Tuesday, August 10, 2010

The USPS – Death Spiral of an Industry?

Suppose you had a business whose sales had dropped 13% over the past year, continuing a multi-year sales decline. You’d probably look for ways to run your business more efficiently by cutting expenses. You might even consider reducing your prices to attract more business.

Well if you’re the United States Postal Service (USPS), you have a different take on what to do about a double-digit decline in revenue: you decide to raise your rates to make up for lost income, in some cases dramatically.

According to BtoB Magazine, in early-July the USPS requested that standard-mail letter rates, the kind used most often for commercial direct mail campaigns, be increased 5%. The USPS also asked that standard-mail parcel rates, used to send small-size merchandise and product samples, be raised a whopping 23.3%.

Raising prices to make up for decreasing sales? Is that any way to run a business?

Mail volume is dwindling because consumers are increasingly using electronic communications as alternatives to postal deliveries. That’s an undeniable fact. The proof: from 2007 through 2009, the volume of mail handled by the USPS fell by 36 billion pieces, a 17% decline and the greatest drop in its history.

This year, the USPS is on track to lose a stunning $6.5 billion. Yet, instead of doing something to manage expenses, the Affordable Mail Alliance reports that in 2009 the USPS managed to reduce labor costs by a mere single percentage point, 1%.

I have long been a proponent of direct mail, believing it best to give consumers a choice of communications vehicles. We’ve also seen studies showing that most people still prefer snail mail over e-mail, viewing it as a welcome respite from their clogged inboxes. But this latest plea for another price increase begs the question: At what point does it become cost prohibitive to use a communications medium whose delivery costs can run up to 100 times more than that of its electronic competitors?

I hate to say it, but maybe it’s time to consider eliminating mail—and the USPS—from the marketing mix.

What do you think?

This post originally appeared on Loyalty Truth, July 26, 2010, and is by Tom Rapsas. You can follow Tom on Twitter: @TomRapsas