereas with email, the spam button, unsubscribe link or reply email is simply far too easy and thus instills extreme power and often unwarranted indignation when a brand should dare email us any type of unsolicited content. We’re not only quick to unsubscribe, if it happens again, we’re likely to fire off an irate email and even go so far as to report them to their ISP or ESP. This can cause permanent damage to the brand and inhibit their ability to send future emails.

Given these risks, we’ve found that the best way to approach lead generation is through the combined use of print and email. Rather than hazard the acquisition of a list of persons who did not specifically subscribe to receive our messages, Spider Trainers counsels clients to purchase the same list selects as a direct-mail list and forgo the email address—we will collect this later. Direct-mail lists are typically less or even much less costly than an email list, and this cost savings can be applied toward the postage and printing costs of a direct mail.

The direct-mail piece is used to entice engagement through the use of a high-value offer that drives traffic to a targeted squeeze page and, in many cases, from there to a microsite focused either on introducing the brand or introducing the product, depending upon how recognizable the brand is to the audience.

FruitRevival (a company providing recurring fresh-fruit delivery to Denver businesses), is in the process of launching just such a campaign. We created a square postcard (we have found that square postcards have a measurably higher engagement rate) for their list segmented as: newly rented direct-mail names, customers who have purchased a fruit gift box, and customers who have received a fruit gift box. Three different headlines and matching copy provide an A/B testing platform along with a call to action (CTA) for a free sample box delivered to themselves or to a person they choose.

Using this high-value CTA, FruitRevival hopes to attract the postcard recipients to their squeeze page where they will collect their email address as well as responses to five very simple questions. Lead scoring of responses will flag recipients ready for immediate sales follow-up (high scorers), move them into an active nurturing campaign (mid-range scorers), or drop them into the drip campaign (low scorers).

Keep your eye on two big rocks: the higher the value of the gift, the higher the conversion rate, and the more focused your list, the more likely the audience will be receptive to the offer. With the right combination, you can easily far surpass the engagement rates you will get with an email list that has not specifically opted in to your messages.

Assessing the USPS January Rate Hike – Start the Clock

While we still wait for the Senate Homeland and Governmental Affairs Committee to move forward with a meaningful postal reform bill (the vote to mark it up has been postponed), the Postal Regulatory Commission provided some very tough news for mailers to swallow just ahead of Christmas Day

While we still wait for the Senate Homeland and Governmental Affairs Committee to move forward with a meaningful postal reform bill (the vote to mark it up has been postponed), the Postal Regulatory Commission provided some very tough news for mailers to swallow just ahead of Christmas Day.

By a two-to-one decision, the PRC concluded that the United States Postal Service, on its second attempt to do so, did offer enough evidence that the Great Recession (2007-2009) did help generate two years of financial losses to create an “exigency” scenario—and protestations and counter evidence that volume and revenue decreases were created by other means (digital migration, Congressional mandates and such) were not enough by mailer and business groups to prevail and reject the exigency claim. Now mailers will have to suck it up—or go elsewhere with their marketing dollars, come January 25. That is when the annual Consumer Price Index-capped increase plus the exigency increase in postage is slated to take effect. Ouch!

Well, due process and due diligence had its day—a dismal one for mailers—and now a real-life experiment will happen. What will the two-year “exigency” rate hike of 4.3 percent—three times the rate of inflation when added to the already-slated CPI hike—do to marketing mail trends this time around?

When the 2007 postage increase took effect, the results were devastating for flats mailers, who endured an unexpected punishing increase.

“The 2007 rate increase was the real culprit for flats volume declines,” said Hamilton Davison, president and executive director of the American Catalogers Mailers Association, recently. “The recession didn’t help either, but the pullback in volume from catalog mailers, for one, was dramatic. Some of our wounds in growing our own businesses have been self-inflicted. Typically mail order businesses have 40 percent to 70 percent of their total mail volume dedicated to new customer prospecting. After the 2007 rate hike, that was cut to near zero. When you stop prospecting, sooner or later your own house file of customers deteriorates due to attrition. But by that time, a vicious cycle occurs, where there are too few new names to mail. The universe of mailable names has declined, and that is hurting the catalog industry just as the economy has been improving.”

Will such a similar outcome happen now that First-Class and Standard Mailers are facing a total, and unexpected, rate hike of 6% in less than 30 days? Like it or not, the clock starts now and we shall see. For some marketers, I fear, enough is enough. And meaningful postal reform still waits in the wings.

Keep the CPI Postal Rate Cap Alive!

There are no guarantees when “grand” budget and funding bills make their way through Congress … there’s always a chance some horse-trading will be tacked on that undermines the interests of and harms the direct marketing community. That’s why I was more than an interested bystander when a federal budget deal was announced last week that seeks to keep the government funded without another costly shutdown

There are no guarantees when “grand” budget and funding bills make their way through Congress … there’s always a chance some horse-trading will be tacked on that undermines the interests of and harms the direct marketing community. That’s why I was more than an interested bystander when a federal budget deal was announced last week that seeks to keep the government funded without another costly shutdown.

There’s nothing in this bill (so far) that is nefarious to marketers (a vote is still needed in the Senate). In the whole of the budget bill, some fiscal conservatives are not happy—prompt spending controls have been punted, and deficit reductions have been kicked down the road, a reflection of our still-weak economy being the rationale.

But it’s also a reflection of what’s dysfunctional in Washington: A seemingly ever-present readiness and willingness to punt fiscal discipline in more matters than just the federal budget. At least the three-year pattern of budget shutdowns and debt ceilings may be diverted. At least we can hope.

Now to postal reform … which was not part of the budget bill.

We need postal reform legislation—both political parties and nearly all postal stakeholders agree on this, but there’s devil in details in a current Senate proposal to move another breakthrough piece of legislation forward.

The reason for postal reform’s urgency, however, has nothing to do with the annual rate cap on postage increases that is now part of federal law.

Yet this most precious centerpiece for ratepayers of the 2006 postal reform act—the Consumer Price Index-Urban annual rate cap on postage hikes—is dispensed in the Carper-Coburn Postal Reform Act of 2013 (S. 1486) bill now before the Senate Homeland and Governmental Affairs Committee. Crucially for us, Senator Tammy Baldwin (D-WI) is leading a bipartisan effort to remove from the bill Section 301 (a Section which would eliminate this rate cap for market-dominant classes, among them First-Class Mail and Standard Mail). If she is successful, the vital rate cap would be preserved. A markup for the bill overall in Committee is scheduled for this coming Tuesday (Dec. 18), so there is still time to voice support for Sen. Baldwin’s effort to amend the legislation and save the cap.

What is urgent, of course, is relief from 2006 Congressional mandates to pre-fund retiree health benefits at a magnitude that was (and still is) wholly unsustainable and has proven to be unrealistic. One might say how ironic it is to have a column praising fiscal discipline bemoan a pre-funding mandate, but this type of mandate is unprecedented, unwarranted and blind to financial facts. The CPI cap, on the other hand, has been an extremely useful tool to USPS and its customers and, arguably, an important driver of USPS management efforts to “right size” USPS infrastructure to today’s mail (and marketing) realities.

Fiscal discipline matters to the private sector, and to all U.S. citizens in our own households and our business affairs. It is shocking (to a layperson, if not Beltway insiders) that such discipline means little to too many policymakers. Price caps are a common-sense, and extremely demonstrable, method for assuring predictable increments in postage hikes which serves to aid businesses and nonprofit organizations in their marketing and media planning. Take these caps away, and we’re back to uncertainty, costs rising unchecked and diverted dollars from direct mail media spending.

Stay tuned to industry organization efforts to see postal reform through—but with the all-important CPI rate cap intact. I’m hopeful Sen. Baldwin has a great week, and so do we.

A Turnaround Idea for Slow 4Q Sales

Only about 30 days or so are left in the holiday season for 2013. Black Friday and Cyber Monday are around the corner. And if you’re looking at your early Fourth Quarter results and can see you need a jolt of energy to turn things around, keep reading. Today we reflect on a shopping trend that began a year ago, and we you offer an idea you can implement

Only about 30 days or so are left in the holiday season for 2013. Black Friday and Cyber Monday are around the corner. And if you’re looking at your early Fourth Quarter results and can see you need a jolt of energy to turn things around, keep reading. Today we reflect on a shopping trend that began a year ago and we you offer an idea you can implement yet this season.

A year ago, early online holiday shopping broke sales records. While forecasts for this year appear to show modest overall growth over last year, there will be winners—most likely online direct marketers ready for the growing number of consumers who purchase via mobile devices. Even if you didn’t plan for mobile marketing, it’s not too late to move into action to help your organization take its place in the winner’s column.

The migration of online shopping will most likely continue its shift from desktops to mobile. Last year it was the Apple iPad making headlines. Consumers used iPads by a factor of nine-to-one over any other mobile device, doubling the year before. With Apple’s 52 percent market share, their users accounted for 88 percent of online shopping traffic, according to IBM’s Digital Analytics Benchmark Report.

Of course, that was then, and this is now. Recent data tells us 170 million iPads have been sold. A substantial number of people have them, and use them.

As direct marketers, you have an opportunity to take advantage of the sheer number of iPads, and the trend toward using it for shopping, by optimizing your website for mobile applications (if you haven’t done that, make it a 2014 priority). In addition, when you use tools that work well on iPads and hold your prospective customer to the screen longer, your odds for success improve.

One of tool that works great on iPads, and has proven to lift sales, is online video.

Consider these stats:

  • Video is a driver of consumer confidence. Consumers are willing to watch videos 60 percent of the time they are found, and 52 percent of consumers report that they are less likely to return a product after viewing a video (Website Magazine).
  • 52 percent of consumers say that watching product videos makes them more confident in their online purchase decisions. When a video is information-intensive, 66 percent of consumers will watch the video two or more times. (Internet Retailer).
  • Shoppers who viewed video on product pages were 144 percent more likely to add to cart than other shoppers (Internet Retailer).
  • Shoppers who viewed video were 174 percent more likely to purchase than viewers who did not (Retail Touchpoints).
  • Looking for higher email click-through rates? Link to a video. About half of marketers who use video in email campaigns see increased clickthrough rates, time spent reading the email, and more sharing and forwarding. (eMarketer).

So what do you do today to test online video in the remaining days of this shopping season?

  1. Conduct a competitive analysis of what your competition is doing with online video. Look at competitor websites for video, search on YouTube and social media. Check the length, and examine their format.
  2. If you don’t have a video, record one (or more)! If you don’t have expertise inside your organization, there are multitudes of creative resources that can help you out. The fact is, an inexpensive camera, and someone with editing skills, can create a video for you in no time. While a bootstrap approach may not be ideal long-term, it’s a place to start.
  3. Load the video on YouTube (10 ways to optimize for search here and 12 overlooked ways to help your video rank higher here). Place it on your website or a landing page.
  4. Send an email to your customer list to promote it. Use the word “video” in your subject line—testing shows your open rate will increase. Since we’re talking mobile here, make sure your HTML emails are using responsive design. If they aren’t, readability on smartphones is challenging, so readership and clickthrough rates go down. Most email portals—e.g., ConstantContact, iContact, Mailchimp, and others—offer responsive design email templates.
  5. Include a link to your video on social media. After about 24 hours, check your social media metrics and you should see a spike in engagement with your followers.
  6. Mail a postcard. You have time. Make it graphically obvious on the postcard you have an important video (story/product demonstration/testimonial) and direct your customers to your landing page. Use an oversized “Play” symbol on a thumbnail that you create of your video. Use a QR code or a PURL to more closely track response.
  7. After bringing prospects to your landing page, you’ve got them started at the top of your sales funnel. Now it’s time for marketing automation software to takeover (more about this topic in a future blog) and convert the lead to a customer before the books close for 2013.

If you haven’t tried video, especially when it’s proven that customers love mobile devices like iPads, now is your time. It’s proven that consumers watch videos, confidence is lifted, and they’re more likely to add a product to a cart and purchase after watching a video. Now is the time to test your organization’s ability to be an agile direct marketer.

5 Hopes for the USPS New Year

October 1 marked the New Year—that is, the 2014 fiscal year of the U.S. Postal Service. But it’s the same old (sad) song, delivered by a dysfunctional Congress. Thanks to our elected Senators and Representatives, we not only have to endure not just another year of postponed reforms, but also an exigent rate case on top of a regular Consumer Price Index-capped rate hike slated for January.

October 1 marked the New Year—that is, the 2014 fiscal year of the U.S. Postal Service.

But it’s the same old (sad) song, delivered by a dysfunctional Congress. Thanks to our elected Senators and Representatives, we not only have to endure not just another year of postponed reforms, waiting longer still for a reprieve from mandates of Congress from years past, but also an exigent rate case on top of a regular Consumer Price Index-capped rate hike slated for January.

For Standard Mail, that means:

  • Letter Mailings CPI-capped rate increase of 1.55%
    But now with the Combined CPI and Exigency, that increase jumps to 6.09%
  • Flat Mailings CPI-Capped Impact 1.66%
    But now with the Combined CPI and Exigency, that increase rises to 6.32%

As Charley Howard of Harte-Hanks correctly surmised, the only exigency here is “continued inaction by Congress.”

What are the chances?

  1. Congress will get its act together and pass a new formula for prefunding retiree healthcare costs that are more in line with … say, sanity?
  2. Such a reform bill will pass—and leave in place the most hard-fought, cherished centerpiece of the 2006 postal reform bill—the CPI-index cap?
  3. That USPS current cost-cutting discipline—and network consolidations—will continue as management had planned, with “right sizing” the infrastructure achieving its intelligent end?
  4. That universal delivery remains intact—in six days, or five—take your pick?
  5. That certainty and predictability is restored to the Postal Service’s financial picture—providing the assurances marketers crave?

Let’s put it this way—if the “right” postal reform gets deep-sixed (again) in the coming election year, then will we pass the point of no return, with marketers taking their integrated marketing dollars elsewhere? If postal reform passes, but the most important mechanism of fiscal discipline—CPI caps—are undermined, or worse removed altogether, will we pass that same point?

By this time a year from now, will the crises be solved—or compounded? The clock keeps ticking.

Gmail’s Tabbed Inbox: What Is Your Risk?

Marketers are vacillating between “no big deal” and “panic mode” when they think of Gmail’s interface that automatically sorts incoming emails. There are two questions that every emailer needs to ask: “What’s our risk?” and “How do we prepare?”

Marketers are vacillating between “no big deal” and “panic mode” when they think of Gmail’s interface that automatically sorts incoming emails. It continues to be a hot topic for users and marketers. Early feedback from Google suggests that users like it because there has been a strong retention rate of the tab experience. This isn’t surprising because the automated sort process simplifies life in the email world. Marketers can expect the tabs to stay.

The effect on email marketing results will fail somewhere between a complete derailing of campaigns and very little change. There are two questions that every email marketer needs to ask: “What’s our risk?” and “How do we prepare?” Answering those questions now makes it easier to respond if the changes have a direct effect on your business.

What Is Your Risk?
Assessing your risk begins with a review of your subscriber list. Estimating how many subscribers use Gmail isn’t as simple as one might think because there are two types of Gmail users. The easiest type to identify includes addresses that end with @gmail.com. They are confirmed users. The second is impossible to identify because Gmail provides email services to corporations, schools and government offices. You would have to have Google’s proprietary list of Gmail clients to know who to tag.

Judging by the databases we’ve analyzed, B-to-C companies have a better ability to measure the risk than B-to-B because people tend to use personal email addresses for consumer shopping. B-to-C companies can look at known Gmail users to access the risk. B-to-B companies will have a harder time because their subscribers tend to use company or organization email addresses. There are always exceptions. One exception for B-to-B is companies that market to soloprenuers.

A large base of Gmail users doesn’t automatically translate into high risk. The tabs have no effect on emails opened in applications like Outlook. There are studies that suggest that direct Gmail opens are less than 4% of total opens. Globally, there may be very little risk. What happens globally doesn’t matter if your database houses a high percentage of direct Gmail users.

How Do You Prepare?

  • Segment known Gmail users. This makes it easier to monitor open rates and times. The timing is especially important if your company sends limited time offers. Placing promotional emails in a separate tab may delay opens instead of reducing them. If the delay extends beyond the offer expiration, it will have a direct effect on revenue.
  • Watch for consistent trends. Gmail users tend to be a bit erratic with their open rates. It’s not unusual to see fluctuations. A small drop may be a hiccup instead of the beginning of the fall.
  • Monitor individual behavior. If you can identify individuals who use Gmail and consistently open your emails, create a segment for them. These are highly engaged people that want to read your messages. A drop in their open rate indicates a problem.
  • Ask for help. If there is a negative Gmail tab effect, ask Gmail users to flag your emails so they will go to the Primary tab. Some marketers started doing this shortly after the tabs became available. I don’t recommend this preemptive move because the new inbox is being tested by users now. If there isn’t a problem, why bother subscribers with information that may be confusing for them? It may not work anyway. While people are in test mode, they may switch between the classic and new versions. When they do, the flagged addresses revert to their original status.
  • Make your content more valuable. When people want to read your emails, they will find them. It doesn’t matter where they are hidden. Avid subscribers look for the messages and will email you if they don’t find them.
  • Watch for trends. If one or more segments start showing declines in response rates and revenue, look for similarities in email addresses. It could be a Gmail issue where the service is being provided to a third party.

Look Who’s Arguing for Higher Postage

It was a busy past week for postal reform followers, as the Senate Homeland Security and Governmental Oversight Committee convened a hearing on a bipartisan measure to implement various Postal reforms. Perhaps the most contentious part of the Senate’s current bipartisan proposal was the centerpiece of the 2006 Postal Accountability and Enhancement Act: The annual rate cap on postage increases tied to the Consumer Price Index.

Well, it was a busy past week for postal reform followers, as the Senate Homeland Security and Governmental Oversight Committee convened a hearing on a bipartisan measure to implement various reforms that would enable billions in necessary U.S. Postal Service (USPS) savings. The House Oversight and Government Reform Committee already passed a postal reform measure earlier this year—without one vote of support from Democrats. Whatever bipartisan effort the Senate can put forward matters greatly, since votes of majority Democrats are needed in the Senate (and eventually the House) for passage, and also to garner White House support.

Perhaps the most contentious part of the Senate’s current bipartisan proposal, based on comments filed and testimonies given, was not five-day delivery or relief from funding mandates of pre-retirement of health benefits (though both of these have their own list of supporters and detractors), but rather the centerpiece of the now-in-effect 2006 postal reform law (Postal Accountability and Enhancement Act): The annual rate cap on postage increases tied to the Consumer Price Index.

Marketing mailers—USPS customers—insist that such a cap remaining in place.

It is this measure of fiscal discipline that acts as the single most important indicator to mailers that the Postal Service will operate within its means, and mailers will have predictable increases in postage that can be budgeted for with a high degree of certainty.

Uncertainty, on the other hand, is the specter that advertising mailers most fear—and one that channels ad dollars most formidably to other media. The 2007 rate hike (the last rate hike ahead of the 2006 law’s implementation) clearly showed what exorbitant and unexpected increases can do, such as the case of catalogers in that year.

Now we have postal unions (predictably), USPS management and the PMG (less predictably), the USPS Inspector General, and even a Senate Republican (now that’s a surprise) arguing for an emergency rate hike (a “last resort” allowed under the current 2006 law, if and when exigency is proven) or, as the Senate bipartisan bill would allow, the removal of the CPI cap altogether as the USPS looks to $20 billion in overall relief (much of which it has achieved already in its own cost-cutting to date) to balance the books.

Well, I have my own feelings about the negative effects of exigency—which I shared recently in a post. (I’m not an economist here, just a student of history.)

Yet, to do away with the CPI price cap stricture? That would make disappear the crowning achievement of the 2006 law that USPS customers fought so hard for. Getting rid of the cap means exigency, in practice, could be a permanent fixture in postage increases—and mailer flight to digital and other channels will be the “giant sucking sound” as uncertainty reigns again (my apologies to Ross Perot). As we know from the past: USPS management goodwill, Postal Regulatory Commission oversight, and mailers’ testimonies of warning in rate case hearings are not enough to stop punishing and unpredictable rate hikes. A law that keeps cost increases in postage within CPI, however, largely has halted such malaise.

The losses that the Postal Service is experiencing today have to do with Congressional mandates, not nimble efforts of USPS management and workforce to right-size the Postal Service and its infrastructure to USPS mail volume trends.

Mailers: Stay tuned—and be prepared to mobilize.

A Possible USPS ‘Exigent’ Rate Increase – Playing Politics on the Backs of Ratepayers?

There are rumors that the USPS may request another exigent rate increase. Why are we going through this again? Advertisers, marketers and the business community love certainty—and have a strong distaste for uncertainty. When one considers the financial situation of the U.S. Postal Service during the past couple of years, it’s enough to keep mailers at bay in planning their ad budgets, and keep them from devoting much to direct mail in the overall media mix.

There are rumors that the USPS may request another exigent rate increase. Why are we going through this again?

Advertisers, marketers and the business community love certainty—and have a strong distaste for uncertainty. When one considers the financial situation of the U.S. Postal Service during the past couple of years—from uncertain prospects of postal reform legislative efforts, to what any emerging postal reform effort might contain or not contain in cost savings, to short-term financial viability and this past year’s default—it’s enough to keep mailers at bay in planning their ad budgets, and keep them from devoting much to direct mail in the overall media mix.

Tying postage increases to the consumer price index and giving USPS the latitude to implement such increases annually (as is now the law) has helped give the business community certainty about postage costs, so they can plan and budget accordingly.

Allowing an “exigent” or additional postage increase to happen when there are extraordinary circumstances (as is also now the law) was intended as a “last resort” to make Postal Service finances whole. Let’s be honest: An extraordinary circumstance happens when there is an absence of postal reform efforts moving forward, and, possibly, when there is an absence of U.S. economic growth and an exhaustion of wise cost containment initiatives inside the Postal Service. All three of these latter scenarios don’t exist—so why even consider an exigent increase?

It’s a bad idea. First, USPS customers would detest such a rate hike, as they do. It’s an uncertainty.

Recently the Direct Marketing Association (DMA) in its Direct from Washington newsletter reported:

With reason to believe that the United States Postal Service (USPS) Board of Governors may vote on a potential exigency rate increase in early September, the Affordable Mail Alliance (AMA), including the DMA, sent a letter to the Governors voicing their opposition of such an increase. The letter expressed concern about the negative effects that would come with such an increase, especially for the mailing industry and its suppliers. The letter recognized the continued financial struggles that confront USPS, but also stated that an exigent rate increase is not the solution to those struggles. With recent progress toward comprehensive postal reform in Congress, along with steady improvement in the USPS balance sheet, the letter stated that an exigency filing ‘at this point would be premature.’ The letter additionally requested a meeting with the Board to discuss the issues at hand and to ensure that USPS is fully informed before making a decision of such great magnitude.

Second, if the architects of an exigent rate hike think that such a case is what is needed to convince lawmakers that postal finances are indeed a mess, and that a reform law—now in discussion—is desperately needed to fix them, then how dare play politics on the backs of ratepayers? An exigent rate hike is unlikely to move best-case legislation forward (and may even help move a bad bill, from customers’ perspective) and will saddle mailers with even higher costs than budgeted. Thus, there would be more uncertainty and more mail dollars flowing elsewhere in advertising.

As the Affordable Mail Alliance contends, any exigency scenarios are at best premature and, might I add, most likely non-existent. So USPS, please listen to your customers and just don’t go there.