Paul Vogel, the U.S. Postal Service's president-chief marketing/sales officer, sat down with Straightline earlier this month for a lengthy overview on how the Postal Service, faced with severe financial difficulties, can adjust to the future, ensure good service and work more effectively with commercial mailers.
“Our issue is we're losing about $8 billion to $9 billion a year,” Vogel said. “We can either ask for legislative changes that put us on a level playing field with the way a normal business operates or continue to reduce our infrastructure, including plants and post offices, to become more efficient.”
The Postal Service wants both those options, but it faces long odds. While it does not receive any public money, it is nevertheless restricted by law and the vagaries of political decision-making in how it manages its pensions and employee health plans; the products and services it offers; and how much it is permitted to charge its customers.
Among the changes the Postal Service would like to see are: continuing job cuts affecting up to 120,000 positions; the closing of about 3,600 post offices; relief from health benefit and retirement payments; and possible elimination of Saturday mail delivery.
The price-hike option is a hot potato, Vogel said.
“We do a lot of business with the American Catalog Mailers Association; and they've told us loud and clear that, if we try to offset an $8 billion loss with a 20% increase in postal rates, it will drive a lot of mail volume out of the system,” he said.
Last year the Postal Service asked the Postal Regulatory Commission to allow it to raise rates an average 5.6%, with higher increases for certain types of commercial mail. That request was denied, since current law restricts postal rate increases to no more than the rate of inflation.
However, Vogel said, a price increase of some sort is inevitable. “Every year we've usually done a pricing change,” he said. “We'll probably go back to the PRC next month. We expect a rate increase tied to the Consumer Price Index.”
Vogel said the Postal Service wants to continue to encourage increased volumes of advertising mail. For the last two years it has held “summer sales,” offering postage rebates in return for increased use of commercial mail.
This summer it offered an upfront discount of 3% for mailers of first-class and standard mail using 2-D barcodes, such as QR codes or Microsoft Tag, on their pieces. It was an attempt, Vogel said, to make mailed pieces more interactive via digital marketing.
Vogel said the summer sales didn't produce the returns he had hoped for because of the complexity involved in qualifying for those rates; generally only large mailers qualified and then had to use a complex formula to prove their volume increased. The barcode promotion, without administration hurdles, performed better, he said, and may serve as a model for the future. “The summer sales did generate additional traffic, but frankly there was an administrative burden we put on ourselves and our customers in order to participate,” he said. “It created a bureaucracy that was a bit stifling; and, with only large companies being able to do it.
“But the QR code promotion worked fantastically,” he said. “We looked at QR code adoption on mail just before this promotion and it was about 2% or 3%. But in July and August, during the promotion, we saw almost 33.9% of standard-mail pieces having some form of code. Instead of offering a sale with a rebate or refund, now we're saying, "let's just give the discount upfront and not worry about the administration.'
“I can't tell you how rewarding that is, with mailers responding to a small discount and really modifying the way they do business,” he said. “We've seen how mailers have adapted, taking a traditional piece of mail and making it more exciting and with added relevance.”
Vogel also pointed to other commercial user-friendly initiatives, such as the new Every Door Direct Mail program, allowing businesses to use so-called “saturation mail” to every business or home in a geographic area, but without having to include an actual recipient name.
“Again, we realized that we had some onerous regulations that prohibited small businesses in particular from getting into the mail stream,” Vogel said. “For example, these businesses often don't have the money for specific, expensive lists. They know the geography but not the names. And now they don't have to buy a permit or go to a distribution center.
“As it's turning out, 98% of our growth in saturation mail is coming from businesses that never used the mail before,” he said.
Vogel said the Postal Service's hoped-for infrastructure and job cuts won't impact service to commercial mailers.
“We've automated a lot of our processes and added intelligence to the mail with Intelligent Mail Barcodes,” he said. “And we have almost 600 processing centers, but we may not need them all. And so, we have bottlenecks in the system. A good process analysis will help us look at our resources, both human and bricks-and-mortar, and learn through self-reflection what we have to do. We can be more efficient.”