A pending postal rate increase, due in May and averaging about 4%, threatens to put further pressure on direct mailers and magazine publishers.
“Partly due to the [U.S.] Postal Service's rising postal rates, as well as the slumping economy and falling response rates, the impact on direct mail has been called a death spiral,” said Jonathan Margulies, director of the Winterberry Group, an advertising and marketing services consultancy.
“The USPS' only response to declining volume and revenue has been to raise postage rates,” Margulies said. “That has the effect of degrading volume even more, with no end in sight until systematic change comes about, either from marketers or the Postal Service.”
USPS governors have approved a 2-cent increase in the price of first-class mail to 44 cents, effective May 11. For business mailers, that increase could be higher.
According to David Straus, Washington, D.C.-based counsel for American Business Media, an association of business media companies, the typical magazine publisher member of ABM may see a postal increase as high as about 6.5%. “And unfortunately, there will be a small number in the 10%-to-11% range, those that mail with a large number of firm bundles,” he said.
The postal rate hikes come at a particularly challenging time for magazine publishers. Media audit company BPA Worldwide said last month that as many as 15% of publications audited by the group will likely discontinue their BPA membership this year. Some publications have been shuttered, while others are dropping memberships to cut costs, according to BPA.
For other industries that rely on the mail, this spring's postage hikes will come at a time when revenue is in decline. For example, Edmund Optics, which manufactures optical components, including lenses, prisms and filters, relies on its catalog mailings to generate business. The company is facing mailing cost increases even as its revenue is off by 15% to 20%.
“We're still talking about mailing our full product offering in one nice, concise book,” said Marisa Edmund, VP-marketing and communications at Edmund Optics America. “Technical buyers like having all the options, specs and pricing in print. But because of the USPS rate hikes, we'll be looking at our paper weights, smarter bundling, co-mingled mailings and some other options that our printers have available to reduce expenses.”
Edmund said her negotiating position with paper mills has improved as they, too, are suffering from reduced sales.
Also, the Postal Service is offering a small discount for direct mailers that start using the new Intelligent Mail Barcode prior to its mandated use this November. The enhanced barcode helps sort and track letters and flats, and expands mailers' ability to track individual pieces of mail.
Digi-Key Corp., a distributor of electronic components that relies on catalog mailings, plans to reduce those mailings from three times a year to just once. Brian Van Elsberg, director-marketing at Digi-Key, said the company will supplement that mailing with more direct mail and e-mail to tout promotions.
“We'll never get away from mailing our catalog,” Van Elsberg said. “I'd be shocked if we ever did. But today we need to employ other channels where information can be distributed faster than just once every four months.”
Last year total direct mail spending declined 3%, according to Winterberry Group, with another 8.6% drop projected for this year.
“It's important to say that the channel isn't dead,” Winterberry Group's Margulies said. “But clearly direct mailers have to go about their jobs in a new way, with more targeting and personalization, and by taking pains to put their data to work.
“The tools, like database automation and analytics, have long been available, but now it's no longer an optional investment. Managing data and gaining visibility into your best customers will ultimately be the difference between sustaining the successes of the past or being left behind.” M