Episode 40 – Industry Corner Podcast

IN THIS EPISODE: USPS 2021 price increases, Proposed incentive for Seamless Acceptance, Topics to be discussed at November MTAC, and the 2021 Next Generation Campaign Award

Show Companion

Links to the resources mentioned in the podcast.

2021 USPS Next Generation Campaign Award


Chris (00:00):
Hi everyone. I’m Chris Lien. Welcome to Industry Corner, a podcast where I discuss postal industry news to help you stay informed. On today’s podcast I discuss the USPS proposed 2021 price increases, a proposed incentive for seamless acceptance that would directly benefit the mailing service providers, topics to be discussed at the November MTAC meetings, and the 2021 Next Generation Campaign Award.

Chris (00:30):
Welcome to the podcast, everyone. I’m going to begin first by talking about 2021 pricing increases. Now the U.S. Postal Service filed on October 9th with the Postal Regulatory Commission, their intended price increases that’ll go into effect on January 24th of 2021. And as a reminder for our listeners, price increases for the Postal Service are kept by the consumer price index urban rate. And this is something that the Postal Regulatory Commission tracks over a trailing 12/24 month average. It’s got a little bit of complexity on how they calculate it, but to put it quite simply, it is tied to the consumer price index and the urban level. And generally speaking by class of mail, it’s not a huge increase. Just as an overall for first-class mail It’s about a 1.8% increase. For marketing mail, about 1.5% increase. Periodicals, overall, 1.5% increase, and package services, overall has a 1.46% increase.

Chris (01:23):
Now these are the market dominant prices. This is not the market competitive prices. Market competitive prices have not been filed yet with the Postal Service. So we do appreciate getting this detail. And I’ll talk about this in a minute on the market dominant products so that we can prepare the software and have everything ready for our customers. But it’s really important that we see what the market competitive prices are going to be. That’s those packages and parcels that the Postal Service primarily that the Postal Services delivering. And we want to see what that is. And the reason for that is if at all possible we would like to coincide the price increases for 2021 for both dominant and competitive products at one time. It just makes it a lot easier for our customers, a lot easier for the industry. And in fact, we’re already kind of dealing with somewhat of a bifurcated situation as it is right now.

Chris (02:09):
If you recall on October 18, the Postal Service put into effect this time-limited increase on packages that is going to run from October 18th, so we’re already in the middle of this, to December 26 to sort of capitalize on the increase of packages during the holiday shipping season. But let’s talk about the market dominant price increases. And as I mentioned before, these are proposed, this is not approved yet by the Postal Regulatory Commission. We do anticipate hearing that sometime here in November and based on what I’m seeing overall here and what some of the industry associations are saying. This seems to be a pretty straightforward pricing increase. Just a couple of highlights. First of all, consumer-facing products, you know, the first-class stamp, those are going to stay at 55 cents and no increase with that. But of course, by not increasing the first-class stamp that gives the Postal Service a little bit more pricing latitude when you look at some of the other subclasses. Now that is 55 cents for a one-ounce letter, if any additional ounce actually did go up that increased to 20 cents. As we get into a little bit further into it, a couple of other items of note stamp price, two ounces, 6.7% increase on that, but we’re going to see a 2.9% single piece cards that have gone up. Share mail letters and share mail cards are being proposed to go down in their price by 15% and 20% respectively. So we’re seeing a price decrease on those, and I’m sure that’s a, you know, an intent here for the Postal Service to try and get the industry to use more of this share mail concept. They see that as an opportunity to grow the mail volume and continue to get people to work with that continuing on into sort of the pre-sorted area, the first-class mail commercial prices, the areas of note here, the everything is getting some kind of an increase, but three that stood out to me, the mixed ADC automation flats, 7.9% increase for the two ounce. Three digit automation flats, two ounce that’s a 6.9% increase, and five digit automation flats two ounce gets a 6.7% proposed increase with those. So you’re seeing an increase on the flats. I’m sure, and you know, there’s a justification with that, that there’s additional handling additional costs for the Postal Service with that, but you could expect to see that increase as well.

Chris (04:13):
A couple of notes on periodicals, as I said before, 1.5% overall increase, you know, nothing really major on it. Most larger circulations are gonna pay you anywhere from maybe 0.4% to 6% or more in postage, depending on what they’re outside or inside County is for that. There’s a separate price for tubs below sack prices, and a few other small changes for periodicals that the Postal Service is doing. And as a reminder to the listeners, periodicals is that one class of mail where we continue to see changes in, in volume of course, which is, which is unfortunate because periodicals are such an important part of the communication, the sort of the foundation in, in communication within this industry, in the nation. But it is a challenge right now for periodicals in terms of covering their attributable costs. Talking a little bit about marketing mail though, a 1.5% overall increase there. One thing to note on the increase, there’s a couple of areas where that got hit a little bit larger than that. Of course, high density letters are seeing a 5.4% increase. And then the other thing that really stood out, and I guess I’m not super surprised marketing mail parcels, 16.8% increase. There’s no question the Postal Service and the new Postmaster General Louis DeJoy are focused on parcels right now with the Postal Service, whether it be market dominant or market competitive. And again, we’re really anxious to see what is the Postal Service going to do for that market competitive pricing. And you’ve seen some of that in the media over the summer from the administration as well.

Chris (05:41):
Something that’s interesting though, with marketing mail. So the full service intelligent mail incentive remains at 0.03 cent per piece on that, but the Postal Service is now introducing something that we’ve been talking about for a long time. And I’m glad to see it a seamless incentive at 0.01 cent or 1 cent, excuse me to eDoc submitters. So let me, let me restate that without stumbling as much. What we’re looking at here is the Postal Service is considering a proposal so that the mailing service provider, the eDoc submitter in most cases is going to directly get a discount for participating in seamless acceptance. We’ve talked about seamless acceptance on the podcast before. This is a way for the Postal Service to further reduce their costs for mail acceptance preparation. The big benefit of course, to the mailing industry is that mail service providers are going to be judged based on an entire month’s worth of mailing. And it’s going to be looking at sort of the behavior over a period of time and not being dinged if you will, on each individual mailing. So there’s a lot of benefits with a seamless acceptance on the high level. The real problem of course, is that you need to make sure your electronic documentation is correct, that the barcodes are populated properly, that you’ve taken care of all the undocumented pieces and things like that. So there’s a lot of things mailers need to do to prepare for it. Because once you go into seamless acceptance, you can’t get out of the system. Once you’ve enrolled, you have to stay in seamless acceptance. And the Postal Service has been talking about benefits for quite some time, but this is the first time that I’ve seen where it’s an actual monetary benefit directly to the mailing service provider. Albeit small, but it’s an interesting step forward. It’ll be interesting to see how the Postal Regulatory Commission responds to that. I think it’s a great idea. It’s a long time coming, so we’re glad that’s going to happen. And just to talk a little bit about how that’s supposed to work. On one of the recent webinars with the Postal Service, they had talked about how it was going to be handled through the electronic payment system. That’s that EPS system with the Postal Service. So if you’re the eDoc submitter and you’ve got a CRID, a customer identifier, and you are on EPS, then you would get that discount applied as a credit to your account. So the key here is that you have to be on EPS. You know, you’ve got to be the eDoc submitter, but if you’re doing that and you’re participating in seamless acceptance, you’ll be able to get a benefit with that,

Chris (08:03):
And talking about EPS, now, if you’re currently on CAPS, that’s that centralized accounting processing system, you will need to transition to the enterprise payment system sometime by really the summer of 2021. Postal Service has been talking about retiring the CAPS program for quite some time, their approach now too, to try and get everybody in there. So this discount is, is certainly aimed at seamless acceptance, but it’s also aimed at, I think, just getting people over into the EPS system, again with an intent to further improve the operating efficiency for the Postal Service, reduce some of their costs and help them to continue to seek some way without a legislative assistance into a more positive, um, financial situation. So the timeline with this is right now, the Postal Regulatory Commission is reviewing. We’d expect a decision, maybe somewhere around November 12th, so right around the middle of November.

Chris (08:56):
And then of course, you know, implementing that and trying to get the software out to the mail service providers, to our customers, as soon as we can before the January 24th increase. And as I said before, on the surface, this looks like a pretty straightforward price increase. So we’ll see, as we go through with this, of course, there’s always an unintended consequence. Sometimes when you change the price and one rate cell, what kind of a signal are you sending to the market for mail preparation. So we’re going to have to look and see what the impact is going to be for the prep on that. And then of course the other big unexpected is what’s going to happen with those market competitive prices. We’re going to have to see where those are going to come in as well.

Chris (09:31):
Talking a little bit about promotions, because that’s also something that the Postal Services talked about. The actual promotions themselves are going to stay the same. So we’re still going to be talking about the great promotions like emerging and advanced technology, the informed delivery, tactile sensory and interactive engagement, mobile shopping, things like that. And those continue to work very, very well. One note here is that the earned-value promotion will no longer have a mailer specific volume threshold. So again, the Postal Service is continuing to look at these promotions and finding ways to add additional incentives for the industry to continue to work on that. And I think that’s a great idea actually, because it’s going to give an opportunity for those mail service providers, mail owners that want to be creative and want to take advantage of not only just the exciting capabilities that you have with mail, recognizing that the response rates continue to go up with direct mail, but also to look for a way to bridge the physical, to digital with that informed delivery program.

Chris (10:29):
And so it’s very exciting to see that the Postal Service is going to continue on with their Next Generation Campaign Award. And this is that the award that is given out to those MSPs or mail service providers and mail owners that are really creatively and astutely blending together that high touch to high tech using the informed delivery program. It applies for both business to consumer B2C type mailings, as well as business to business B2B type mailings. And it focuses on how you’re using the innovative, direct mail campaigns that bring together again, that high touch to high tech. So the Postal Service is rolling out the information on this. They’re going to have a number of different awards, including the grand champion, which will be announced at the National Postal Forum in 2021. That’s supposed to be in Nashville. So hopefully we’ll have a chance to get together and we’ll be together in Nashville in 2021, but the Postal Service is going to be featuring a next generation campaign book. So you’re going to have, if you win, you’ll get some of the very cool mail pieces that you put together. A spotlight in this book. I knew I got every one for the last several years and they’re, they’re really a fun thing to show people and talk about how mail has evolved and what exciting opportunities there are with it. The contest opens on November 20th now is the time where you want to be looking at beginning to participate in this. And the deadline to enter into the contest is February 19th, 2021.

Chris (11:47):
So finally, I just want to talk a little bit about MTAC. So MTAC was supposed to be the last week of October. The Postal Service decided to push that out. Didn’t want to do that right before the election. Just kind of focus instead on getting the ballots in the mail, related to the presidential election out on time. And the Postal Service of course has been focusing a lot on mail and, and the ballots and election mail and political mail. You’ve seen all that in the headlines, I’m not going to go through the details on it. I will tell you that service performance is being watched very, very closely. It did seem to show some improvements. We had a little bit of some concerns as we came into the October timeframe, but I do believe that the Postal Service is being truthful, where they’re saying that they’re focusing on this, they’re trying to get this moved as quickly as they can. And just knowing some of the people that I’ve had, the pleasure of meeting through the Postal Service at headquarters. I, I know that they’re committed to making sure that that mail is being delivered on time, but we did move out the MTAC meetings to later in November.

Chris (12:42):
And a lot of what we’re going to cover in those MTAC means we’re going again, uh, talk about seamless acceptance. We want to make sure we completely understand everything related to that. We’ll talk about the mail quality data delegation that’s in the informed visibility program. You know, informed visibility is an important vehicle to communicate information, not just about mail tracking, that’s been the sort of the primary purpose, but that through that informed visibility channel, we’re going to be able to receive information about the quality and integrity of the mail. So some of that electronic mail integrity reports that EMIR information that’s going to be transmitted through informed visibility. Of course, the informed delivery campaign information that’s going to ultimately be transmitted through the informed visibility channel as well. So it really becomes this central conduit by which the Postal Service is going to be able to communicate through the entire supply chain. And that’s really important so that we can leverage that data and work together as a, as a supply chain in an industry to present the efficacy of these mailing campaigns and how to continually improve on that. It was noted that approximately 79% of full service was in measurement. They saw a little bit of a decline, and we’re going to try to understand this a bit better for first-class mail in terms of same period last year for mail that’s measurement. You know, certainly we saw an impact of mail volume due to the COVID pandemic earlier, but marketing mail that’s in the system now is getting more measurement with that. So we’re seeing some slight increases in terms of the marketing mail eligibility for measurement. So that’s a good thing. So we’re gonna look at that. We’ll go a little bit more detailed into it. Of course, we’re going to talk about and look back on service performance. We all know through the headlines that there were some changes that were implemented in July, they had an impact in August and September, and then a lot of work to, to try and get that back on time. The delivery network there’s been some changes the headquarters on some people and org charts. So you get an opportunity to meet some people, at least virtually anyway, uh, hopefully, you know, next year as we come into 2021, we’ll begin to have in-person MTAC meetings again. So, you know, that’s pretty much just kind of a highlight of some of the things with MTAC that we’re going to be looking at.

Chris (14:43):
And then finally, before we wrap up here, just a few other things to point out, I mentioned before that we’re still waiting for the competitive product prices. We haven’t seen those yet. So that’s hopefully going to be coming out soon. We still need the Postal Service to produce a strategic plan that’s going to talk about how they’re going to cover their costs. They’ve made some progress. In fact, I failed to mention it with the marketing mail adjustments, or proposed price increase for 2021. This should finally close that gap on the destination entry discount, where the Postal Service was passing through more than a hundred percent in terms of the costs in the form of a postage discounts. That’s why they’ve been reducing that amount of discount that hopefully should now be corrected with this next price increase. The Senate is adjourned, but Congress may decide to go forward with a COVID relief package. And if they do right now, there’s a lot of talk about getting some financial funding for the Postal Service with that. This goes beyond the $10 billion lending authority that the Postal Service had available under the care act. This could give direct financial relief to the Postal Service, primarily designed to cover some of the costs that they had unexpected costs due to respond to the COVID-19 pandemic.

Chris (15:53):
We’re still waiting for the Postal Regulatory Commission to advance its review of the existing rate making framework as well. And just looking to see what’s going to happen with parcels, you know, that’s the other big thing right now is, you know, looking back on how did we perform in terms of parcels for service performance, the price increase with that, and just additional ways that we can try and control the cost for the Postal Service through better mail preparation, and of course, better address quality. CASS Cycle O has been deferred out till 2022. We’re going to continue to work on some improvements and address quality until that timeframe. But it’s really about being astute with mail preparation, and we’re excited to be able to continue to deliver that technology and services that help our customers achieve that.

Chris (16:37):
So that’s just a quick update on a few things that are going on in the industry right now. I hope you found some of this informative, but if you’ve got any questions as always, please don’t hesitate visiting our webpage bccsoftware.com or giving us a phone call. We always want to know how can we help? Thanks everyone, and have a great.