Will the upcoming postage increase be like the last one in May 2015?

Absolutely not. The 2015 postal rate change is widely viewed as a disaster. It included two do-overs because of mistakes and many unintended consequences. Causes included rushing, understaffing, and untested, complicated structural pricing changes.   

The USPS learned from the experience and has committed to avoid surprises and to fix some of the pricing signals that did not work as expected. They put in place new management structures, with pricing and costing together in finance, and product management in marketing.

When will prices go up?

The Postal Service has said it plans to change its pricing on Sunday, January 22, 2017. The law requires USPS give at least 45 days’ notice, which would be around December 8.

But the Postal Service made a very customer-friendly and practical decision after the law passed in 2006. That is, it would give at least 90 days’ notice. That would be around October 24.

When will USPS announce the new pricing?

We expect USPS to announce its proposed pricing on October 17, 2016, or slightly before. The Consumer Price Index is adjusted monthly. The next change will be released on the morning of October 18.

Calculating postal pricing involved hundreds of rate cells and is very complicated. USPS wants to use the full price cap for each class of mail. And the Postal Service tries to get the maximize its revenue from the pricing changes.

Pricing staff are most likely finalizing all the new prices. They will seek senior management and Board of Governor approval before the next CPI adjustment on October 18.  They also will file the proposal with the Postal Regulatory Commission (PRC) before the CPI adjusts again.

What will the price cap be?

We expect the cap on each class of mail, including First Class, Standard, and Periodicals, to be 0.87 percent. This covers a period longer than one year of inflation because USPS last raised prices more than a year ago. The cap applies to the weighted average of all price changes within each class of mail. So individual price changes will vary.

Some postal prices increased a lot more than the cap last time. Will that happen again?

Probably not. There is always some range of price changes around the cap average.  Last time the range was larger than normal for some categories, such as Periodicals. This can cause something called “rate shock” that the USPS and PRC try to avoid. We believe that some of the rate shock last time was unintended.

The Postal Service needs nothing more right now than customers and volume. Rate shock can send away customers and volume that might otherwise stay in the mail. Phasing in structural changes over a number of years rather than in large increments can help customers adjust their budgets. That is what we and other mailers have been asking the USPS to do going forward.

We expect, but do not know for sure, that the Postal Service will strive to avoid rate shock in 2017. They will, however, continue to make structural changes in their rates that they think are necessary.

Is the USPS being transparent with its customers?

The Postal Service seems to be doing the best job in years of communicating a price change in advance. They released a description of “structural changes” to pricing that they are considering. Postal pricing folks have been speaking informally with customers and answering questions. It appears that they did not receive many objections as they have not revised their original set of proposals.

We’re not sure which metaphor is more appropriate so we will use both. The proof will be in the pudding. And the devil will be in the details.

Mailers should use the 90+ days between announcement and implementation to figure out the specific impact on their costs. They can do this by consulting with their mail service providers and USPS representatives.

What are some of the highlights of the 2017 structural changes?

• Elimination of Flats Sequencing System (FSS) prices—if you were hurt by these new price cells, you will probably be helped by their removal.
• Change in the piece/pound breakpoint for Standard Mail–instead of starting up-charges for more weight at 3.3 ounces, it will start at 4 ounces. If you can benefit from heavier Standard letters or flats, the additional weight in the 3.3 to 4-ounce range will not cost you extra postage.
• Third ounce free for commercial First Class Mail letters—up-charges for more weight will start at 4 ounces instead of three. If you want to send more in your First Class letters, such as promotional materials, you can add another ounce for no postage.
• Elimination of the annual fee for Business Reply Mail (BRM) customers who use only Qualified Basic Qualified BRM and High Volume QBRM for letters and cards.
• Share Mail product to become part of the 2017 Earned Value promotion—receive postage discounts for trying Share Mail which some nonprofits have found to boost fundraising results. Share Mail enables your benefactors to mail on a request for donations to their friends.