Written by Donna Hanbery | Executive Director, Saturation Mailers Coalition (SMC)

Paul Vogel is the USPS official charged with helping the Postal Service grow its languishing business. Vogel has expressed a commitment and interest to nurture saturation mail as a high margin, profitable, Postal Service product. In the past two months, the Postal Service has shown a sincere effort to grow its saturation, program mail business by maintaining stable rates up to the 3.3 oz. break point and by expanding the rules on simplified addressing to include city routes. Pete thanked Paul Vogel, and his team, for listening to what our industry has been saying. He explained that the Harte-Hanks shopper division had over 10M in circulation in Florida and California and had branded the name Pennysaver in California. He stated that many other independently owned and operated free papers, also using the name Pennysaver, have been published since the 1930s ranging from small to large circulations throughout the United States.

Pete lost no time explaining how Harte-Hanks Pennysaver promoted print and the mail to the small business advertiser as the best way to market and grow their business. Pete said, “We’re hyper local. We are the sales force for Main Street. We combine the mailed Pennysaver with the internet. Sixty percent of our advertisers are using us to create a web presence for them. It works very well.”

Donna Hanbery, Executive Director of SMC, accompanied Pete at the meeting. Paul Vogel’s team included Tom Foti, David Mastervich, and Jo Ann Miller. Foti and Mastervich have been active over the past two years overseeing the 2009, and current 2011, saturation volume incentive programs. They have been engaged in listening to, and learning from, free papers and SMC members about the program mail business and marketplace.

Donna gave a little background about the free paper industry and shared information developed by the Free Paper Associations and PaperChain about the power of papers to small business. She said: “In the 70s, the Postal Service was the main source of distribution for free papers. When postal rates escalated, you lost market share. The steps you have taken to hold down rates and simplify addressing could renew interest with papers returning to the Postal Service for distribution.”

Pete praised the Postal Service for the positive steps it had taken to grow saturation mail business. “First and foremost, I want to applaud what you are doing.” He explained that weekly programs, like free papers had a very close, connected relationship with the Postal Service to enter and deliver mail. But, he stressed, it was essential to work together and maintain good communications. “Our businesses all need certainty. Lack of predictability, or inconsistency, is a killer.”

SMC and Harte-Hanks Pennysaver have been proponents of a simplified-but-certified idea that would allow program mailers to do simplified addressing on city routes. Now that the Postal Service has expanded the concept to all saturation flat mail, some of our members have operational concerns. Pete volunteered to have his staff, with decades of experience in managing multi-state mail programs, develop best practices with the Postal Service for handling do-not-deliver requests. Harte-Hanks had previously assisted the Postal Service in testing DAL automation and has always been willing to work with the USPS to develop operation practices that produce the lowest combined costs and meet advertiser and consumer needs.

On the rate side, Pete explained that free papers that mail were saddled with very high fixed costs and prices. He commented: “In the 70s we used to say that the Pennysaver relied upon three Ps – people, paper and postage. Postage used to be our third highest expense. Now it’s No. 1.” The Pennysaver, like many other SMC members, was forced to trim circulation in marginal areas during down economic times. Now advertisers are urging mailers to expand their circulation footprint, but adding new markets and geography is a major commitment.

Vogel asked if the Pennysaver was able to take advantage of any of the recent Postal Service incentives. Pete commented that the incentives were a step in the right direction, but the incentives were too short-term. For a mailer to open a new market, it is a multi year commitment. It may take years before a mailer sees a return on its investment. When there is uncertainty about rates, like last year’s threat of a 5% exigency increase, this can be a “deal breaker” to opening new territory.

Vogel asked for ideas that would be welcome to Harte-Hanks, as well as other SMC members, to grow saturation mail. Donna and Pete threw out a number of ideas and suggestions, including the following:

• The Postal Service should reward frequency, or loyalty, like every other business. Advertisers get a rate break when they commit to advertising every week. The Postal Service should consider a lower rate for program mailers with a stated frequency in a market. This is simply a recognition that a partner who makes a commitment to be with you week in and week out, month in and month out, and not just during the holidays or before other prime times, is a different and more valued customer.

• The Postal Service has excess capacity. There may be parts of the country that have no shared mail programs, or no free papers, that are in the mail. If the Postal Service has a market with excess capacity, the Postal Service could offer a lower, “open-the-market” rate to any program mailer that was willing to come in and contract for doing a mail program for a fixed period of time, such as one or more years. The Postal Service has recently filed an NSA with Discover Financial. The NSA will give Discover a hedge against future postal rate increases in return for Discover’s commitment to maintaining, and increasing, its postal rate spending. If the Postal Service could give its loyal customers, or new market customers, a hedge against rate increases, this would stimulate an interest in opening new markets, expanding frequency and circulation.

• Pete challenged the Postal Service to consider investing part of its ad budget in free papers, a wonderful advertising vehicle to target and capture thousands of small businesses. Pete praised the Postal Service’s flat rate box television campaign. This same campaign in print could reach lots of potential small business users by doing an insert in the Pennysaver.

• A lower pound rate, or combined rate for heavier pieces, would help. Mailed free papers, and other SMC members, would like to attract more advertisers and heavier inserts into their programs. The current pound rate, and the lower prices offered by newspapers and private carrier papers and products, make it hard to bring some advertisers into the mail. Any incentives and programs the Postal Service could develop to give program mailers an opportunity to expand their programs’ weight, or contiguous geography, would benefit both the Postal Service and program mailers.

Paul Vogel and his team talked about their openness to building business with new products and contract rates. They acknowledged, however, that a contract that benefited one mailer might be challenged by another mailer as unfair or discriminatory. It appears, however, that the Postal Service has been considering the benefits of a loyalty program or some steps to recognize that more frequent, and committed program mailers, may be a customer or product group that deserves consideration in the form of better rates, or more certainty about future rates, in return for the commitment to retain volume and revenue with the Postal Service.

The meeting ended with a promise for the Postal Service and the Pennysaver to work together to explore best processes for the new rule changes on city-simplified. There was also an invitation and encouragement for program mailers to pursue more specific suggestions, and revenue growth proposals, with the Postal Service in the future.