Late on Friday, October 7, the Postal Service submitted a filing with the Postal Regulatory Commission proposing a price increase. This would be in effect on January 22, 2023. The PRC will review the filing to ensure that USPS calculations are accurate and the proposed prices comply with statute. The PRC is expected to approve the request in November. Yes, postage increased in July and now there will be another increase in January. We also expect another increase in July of 2023.
Here are some of the proposed rates:
- Stamp and Meter price differential will remain at 3 cents.
- Non-machinable surcharge for Letters will increase from 39 cents to 40 cents.
- Additional ounce rate will remain at 24 cents.
- 5-Digit Automation Letters price will increase 3.5%.
- The overall increase for Flats is 6.2%.
Standard Marketing Mail:
- Letter overall increase is 3.2%
- Flat overall increase is 6.2%
- Creation of 5 new discounts for flats on SCF pallets
- EDDM retail increase 1%
- CRRT overall increase 6.2%
Your questions answered:
- How is the amount of needed revenue determined? The Postal Service’s costs drive the amount of revenue needed. Few costs are fully within its control: salaries and benefits are specified by contract or federal programs, the marketplace determines transportation and fuel cost, and retail and delivery costs are part of its universal service mandate. By law, rates must be set to cover a product’s attributable costs and a share of USPS institutional costs.
- How are the size and timing of rate increases determined? The 2006 postal reform law specified that the size of a price increase for USPS “market-dominant” products, like First-Class Mail, Marketing Mail, and Periodicals, is capped at an amount linked to changes in the Consumer Price Index. The cap is determined by using separate formulae for an annual rate increase and for increases at shorter or longer intervals. The USPS can choose when to raise prices, but the law requires them to be regular and predictable, so an annual (or semiannual) cycle fulfills that directive.
- Why have increase been so big? The 2006 reform law that changed the rate setting process also mandated a 2016 review by the Postal Regulatory Commission to be sure it was working as designed. The PRC found the USPS’ financial condition (caused largely by the prefunding mandate) was poor so it had no choice but to conclude the rate setting process was yielding too little revenue. In turn, the PRC revised the ratemaking process in November 2020 to give the USPS more rate authority, allowing over-CPI rate increases to compensate for lost volume, to help make prefunding payments, and to improve the cost coverage for “underwater” products. The USPS is using all available rate authority because the Postmaster General wants to offset what he projects to be $160 billion in losses over the next decade. Though many disagree with the projection and the size of the price increase, the Governors of the Postal Service supported the PMG and have authorized the filings.
Don’t let the postage rate increases scare you away from this important marketing channel. Direct mail has the highest ROI of all marketing channels when done correctly. On average the postage rates increased by less than a penny per piece so they are not going to drastically increase your overall direct mail budgets, but it is important to account for the additional postage funds. It’s time to get creative and send direct mail that is interesting as well as cost effective. Are you ready to get started?