Links to the resources mentioned in the podcast.
On today’s podcast, I provide some highlights from the recently published Household Diary Study, recap of the June MTAC meetings, and provide an update on the August USPS price adjustments.
Welcome to the podcast! One of the publications I look forward to each year is the annual Household Diary Study. This is an annual report published by the USPS that measures the types and volumes of mail sent and received, tracks trends in mail usage over time, and compares mail usage by household’s demographic characteristics. This report has been published every year since 1987 and is 237 pages long and filled with very interesting information.
Like everything, the COVID pandemic had an impact on overall mail volume in fiscal year 2020. Overall market dominant mail was down nearly 10 percent reflecting a 4.8% decline in First-Class Mail and a sharp decline of 15% for Marketing Mail. In fact, with the exception of a few subclasses, mail volume for every class was down compared to 2019 and we are continuing to see more declines in transactional mail, periodicals, and advertising mail primarily due to electronic alternatives.
For fiscal year 2020, US households received 99.9 billion of the nearly 130 billion pieces of mail handled by the USPS according to the latest USPS revenue pieces and weight report. And of that total, fifty-five percent of the mail households received was sent via Marketing Mail. Only 2% (2.5 billion pieces) of household mail was sent between households; the rest was sent between households and non-households.
The Internet and other digital only methods of communication continue to have a significant impact on transactional mail. Ten years ago, bill payment methods were evenly split between payment by mail and electronic payment. In 2020, that mix has changed to a 20/80 split with nearly 80% of bill payment being done electronically.
While transactional mail has significantly declined in the past ten years, advertising Mail continues to be the number one usage of mail. In FY 2020, 89% of all advertising mail received by households consisted of Marketing Mail (54.8 billion pieces). Another 10% (6.3 billion pieces) consisted of First-Class Mail, either stand-alone advertising (3.5 billion pieces), or advertising-enclosed pieces that are sent along with other matter (2.8 billion pieces). The volume of stand-alone advertising contracted 45% over the past decade. As a share of total advertising, stand-alone First-Class Mail advertising fell from 8% in 2010 to 6% in 2020.
And unfortunately, we are continuing to see declines in Periodical mail. In 2020, households received 3.9 billion periodicals by mail, down from 4.2 billion in 2019 which is a 9% decline. Over the past decade, readership and circulation levels dropped rapidly across all categories of periodicals. This loss in volume was mainly the result of households migrating from paper to online publications, which can provide less expensive and often free substitutes of hard-copy content.
The Study pointed out something I’ve always thought was interesting in that even though the United States contains 5% of the world’s population, the Postal Service delivers over 45% of the world’s mail. And based on the study, in spite of a declining frequency of visits over the past several years, the use of post offices for mailing services continues to dominate the mail service industry. Forty nine percent of all U.S. households patronized a post office at least once monthly in 2020, while just 12% visited a private mailing company. Over 18% of all households in the U.S. visited the post office three or more times a month. Even with the growing availability of alternatives to mail products and services, in-person visits to postal facilities remain strong.
Since most mail is Marketing Mail and since that is also what most of the BCC Software customers a producing based on the Process Acknowledgment Forms submitted to us as part of the NCOALink process, I am always particularly tuned into the Advertising Mail section of the Household Diary Study.
According to GroupM, American businesses spent approximately $228 billion in 2020 advertising their products and services, a 3.9% decrease from 2019, following a 3.4% spending increase in 2019. Of this total advertising spending, 5.5% was spent on direct mail, the third largest spending medium after the Internet (50.2%) and TV (27.6%).
The pandemic and its related business closures in 2020 resulted in a 20.7% decline in direct mail spending versus 2019. Internet advertising, on the other hand, grew 9 percent – the only media channel with spending growth. This is likely due to the surge in ecommerce activity as we were all effectively sheltering in place during the pandemic. According to GroupM’s estimates, direct mail’s share of ad spending began declining from about 9% in 2015, falling every year since and reaching 5.5% in 2020, its lowest level to-date.
Despite the general decline in advertising dollars, direct mail continues to be a popular choice for its highly efficient and versatile method for businesses to communicate with consumers. Direct mail can be targeted to the interests of individual customers, and used both to locate new customers and maintain relationships with existing customers. Direct mail allows for a variety of different types of advertising: letters, postcards, catalogs, and free samples. It can be sent as First-Class or Marketing Mail, allowing advertisers to trade off expeditious, personalized First-Class mailings against cost-savings from Marketing Mail.
Importantly, the effectiveness of direct mail is readily measurable, more so than most other media. Businesses can track the response rate to a mailing far more precisely than for a television commercial or magazine advertisement. This feature alone gives advertising mail a key advantage over other media.
Given that advertising mail is used to sell goods and services, it is not surprising that the volume of ad mail received by a household is closely tied to their income and education. In 2020, households with incomes of $100,000 or more received almost twice as many advertising mail pieces as households earning less than $35,000 (11.2 vs. 6.3 pieces per week).
Education too played a key role in the volume of advertising mail households receive. For example, households headed by someone without a high school degree received 6.8 pieces per week, while households headed by a college graduate received 9.8 pieces. The role that education plays in advertising mail is two-fold. First, direct mail is a written type of communication, and education may play some role in its relative effectiveness compared to television or radio advertising. Second, education is not only tied to current household income, but also to future household income. A college graduate who currently has a relatively low income may, in a few years, earn a much higher income.
Impressions are the key for direct marketing, and here is where direct mail has a huge advantage. Whether they wish to receive more or not, the household diary survey reveals that most households either read or scan their advertising mail. In 2020, 50% of households read their advertising mail and an additional 23% scanned it. Another 26% of households reported not reading advertising mail, a percentage that remained remarkably stable since 2018.
Ultimately, advertisers send direct mail because it works—household members read and respond to it. Households report that they intend to respond to about 10% of First-Class ad mail and 11% of Marketing Mail. While these intended response rates are usually higher than actual response rates, the data demonstrate that direct mail can have a significant impact on household purchasing behavior. Also measured in the study are households that “may” respond to an additional 10% of First-Class advertising and another 13% of Marketing Mail advertising. This is not to say that a similar mail piece may receive a higher response rate if mailed via Marketing Mail; it is more likely the result of the difference in the mix of ads received. For example, catalogs, which typically enjoy a high response rate, are routinely mailed by Marketing Mail and only rarely by First-Class Mail. Credit card ads, on the other hand, have the lowest response rate and are often mailed First-Class. The United States Postal Service OIG published an excellent report in August of 2019 on this that I would encourage everyone to read. It’s entitled: “Advertising Mail: Mail Mix Matters”.
Of course, there is a lot more in the study than what I just shared, so please visit the Postal Regulatory Commission at www.prc.gov to download this year’s Household Diary Study.
Turning now to MTAC, we had another productive meeting via virtual attendance. As usual, the PMG provided an opening statement which primarily spoke to their 10-year plan entitled Delivering for America. In fact, much of the first day of MTAC was centered around the plan including changes to the USPS network.
One of the more interesting presentations for me was how the USPS is leveraging their Mobile Delivery Devices to resolve potential vacant or occupied addresses. Codes P and X are now flags that will reflect this as follows.
A P code reflects address records where USPS has received information indicating that the address may be vacant or no longer occupied. This is determined when the USPS receives a family Change of Address (COA) out of an address with no corresponding COA filed into the same address after 90-days.
The X code reflects address records where USPS has received information indicating that the address may be occupied or no longer vacant. This is determined when the USPS receives a Change of Address (COA) into an address currently recorded as vacant on the Address Management Systems (AMS) database.
Incorrectly coded vacant record can result in an average lost revenue of $17.96 annually. Resolving these records in near real-time will eliminate this potential revenue lost while improving the data quality of the USPS commercial addressing products and services. USPS is piloting the process of sending P/X Vacant records directly to the Carriers’ MDD. Carriers will have the ability to validate/confirm the records in the office during the morning operation, or on the street as the carrier approaches the mailbox. Updates will feed into AMS on a weekly schedule. If the prompt is ignored, the program will resend the request for resolution the following week to the carrier.
Also related to address quality was resolving what are known as cross state addresses. There are instances where a post office delivers to a different ZIP Code®in a neighboring state. When Rural Free Delivery was implemented in the late nineteenth century, the last line of the customer address was that of the post office delivering the mail. The AMS database has now been modified to assign addresses to the state in which they are located without adding a new phantom PO record and new ZIP Code.
The example that was shown was for a postal customer living in Alliance Township, SD. The Postal Office that handles that mail is in Pipestone, MN – a place I know quite well as I have ancestors that lived and farmed in that area. In the past, this cross-state address situation made it difficult for things such a voter registration and other things. Now, they will have an address that correctly reflects their statehood.
All of the presentations from MTAC are posted on PostalPro as well as the recording of the PMG, so please check them out. Oh, and a huge shout out to the newly elected MTAC Industry Vice-Chair Lisa Wurman! Lisa was elected at this last MTAC meeting and will begin serving as MTAC Industry Vice-Chair on January 1, 2022. This is a two-year term, which then automatically transitions to serving as the MTAC Industry Chair on January 1, 2024 for two years. Thereafter, Lisa will optionally serve for two more years as the MTAC Industry Immediate Past Chair in an advisory role and will join the ranks of the MTAC Ex Officios such as myself, Wanda Senne, Bob Schimek, Erv Drewek, Phil Thompson, Anita Pursley, and others.
Finally, and it is really no surprise, the PRC issued their final ruling on the mid-year price increase, which scheduled to begin August 29 of this year. Since the PRC is the regulator that provided the USPS the expanded pricing authority as part of its ten-year pricing review, this was really just an exercise of checking the math on the USPS price increases by class and subclass. There were a few tweaks to pricing in Periodicals for Science of Agriculture, but nothing beyond that. And since the industry requested stay of implementation has not been resolved, you can be prepared for the pricing to go into effect as planned by the USPS. BCC is actively working on the software updates and will have them to our customers at least two weeks in advance as we’ve typically done.
The big question right now is if the USPS is also going to file for a market competitive increase. Most in the industry feel that they will seek another package surcharge for this October similar to what they did last year, taking advantage of the continued growth in packages and the holiday shipping season. If they do file, they would likely do so in August so we will have to watch that closely. As a reminder, market dominant price filings have a 90-day notification period and market competitive have a 45 day notification period.
If you’d like to learn more about mail tracking, or how to better automate your mailing workflows, please visit us at BCC Software.com or give us a call. As always, we’d like to know “How can we help?” Thank you for listening to the podcast and have a great day!