Another round of rate increases is on the way for customers of the U.S. Postal Service in 2024, even as regulators express concern about their widespread effects on the financial health of the U.S. mail system.
In a May 30 ruling, the Postal Regulatory Commission approved a new across-the-board rate schedule, to take effect July 14. The Postal Service had requested the new rates in a filing April 9. See the full pricing summary from Quad here.
The July 14 adjustments represent the second rate increase for 2024 and the third time in the last four years that the Postal Service has hiked rates twice within the same calendar year.
While the Regulatory Commission said it found “no legal basis” to reject the request, the panel said it “strongly encourages the Governors to consider exercising their business judgment, consistent with statutory and regulatory requirements, not to increase rates by the full amount permitted by law.”
As one of the largest customers of the Postal Service, Quad has conducted an extensive analysis of the filing based on our postal data warehouse to examine the impact on commercial mailers. Our review suggests that the average rate increase may vary greatly compared to the USPS class level filing averages of 7.75% or 9.75%, depending on the category of mail involved. The Postal Service argues that it needs to raise new revenue to help fund its ongoing modernization program as described in its “Delivering for America” 10-year plan.
Individual clients may see percentage changes that are either higher or lower depending on the type of mail, where it’s being sent, weight and other factors. For instance, nonprofit marketing mail flats could see increases of as much as 17%, according to Quad’s analysis. However, rates for heavy marketing mail flats may see increases as small as 2% based on enhanced drop ship discounts.
Commissioners indicated that they had received comments during the ratemaking case that “presented a number of reasons why rate increases below the legal limit may be appropriate for business and public policy reasons.” These include:
“The Commission is concerned, given the current state of affairs, that the Postal Service’s proposal does not reflect reasoned consideration of the potential widespread effects of its proposal, is not prudent, and is not consistent with the best interests of all stakeholders.” The order adds: “This combination of stressors may be unprecedented in the history of the Postal Service.”
Commissioners’ comments echo concerns from marketers and other commercial mailers, who say the increases are making mailing costs unsustainable and are pushing overall mail volumes into a downward spiral. Since 2021, commercial mailers have experienced compound rate increases of between 29% and 83%.
Quad Director of Postal Affairs Bob Schimek recently discussed the Quad rate-hike analysis during a webinar, and this is how he summed it up: “Unfortunately, this price change is going to be a big one.” He noted that in asking for increases that amount to roughly five times the rate of inflation, the Postal Service is asking for the maximums allowed under the law.
During the webinar, Schimek provided the USPS initial guidance for postal rates into 2025 to assist clients in budget planning. The USPS projects the twice-yearly increases to continue, but at a slightly more moderate rate given the expiration of approval for certain categories of rate hikes.
Promotions and incentives ruling
The commission also adopted a request from the Postal Service for adjustments to its program of promotions and incentives for 2025. The approval includes new ways for clients to save money.
For instance, a proposed new sustainability add-on promotion will offer a 1% discount to mailers who demonstrate a level of recyclability for paper used. The USPS is also proposing a new catalog incentive, starting July 2024, utilizing a broader definition of a catalog for mailing purposes.
Most immediately, mailers are reminded about the time-sensitive nature of this year’s new First-Class Mail and Marketing Mail Growth Incentives program. The program provides postage credits to mailers who grow qualifying First-Class Mail or Marketing Mail volumes in calendar year 2024 compared to corresponding volume in fiscal year 2023. As a reminder, the Postal Service says that to participate in the Mail Growth Incentives program, customers must register, and both the mailer and the Postal Service must agree to the baseline on or before June 30. The process requires time for investigating and reviewing data, so don’t wait until the deadline to register.
Quad is planning an upcoming webinar to discuss the new promotions and incentives in detail, and we continue to urge clients to take advantage of all opportunities for savings and postal optimization. We recently introduced Household Fusion™, a new mail-bundling solution designed to offset rate hikes by combining into one recyclable polybag marketing mail from different brands — or various magazines from different publishers — destined for a single household.
Quad is committed to helping clients find solutions to offset Postal Rate hikes and maximize all aspects of their mailing programs. If you have additional questions, please contact your Quad Sales representative.
