Answered by Dick Gorelick

Question:
I can live with the recent, relatively minor, increase in postal rates. However, I understand that double-digit increases in Standard A rates are probable in 2002. There's no way my organization can absorb that type of increase without making substantial changes in the product, quantities, or even the "marketing mix." What should I do?

Answer:
That's a simple question requiring a complicated answer. Your information is correct. The U.S. Postal Service is in a rapidly deteriorating financial condition. Even if operating expenses are reduced, a substantial rate increase is coming. Only details about the timing and extent of the increase are in question.

You need to work on several fronts to offset the increased distribution costs. Depending on the product(s), you should consider:

• format, size, and paper stock. In the case of catalogs and some other products, high-bulk paper may be an alternative. While it can't offset the entire increase in postal rates, it may help to offset as much as five percent of it.

• improve list hygiene and other aspects of database management. Undeliverables can be very expensive, especially when the extra costs of printing are considered.

• speak to your suppliers - NOW. Thank them for their prior help in keeping costs down but tell them you also expect ideas to help improve the effectiveness of your organization's direct mail. Traditionally, the relationship between print buyer and seller has centered on cost. Spurred by the forthcoming increases in postal costs, there needs to be a balance: both sides of the cost-benefit relationship need to be considered.
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