2010 Postal Rate Increase - Fuzzy Math?

The USPS service recently recommended an average postal increase of 5.6%. In their view this will help close the gap on the red ink trail they have been leaving behind them. I am not sure what reality they are operating in, but it is not the same one the rest of the businesses are in.

A postal rate increase will do nothing more than extend their losses into upcoming quarters and put one more nail in the coffin of the direct mail industry. Have they even attempted to speak to their customers? As a one time heavy direct mailer I can let them know that the way to get our business back is not to raise the postal rates further.

The math they are using is A x B = Profit with A being amount of mail sent and B being the price to send that mail. In any scenario if you decide to choose B that has a direct affect on A, but in their math the new equation looks like this: A x (B x 5.6%) = Profit. The price has risen 5.6% and and the amount of mail stays the same, which in turn results in more profit... or less of a loss as the case may be.

Unfortunately, that completely ignores the effect that the amount of mail will decrease as the postal rate increases. The Law of Demand is a common economic principle telling us that the higher a price goes the less demand for that product there will be.

Taking the law of demand into account the USPS can bank on losing another batch of customers this year based on their price increase. Unfortunately that will continue the spiral affect that they have been seeing for years now.

Instead of trying to squeeze more money out of the customers that they still have, it may be time to investigate how they can sign on new customers or win previous customers back. Again, opening up a dialogue with previous customers or prospects would be a great start and probably eye opening.

The USPS is not the only industry facing threats from technology, but they do seem to be one of the most stubborn in their responses to the threat. Direct Mailers, keep letting your USPS representatives know what this will do to your volumes this year. Maybe the point will get across.