A Quick Look Ahead for Catalogers

The following is an article prepared by PostCom President Gene Del Polito for Catalog Success. The views expressed are solely the author's.

By now, just about every catalog merchant in America should have gotten more than his or her fill of news, comments, and opinions on the meaning, impact, and consequences of the 2006 postal rate case. If you have no idea about to what I am referring, then perhaps you'd be better off finding some new career. Everyone else, I'm sure, knows exactly what I mean.

The R2006 postal rate case is over. It's history. By now, you've learned how to adjust your business marketing practices to accommodate for the horrendous effects of the recent round of catalog postal rate increases. If you haven't, then you're about to learn some of the hardest, unforgiving lessons of trying to make a living in a hotly competitive marketplace.

Your focus should now be on the future. No, not the future of five to ten years from today, but the future of what's likely to happen over the next 12 months.

The Postal Service already has learned a "novel" lesson (novel, that is, only to itself) from this last round of postal rate increases. The postal chieftains have discovered that the punitive rates assigned to those who mail larger than letter size (flat) mail pieces has sorely affected flat mail volume. Reportedly, the volume of flat mail is now at a level that was last seen immediately after the anthrax crisis. It's in the dumper.

Of course, to anyone who has to pay the postage bill to distribute his catalogs by mail this comes at no surprise at all. In fact, PostCom and others had warned the Postal Service that double-digit rate increases would have a deleterious effect, so much so that USPS estimates of flat mail volumes and revenues should have been considered without merit by the Postal Regulatory Commission. (Okay, once again, that's nothing more than recounting history. Enough of that.)

So what does lie in store? In a nutshell, plenty.

First, catalogers should be keenly aware that the Postal Regulatory Commission is well into the process of seeking public comments on a new proposed ratemaking schema. Some of your fellow catalog marketing colleagues have stepped up to the challenge, and have provided the Postal Regulatory Commission with some excellent comments. James West of Williams-Sonoma particularly deserves kudos for his excellent testimony at a recent PRC field hearing. West gave the PRC a quick short-course in the changing nature of catalog (multichannel) marketing, how marketers make their decisions regarding media alternatives, and factors that are key to determining the look and feel of a finished printed product.

Second, you should know that the Postal Service is already making noises about needing another billion dollars to accommodate some expenses that have flowed from the new postal law. Postal officials say it's essential that the Postal Service have "one more bite at the apple" to set appropriate postal rate and classification baselines before stepping into the brave new world of living within the constraints of an inflation-based price cap.

And how does the Postal Service intend on raising this new booty? Well, it has two options. One is to file one more old style cost-of-service rate case, which the new postal law permits provided the request is filed before December 20, 2007. The second is to request a rate change under the class-based inflation cap provided by the new postal law.

There is no doubt in the minds of any rational postal representatives that mailers should strive to avoid at all costs having the Postal Service request a billion in new rates under the old cost-of-service ratemaking rules. Recent history should have provided more than sufficient of the perils associated with giving the PRC another crack at second-guessing the USPS' business judgement (even if that judgement was somewhat short-sighted). If an increase in revenue is really needed, then the Postal Service and the Postal Regulatory Commission should be urged as strenuously as possible to effect any rate change under provisions envisioned by the Postal Accountability and Enhancement Act of 2006 (PAEA).

It's important to keep in mind, though, that the PAEA inflation-based pricing limit pertains to revenues derived from mail aggregated at the class level. Under PAEA, the Postal Service will have ocnsiderable discretion as to how rate increases are to be applied at the rate category and subclass levels. So, what in fact is an inflation cap on rates calculated on the class as a whole may actually be reflected in rates that might be above or below cumulative inflation when viewed from a rate category or subclass perspective.

If catalogers really believe in their ability to exercise policy making clout, now's the time to show it. Catalogers ought to be sending the postal governors and the Postal Regulatory Commission a loud and clear message that one more cost-of-service rate case shouldn't be a seriously considered alternative. The cry should be to start working under the new law or nothing.

Catalogers still will have to step up to the challenge to educate the Governors and the Commissioners on what catalog marketing is all about. They need to explain the questions and decisions catalog marketers must make in determining the media through which they'll expend their marketing and advertising dollars. They'll also need to explain what market-based intelligence goes into the decision on how a mail marketing piece should look when mail is chosen as a marketing alternative.

This past rate case should be evidence enough that those who are empowered by government to regulate one of the key channels through with you do business haven't a clue as to why you do what you do. This ignorance needs to be expunged, and only the willingness of those who will be most significantly affected by future rate increases to educate postal policy makers about the realities of catalog life can get this job done.

Don't presume for a minute that any public official knows even an iota about your business. If, however, you don't take on the task of getting them to know what they need to know to ensure that postal policy and regulation will do no harm, then someone else will. Unfortunately, that someone else may have an entirely different view of the postal world than you do.