Why Isn’t the U.S.Postal Service Profitable?

By Paul Johnson, President CMS – Complete Mailing Solutions

Since we originally posted this blog (07/2017), the Coronavirus has turned the world upside down.  Like many businesses, the United States Postal Service, arguably one of the key most essential services, is struggling even more in the face of this international pandemic.  In fact, mail volume declined about 30% in March and is projected to be down 50% by the end of June.  Unlike UPS and Fed/Ex, the USPS is not allowed to raise pricing at will to compensate for a change in demand.  At a time when the Postal Service is needed more than ever, Congress needs to get serious about providing assistance to sustain this service on which all Americans rely. #USPS_Is_Essential
Read on to find out why the USPS is in the condition that it is:

“Have you ever wondered why the USPS isn’t profitable?”

What if Congress passed a law requiring businesses to prefund employee healthcare and pensions for 75 years in advance? Can you imagine how that would impact your company financially? It’s interesting that Congress requires 100% funding for 75 years in advance for the USPS when,according to The Motley Fool,the U.S. Government is only 42% funded.

But, wait, there’s more…

  • What if you couldn’t increase your pricing based on changing market conditions (such as rising fuel costs or competitive pressures)?
  • What if you were required to distribute your goods/services to a broader market, even if that market was unprofitable?

If you’re like most executives you’d say: “No way! We can’t survive in that environment!”

Profitability image shown by magnifying glass and chart

Welcome to the Postal Service! These are just a few restrictions that the USPS must grapple with. Each of these individually would have a significant hit to the profitability and sustainability of a company. Collectively, they’re nearly untenable.
Remember, the USPS does NOT receive and revenue from the American taxpayer, their only source of revenue is for products and services!
And the list goes on:

  • They cannot add a fuel surcharge to pricing (as FedEx and UPS can) to maintain profit levels.
  • They are required to provide service to people and businesses in remote areas even though it may be highly unprofitable. In fact, the USPS delivers packages for UPS and FedEx in geographic areas UPS/FedEx consider unprofitable.
  • Although the USPS is not a government entity, it is governed by Congress and the Postal Rate Commission (PRC), which restricts potential avenues for expansion into other products and limits competition with other companies (such as UPS and FedEx). Congress has been influenced by competitors to get the USPS to abandon new products. Here are some examples cited by The Motley Fool:
    • Plans to develop an online payment system in 2000 were scuttled when the Internet industry cried foul.
    • Public copy machines.
    • In-store sales of phone cards and money transfers.
    • Selling postal meter cartridges (Pitney Bowes objected).
  • The USPS is required to invest exclusively in government bonds while private companies can invest in a wide variety of securities to improve profitability.
  • The USPS is forbidden by law to lower prices to get more business.

There is much criticism of the Postal Service for losing money. However, without unreasonably burdensome restrictions, it would likely be a different story. Not only do many of these restrictions not make sense, they directly undermine the success of the USPS. Many would have us do away with the Postal Service altogether. Yet, they provide a tremendously valuable service to our country across a huge geographic expanse and at very low rates. Services in Europe that are comparable to our
first class
delivery, cost at least two to three times more than in the U.S. Many projections around elimination or privatization (full or partial) of the Postal Service paint a picture or greatly increased prices and decreased service levels and quality.

So, what’s the answer? How about if we consider a simple solution? What if we just got out of the way (by relieving the USPS of unnecessary burdens) and let them run their business as a business?

For a more recent post see why we think It’s Time to Allow the USPS to Compete Fairly

Now Is Not The Time to Fold Your Wings!

By Paul Johnson, President CMS – Complete Mailing Solutions

We are in uncharted territory as we face the COVID-19 pandemic.  The landscape is changing daily, making it difficult to make business decisions and navigate.  Its impact will clearly be far reaching, although to what extent we cannot know.

economic slowdown graph

If you’re like most businesses, you are probably drowning in the midst of crisis management, trying to figure out the logistics of keeping your business going.  Businesses often react to challenging times and market downturns by folding their wings and becoming very conservative with expenditures.  In some areas of the business, this is wise. For example, you don’t want to make large investments in tangible products if consumers will not be able to purchase them for some time. 

However, history tells us there is one area where investment should continue – marketing and communications.  How you keep your company stays in front of your current customers and prospects can dramatically impact how quickly your business will rebound and be stronger once things improve. 

While it may not be possible to keep marketing expenditures at the same level as in a growing marketplace, you can make wise choices that will help your business maintain market share during a downturn and be poised to grow once the economy starts to turn around.  In fact, history has shown that continuing marketing efforts during times like these can increase sales and market share dramatically down the road.

Why You Should Keep Your Marketing Communications Flowing

  1. Your competitors have probably gone dark – The natural tendency is to stop marketing efforts.  However, is it very likely that your competition is doing so.  This “opens up the airwaves” if you will, so to that your name and message has a lot less clutter to break through to be heard.  It speaks clearly to the consumer that you are in business, ready and willing to provide your product or service.  Once things get back to normal, consumers will remember you name (especially since there may be a question regarding which businesses still are in existing). 
  2. It Takes Time For Marketing Communications to Be Effective – It takes time for marketing efforts to ramp up and take hold again.  The adage is that it takes 21 exposures to a marketing message to get through.  You can easily lose 3-6 months to build up awareness again if you have not been communicating.  If your competitors have gone dark, now is the perfect opportunity to grab more market share in the future.
  3. Things will return to “normal” – While consumers and businesses may have cut back purchases for the time being, there will be an end to the current situation.  At that point, pent up demand will burst forth.  By keeping your company top of mind, the natural inclination will be to contact you first for whatever goods or services they want. 

So What Should You Be Doing?

There are many marketing tools that don’t require heavy expenditures that will keep your name in front of consumers:

  • Your Website
    • Update your site with relevant COVID-19 messaging.  Are you still in business?  Do you have full or reduced hours?  Can you still handle requests?  How are you keeping your customer’s safe?  All these convey that you’re in business and doing everything possible to meet your customer’s needs.  We’ve added a pop-up to our website that provides this information as well as a banner on our home page that lets viewers know we are monitoring CDC guidelines.

    • Highlight any special offers to encourage sales.  At CMS, we’re promoting a special offer to our customers, which is prominently featured throughout our site.

    • Update and refresh your site to make it more appealing and user friendly.  Drop under-performing products and services that are a drain on resources and your bottom line.

  • Email Campaigns
    • With a significant number of people working remotely now, utilize email campaigns, on a regular basis, to inform customers and prospects of your status and make attractive offers to encourage sales. At CMS, we are using this time to test content, offers, frequency and scheduling of our emails.

    • Provide value-added information to consumers that will help them cope with the current situation. Share positive stories about people helping others, jokes, fun games to lift people’s spirits and help them through. If these can be related to your product or service (without it turning into an obvious sales message all the time), all the better.
  • Social Media
    • A perfect way to share helpful and encouraging messages and let people know you’re still in business.

    • Share and repost helpful information or how your customers, friends, family have stepped up to help one another. Now is the time to share as much positive news as possible.
  • Mail and Parcel Shipping
    • The USPS is still going strong. If you’re mailing invoices and statements to current customers, consider adding marketing messages and offers that will help encourage additional sales. We offer tools, like OMS500, that allows you to easily customize messages on invoice and statements.

    • If you are still shipping parcels, include a thank you message to your clients to convey your appreciation of their business. At CMS we are including along with a Thank You note along with a special offer to our customers.
  • Share Your Gratitude
    • While this is a tough time, we’re all in this together! Take a moment to reflect on the good things that are happening in the midst of all the negative press. Pay it forward to others with offers to help or special offers to ease the burden for your customers. We have weekly video staff meetings to keep in touch, share news and pull together as a team. Take a deep breath – we will come out of this stronger and closer!

Now is definitively not the time to put your head in the sand.  So don’t give up on your Marketing Communications, with focused effort, your business can survive and be even stronger once this storm passes.

How are you communicating with your customers?  How have you been expressing your gratitude to your customers, family, friends and community.  Share your ideas and experiences with us!