Postal Rate Increases

In the largest price increase since 2007, the U.S. Postal Service (USPS) is proposing a rate hike of 5.9%, a move that has catalog mailers scrambling to assess the impact of such an increase and also evaluating less expensive alternatives. The Postal Regulatory Commission (PRC) has up to 90 days to rule on the proposal, with the price increase going into effect as early as Jan. 27, 2014.

In an open letter posted on its site, the American Catalog Mailers Association (ACMA) further warned that the PRC can apply the increase differentially to each class of mailer, which could include a surcharge on Standard Flats used to send full-sized catalogs that could be as high as 10% to 12%.

For many catalog mailers, simply paying the higher mailing rates is not an option. Instead, early feedback suggests that many intend to reduce catalog circulation and send frequency; use less expensive forms of mailing such as mini catalogs; and even employ digital promotions, such as email, search engines, digital ads and social media. 

“We will look at everything from page count, to mailing frequency and circulation, to online and mini catalog options if the proposed postal price hike is approved,” said Kerrie Thornton, a business analyst with National Ropers Supply (NRS), a Decatur, Texas-based catalog, online and store retailer of Western lifestyle decor and supplies.

The rate hike was recently proposed by the USPS Board of Governors as part of an effort to close a USPS $20 billion dollar budget gap. If approved, the hike “will do real damage to an industry still struggling to adjust to the exorbitant 2007 rate hike where many companies are struggling mightily, mail volumes are depressed, and the availability of quality names to mail is diminished,” wrote the ACMA’s president and executive director, Hamilton Davison.

In the face of the proposed postal rate increase, some catalog mailers are weighing alternatives. One option are so-called “mini-slim catalogs.” Despite having fewer pages, mini catalogs allow companies to cut production costs without sacrificing circulation or frequency. Though not considered a replacement for full-sized catalogs, mini catalogs can be used on a case-by-case or supplemental basis to fill the void of a catalog unsent due to mailing price increases.

“We expect that expanding what we do with mini catalogs should help us offset much of the proposed rate hike,” Thornton said.

Mini catalogs mail at the cost of a standard automated letter and provide up to 10 pages to promote products. They can cut mailing and production costs by a third, helping to offset the increase in mailing costs. They can also be as effective as larger catalogs in response rate, as well as driving customers to company websites.

Where a marketer is doing four to five mailings a year of full-sized catalogs, supplementing their schedule by doing three full-sized catalog mailings and two mini catalog mailings, for example, can significantly lower cost without lowering response rates. While mailing a full-sized catalog can cost 57 cents a piece at a million mailed, mailing these new mini catalogs can cost as little as 28 cents a piece at similar volume. This can make mini catalogs a cost-effective alternative even to postcards.

Driving Prospects and Customers to the Company Website

NRS needed an inexpensive way to drive customers and prospects to make purchases at their website. According to Thornton, the retailer had traditionally mailed out five to six full catalogs of more than 250 pages annually, costing about $1.50 each at their volumes.

To cut costs, they began substituting a few 84-page catalogs for the larger catalogs, but still found this a costly way to market to prospects. Another challenge was forecasting accurate inventory and sale prices in these catalogs, since the printed data could be out of date by the time customers went online to buy. 

As a solution, NRS chose to mail out two full catalogs a year, supplemented by mini catalogs by B&W Press, a Georgetown, Mass.-based printer specializing in direct marketing, in between.

“We found that sales with the mini catalogs were as good as or better than with the 84-page catalogs,” Thornton said. “For as little as 32 cents per mini catalog, we’ve been able to get our key product groups in front of prospects and customers to drive them to our website, where inventory and pricing is up-to-date. For about the cost of producing and mailing a postcard, we’ve found this to be a much more effective direct-marketing approach.”

Western goods retailer National Ropers Supply switched from mailing out five to six full catalogs a year to just two, with the gap supplemented by mini catalogs.