A Mailer's Take on the State of Catalog Mailings, Part 1
Historically, catalogers have relied heavily on printers and consultants to keep them abreast of postal matters. There have been, and will continue to be, plenty of exceptions, of course. One such exception is Allen Abbott, EVP/COO at Paul Fredrick MenStyle, a Fleetwood, Pa.-based marketer of men’s apparel. An active backer and member of the upstart American Catalog Mailers Association, Allen gives one mailer’s view of where the U.S. Postal Service is headed and how catalog mailers fit into the picture. Here's part 1 of that interview; part 2 will appear in our May 5 edition. —Paul Miller
Catalog Success: How has postal rate making changed since the implementation of the 2006 postal reform legislation?
Allen Abbott: Prior to the Postal Accountability and Enhancement Act (PAEA), postal rate making was a lengthy litigation process, presided over by the [former] Postal Rate Commission. Rate decisions were made based on cost attribution arguments, with the overriding legal consideration that the Postal Service was mandated to run its operation on a break-even basis.
Under the new law, the USPS has been given much broader latitude to price products and services on a market basis. The time frame for rate making decisions has been dramatically reduced.
CS: What's the current role of the Postal Regulatory Commission?
AA: The Postal Rate Commission was renamed the Postal Regulatory Commission (PRC) in the PAEA, and the agency’s role has changed from active rate setting to more of an oversight role with much broader powers. The commission does still play a major role in the “rate adjustment” process, however.
The PRC reviews all rates proposed by the USPS to make certain that one, price increases for entire classes of mail don't exceed the legal cap based on the consumer price index (CPI), and two, that other stipulations of PAEA are being met. All subclasses of mail, for example, must pay rates that at least cover their attributable costs.
CS: How are catalog companies faring under the new legislation?
AA: Catalogers have done pretty well under the new approach. In part, this is because postal officials are aware of the debilitating effects that the last “old style” rate case had on catalogers, and partly because some catalogers have become more active in the process. The result is that advertising flats (i.e., catalogs) have had less than CPI increases in both the 2007 and 2008 adjustments (effective the following May).
In its commentary on this last rate increase, however, the PRC made specific comments regarding the failure of the advertising flats classification to cover its attributable costs. This comment should serve as a warning to catalogers that we may not fare as well in future rate-setting decisions.
CS: Why is this?
AA: In its 2005 commentary, the old PRC published very similar language, leading to a massive cost increase for all catalogs in the 2006 rate case. As a result, catalog mailing costs went up dramatically in mid-2007. The stars are aligned for another large and broad increase for catalogers.
CS: What can the catalog community do to address the concerns voiced by the PRC?
AA: The entire cost attribution methodology for mail was developed with little or no input from the catalog community. Because of our lack of participation in this process, many “close calls” may not have gone our way. As an industry, catalogers must understand what those cost attribution rules are and then begin to challenge those that we may disagree with while working with the USPS to reduce the costs of handling our type of mail.
CS: If the Postal Service's proposal for a "summer postage sale" for standard mailers is approved and implemented, how might Paul Fredrick change its mailing plans to take advantage of this?
AA: Since we've been aggressively moving customer acquisition spending from the mail to other types of media, we'd have to add 100,000 catalogs to our current plan just to meet the threshold formula set by the USPS. I don’t see that happening, so the USPS sale won’t have any impact on our business.
Paul Fredrick recently joined the American Catalog Mailers Association, a catalog-owned, catalog-controlled and catalog-focused trade association. For those who want to see the policy process in action, I’d encourage fellow marketers to come to the ACMA Forum, May 20-21, in Washington, D.C., and get a front row seat to public policymaking in action.
