MTAC Summer ’24 Meeting
Welcome to Deets with Doug! I am Doug Gamroth, Senior Director of Postal Strategy at American Litho. I’ll do my best to bring you industry news and developments to keep you well informed on national postal gatherings.
It was a packed house on day 1 of the MTAC 2024 summer gathering. The general public will have one last opportunity attend day 1 at the fall gathering (Oct) as it will be the last time any non-MTAC member will be permitted to attend these events. In addition to this 2025 change the option to dial-in will also be eliminated, even for current MTAC members.
PMG Highlights
- The PMG spoke to MTAC for an hour with an upbeat attitude regarding the progress of his Delivering For American plan. Much of the presentation felt a bit like a general contractor keeping the industry up to speed on the progress of the new Sorting & Distribution Centers (S&DC), the inevitable fallout of current location rationalization, and countless mentions of fresh paint and upgraded LED lighting solutions. Granted it’s always nice when a facility is modernized and employees feel a little bit more pride in their space on a day to day basis, but the industry is far more interested in the improved efficiencies that these facilities will provide, adequate training to ensure employees can operate in the new environment, and the projected improvements to their service level agreements that the industry is now watching like a hawk.
- PMG metrics of note:
- 68 Sorting & Distribution Centers launched
- 15 more S&DC’s to be completed in September ’24.
- 800 S&DC’s in total when all is said and done. This number could escalate to 1,000 depending on existing network locations being repurposed instead of being rationalized.
- The USPS saw $80mm saved in transportation in July alone by properly filling trucks. Hoping to see almost $2bn in transportation savings in total.
- 200 postal locations will be removed in the coming years, possibly to the chagrin of rural areas that will see their PO’s absorbed into a larger regional processing & distribution center, ultimately sacrificing their delivery times to the greater good of the USPS network structure.
- The USPS is ready for the fall peak season and has no plans to hire additional workers to manage the volume influx.
- One of the PMG’s interesting notes was his response to a question from an MTAC member asking what the USPS is doing to ensure mail remains relevant and attractive as a marketing channel. The PMG said that he doesn’t believe it’s a mission or any business of the USPS to assist with such matters, but rather the USPS should remain focused on improving their network structure and financial stability. It’s the job of the marketer to utilize the USPS network’s soon to be finely tuned capabilities for their marketing messages.
- While many MTAC members took mild offense to this, I for one agree with the PMG on this topic. A bit of a “make certain your own house is in order before trying to fix the rest of the world”. However I think mail owners everywhere would appreciate the USPS displaying some passion, fake or not, about the mail itself instead of showing us the S&DC’s “new paint and LED’s that were paid for with our semi-annual postage increases. Convince the mail owners of this space that the USPS is in the mail channel trenches with us and we’re gonna get through this transition period together, no matter how uncomfortable. While studies are showing marketing budgets appear to be increasing YOY, I don’t believe it’s to uptick their volumes or because of an undying loyalty to postcards & letters, but rather to merely cover the postage increases while still hitting their target volumes & acquisition goals, all while praying their companies don’t sour on this form of marketing.
- The postal Service reported a net loss of more than $6bn in FY24 through Q3. Based on trends the net loss will be greater than the Delivering For America forecast and greater than FY23. My summary of the sentiment from USPS leadership is “Have patience, we’re building a better network, we’re heading in the right direction, and we’re praying the volume doesn’t significantly decline further before it’s too late.”
- Q3 FY24 YOY volume comparisons:
- 1st class mail ~ Down 4%
- Mktg Mail ~ Down 0.4%
- Pkgs ~ Up 2%
- Periodicals ~ Down 8%
- Total Volume ~ Down 1.7%
- Q3 service performance (On-time scores):
- 1st class letters/flats ~ 86% – down 6.5% YOY
- Marketing mail ~ 94% – down 2% YOY
- Compared to the same period last year, USPS compensation & benefits expenses are up $800mm, transportation costs are down $1bn, utilities and miscellaneous expenses are up $200mm.
Changes to MTAC in 2025
- The Tuesday open session will now be closed off to the general public and restricted to MTAC members only
- Meetings to revert to in-person only. Dial in option to be removed.
- MTAC day 1 to now focus on technical issues, not strategy updates.
Personal Observations
- An oddly irritating catchphrase from the USPS officers that has been crawling up my spine a bit comes in various forms of “America still has the lowest postage costs in the world to send a letter, it’s a heck of a deal!”
- The reason this concerns me is that the US letter mailing industry has rarely been thinking with a “the grass is greener on this side of the fence” mentality when it comes to US national postage and our marketing budgets. What we do know is that a 1st class stamp was $0.50 in 2018, and it’s $0.73 in 2024. That’s a 46% increase in just 6 years. Many of us couldn’t care less if it’s cheaper than another country with a different postal structure, a different currency, and a different set of rules.
- A country like Australia is a not so close 2nd at around $1.50 for a stamp on a small letter sent nationally.
- Does this mean the cost of US postage is a “great deal” as long as it’s cheaper than other countries? At what point is it no longer a “heck of a deal”?…as long as it stays the lowest of any country then we should keep direct mail in the budget no matter how glaring the number becomes? That concept is a lonely hill to die on and national marketers aren’t likely to come along for the ride. As of right now it’s still a heck of a deal despite sticker shock, but I’m even more thrilled that I was in the direct mail industry back before the USPS began “fixing the pricing glitch”.
While studies are showing that marketing budgets appear to be increasing YOY, I don’t believe it’s due to an anticipated uptick in mail owner volumes but rather an effort to “keep up” with the bi-annual postage increases we’ve all (unfortunately) become accustomed to. Mail owners are aware of the powerful results of the direct mail channel for achieving customer acquisition goals and cross selling initiatives. Now more than ever mail owners need to be working closely with their mail service providers to explore potential savings with mail piece format considerations, employing enhanced postal optimization hybrid strategies that are unique to their mail mix profile, and to consider the value adds of participating in USPS promotions that they may be missing out on.
American Litho looks forward to partnering with you to assist in sharpening your direct mail strategies and exceed your marketing goals.
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