Stating that his agency was in “the midst of a financial disaster”, Postmaster General Patrick Donahue has publicly stated that the only solution may be an increase in the price of stamps (Miga, 2013). Suffering a sixteen billion dollar loss last year and current predictions estimating his agency will lose another six billion this year, it’s tough to disagree with the Postmaster General’s assessment. Although federal law states the Postal Service can’t raise their prices more than the rate of inflation without approval from the Postal Regulatory Commission, many companies are still growing concerned. For one thing, an emergency rise in prices could be only one of two price hikes this year if the USPS still follows through with their yearly rate increase as well (Associated Press, 2013).
Rates to Be Affected
According to the Postal Board of Governors, the increase in stamp price would go up three cents to forty-nine cents starting January 26th (Jones, 2013). Each additional ounce of first-class mail, which currently costs the customer an extra penny, would go up to twenty-one cents. International letters would cost five more cents, increasing the price to $1.15.
Many businesses that depend on the USPS’s services have stated they may need to reassess their business model if these increases are approved. The Software and Information Industry Association, for example, has stated that the 800 companies that make up its trade association would look to reduce their reliance on the postal service if prices increased (Jones, 2013). A spokesperson for the association estimated that the increased prices could ultimately result in a complete loss of revenue for some of their companies.
Direct Marketers Hit Hardest
One group that will certainly be hit hard by an increase is direct marketers. The Direct Marketing Association, which is made up of thousands of companies and nonprofit groups that utilize data to assemble mailing lists of potential customers, also weighed in on the matter. They stated, “DMA is seriously concerned that this action will significantly harm the Postal Service and the mailing industry in the very near future…the Board of Governors has misguidedly decided that raising prices will help cure is lack of sales” (Jones, 2013).
Demand for Consumer Mailing Lists Will Rise
If the price hikes pass, the demand for consumer mailing lists that are updated regularly with the National Change of Address provided by the United States Postal Service will also increase. Companies simply will not be able to afford sending mail to a potential customer at an address that is no longer theirs. The National Change of Address is a dataset of around 160 million permanent change-of-address records. This information allows those compiling mailing lists to update the addresses on their lists before sending off mail (USPS.gov).
Companies who depend on the USPS will have a lot to consider if the increase in postage rates is applied. Even if they can maintain healthy profit margins, there’s no telling if the USPS will need to revert to this strategy again in the future. Aside from completely overhauling their business model, the best chance most companies have of coping with the increase in their overhead is to make sure each piece of mail sent gets to its intended receiver by using consumer mailing lists updated by the National Change of Address.