Transcript

On today’s podcast, I discuss some highlights of the annual Household Diary Study, the USPS recently published a preview of what we can expect in the January 2023 price change, and we are heading into a busy fall mailing season with a lot of industry activity.

On today’s podcast, I discuss some highlights of the annual Household Diary Study, the USPS recently published a preview of what we can expect in the January 2023 price change, and we are heading into a busy fall mailing season with a lot of industry activity.

Welcome to the podcast, everyone! 

One of the annual publications I always look forward to is the Household Diary Study. This is a publication that has been continuously done since 1987 and measures the types and volumes of mail sent and received by U.S. households, tracks trends in mail usage over time, and compares some demographic characteristics of mail usage by household. It is over 200 pages of interesting information that frankly every mail service provider should look at each year as it provides very important information about market trends and forces impacting our industry. About 5,200 households participated in this study.

This year’s report, which is really a reflection of 2021, noted the continued decline in overall mail volume. Total mail volume for 2021 was nearly 130 billion of which 104 billion were sent to households. Only 7 billion pieces were mailed from households, which unfortunately reflects the continued divergence of bill payments from mail to electronic. In fact, 79% of bills were paid electronically in 2021. Ten years ago, it was about 50/50 between paying bills by mail versus electronically.

Of course, advertising is now the predominant use of the mail and it accounted for 60% of all mail sent and received by households. While mailers use both First-Class and Marketing Mail to send advertisements, Marketing Mail is still the predominant class of mail for advertising. 89% of advertising mail received by households consisted of Marketing Mail, which was roughly 60 billion pieces. First-Class advertising mail was 3.6 billion pieces.

Sadly, periodical mail volume continues to decline. Over the last ten years, Periodicals fell 39% as readership and circulation levels fell sharply across all categories of periodicals. Periodicals consist of primarily magazines, newspapers, and newsletters of which magazines are the dominant form at 70% of the overall periodical mail household mail volume of 3.6 billion pieces in 2021.

Of course, the big mail volume growth story continues to be packages. The pandemic generated a surge in e-commerce, which resulted in a 27% growth in package volume in 2020. That growth trend continued with a 10% increase in package volume for 2021 versus 2020. The total package volume was about six and a half billion pieces.

As noted earlier, the USPS delivered 130 total billion pieces of mail in 2021. This was a 0.2% decline compared to 2020, so relatively flat. However, if you look at it by class of mail you see that First-Class mail was down by 3.9% versus 2020. This decline was offset by growth in Marketing Mail which increased by 3.4% and Package Services which grew by 3.5% overall.

And while it is good to see Marketing Mail rebound from the pandemic, the reality is that it is far below pre-pandemic levels. The pandemic resulted in a 15.5% decline in Marketing Mail in 2020 as businesses were temporarily closed or went out of business. Sadly, much of the nearly 12 billion pieces of mail we lost in 2020 simply are not coming back; at least not in the short term.

One trend I like to watch closely is the percentage of “wallet share” used for direct mail. In 2021 American businesses spent approximately $294 billion in advertising, which is an overall increase of 30% versus the prior year. Unfortunately, only 5% of that was spent on direct mail. This is a continued downward trend from a 9% share in 2011. Direct mail is the 4^th largest spend for marketers after Internet, TV, and radio.

Since advertising mail is meant to sell goods and services to the recipients, it’s no surprise that the volume is targeted toward higher income earners with a post-secondary education or degree. Twice as many mailpieces are received by households with annual income over $100 thousand than those earning less than $35 thousand. As for education, households headed by someone without a high school degree received 7.4 pieces per week, while households headed by a college graduate received 10.6 pieces.

In 2021 we saw that for the first time, merchants were no longer the largest mailers of advertising materials, falling second to the financial industry. Merchants mailed 25% of total marketing mail ads compared to 27% mailed by the financial industry. And whether households wish to receive more advertising mail or not, the study found that 49% of all households read ads received by mail. An additional 21% of the households scanned the mailpiece, leaving 29% of the households reporting not reading the advertising mail at all. This percentage was three times higher than in 1987 but only slightly higher than in 2019 and 2020. Given the large growth in advertising mail since 1987, it seems clear that U.S. households read more advertising mail now than in the past.

As I’ve noted on the podcast before, astute marketers use mail to advertise because it simply works. No other single form of advertising can match the response rate of direct mail. Households reported in the study that they intend to respond to about 10% of either first-class or marketing mail ads. Digital-only advertising, such as email, doesn’t even equate to a 1% response rate.

Finally, and perhaps it’s a reflection of our overall society, personal correspondence through the mail has dropped sharply in the last ten years. Ten years ago, over 3.2 billion greeting cards were mailed. Last year, that dropped to slightly over 2 billion. And letters from friends or relatives have dropped in half from 837 million to 489 million. I know my wife and I still mail Christmas cards with a letter included each year, hopefully, you do as well.

Now, let’s turn to some recent news from the USPS regarding the January 2023 price increase. In partnership with the Postal Early Exchange Committee, or PEEC as it is known which is a subcommittee within the Delivery Technology Advocacy Council or DTAC which is yet more acronyms to learn in this industry, the USPS has provided some important notices for what is planned with the January 2023 price increase. As a reminder, and there is a clarifying statement with the industry alert that came out on September 13, the USPS has not yet formally presented to the Board of Governors for consideration or the Postal Regulatory Commission for approval, the planned changes that were shared. But suffice it to say, we should all begin planning accordingly for what will be some important and transformative changes to the USPS network in its effort to fulfill the Delivering for America Plan and achieve financial stability by 2024.

The FAQ and preliminary plan indicate that there will be major structural changes to presorting as well as price adjustments. Some of these will be notably visible, and some will involve sortation schemes that haven’t been changed in decades, so the industry is already fully engaged in order to meet the required implementation date of January 22. Some of the more notable changes include preparation for the network redesign I discussed on the prior podcast. Sectional Center Facilities, SCFs, will be designated as local Processing Centers, or LPCs. Network Distribution Centers, NDCs, will be designated as Regional Processing Distribution Centers, or RPDCs. And as I noted on the prior podcast, the USPS will be merging tens if not hundreds of DDUs into mega sort centers, which will be known as Sorting and Distribution Centers, or SDCs. These are some of the visible changes we will see and it means potentially significant changes to labeling lists and of course container labels. 

Some of the changes that will be occurring “under the cover” so to speak of the presort engine will be sortation changes. Of course, as the mega sort centers, or SDCs as we will begin to reference, rollout over what will likely be 18 to 24 months will result in sortation scheme changes and containerization changes. One containerization change we will begin to see in January is the elimination of sacks as containers for flats acceptance and entry in favor of palletized bundles and flat tubs. We will also see the elimination of FSS sortation and changes to Critical Entry Times for Periodical mail.

In addition to sortation changes, there are also some expanded workshare incentives as well. The USPS proposes to include an incentive for Mail Service Providers that claim Informed Delivery promotions successfully on Postage Statements. The new Mail Service Provider discount will require a new enrollment process via BCG (Manage Permit section of BCG), where the submitter will provide its Permit to receive the incentive upon successful processing of the ID promotion on the Postage Statement. There are also numerous new promotions for Business Reply Mail, Retargeted Mail, and Personalized Color Transpromo. If you’re not taking advantage of these promotion discounts, you should really look into them. Your software provider can help guide you through how their products support these promotions and they are a great way to not only reduce postage but also add value to the mail.

One other discount that I wanted to share, which caught my eye, is for Marketing Mail flats. The USPS proposes a discount for flat-shaped Marketing Mail prepared on LPC (SCF) pallets regardless of the entry point. This preparation assures that no bundle sorting is required prior to the final processing plant. This proposed discount will be applicable to Automation Flats, Nonautomation Flats, Automation & Nonautomation Carrier Route Flats, High Density, High-Density Plus, and Saturation Flats. What is interesting with this is that it applies to all Flats only on Pallets. The existing Direct Container Discount is limited to CR Flats, but the new LPC Pallet Discount is applicable to Automation Flats, Nonautomation Flats, Carrier Route Flats, High Density, High-Density Plus, and Saturation Flats. There will be further modifications to this proposed discount, but it could be a leading indicator of some major changes to the way mail is presorted. More to come on this for sure, so stay tuned.

Finally, as I wrap up this podcast recording, I wanted to note that it is National PCC Week! Major events will be held throughout the nation with USPS officers at various venues as well as exhibitor areas and outstanding industry presentations. The theme for National PCC Week is “Facing the Future Together”, which was the same theme for the National Postal Forum. In many ways, this will be a continuation of the great discussions and face-to-face collaboration we are continuing to see. For many PCCs, this will be the first time having a face-to-face meeting since the COVID lockdowns and cancelations, so hopefully an opportunity to rebuild, retool, and strengthen the Postal Customer Council network.

Some other events coming up in October include Printing United in Las Vegas, MTAC meetings, Postcom meetings including a 75-year celebration of Postcom, and DTAC meetings. It’s going to be a busy October and hopefully a busy fall mailing season and lead up to a major mid-term election season. I’ve already heard from one major printer that is doing a state-wide saturation political mailing, so hopefully, that is a leading indicator of an increase in mailings this year.

Folks, I want to thank you for listening to today’s podcast, and if you’d like to learn more about mail tracking, or how to better automate your mailing workflows, please visit us at BCC Software.com or give us a call. As always, we’d like to know “How can we help?” Thank you for listening to the podcast, and have a great day!