After years of fighting, direct mailers finally succeeded in forcing the U.S. Postal Service to remove the exigent postage rate increase that was designed to offset losses resulting from the recession. For the first time in 97 years, postal rates actually decreased on April 10th by 4.3%!
This raises an interesting question: Are direct mailers going to use the savings to increase their mail volume or are they going to pocket the difference?
One way to predict mailer response is to look at price elasticity data, which estimates how many more people will purchase something if its price decreases by a certain amount. Fortunately, the Office of Inspector General for the U.S. Postal Service analyzed postal price elasticities for different categories of mail in 2013. By averaging their estimates for the four years following the worst of the recession (2009 – 2012), we can make some predictions.
First, as price elasticity would predict, consumers have met the price decrease with a yawn. According to the USPS’s estimates, the 2 cent decrease in the price of a first-class stamp is only going to result in a 0.4% increase in the number of letters mailed by consumers.
Among commercial bulk mailers who don’t use Enhanced Carrier Route (ECR) processing, the reaction isn’t likely to be much greater. The 3.4% decrease (from $0.238 to $0.230 for an automated letter sent to a SCF with 3-digit or AADC sorting) is predicted to increase volumes mailed by only 0.8%.
However, mailers who use Enhanced Carrier Route processing are more likely to take advantage of the postal savings to send more mail. The 4.3% decrease (from $0.256 to $0.245 for Basic Carrier Route letters delivered to a SCF) is predicted to increase the volume of ECR mail sent by 2.7%.
Since this is the probably the only time in our lives that we’re going to experience a postal decrease, let’s have some fun with it. These are our predictions for how the price decrease will affect mail volume. Do you agree? Disagree? Let us know what you think is going to happen over the next year and earn bragging rights if you’re right!
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