Winter Chill

The upcoming postal rate hike, touted as the smallest in U.S. Postal Service history, came as a relief to some commercial mailers but leveled a crushing blow to the nonprofit sector.

“For nonprofit mailers this is a crippling increase,” says Neal Denton, executive director for the Alliance of Nonprofit Mailers, adding that nonprofits can expect increases from 11% to 20%.

Big commercial mailers, like catalogers Lillian Vernon, Lands’ End and Coldwater Creek, say the overall 2.9% increase to take effect Jan. 10 will have a “minimal” impact on mail plans.

But for nonprofits, the scramble has begun to find ways to maintain donor bases in the wake of the increase, Denton says. Many are anticipating deep cuts in prospecting efforts and tough negotiations for list rental costs.

The Center for Science in the Public Interest-a Washington, DC-based nonprofit organization that publishes a monthly national nutrition and health newsletter called “Nutrition Action Healthletter” with a circulation of 900,000, expects the postal rate hike to add $125,000 to $150,000 to its prospecting postal costs alone next year, says Dennis Bass, deputy executive director for the group.

And because of the increased costs, Bass says the organization will most likely cut prospecting efforts, mainly done via direct mail, byas much as 10% with a predicted loss of 50,000 to 100,000 subscribers.

The organization plans to mail 20 million prospecting pieces this year.

“The postal service has never liked the mandate from Congress that they had to provide lower rates to nonprofits,” Bass says. “They’ve done everything they can to get rid of those rates and to bring them up to commercial levels.”

In line with this thinking, the Alliance of Nonprofit Mailers has filed an appeal with the United States District Court of Appeals claiming that the rate hike is illegal.

And, experts say, as the date for the increase draws near, mailers will be looking for deals at the negotiating table such as lower base rates, name exchanges, decreased selection charges and increased list performance.

“Brokers get killed,” following a big postal rate hike, says Joy Contreras, vice president of consumer list management for Edith Roman Associates Inc., Pearl River, NY.

Mokrynski & Associates Inc.’s Howard Kupfer agrees. “When costs go up, whether it’s postage or paper, there’s always a little bit more emphasis from the mailer for the broker to get the better and better deals,” says Kupfer, senior vice president of list brokerage.

The Alliance’s Denton says nonprofit mailers, particularly the smaller organizations which make up 70% to 75% of the nonprofit industry, that don’t have the kind of pre-sortation and automation technology that brings deep discounts to larger mailers, will see postal increases as high as 20%. Increases that could re-route funds from primary services to postal costs, prompt a change in mail frequency from weekly to monthly, or worse, force small, community-based nonprofits to shut down, he says.

Fundraisers at Disabled American Veterans hope that a two-year effort to improve the group’s direct mail efforts will offset the postal increase. That hike is expected to cost the organization an additional 6%, or $800,000 in postal costs next year, says Max Hart, director of fundraising.

The organization mails 60 million renewal and prospecting pieces each year.

To increase net income, Hart says, mail frequency to supporters was upped from four to five times per year. Prospecting efforts were increased and new design elements and creative have been tested, “We do not have the ability to pass the increased costs along to our customers,” he notes.

“You’ve got to really critique and tweak in every area you can,” says Valerie Bloom, a broker and account manager in the fundraising division at Millard Group Inc., Peterborough, NH. “You just want to put the best plan in the mail that you can.”

Some nonprofits, Denton says, aren’t even aware of the big increase and won’t discover it until they walk into the post office with a tray of mail.

“The Postal Service has been spending so much time thumping themselves on the chest trumpeting the low increases that a lot of nonprofits have been lulled to sleep and are just unaware that these rates are going to be so much higher,” Denton says.

Edith Roman’s Contreras explains that even though the overall increase is small, nonprofits as well as commercial mailers will still look for a variety of options to cut back on mailing costs. Email, which wasn’t as popular during the last big postal increase of 14% for third class in 1995, may be a popular alternative . “Now, there’s a new option and that is to email your message. There is no cost of postage,” she notes.

Mega mailers like Land’s End, who mailed 230 million catalogs worldwide for fiscal 1998, are not changing its mail plan based on the postal increase, says Charlotte LaComb, manager of investor and financial relations for the cataloger.

LaComb called the increase “small” adding that “while we always hate to see the cost of business going up in any way, we know that happens.”

Lillian Vernon’s David Hochberg says, existing customers will not be affected by the rate hike but that prospecting may be “minimally” affected. He cautions that mailers will still “mail heavily” prior to the increase causing postal delays in customers receiving catalogs. LillianVernon mails 178 million catalogs per year.

But, experts say, even while big commercial mailers breath a collective sigh of relief, they may feel a pinch in list rental revenue. Nonprofit mailers, having to cut back on prospecting efforts, will continue to mail donor files but trim list rental costs in the secondary markets, catalog and publishing, Bloom says.

Bloom conducted an informal survey among mailers, including a number of large nonprofits, who indicated the increase was expected and planned for.

“On the larger scale, mailers have been preparing for the increase, it’s the cost of doing business and they’re going to put it in their plans and work around it the best they can,” Bloom says. “The bottom line is, people have to stay in the mail, they have to maintain their donor base.”