BEFORE THE
POSTAL REGULATORY COMMISSION
WASHINGTON, D.C. 20268-0001
:
Rate Adjustment Due To Extraordinary : Docket No. R2010-4
Or Exceptional Circumstances :
:
INITIAL COMMENTS OF THE SATURATION MAILERS COALITION
AND VALASSIS DIRECT MAIL, INC.
(August 17, 2010)
The Saturation Mailers Coalition and Valassis Direct Mail, Inc. hereby submit
their initial comments on the Postal Service’s request pursuant to section 3622(d)(1)(E)
of the Postal Accountability and Enhancement Act (PAEA) for rate adjustments due to
“extraordinary or exceptional circumstances,” filed with the Commission on July 6, 2010.
INTRODUCTION AND SUMMARY
We agree with the position of the Affordable Mail Alliance (AMA) that the Postal
Service’s filing does not satisfy the “extraordinary or exceptional circumstances” test of
the statute and should be denied.1 We further submit that an exigent rate increase at
this time is particularly perilous for mailers and ultimately the Postal Service because of
the still-fragile condition of the nation’s economy and the marketplace. Consumers and
businesses are guarding their pocketbooks and are not receptive to price increases.
That, along with the Postal Service’s poor financial condition and the prospect of
greater-than-CPI rate increases, are creating a crisis of confidence in postal distribution
that could precipitate a steeper downward cycle in mail volumes.
1 See Answer Of The Saturation Mailers Coalition, Valassis Direct Mail, Inc., Valpak Direct
Marketing Systems, Inc. And Valpak Dealers’ Association To Motion Of The Affordable Mail Alliance To
Dismiss Request, August 2, 2010. Our only disagreement concerns AMA’s further contention that the
Postal Service’s current financial predicament is due primarily to mismanagement. Id. See also,
Comments of Senator Susan Collins to the Commission, August 9, 2010.
Postal Regulatory Commission
Submitted 8/17/2010 1:49:56 PM
Filing ID: 69742
Accepted 8/17/2010
2
Nowhere is that risk greater than in the case of saturation mail. Not only does
saturation mail have the highest price sensitivity and cost coverage of virtually any mail
product, but it operates in a highly competitive marketplace with non-postal alternatives.
The retail and service-sector customers of saturation mailers are themselves highly
price-sensitive and have been hit especially hard by the recession and its uncertain
aftermath filled with continuing fears of a double-dip or deflationary economy. Those
customers that remain cannot or will not accept advertising rate increases, and will
either cut back distribution to maintain budgets or leave the mail for non-postal
alternatives. Those saturation mailers that have weathered the first round of the
recession are likewise not in a position to absorb those postage increases, but will have
to seek ways of cutting their own costs by paring distribution or converting some or all of
their programs to alternative distribution channels. In sum, even what the Postal
Service might believe to be a relatively “modest” increase is, in the reality of the current
marketplace, unsustainable.
In these troubled circumstances, the Commission must assess whether the
increases proposed by the Postal Service will, indeed, be likely to generate the volumes
and revenues it has projected. In the case of saturation mail, they will not, raising the
risk of permanently driving away profitable mail volumes.
In the face of these uncertain times and the consequent risk of unaffordable
postal rates, the better course now is to first fix the underlying public-policy problem that
is causing the Postal Service’s financial hemorrhaging. Even the Postal Service
acknowledges that its highest priority for near-term financial relief is not this exigent rate
increase, but instead obtaining legislative relief from the overfunding of its pension
3
obligation and its burdensome and excessive prefunding obligation for retiree health
benefits. On that point there is unanimous agreement within the postal community –
including not only mailers and postal workers and management but even the
Commission. The time and energy that is being consumed by this proceeding could be
far better spent securing that legislative relief which is far more critical both to the Postal
Service’s short-term cash needs and its long-term viability.
We submit that the Postal Service should instead be focusing its pricing initiatives
on understanding its products and their market characteristics and then designing
price and service programs that meet mailer needs. If properly constructed, such
initiatives could retain and increase postal revenue and contribution. Thus, we support
the Postal Service’s proposed High-Density/Saturation Incentive Program, although we
believe it is way too restrictive and overly optimistic in light of current market conditions,
and that it should be reconsidered after consultation with the industry.
Market-based pricing initiatives are critical especially in today’s tough
environment. By contrast, this exigent rate request is the wrong remedy at the wrong
time, as it could well do more harm than good for the Postal Service.
I. THE PROPOSED INCREASES FOR SATURATION MAIL COME AT A
PERILOUS TIME IN THE MARKETPLACE.
At the time the Postal Service filed its exigency proposal in early July and in the
preceding months when it was planning the filing, the general sentiment was that the
American economy was beginning to recover from the worst recession and financial
crisis since the Great Depression. That hope has now faded. This changing
circumstance greatly compounds the risk that postal rate increases at this precarious
4
time would harm the Postal Service’s short- and longer-term position in the market,
particularly in the case of the highly price-sensitive saturation mail market.
A. The Worsening U.S. Economy
The bleak economic news over the last few weeks makes clear that the
shallow recovery from the recession has stalled. As reported in the Wall Street Journal
just one week ago:
Downgrading its assessment of the economy, the policy-making
Federal Open Market Committee said the recovery “has slowed in
recent months,” and that the “pace of economic recovery is likely to be
more modest in the near term than had been anticipated.”
…
The Fed noted that high unemployment, modest income growth, lower
housing wealth and tight credit were holding back household spending.
Meanwhile, lending by banks “has continued to contract,” the Fed said,
while construction remains weak and employers remain reluctant to
increase payrolls. (emphasis added).2
This growing pessimism is reflected not only on Wall Street but on Main Street
and among economists:
The optimism that had pervaded Wall Street only weeks ago has faded
quickly. In its place is a growing realization of what many Americans
have been feeling in their bones: this is not the economic recovery that
the nation had hoped for…. Given the uneven rebound in the United
States, and now signs that the world’s other economic engines are
slowing, economists say Americans may confront high unemployment
and lackluster growth for some time to come.3
2 Sudeep Reddy, “Fed Sees Recovery Slowing, Central Bank Worried About Economic Vigor,
Won’t Shrink Securities Portfolio,” Wall Street Journal, August 11, 2010.
3 Graham Bowley and Christine Hauser, “Trouble Abroad Adds To Worries For U.S. Recovery,”
New York Times, August 12, 2010.
5
Growth in real GDP has slowed since the last quarter of 20094 and, without
substantive intervention, is expected to slow even more over the rest of the year with
2011 starting off very weakly.5 Unemployment remains at a high 9.5% which does not
include 2.6 million persons “marginally attached to the labor force;” and total
employment is actually down from a year ago, causing concerns about a stalled
recovery or second recessionary dip.6 Personal incomes have stagnated or declined,
consumer confidence remains low, and consumer spending is restrained.7 The housing
market, a key driver of the economy, remains slumped and faltering despite the lowest
mortgage rates in history.8 Availability of commercial credit remains tight, especially for
4 Bureau of Economic Analysis, National Income and Product Accounts Gross Domestic Product:
Second Quarter 2010 (Advance Estimate), July 30, 2010,

http://www.bea.gov/newsreleases/national/gdp/2010/pdf/gdp2q10_adv.pdf.

5 Economy.com. See also, John W. Schoen, “Weak Job Market Puts Recovery At Risk,”
MSNBC.com, August 6, 2010.
6 Michael A. Fletcher, “July Jobs Report Renews Concerns Over a Stalled Recovery,” Washington
Post, August 7, 2010.
7 The Conference Board, Inc., “Consumer Confidence Index Declines Again,” July 27, 2010. See
also, Phil Izzo, “U.S. Incomes Tumbled in 2009,” Wall Street Journal, August 9, 2010; and Reuters, “US
Consumer Sentiment Edges Up in Early Aug-Survey,” August 13, 2010:
U.S. consumer sentiment inched up in early August from July and was a tad above expectations,
but consumers see little improvement in the economy ahead… The slight pickup in sentiment
follows a drop in July to the lowest level since November, the data from Thomson Reuters/
University of Michigan’s Surveys of Consumers showed…. The sentiment index is just several
points above where it was a year ago, with worries about prospects for job growth and income
hanging over sentiment. “The gain was too small to represent a meaningful improvement,”
Richard Curtin, director of the surveys, said in a statement. “Consumers have increasingly come
to expect lackluster income and job growth for an extended period of time.”
8 Standard and Poors.com, S&P Indices, “For Past Year Home Prices Have Generally Moved
Sideways According to the S&P/Case-Shiller Home Price Indices,” July 27, 2010. See also, Meena
Thiruvengadam and Tom Barkley, “Home Builders Remain Wary,” Wall Street Journal, August 16, 2010:
U.S. home builder confidence continued to stagnate in August, as economic uncertainty kept
buyers at bay despite ultra-low mortgage rates. The National Association of Home Builders …
said its housing market index, which measures builders’ attitudes toward sales prospects for
single-family homes, fell to 13 in August. The reading is down from 14 in July and the lowest
since March 2009. A reading above 50 on the index indicates more builders view sales
conditions positively than see them negatively. “Builders are expressing the same concerns that
(footnote continued next page)
6
small businesses.9 Economic difficulties in other parts of the world, including key
European and Asian markets, weigh heavily on the prospects for America’s near-term
recovery and are creating fear of an extended economic “malaise”:
Investors around the world scrambled for safe havens as fears of a
global economic slowdown grew…. “It’s pretty clear that economic
gravity is setting in,” said Talley Leger, portfolio strategist at Barclay’s
Capital…. Market sentiment has soured quickly. It underscores just
how jittery investors remain nearly two years after the collapse of
Lehman Brothers Holdings sent markets world-wide crashing…. With
bond yields dropping amid the specter of deflation, or a decline in
prices, investors are worried that a prolonged Japanese-style malaise
is about to grip the U.S. and Western Europe.10
For all these reasons, the Fed is concerned about deflation and is attempting to
address it by recently announcing after its August 10 Open Market Committee meeting
that it will maintain the very low interest level of its securities for some time to come.11
That deflationary concern is widely shared by knowledgeable economic observers:
(continued from prior page)
they are hearing from consumers right now, particularly the sense that the overall economy and
job market aren’t gaining any traction,” NAHB Chairman Bob Jones said.
See also, PRNewswire-FirstCall, “ ‘Unusually Uncertain’ Outlook Tamping Down Economic Activity
According to Fannie Mae’s Economics & Mortgage Market Analysis Group,” August 16, 2010.
9 Federal Reserve Bank of New York, U.S. Credit Conditions,
http://data.newyorkfed.org/creditconditions. See also, Sudeep Reddy, op.cit.; and Katherine Ryder, “The
Wrong Fix For Small Business Lending,” CNNMoney.com, July 20, 2010: “…Federal Reserve chairman
Ben Bernanke said banks across the country are systematically denying loan requests from financially
credible small businesses….”

http://money.cnn.com/2010/07/20/news/economy/small_business_lending.fortune/index.htm.

10 Mark Gongloff, Alex Frangos and Tom Lauricella, “Markets Swoon On Fears,” Wall Street
Journal, August 12, 2010. See also, Sudeep Reddy and Emmiline Zhao, “Wider Trade Gap Signals
Weak Growth,” Wall Street Journal, August 12, 2010:
The U.S. ran a surprisingly large trade deficit in June, raising concerns that the economic
recovery is losing steam faster than previously thought…. U.S. consumers appear to be
concentrating on imported tech gadgets, rather than on furniture and other items that tend to be
more domestically produced…. Trade could remain a drag on the U.S. economy in the second
half of the year as growth around the world remains weak.
11 Travis J Berge and Oscar Jorda, “Future Recession Risks,” FRBSF Economic Letter, August 9,
2010.
7
Some Fed officials, as well as private economists, have been warning
that the risk of deflation – broadly falling prices and wages across the
economy – is rising. A Wall Street Journal survey of economists,
mostly from Wall Street, found this week that, by a two-to-one margin,
they see deflation as a greater risk over the next three years than
inflation.12
These and other negative factors are causing concern that the economy is at risk of
deflation and/or a double-dip recession. Ominously, conditions seem to be getting
weaker, not stronger.
B. The Fragile Market For Saturation Mail
The nature of the saturation mail market makes it particularly sensitive to
these economic uncertainties and to increasing postal rates. Saturation mailers serve
the advertising needs of local, regional, and national retail and service businesses, both
large and small, as well as individual entrepreneurs in markets throughout the nation.
These are the very sectors that have been under greatest duress over the last two
years of economic turmoil, particularly hard hit by the severe crimp on consumer
spending. As recently reported:
Most major retail categories reported lower revenues, including the
previously strong electronics stores where sales fell 0.1%…. Overall, the
soft retail activity underscores the tight budgeting by households. When
higher prices (gasoline) or big-ticket purchases sop up more of the
monthly, spending gets cut elsewhere. The recent continuing upward
trend in gasoline prices could continue to exert an unwelcome drag on
discretionary spending. – David Resler, Nomura Global Economics

http://blogs.wsj.com/economics/2010/08/13/economists-react-consumercant-

drive-recovery/ (emphasis added).
This general drag on discretionary spending is particularly acute in the retail
categories that form the core of many saturation mail programs, especially in the key
12 Sudeep Reddy, “Fed Sees Recovery Slowing, Central Bank Worried About Economic Vigor,
Won’t Shrink Securities Portfolio,” Wall Street Journal, August 11, 2010.
8
grocery store client sector:
The most notable drag on spending continues to be persistent weakness
in the heavily weighted grocery store component, which accounted for
13% of overall retail sales in July and 20% of retail control. Grocery store
sales fell 0.3% in July, a fifth straight decline for a 4.3% annualized drop
over this period. Food prices in the CPI report have risen 0.9%
annualized over this period, so the decline is even bigger in real terms. –
Ted Wieseman, Morgan Stanley (emphasis added), id.
And, the distress extends across other key saturation mail client categories:
The rebound in motor vehicle sales was also encouraging. But that gain
contrasts sharply with the weakness evident in other discretionary
spending categories. Furniture and clothing sales have contracted in
every one of the last four months. Building material sales have contracted
for three months in a row. Admittedly, the staples don’t look much better.
Food sales have fallen for five consecutive months, but those modest
declines reflect a stagnation in prices as much as falling demand. – Paul
Ashworth, Capital Economics (emphasis added), id.13
Another key saturation advertising client category that is under the greatest
duress is small businesses. Most small businesses lack the financial resources to
weather sharp and extended downturns, with limited access to capital and, as noted
earlier, now virtually frozen out from commercial lending sources. Unlike large retailers
that have the leverage to demand price concessions at the threat of switching to lowercost
non-postal alternatives, small businesses have few or no effective alternatives but
simply cannot afford to increase their advertising budgets, or in many cases even to
maintain existing budgets in these harsh economic times. Faced with these consumerspending-
related economic pressures, the customers of saturation mailers that are still
in business are in no position to accept price increases.
13 We would note that the “rebound” in motor vehicle sales has undoubtedly been aided by the
massive federal intervention to bolster the American auto industry with capital infusions, stimulus
programs, and bankruptcy valves that have enabled the industry to shed much of its debt and mitigate its
retiree pension and health benefit obligations. By contrast, the American retail and small business
sectors – and the Postal Service as well – have had to “go it alone.”
9
These acute economic concerns and the adverse impact of a postal rate
increase are compounded in the saturation mail market by a number of other factors
inherent to the industry:
• Saturation program mailers undertake a large risk when they establish a
regular weekly or monthly mail program. Not only is there a large start-up
cost to set up the program, but they must for market reasons mail to all
addresses within the program coverage-area and pay the postage, regardless
of the number of advertisers or ad revenues generated within the mail piece.
• Postage is typically the largest cost component of saturation mailings, in
many cases constituting up to one-half of the total program cost.
• Saturation mailers compete for local advertising with non-postal distribution
alternatives such as newspapers and private delivery that are generally lowercost
than mail. They also compete with increasingly sophisticated electronic
and broadcast communications.
• A growing number of saturation mailers have converted some or all of their
distribution to non-postal alternatives due to high postal rates, either through
arrangements with newspaper total market coverage (TMC) programs or
private delivery.
• The advertising customers of saturation mailers – large and small retailers
and service businesses – themselves operate in highly competitive markets
that have been particularly hard-hit by the recession. Most cannot afford or
are unwilling to accept higher advertising costs and are instead demanding
price cuts.
To assess this impact, the Saturation Mailers Coalition recently requested its
members to respond to a questionnaire concerning the impact of a 5-percent postal rate
increase on their businesses. The responses that have been received are presented in
Appendix A hereto.14 While we do not claim that these constitute a statistically
“representative sample” of the industry, the responses do accurately describe the
general nature of the market and the grave concerns of saturation mailers about the
14 In some cases, at the request of a respondent, we have redacted identifying information due to
concerns about the commercial sensitivity of their response. Such redactions are indicated in the
attached statements.
10
adverse impact of a postal rate increase at this time. Among other things, these
responses clearly demonstrate that in the current economic and market climate:
• The customer base of saturation mailers has been eroded by recent
customer closures, bankruptcies, and consolidations. Many of the
remaining customers, particularly small businesses, are under extreme
financial pressure due to the poor economy.
• Most saturation mail customers are unable or unwilling to accept rate
increases, but are instead demanding price cuts. Rather than pay
higher rates, they would either cut distribution to maintain existing
advertising budgets or switch to non-postal competitors.
• Because saturation postal rates were already high relative to the
marketplace, saturation mailers have maintained lean cost structures.
With this economic downturn, they have further slashed costs and in
some cases have dramatically scaled back operations. They are not
able to absorb a postal rate increase.
• Many saturation mailers currently use non-postal alternatives for a
portion of their distribution. Most are considering new or additional
conversions to private delivery or newspapers if postal rates are
increased. Some have recently converted entirely to private delivery
due to high postal rates, and others plan to do so if postal rates
increase.
• Those saturation mailers that intend to stay in the mail are planning
cuts in their distribution “footprint” or their frequency in order to control
their postal distribution costs.
• For at least some saturation mailers, the proposed rate increase would
be “devastating” or “deadly” or “put us out of business.”
In short, saturation postal rates are already too high and at the “tipping point.”
Mailers are actively assessing private delivery – which has become far more reliable
and user-friendly than in the past – and some are already beginning to convert at
existing rates. A rate increase at this time thus threatens the highest margin, most price
sensitive mail in the postal system – mail that, once it is gone, is not likely to come back.
11
C. Saturation Mail Is Already At Or Near The “Tipping Point”
The Postal Service in this case used its traditional demand models, based
on historic volume response to price changes, to estimate volumes and revenues.
Witness Kiefer acknowledged that this was done because the Commission was familiar
with the models and that no better data were available. Yet he also acknowledged that,
given the uncertain state of the economy, those models might not accurately reflect
volume response under current conditions as expected in 2011.
We do not “fault” the Postal Service for using those models as a “default.”
However, it is now clear that they are not reliable or credible in the face of the current
and foreseeable economic environment. That is especially true for saturation mail given
its characteristics and the realities of the current saturation mail market. A rate increase
in these circumstances will certainly cause a far greater loss of volume than predicted
by the historically-based demand models.
At the recent hearings with Postal Service witnesses, the Commissioners asked
a number of probing questions concerning the expected impact of the economy on the
Postal Service’s financial projections. The witnesses were, understandably, cautious
and non-committal in their responses. The simple truth is that no one – not even the
world’s greatest economists – can predict with any assurance what the American
economy will be like in 2011.
This itself is a telling reality. At no time in memory has there been so much
economic uncertainty, particularly on the downside. Nevertheless, there are some
general boundaries of current expectations that should guide the Commission. On the
high side, no one is predicting that the economy will be robust next year. The very best
12
of expectations are for a sluggish and bumpy gradual recovery over the course of
several years, but even those are filled with grave caveats. The growing fear, if not
consensus, is that the recovery will slow or stall – or much worse, will slide backward –
a prospect that was not of widespread concern when the Postal Service prepared and
then filed its request in early July.
This brings into serious question the wisdom of raising postal rates at this time.
The Commissioners themselves, in their questioning of Postal Service witnesses, have
probed whether postal rates may be near the “tipping point” where the historically-based
estimates of price elasticity are no longer valid. We submit that, when faced with
uncertainty that encompasses very dire economic outcomes, the far better course is to
exercise extreme caution in raising rates for price-sensitive, high-markup products that
are at risk of leaving the system permanently. That is unquestionably so in the case of
saturation mail, where the marketplace even today is unable to sustain price increases.
The Commission can and must take this into account in assessing whether the
proposed rates will achieve the results assumed by the Postal Service, or whether a
smaller or no increase for saturation mail would better serve the Postal Service. The
latter course – no rate increase – is in these unique and worrisome circumstances the
most prudent.
II. THE POSTAL SERVICE’S AND COMMISSION’S FIRST PRIORITY SHOULD
BE ACHIEVING A LEGISLATIVE FIX TO THE CORE PUBLIC-POLICY
PROBLEM THAT IS CAUSING THE FINANCIAL HEMMORAGING, RATHER
THAN IMPRUDENTLY RAISING POSTAL RATES IN A DEPRESSED
ECONOMY.
For the reasons explained above, the proposed exigency increases – particularly
for saturation mail – should be denied as improvident, unwarranted, and counter13
productive in the current depressed economy. More fundamentally, this exigency filing
is a symptom of a far greater disease caused by faulty public policy that is bleeding the
Postal Service far beyond its ability to recover through self-defeating rate increases –
namely, the pension and retiree health overfunding problems that are drowning the
Postal Service in red ink. If not cured, they will inevitably drive the Postal Service into
insolvency. The first priority must be to legislatively fix those core problems which, if
rectified, would obviate the need for an exigency rate increase.
The primary cause of the Postal Service’s immediate financial woes is the
onerous and unfair burden imposed upon the Postal Service by Congress in the PAEA
to prefund the retiree health benefits obligation on an extremely aggressive payment
schedule. In total, these obligations amount to a cash drain well in excess of $7 billion
annually, representing a staggering 11% of the Postal Service’s total expenses.15 Not
only is this prefunding requirement unique among American business, but the Postal
Service has absolutely no control over these expenses. They are etched into law, and
can only be changed by an act of Congress. Significantly, absent these payments, the
Postal Service would have been profitable even in this era of declining mail volume.
Fortunately, Congress also included in the PAEA a new section 802(c) allowing
the Postal Service to appeal determinations by the Office of Personnel Management
concerning its pension and retiree health obligations to the Postal Regulatory
Commission. The Commission has just concluded its watershed review of the Postal
15 This $7 billion annual figure includes over $5 billion in prefunding and $2 billion
for current retiree health premium payments. This aggressive prefunding schedule was
written into the PAEA at the insistence of the Administration for purposes of maintaining
“budget neutrality,” a burden made even worse by a late amendment that the annual
premium payments also be paid by the Postal Service rather than being drawn from the
Retiree Health Benefits Fund.
14
Service’s appeal of OPM’s pension determination in Docket SS2010-1, issuing the
report of its independent actuarial consultant, the Segal Group. That report concurred
with the USPS Office of Inspector General’s contention that the Postal Service had
been overcharged in the allocation of pension costs for employees of the old Post Office
Department who continued employment with the USPS, concluding that under a “fair
and equitable” allocation based on generally accepted accounting principles, the Postal
Service has indeed overpaid its pension obligations in the magnitude of $50-55 billion.
The priority now must be obtaining corrective legislative relief. That task will
require the cooperative effort of all interested parties – mailers, management, and labor
groups working together – to credit the pension overfunding to the retiree health benefit
prefunding obligation, thus placing the Postal Service on sounder financial footing so
that it will be better able to manage in the difficult times ahead.16
The Commission will know by September 30th – the due date for Postal Service
payment of the next installment on retiree health prefunding – whether and to what
extent Congress has acted to mitigate that prefunding burden, and will likely also know
whether and how Congress intends to pursue a permanent fix on these obligations.
That information will be available prior to the statutory 90-day deadline for Commission
action on this exigency rate request. The Commission should and must take into
account any such Congressional actions and statements of intention in determining
whether and to what extent the Postal Service has justified and needs the proposed rate
increases, in whole or in part.
16 We recognize that such funding legislation is not a long-term panacea. The
USPS must continue its restructuring and cost-cutting efforts, and needs further relief on
other constraints that impair its ability to manage.
15
III. THE SATURATION AND HIGH DENSITY INCENTIVE PROGRAM
In general, we support Postal Service initiatives to stimulate volume growth of
saturation mail. However, we are concerned that the proposed “Saturation and High
Density Incentive Program” is unlikely to achieve that goal in a meaningful way. A
principal impediment is the “baseline” requirement that a mailer will be eligible for
incentive rebates only on that portion of its incremental volume growth that exceeds its
calendar-year 2010 baseline volume by 5.5 percent, which the Postal Service states is
its “forecasted growth projected to occur in FY2011 for these product categories.”
Testimony of USPS witness Kiefer, Appendix A at 4.
Even without an exigent rate increase, that projected 5.5-percent growth of
saturation and high density volume is unrealistic for all the reasons discussed above.
With the uncertain economy and saturation mail marketplace, even a “no growth”
assumption might be optimistic. But if an exigent increase is implemented in January
2011 – coinciding with the start of the incentive program – saturation mail volumes will
almost certainly decline in calendar year 2011. Requiring saturation mailers who will be
reeling from a rate increase in a harsh economy to grow their volumes by 5.5 percent at
the higher rates before they can qualify for incentive rates is self-defeating.
What the Postal Service should instead be focusing on are incentives designed
to keep saturation mailers in business and in the mail. The Postal Service’s highly
restrictive incentive will not help mailers who are in difficulty or who are considering
shifts to private delivery to stay in the mail. Nor will it provide the kind of effective,
longer-term incentive to encourage saturation mailers to expand volumes on a
permanent basis. Saturation mailers, because of their market need to commit to a
16
regular weekly or monthly mailing schedule in a market on a long-term basis – and
because of the risk that such a commitment entails – need to have incentives that
“match the market need.” For the Postal Service, the greatest benefit of such longerterm
incentives is that, if successful, they will generate new volumes and revenues on a
permanent basis that will continue even beyond the expiration of the incentive.
Finally, while our focus has been on the need for effective pricing incentives for
saturation mail, this business objective must extend further to encompass all forms of
mail whose retention and growth can help bolster the Postal Service’s financial
condition. It would be of no long-term benefit to saturation mailers if they ended up
being the last ones left standing to foot the cost of universal service. It is in the interest
of the Postal Service and all mailers to expand the base of volume supporting the postal
system.
Respectfully submitted,
Thomas W. McLaughlin
Burzio McLaughlin & Keegan
1054 31st Street, N.W., Suite 540
Washington, DC 20007
(202) 965-4555
bmklaw@verizon.net
Counsel for Valassis Direct Mail, Inc.
and the Saturation Mailers Coalition
ATTACHMENT A
STATEMENTS OF
SATURATION MAILERS COALITION MEMBERS
CONCERNING
IMPACT OF A 5-PERCENT POSTAL RATE INCREASE17
17 In some cases at the request of a respondent, information that might reveal the
identity of the responding company has been deleted due to the commercially-sensitive
nature of the response. Such redactions have been marked.
ATTACHMENT A, Page 1
Statement of Jeff Demers, Co-owner, C&G Newspapers
My name is Jeff Demers and I am co-owner of C&G Newspapers (along with my mom
and dad, two brothers and two sisters) located in Warren, MI. We publish free local
newspapers that are mailed to 95% of the homes in our distribution area. C&G’s 19
newspapers cover the local news in 47 communities and 66 ZIP codes, serving more
than 600,000 homes every week. Our newspapers are the only source of local news
available to the vast majority of the cities we serve. Since our newspapers are free, the
only source of C&G’s revenue is advertising.
Given the current state of the economy, the effects of a 5% increase in postage will be
devastating for our business. The increase in postage will amount to $250,000 -
$300,000 per year. If we try to pass along this increase to our customers we will lose
much more revenue due to ad down-sizing and less frequency than we would generate
with the increase in advertising rates. This obviously puts us in a bad spot and will force
us to consider making some drastic changes. These changes may include down-sizing
circulation, going to private delivery, closing marginally profitable newspapers and
publishing less frequently.
Over the past two years we have had to cut back in our production and editorial
departments as well as our front office due to the down-turn in the economy and
advertising. We have maintained our circulation and frequency through this difficult time
so we can still provide our customers with the best response possible. If we are forced
to cut our circulation and reduce the frequency of our newspapers, our customers will
not get as good of a response and they will begin to cut back on their advertising or
spend their shrinking budgets in other media. Then the downward spiral begins and it
won’t be a happy ending.
The onslaught of internet advertising and the decline in circulation and viability of the
daily newspapers hasn’t helped the image of newspapers in general. In fact it’s
extremely challenging to educate advertisers on the difference between daily
newspapers and weekly community newspapers. Competition for advertising dollars
has never been as fierce as it is today.
The truth is that C&G Newspapers provides a valuable service to the communities it
serves. It’s not just the news we bring that helps bind more than a million residents to
the 47 communities in which they live. It’s also our contribution to the success of local
businesses that helps make these 47 communities better. We all know that without a
strong local business community neighborhoods start to decline. In addition, C&G
employs more than 100 hard working and dedicated individuals.
ATTACHMENT A, Page 2
So, will the postage increase affect C&G Newspapers? You bet it will, along with the
businesses and the lives of everyone associated with it. With the fragile state of our
economy, this is the worst possible time to raise postal rates.
Jeff Demers
Publisher
C&G Newspapers
Warren, MI 48089
jdemers@candgnews.com; 586.291.1874
“In Your Mail, Every Week”
Visit our website: www.candgnews.com
ATTACHMENT A, Page 3
Statement of Steven Silver, The Yankee Pennysaver
A 5% increase will be deadly to our business. The Pennysaver’s clientele are small
business owners. Our largest small business used to be car dealers. GM, Chrysler and
Ford have shut down 7 franchised dealers in our small market. Those dealers spent on
average $700 per week in our direct mailed publication. There are no businesses filling
that void. $4,900 per week in lost revenue that is not coming back was a major loss to
us. We had to eliminate 2 Full time positions.
The economic down turn has been and continues to be a disproportionately harsh on
the small business owner. We don’t trade derivatives, or currencies, and we have had
no government help. Credit is not available to us other than in the form of cash
advances on our credit cards, and who can afford 20 % interest.
Postage is currently our largest single expense. It is just under twice the cost of printing
and salaries. Our rates in order to keep our small business advertisers are the lowest
rates in our 17 year history. WE HAD TO LOWER OUR RATES AND ACCEPT
LONGER PAYMENT TERMS IN ORDER TO STAY IN BUSINESS.
In good times, our publications averaged 56 pages. Even after dropping our rates in
order to defray to postal expense we still lost customers remember those 7 car dealers
(7 pages in 4 zones). Here is the math: In one of our zones, we mail used to mail
15,000 homes at 14.2 cents each (total $2,130 including the DAL) or $38.04 for postage
per page. Our current page count has dropped to 32 pages and postage is now 15.9
cents. Our per page postal cost has risen to $74.53 almost doubling. The bigger
publications want a reduction in the pound rate. If I was overweight (64 pages) I
wouldn’t complain. Why not offer a more variable weight rate?
If the Post Office were to increase our rates by 5% will probably will not be able to
maintain our current level of mailings. Our best alternative would be to mail on an every
other week schedule. The Post Office may get an increase on a per piece basis, but I
guarantee they are going to significantly loose volume. The postal service by increasing
rates is going to encourage every business and individual to look for alternatives. In my
case going every other week, or using carriers, emailing bills and statements, paying
online to avoid buying stamps. Increasing rates would have the same effect as an
airline raising their ticket prices and getting more per passenger and only having half the
seats sold.
Steven Silver
Publisher
The Yankee Pennysaver
Brookfield, CT 06804
ATTACHMENT A, Page 4
Statement of Greg Belair, Director of Shared Mail, Mailbox Merchants
How will a 5% postal rate increase impact your business and your customers?
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
Increased rates will require a higher level of scrutiny of the current zip profile.
Zips that have been marginal in terms of profit will likely be discontinued from
our shared mail program.
Will you be able to pass all or any part of the increase on to your customers? What are
your customers asking you to do with regard to prices? Are customers insisting on flat
rate contracts or are they willing to pay increases in advertising costs that relate to your
changes in postage, paper, etc.?
We are probably in the most rate sensitive period of the last 10 years. In the
past, a 5% rate increase could be passed on with just some token resistance,
but in the current economic environment, clients will choose other media
rather than spend more dollars. Their budgets are fixed and if that means
cutting back, or changing media all together that’s what they will do.
What other things are you seeing in the marketplace with regard to competition or other
media?
All competitors are offering “Deals”. Clients are expecting price reductions
right now, not increases.
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and “deals”?
We have looked for private delivery options, but the rural nature of most of our
programs has made that a challenge. If we were able to find a provider we
would likely test alternate delivery.
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
We have seen clients cancel ads due to budget constraints, some multi store
customers are closing marginally profitable locations which means less
advertising revenue for us.
Greg Belair
Director of Shared Mail
Mailbox Merchants
15040 NE Mason Street
Portland, OR 97230
503 345-1180 %u0131503 256-3450 Fax
www.mailboxmerchants.com
ATTACHMENT A, Page 5
Statement of Mona Garwood, General Manager, Vinton Livewire
Donna – the long and the short of answering your questions below.
In a recent conference call with our corporate office, we have been directed to
look at developing our own private distribution system and leaving the post office
all together due to this recent proposed increase. Currently 75% of our total
distribution is delivered by USPS. It is possible that we will make this move one
way or the other, regardless of whether the increase goes through or not, as it
seems an increase will be inevitable at some point or another. Most likely, our
three other sister publications in NE Iowa will be directed to make the same
move.
Hope this helps,
Mona Garwood
General Manager
Vinton Livewire
108 E. 5th St., Vinton, IA 52349
Ph. 319-472-3303 or 472-2311
Fax: 319-472-4811
[mailto:monag@cedarvalleydailytimes.com]
How will a 5% postal rate increase impact your business and your customers?
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
Will you be able to pass all or any part of the increase on to your customers? What are
your customers asking you to do with regard to prices? Are customers insisting on flat
rate contracts or are they willing to pay increases in advertising costs that relate to your
changes in postage, paper, etc.?
What other things are you seeing in the marketplace with regard to competition or other
media?
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and “deals”?
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
ATTACHMENT A, Page 6
Statement of Sharon McRoy, Today’s AdVantage
Re: How will a 5% postal rate increase impact your business and your customers?
At this point in time, any increase in anything will put us out of business. We have been
unable to raise our rates in years and due to economic conditions, that is not possible at
this time.
Eliminating a mail delivery day, or even two, is the only possible answer for the post
office crisis. I can work with that situation, more expense I cannot.
At this point, “hoping” for no postal price increase is not the point … praying is.
The only thing we can do is eliminate copies to keep the cost the same which changes
our commitment of the last 25 years to our advertisers.
Thank you,
Sharon McRoy
Co-Owner
Today’s AdVantage
Alton, IL 62002
ATTACHMENT A, Page 7
Statement of John Sabo, SVP of Production Operations, Money Mailer, LLC
How will a 5% postal rate increase impact your business and your customers?
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
I can say the increase in postage makes our franchise system reluctant to
increase frequency or mail additional areas because of the additional
overhead attributed to postage.
Will you be able to pass all or any part of the increase on to your customers? What are
your customers asking you to do with regard to prices? Are customers insisting on flat
rate contracts or are they willing to pay increases in advertising costs that relate to your
changes in postage, paper, etc.?
Many customers are reluctant to accept price increases. Most customers are
saying they have a fixed budget for advertising or an allotment to advertise
through Money Mailer. So the Franchisee or sales rep can decide to either cut
back on the client’s circulation or mail the same circulation and absorb the
postage. If the circulation is reduced the client will shop for a lower price even
if it means lower redemption. The family business owners are really hurting.
A short-fall in revenue coupled with banks tightening credit limits makes it
very difficult for small business owners to absorb price increases. Restaurant
owners are faced with inflationary pressures with the cost of food product
(rice, flour, sauces, dairy products, vegetables etc.). Landlords are increasing
rents to cover increased taxes. Businesses are in fear of a double dip
recession with a much longer recovery period therefore controlling spending.
What other things are you seeing in the marketplace with regard to competition or other
media?
The printing industry is consolidating at a rapid pace. Printers and mail-shops
with a long history of being in business are closing or being acquired by
larger companies only to shutdown equipment and obtain the existing
business. Direct mail business from major industries auto, home
improvement and financing has dried up with a high probability of not
returning any time soon. Staff reductions continue at a rapid rate. The paper
industry is owned mainly by private equity which is shutting down paper mills
creating a shortage of material by limiting allotments and announcing
significant price increases. Most of the new social media cannot be monetized
quickly enough leaving companies with larger investments and little to no
revenue streams. This has been the most difficult period beginning in early
2008 to collect payment from customers. Trucking firms are going out of
business and those remaining are raising prices.
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and “deals”?
ATTACHMENT A, Page 8
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
Companywide 20% of the staff has been reduced in the past 18 months.
Everyone retaining their employment experienced a pay reduction from 5 to 20
percent depending upon the pay grade for a period of time. Matching 401K
benefits were reduced along with insurance coverage. Credit has been
extended to many customers to retain their business. There are fewer
candidates available for franchising and able to invest in a self-owned
business due to the tight lines of credit.
John Sabo
Senior Vice President of Production Operations
Money Mailer, LLC
Garden Grove, CA 92841
ATTACHMENT A, Page 9
Statement of Shari Rapone, Circulation Manager, Genesee Valley Penny Saver
At the Genesee Valley Penny Saver we mail about half of our 155,000 weekly
distribution. We currently spend about $12,500 a week in postage. A 5% rate hike will
increase that by about $600.00 a week. This comes at a time when we are filling full
time positions with part time positions and asking our current members to take on more
work in a companywide effort to battle these tough economic times.
We will be raising our rates in October by 5% and it is something our advertisers are not
happy about… as all businesses are under the same economic pressures. This will
inevitably force our advertisers to place a smaller ad so their advertising costs remain
the same.
Over the last few years we have converted over 20,000 pieces of weekly mailings to our
own adult carrier delivery system. We are currently switching two areas over from the
mail system to our own adult carrier delivery system which will eliminate about 8,000-
10,000 more pieces from the USPS mail. We will continue to convert from mail to
carrier as we can see that the postage rates are continually rising. We started these
conversions due to the ever rising postage rates but it only fueled our efforts when the
USPS proposed the 5 day delivery concept. We are a weekend delivery publication and
we and our readers want that to continue.
In the end…I can understand that the postal system is also feeling the tough economic
pressures. Maybe more than some due to the rapid loss in revenue to the internet and
e-mail… that not too long ago was going through the US postal system. We simply ask
the USPS to hang on to the customers that are loyal to them and would continue to use
the postal system if it was affordable. Go ahead and raise the price of a stamp to the
occasional mailer or the parcel piece someone mails once a month, but work with the
bulk mailers that are there every day or every week with MAIL. Welcome the idea of
“Simplified but Certified” and open the door to new business and keep the current ones
from migrating to other means. The USPS has customers they will lose, like these
members of SMC, that want to do business with the USPS but they continue to push us
into other avenues with across the board rate hikes.
Shari Rapone
Circulation Manager
Genesee Valley Penny Saver
Avon, NY 14414
sharirapone@gvpennysaver.com
(585) 226-8111, Ext. 131
fax (585) 226-3390
ATTACHMENT A, Page 10
Statement of Bill Derby, Publisher, The Johnson City News & Neighbor
We converted our 31,000 mail to carrier three years ago this August. We had
used D-cards weekly while in the mail with our community newspaper. We dropped
shipped to DDU PO’s each week to earn the lowest rate. After thinking about it for two
years, we put our conversion plan into action converting our distribution route by route
over a three month period. It has worked very well including eliminating non-readers.
We were spending approximately $300,000 per year with the PO. We knew it
would be difficult to say in the mail and be competitive with our insert rates as well as
publishing numerous special sections. We saved over $72,000 net in our first year.
That also is not counting the postal increases we would have had to pay with our heavy
special editions. There was no way we could pass along increases to our customers.
We have also been able to hold our ad rates over the past two years without increases
keeping us very competitive with the local daily.
We also started a volunteer paid circulation newspaper asking readers to buy
subscriptions for $20 for one year. We now have nearly 1,000 paid subscribers and
were given a periodical postal permit for that separate edition, The Johnson City News.
Our renewal rate is over 80% with many buying a two and three year subscriptions. We
also now qualify to join the Tennessee Press Association since we have a paid
subscription newspaper. They don’t allow free papers.
Many of our national customers, grocery chains and ad agencies are asking for
rate discounts or added value programs. We do have a little room to negotiate insert
rates with these customers since we are not locked into postal weight rates. It’s a new
world for the industry.
With our good carrier system we have the ability to deliver other products but
have not pursued that as yet.
I appreciate your hard work and efforts on behalf of our industry. We are just
thankful we were able to convert to our carrier system.
Best regards,
Bill Derby
Publisher
The Johnson City News & Neighbor
Johnson City, TN 37604
ATTACHMENT A, Page 11
Statement of Bill Cotter, National Sales Director, Trib Total Media
While our discussion is fresh in my mind to answer your question on what a 5% postal
increase will do to our business, this is our situation in Pittsburgh:
1) We are currently mailing over 800,000 pieces weekly in the Pittsburgh market
spending roughly $150,000 per week in postage. At our current distribution we would
be adding $400,000 in expenses. We will not do that. We would be forced to “scale
back” our mail quantity to keep our weekly cost with the USPS flat.
2) We also are working with an alternate delivery company currently that is assisting
us to deliver 280,000 bags over the weekends so they are certainly an option if our
postal rates continue to rise.
Business is beginning to get better in our market. Most of our negotiations with our
customers center on “flat rates” and discounted rates for more frequency or more
pieces. To just increase rates 5% is absurd and not reality with todays market and
economy.
Thanks,
Bill
William M. Cotter
Major/National Sales Director
TRIB TOTAL MEDIA- We Deliver Newspapers. And More.
460 Rodi Road
Pittsburgh, PA 15235
bcotter@tribweb.com
Office: 412.871.2304
Cell: 412.480.0466
Fax: 412.871.2351
ATTACHMENT A, Page 12
Statement of Scott Patterson, Carolina MoneySaver
We were forced to cease publishing our 170,000 weekly direct mail publication. We
simply could not handle the postage expense in this economy. Many of our customers
are small businesses who are struggling to stay afloat, others have already closed.
Since we ceased publishing, we have had dozens of calls from small business owners
who needed our publication, and are now concerned that they will go out of business
while they struggle to find other viable ways to advertise their business. Of course,
when the business closed dozens of people who were on the team joined the ranks of
the unemployed.
A new company has formed, with less than 10% of the circulation of the old company,
and two partners with no employees. The new company cannot sustain a postage
increase. The small businesses who now rely on us will not accept an increase of 5% -
when they have no way to raise their prices by 5%. In today’s economy, no private
business has this kind of pricing power!
Our customers deal with monthly budgets, and pay a flat rate for their ads. When
postage goes up, when paper goes up, when ink goes up, they don’t care.
Our daily paper, owned by [redacted], is migrating their TMC program from the mail to
carrier delivery. This drastically lowers their delivery expenses, and guarantees them a
flat rate regardless of weight. They are now selling inserts at pricing we cannot
compete with using mail. A rate increase from the post office just makes the gap larger.
Scott Patterson
Publisher
Carolina MoneySaver
Monroe, NC 28110
704-246-0901
ATTACHMENT A, Page 13
[Company Name Redacted]
How will a 5% postal rate increase impact your business and your customers?
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
How we deal with increased postage is determined by what our customers
have said. The majority of our large customers, those mailing 6 or more times
said they will reduce their mailings and profiles so that any postal increase is
offset. The other large clients said they will look for other less expensive
alternatives, i.e. the papers and digital. Virtually all of our small customers
said they cannot afford the increase thus they will either stop advertising or
place ads in the papers. The majority of our customers said increasing prices
now when most businesses are maintaining or decreasing their prices is
equivalent to business suicide. Should these stats hold up the overall
financial impact for us will be devastating. Conservatively speaking we could
be looking at losing 30-50% of our existing revenue.
Will you be able to pass all or any part of the increase on to your customers?
See above.
What are your customers asking you to do with regard to prices?
Our customers are asking, some insisting, that prices remain flat or decrease.
Are customers insisting on flat rate contracts or are they willing to pay
increases in advertising costs that relate to your changes in postage, paper,
etc.?
What other things are you seeing in the marketplace with regard to competition or other
media?
The papers are becoming more active and aggressive with pricing. As a result
we have lost a major grocery store and hardware chain.
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and “deals”?
Our shareholders are now insisting on moving as much if not all to a
distribution method other than the mail. We are looking to develop alliances
with some of the more than 200 weekly papers and use their adult carriers for
our distribution. Additionally we are looking into developing our own adult
carrier system in some of the metro areas.
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
We have reduced staff by 20%, frozen compensation increase for the past two
years, and implemented 5 unpaid holidays. Going forward we will have to
ATTACHMENT A, Page 14
continue with these measures so as to keep our costs down and remain
competitive in the market. Many of our customers have had to do the same.
[name redacted]
General Manager
[company name redacted]
ATTACHMENT A, Page 15
Statement of Camille Stinton, ValuMail
How will a 5% postal rate increase impact your business and your customers?
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
ValuMail will have no choice but to reduce frequency and or cut geography.
Will you be able to pass all or any part of the increase on to your customers? What are
your customers asking you to do with regard to prices? Are customers insisting on flat
rate contracts or are they willing to pay increases in advertising costs that relate to your
changes in postage, paper, etc.?
Rate increase are also a challenge, a portion of pass along will be tolerable,
however from past experience the advertiser reduces frequency and coverage
area. Especially now that we have not had a full economic recovery.
What other things are you seeing in the marketplace with regard to competition or other
media?
Alternate delivery being rolled out, Non Postal Carriers, routes with lower rate
for delivery. Saturated and targeted.
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and “deals”?
This year we tried one program merged with another postal customer it went
well and a significant postage savings. The downfall was that we were not a
standalone product.
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
Reduced placement.
Camille Stinton
Preprint & Direct Mail Advertising Manager
ValuMail
285 Broad Street
Hartford, CT 06115
cstinton@courant.com
ATTACHMENT A, Page 16
Statement of Marcia Hulet, The Dandy Dollar
How a 5% Postal Rate Increase will Impact my Paper:
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
Our publication will most likely cut back on the area of our mailings.
Will you be able to pass all or any part of the increase on to your customers? What are
your customers asking you to do with regard to prices? Are customers insisting on flat
rate contracts or are they willing to pay increases in advertising costs that relate to your
changes in postage, paper, etc.?
We will be forced to institute a rate increase to offset the cost of the increased
postage, even though our customers are going through rough times also and
have requested a hold on rate increases for the time being.
What other things are you seeing in the marketplace with regard to competition or other
media?
Our competition is a daily newspaper, corporate owned, and they are doing
everything in their power to put us out of business. Offering cut-throat rates
on advertising, smear campaigns, etc. This postal increase will only hurt us
even more.
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and “deals”?
I am looking into the costs associated with private delivery. I already pay over
$2700 each week to the post office so I may actually save money by going to
private carriers.
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
In recent years we have changed printers to save money rather than increase
rates due to postal increases. Myself and other company executives have also
taken drastic pay cuts. Going forward I will have to ask my employees to wait
on pay raises and increase their duties. Shutting down the office and not
putting out a paper for one week over the Christmas holiday will also save on
printing and postage expenses.
Marcia Hulet
The Dandy Dollar
118 West 3rd Street
Ottumwa, IA 52501
[mailto:mhulet@thedandydollar.com]
ATTACHMENT A, Page 17
Statement of Tom Loury, TomL Publishing LLC
How will a 5% postal rate increase impact your business and your customers?
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
Will you be able to pass all or any part of the increase on to your customers? What are
your customers asking you to do with regard to prices? Are customers insisting on flat
rate contracts or are they willing to pay increases in advertising costs that relate to your
changes in postage, paper, etc.?
What other things are you seeing in the marketplace with regard to competition or other
media?
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and deals?
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
Hi Donna
I will have to figure out how to change my method of delivery, probably carriers. I
prefer the mail but they keep raising prices I will change. I can get it delivered for
half of what the postage is now and don’t have to many problems but as it goes
up it is no longer worth it to me.
Tom Loury
Publisher
Lady Lake Magazine, Ocala Downtown, Seniors Voice, Village Spectator
TomL Publishing LLC
Dunnellon, FL 34430
ATTACHMENT A, Page 18
Statement of Shane Goodman, President, Big Green Umbrella Media, Inc.
How will a 5% postal rate increase impact your business and your customers?
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
Both.
Will you be able to pass all or any part of the increase on to your customers? What are
your customers asking you to do with regard to prices? Are customers insisting on flat
rate contracts or are they willing to pay increases in advertising costs that relate to your
changes in postage, paper, etc.?
We will not be able to pass on to customers, as we must hold prices or lose
them.
What other things are you seeing in the marketplace with regard to competition or other
media?
Electronic media seems to be coming back after a tough 2009. Election
revenue is helping. 2011 will prove to be tough for them again. With
decreasing revenues, increasing printing costs and increasing mail costs, the
print industry will be in trouble. Us included.
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and “deals”?
We will be heavily exploring carrier delivery and rack distribution to replace
mail in some areas.
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
Margins are much slimmer. Not much room left to cut anywhere. We are
deeply concerned.
Shane Goodman
President and Publisher
Big Green Umbrella Media, Inc.
414 61st Street
Des Moines, Iowa 50312
phone: 515-953-4822, ext. 305
fax: 515-953-1394
www.dmcityview.com
www.iowalivingmagazines.com
www.iowamomentum.com
www.desmoinesdollardealer.com
ATTACHMENT A, Page 19
Statement of Maureen Gipprich, Market Select, Inc.
In response to your questions concerning the 5% postal rate increase:
1. We absolutely will cut back on areas that we mail. We would take a very close
look at each and every zip to see if we should continue to mail it.
2. Passing on an increase in today’s economy is very difficult. We have had to
“Hold” a lot of the pricing from last year. Our customers will see 5% as above the
inflation rate and not accept that as a legitimate increase. Also, as we have been able
to retain our customers, some have cut down on the circulation that they once mailed.
This increase would only have them cut again, much like us cutting out zips.
3. We have had much better success in our business as opposed to other media.
We have been able to convert some clients from the newspaper to direct mail. Postal
increase will have them thinking about moving back to the paper.
Maureen Gipprich
Market Select, Inc.
P.O. Box 3855
Reading, PA 19606
ATTACHMENT A, Page 20
Statement of Janelle Anderson, Executive Director, Wisconsin Community Papers
Here is a summary of a couple big publishers who are in the mail.
How will a 5% postal rate increase impact your business and your customers?
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
CUT BACK.
Will you be able to pass all or any part of the increase on to your customers?
I doubt it. Would try not to because revenue would decrease.
What are your customers asking you to do with regard to prices?
Lower them. They don’t care what the Postal rates are.
Are customers insisting on flat rate contracts or are they willing to pay increases in
advertising costs that relate to your changes in postage, paper, etc.?
Flat rate…
What other things are you seeing in the marketplace with regard to competition or other
media?
E-mail, texting, social media.
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and “deals”?
Yes, doubling up and Mobile texting.
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
Circulation and change method of delivery.
Janelle M. Anderson
Executive Director (Janelle@wisad.com)
Wisconsin Community Papers
President (Janderson@pdsadnet.com)
Publishers Development Services, Inc.
101 S. Main Street
Fond du Lac, WI 54935
Phone 920-922-4864 Fax 208-441-8802
ATTACHMENT A, Page 21
Statement of Chris Brewer, MoneySaver Coupons
How will a 5% postal rate increase impact your business and your customers?
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
We have already cut back by 20,000 mailings per month and may reduce again
by another 10 to 15,000 if this next rate increase comes through. We have
considered reducing our frequency by half which would lower our annual mail
volume by nearly one million.
Will you be able to pass all or any part of the increase on to your customers? What are
your customers asking you to do with regard to prices? Are customers insisting on flat
rate contracts or are they willing to pay increases in advertising costs that relate to your
changes in postage, paper, etc.?
The simple answer is no. Some might pay it, but most hate price increases
and we end up looking like the bad guy.
What other things are you seeing in the marketplace with regard to competition or other
media?
It is as competitive as it has always been, but I’ve been seeking mergers and
shared mailings with other mailers so we can cut our postage rates. The
government never considers how entrepreneurs will adapt to this type of
brutal, short-sided regulation.
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and “deals”?
See above.
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
We’ve cut employees, we’ve cut benefits…while the postal employees get
tremendous benefits and could care less about my books getting delivered
without our DAL card or worse things like our books ending up in postal
dumpsters. (you don’t have to print that) As you can see, I’m just about fed up
with the postal service and can’t wait to get my online site redone and my
mobile app completed so I can fire the postal service completely…a loss of
$150,000 a year to them.
Chris Brewer
President
MoneySaver Publishing, Inc.
Springfield, MO
ATTACHMENT A, Page 22
[Company Name Redacted]
How will a 5% postal rate increase impact your business and your customers?
Will you simply pay the increase or will you cut back on the area and frequency of your
mailings?
Probably a combination of both. Some of our current circulation is close to
break even and a 5% postal increase would drop that circulation into the loss
column. Because that effected circulation may include market-wide
customers, we’ll need to determine if we absorb the loss in order to retain
those customers in the remainder of our profitable circulation.
Will you be able to pass all or any part of the increase on to your customers? What are
your customers asking you to do with regard to prices? Are customers insisting on flat
rate contracts or are they willing to pay increases in advertising costs that relate to your
changes in postage, paper, etc.?
We are being hammered daily by customers seeking rate decreases. We have
non-mailed competitors waiting to take advantage of any type of increases
associated with mailings. We are also being forced to take significant
newsprint increases. Though there may be some select opportunities to pass
on some of the incremental costs to do business, those will be few and far
between….and nowhere near enough to mitigate the additional expense we
have to absorb.
What other things are you seeing in the marketplace with regard to competition or other
media?
As it relates to mailed competitors, we are seeing an increase in the marriage
mail of like competitors inserted into each others products. All in order to
offset postage expense. We are also seeing a drop in mailed frequency from
some competitors; ie. quarterly vs. monthly. And some have just folded. The
local newspapers are aggressively packaging and bundling their product
lines, to include their cable and local network holdings, to attract or retain
customers.
Are you doing anything with private delivery, doubling up your distribution with other
mailers, or offering your customers different types of media and “deals”?
We continue to evaluate private delivery options and have had conversations
with newspapers about joint distribution ventures. So far, none of the options
are attractive enough that we would consider diluting our brand with marriage
(mailed or non-mailed) distribution. I know these increases in postage and
newsprint will re-ignite conversations about those options. Maintaining
market share is a strategic position for us, so we continually look for
opportunities (or deals) to retain our customers and to help keep them afloat
during this difficult economic environment. Additional cost increases will
negatively impact our opportunities to maintain those relationships.
ATTACHMENT A, Page 23
What sacrifices or cuts have you (and your customers) had to make in recent years and
going forward?
For our [redacted] operation, those cuts and sacrifices have been
monumental. Over the past 18 months we have consolidated manufacturing
operations, having to let go well over 100 employees. The range of additional
value-added services for our customers has been scaled back to bare
essentials. We curtailed nearly 19% of our mailed circulation that had fallen
below our break even point. We are more aggressive with our circulation
strategy, tightening up on mailings…all designed to reduce our postage
liability.