Everyone knows that expression, “When life gives you lemons, make lemonade…” By the time this article is published, there will have been no shortage of press about the USPS price changes slated to take effect in July. And let’s face it, no one likes a price increase, particularly a significant one and particularly when they come twice a year, so this announcement is definitely a lemon. That being said, I’d like to focus this article on some of the positive changes and opportunities in the USPS’s proposed price changes, which businesses continuing to use the mail should be sure to explore for the remainder of 2024 and into 2025. So here are some ways to make that price change lemonade…

Increased Incentives. For First-Class and Marketing Mail, the Full-Service IMb incentive will increase from $0.003 per piece to $0.005 per piece – a more than 60% increase and for an incentive that has been unchanged for many years. With upwards of 84 billion IMb Full-Service pieces mailed in FY2023, this incentive increase will benefit many mailers.

The USPS’s price change also includes an increase of the Seamless Acceptance incentive for First-Class and Marketing Mail from $0.001 to $0.002 per piece. This doubling of the Seamless incentive significantly helps offset the costs that mail service providers (MSPs) incur in meeting the Seamless program requirements and provides additional incentive for MSPs currently not enrolled in Seamless Acceptance to enroll. For FY2023, over 63 billion pieces were mailed through the Seamless Acceptance program, which has many benefits for both the USPS and MSPs.

The USPS is also planning to repeat the Growth Incentive in 2025, which provides businesses that mail more than one million pieces during the incentive calendar year and grow their volumes compared to the prior year (or in the case of 2024, compared to the USPS’s Fiscal Year 2023) the opportunity to qualify for a 30% postage credit based on their volume growth. According to the USPS at the April MTAC meeting, over 950 businesses have signed up for the Growth Incentive in 2024, representing over 38 billion pieces of mail. The USPS reported at this meeting that it estimates about two billion pieces of volume growth in 2024 will be eligible for the incentive.

A new Catalog incentive will allow pieces that meet the USPS’s definition of a catalog to obtain $0.001 per piece simply by indicating the piece is a catalog. The USPS has published the definition of a “catalog” as part of its July price changes, and pieces classified as letters, flats, or even parcels could qualify, and pieces mailed as Marketing Mail (except EDDM-Retail) or Bound Printed Matter could qualify.

New Promotions. There are new promotions for 2025 included in the USPS’s price change as well as changes in some discount levels and the ability to do up to three promotions simultaneously on the same mail piece and combine the discount for all three promotions, which means up to six percent combined discount could be available. The USPS has changed the Informed Delivery promotion to be an “add-on” that can be combined with any of the five core promotions, vs. how it works currently as a promotion on its own with a set period for participation. The five core promotions will be: Integrated Technology; Tactile, Sensory & Interactive (TSI); Continuous Contact; Reply Mail IMbA, and First-Class Mail Advertising.

The new Continuous Contact promotion will provide a three percent discount for mailers who send qualifying USPS Marketing Mail letters and flats to the same household two or more times within the promotion period. Following the first mailing to a household, mailers will receive the discount on all subsequent mailings within the promotion period. The content of each mail piece must be iterative or complementary, not duplicative.

The new First-Class Mail Advertising promotion provides a three percent discount for First-Class Mail letters and flats that promote offerings within the mailing, and it will be available September through December of 2025.

The new Sustainability Add-On/Upgrade Promotion, which will be available all year in 2025 as an add-on to one of the five core promotions (except it can’t be combined with the Reply Mail IMbA promotion) provides a one percent discount to mailers who prove their printer (inner contents or outer envelope) is using one of several approved environmental certifications. It will be available for First-Class Mail automation letters, cards, and flats and USPS Marketing Mail automation letters and flats.

Sortation Discounts. The USPS is significantly increasing the discount for First-Class Mail automation pieces sorted to the 5-digit ZIP. All businesses can take advantage of these savings even if their mail has insufficient 5-digit ZIP Code density by utilizing a commingle or comail service provider. These providers take mail from many businesses and sort it together, which builds five-digit ZIP code sortation density and enables the mailer access to postage savings they would not be able to attain on their own. The significant increase in the First-Class Mail automation five-digit discounts gives businesses even more opportunity for savings by using such providers. For Marketing Mail, the incentive to sort flats to CR entered at the DSCF will increase.

Containerization. As the USPS begins to implement its network redesign and facility changes, it is also developing and increasing incentives to containerize mail in ways that make it easier for USPS to cross-dock containers at facilities when processing will be performed in a different facility. The USPS is increasing the SCF pallet discount for qualifying Marketing Mail flats prepared on ADC, three-digit and five-digit SCF pallets, as well as increasing other containerization discounts for Carrier Route Marketing Mail.

Business Reply Mail. The USPS is restructuring and improving its Business Reply Mail (BRM) product by offering a significant discount for BRM IMbA (BRM accounting). Qualified Business Reply Mail (QBRM) customers would enroll in Intelligent Mail Barcode Accounting (IMbA) and USPS would waive annual account maintenance and quarterly fees and reduce the per-piece fee.

Drop Ship Changes. USPS is implementing a change to the Marketing Mail flat-shaped products rate structure, which results in changes to the incentives to drop ship. Although the USPS has generally proposed changes that lessen the incentive to drop ship to the DSCF, the incentive was increased for drop shipping heavy weight flats.

In the longer term, change is coming to the drop ship structure as the USPS rolls out its network design changes. Whether the changes to drop ship will be positive or negative may depend on what and where you are mailing to, and the drop ship discounts the USPS ultimately establishes. For mail that can be drop-shipped today to the Destination Delivery Unit, there may be opportunities to consolidate and drop at fewer locations by dropping at S&DC facilities. For mail that the USPS wants drop shipped to the RPDC facilities, that would be fewer total facilities than drop shipping to the LPCs (the equivalent of today’s DSCF drop ship), but it would depend on what the discount is and the service impact to know whether the change could be positive or negative.

[Note the above information is taken from the USPS’ proposed price changes -- at the time this article was written the proposed changes were pending approval from the Postal Regulatory Commission, which was expected to occur by end of May… so check the PRC decision for the final changes as the final could differ from the proposed.]

PRC Rate System Review. Another activity happening that could change the prices the USPS charges in the future is that the Postal Regulatory Commission (PRC) has started a proceeding to review the USPS’s rate structure. This proceeding had been envisioned by the PRC to be something it would initiate five years after it implemented significant changes to the rate system in 2021 as a result of its 10-year review of the system required under the Postal Accountability & Enhancement Act (PAEA), but the PRC is initiating the review early, in part because of the USPS’s finances, volume declines, and other factors.

Included in the changes the PRC made to the rate system as a result of its 10-year review were the creation of the Density Additional Rate Authority and Retirement Additional Rate Authority – both of which allow the USPS to increase prices above the CPI cap. The Density Rate Authority works on the premise that the USPS’s number of delivery points grow each year and when its volumes decline, there are fewer pieces per delivery. For the July 2024 price change, over 4.3% of the 7.8% average price increase comes from the Density Rate Authority. The Retirement Rate Authority was designed to address the PAEA requirement that the USPS pre-fund its retiree health benefits, but the Postal Service Reform Act (PSRA) of 2021 largely addressed that issue by eliminating the requirement and the liability from the USPS’ balance sheet. The USPS is moving to a new retirement benefits system for its employees and the Retirement Rate Authority will expire in January of 2026. For the July price increase, 1.8% comes from the Retirement Rate Authority.

There are other elements of the USPS rate system that likely will be discussed as part of the PRC’s review. Comments will be due in July and August, so the PRC is not likely to conclude the proceeding before the fall, but it could determine that changes are needed which could impact USPS price changes after the proceeding is finalized.

Kathleen J. Siviter is Asst. Executive Director of the National Association of Presort Mailers (NAPM) as well President of Postal Consulting Services Inc. (PCSi), and she has over 30 years’ experience in the postal industry. She has worked for the U.S. Postal Service, Association for Postal Commerce (PostCom), and others, as well as providing consulting services to a diverse set of clients with interest in the postal industry. She has also worked with PostalVision 2020, an initiative designed to engage stakeholders in discussions about the future of the American postal system.

This article originally appeared in the May/June, 2024 issue of Mailing Systems Technology.