SATURATION MAILERS ASK USPS FOR “SIMPLIFIED BUT CERTIFIED”

The following is a “white paper” by Saturation Mailers Coalition executive director Donna Hanbery that describes the SMC's “simplified but certified” proposal regarding walk-sequenced saturation carrier route mail which will be introduced in the R2006 postal rate case. The views expressed are the author's, and do not necessarily reflect the official position or policy of the Association for Postal Commerce. Those holding alternative points of view are invited to respond via this publication.

For the past five years, saturation mailers have been asking the Postal Service to approve a “simplified but certified” alternative for the detached address label. Some mailers, associations, mailing service providers, and Postal Service officials are asking, “What is simplified but certified? Why do saturation mailers want it? and Why should the Postal Service support it?”

SIMPLIFIED BUT CERTIFIED - THE PROPOSAL

Saturation mailers are asking the Postal Service to adopt a simplified/certified addressing method for all saturation flat deliveries. This would provide for a simplified “postal customer” address, indicia, and certification notice printed directly on a saturation flat piece. It would also require carriers to honor do-not-deliver requests. The last could involve negative detached address labels (such as a DAL card only for do-not-deliver households), a manifest of do-not-deliver addresses, or other mechanism to be developed between mailers and the Postal Service.

To use the simplified/certified addressing method, a mailer would need to purchase an updated mailing list that meets all existing requirements for saturation mail. The address list would have to be CASS certified.

This is vastly different from past industry or USPS proposals for “unaddressed” or “Neighborhood Mail.” A saturation flat mailer would have to do everything it does today to acquire, maintain and update an address list. Details are topics for further discussion. One approach: a permit number and “certification” that the mailing conforms to an enhanced carrier route walk sequence certified list could be printed below the name “postal customer” on an address line.

The proposal would also address deficiencies in today’s mailing regulations. Simplified or unaddressed “postal customer” mail is allowed today in rural routes, 35% of all residential addresses in the nation. In these areas saturation mailers can address “postal customer.” Unfortunately, for saturation mailings in rural areas, regulations do not provide any capability for mailers to honor “do not mail” requests. Mailers who wish to voluntarily honor do-not-mail requests, or are concerned about compliance with any state or federal law requiring the exclusion of an address, have no mechanism for requesting the Postal Service to skip a saturation simplified rural delivery. For that reason, many saturation mailings in rural areas have been using a DAL address, even though a full address is not required.

The saturation mailers’ proposal simply asks the USPS to expand the concept of simplified mail from rural areas to city routes and to adopt a certification and do-not-deliver procedure. This would ensure that all mailers use fully qualified and updated saturation lists, just as today. The certification procedure could also require that mailers meet eligibility criteria and have postal permits. This would address concerns about opening the mailbox up to “just anyone” or diluting the value of the mail. Further, the proposal includes the development of one or more ways for the letter carrier to identify the “do not deliver” addresses. The proposal is an overall improvement over today’s standards for rural areas.

WHY SATURATION MAILERS WANT SIMPLIFIED/CERTIFIED: THE BACKGROUND

Saturation mailers want to stay with the Postal Service. Reducing costs for the mailer and the Postal Service would help enormously.

Most saturation flat mail volumes comes from shared mailers who do regular program mailings. The most common types of shared mail are weekly free papers or “shoppers” and shared mail packages that combine ROP and insert advertising in one flat mailed piece. Saturation shared mailers may mail from twice a week to six times a year. For weekly program mailings, production demands are intense and turnaround time for the mailer and USPS is short. Saturation shared mailers may vary from a shopper sent to one zip code, to regional or national coverage. Still all face similar competitive and production demands. All depend on a mix of advertisers with heavy reliance on local, small businesses. This mail is very price sensitive. When postal rates increase, the costs cannot easily be passed on to customers. Big advertisers can take their business elsewhere. Small businesses often do not have the dollars.

Since saturation shared mailers typically pay 20-50% of their gross revenues to the USPS in postage, they are highly motivated to help the USPS reduce costs. Accordingly, saturation mailers have partnered with the USPS to prepare and enter their mail as efficiently as possible. The detached address label card or DAL was first requested by the USPS as a way of “addressing” that eliminated the need for carriers to case flats. The DAL has become a cornerstone for much of the industry because it allows mailers to separate addressing from the complex and time sensitive package production.

Saturation shared mailers offer advertisers zoned advertising either in separate ROP editions or by inserting preprinted ads into specific carrier routes. For weekly mailers, deadlines for time sensitive advertisers permit the production of flats “just in time,” with the insertion of time sensitive ads, like grocery and auto, completed right before the mail is drop shipped to individual DDUs — usually at a prearranged time each week. By having DALs ready to go, separately from the flats production, advertising distributors have developed programs that use the mail. Conversely, many shared mail businesses would not use the USPS but for the option of DAL addressing.

In the 1980s, when third class mail experienced double digit rate hikes, some businesses left the mail. In years of stable rates, work share discounts, and reclassification, some businesses went back to the USPS that left the mail. DALs were part of the reason.

Saturation mailers have long sought an alternative way for doing addresses that could minimize DAL costs other than the unworkable alternative of on-piece addressing. The “certified/simplified” option can take DAL costs out but keep saturation mail volumes in the USPS.

SATURATION MAILERS CONSIDER PRIVATE CARRIER DELIVERY AS ALTERNATIVES TO HIGHER COST OR PRODUCTION PROBLEMS WITH ON-PIECE ADDRESSING

In 2005, the Saturation Mailers Coalition warned members that the days of the detached address label were numbered. Members were asked how they would respond to a rate request that included a separate or higher surcharge for the DAL. The survey also asked members to address on-piece addressing issues in their reaction to the simplified/certified proposal. A summary of responses:

Response to Higher Cost for DAL or DAL Surcharge. Few mailers could accommodate or pass on a cost greater then 0.5¢ to 1¢. Mailers were quick to mention the 6% rate hikes in January 2006, stating that an additional rate or surcharge would lead to a re-evaluation of distribution options and potential cuts in circulation and frequency.

Many were using private carriers for part of their distribution. Saturation mail is not subject to the private express statutes. More than half of the audited circulation of free papers is already delivered outside the USPS. An increase in rates or operation costs, would increase use of private carriers.
For some mailers, absolute dependence or reliance on the DAL is a cornerstone of their business. One responder noted, “I’m still paying on the $15,000 I spent to acquire DAL equipment.”

On-Piece Addressing Issues.

Mailers were divided about whether they could switch to on-piece addressing noting it would involve substantial costs. Most believe that switching to on-piece addressing would not be feasible or cost effective. Cost and production concerns noted:

Integration of printer and inserting equipment is problematic. The production speed, and last minute production for carrier targeted inserts into packages is not consistent with on-piece addressing.

• It is hard or impossible to maintain integrity of delivery point sequencing when there are machine jams.
• It is difficult to print on packages with different thicknesses and number of inserts and to maintain DPS integrity if addressing must be done after the time sensitive processing of inserts.

Additional inserting equipment, manpower and space would be needed to avoid in-home date cut-off changes. This could require second shift time and higher labor costs. Printing and drying ink slows down production, needing additional space and equipment to add addressing capacity.

For mailers who rely upon printers or mail houses, the change in production time or additional cost of the DAL could result in loss of customers, especially time sensitive customers. To remain competitive they also would develop or consider private carrier delivery capacity.

Reaction to Simplified/Certified Proposal.

“We have been doing this for years on rurals. It is about time the Postal Service let all weekly program mailers help the Postal Service reduce sorting costs and our preparation costs.”

“This is the only way we can retain our advertising base with our short turnaround times and production schedules.”

“We would much prefer the existing DAL method. The capital and production costs of on-piece are a nonstarter. It is imperative we have simplified/certified.”

WHY SHOULD THE POSTAL SERVICE AND RATE MAKERS APPROVE SIMPLIFIED BUT CERTIFIED?

It is the right thing to do. In its R2006-1 rate filing, the USPS has proposed a 1½ cent DAL surcharge and indicated that it wants to eventually eliminate all manual carrier casing of letter-shaped mail. This surcharge represents a very large postage increase for mailers that must keep using the DAL. Alternately, for DAL mailers that will convert to on-piece addressing, the capital and operating costs of that new process will be very large and ongoing. Either way, the USPS proposal will hurt many of the most price sensitive mailers.

Saturation program mailers are not subject to the private express statute. When they set up private carrier systems, they not only take business from the Postal Service but become competitors. Without the simplified/certified alternative, the USPS will lose saturation volume and the contribution it makes to system overhead. Saturation program mailers bring predictable, dependable mail volume to local delivery offices each week. Many of these mailers have partnered with the Postal Service for the past 25 years to build a business and delivery system around the DAL. This required years of refinement to get costs and productivity systems in place. There is a reason that few shared mailers or free papers are doing on-piece addressing today. On-piece addressing is a huge disincentive. It results in longer production times and an inability to retain time sensitive advertising.

Simplified/certified will allow mailers that could not afford or justify the capital costs associated with on-piece addressing to remain in the mail but avoid a DAL surcharge that translates - all by itself - to a double digit hike in the mailer’s cost of doing business. If the USPS cares about its customers, it should develop a simplified/certified addressing alternative in its own interests, as well as in its customers’ interests.

To repeat, simplified mail already is accepted in rural routes that cover 35% of residences. Simplified mail, without a certification method, is also allowed on city routes for official mail by federal, state, and local government agencies, political mailings, and by the USPS itself.