Oct 9, 2007
In Memory of Lysander Spooner (Some thoughts on Postage)
This week’s column is dedicated to the memory and spirit of Lysander Spooner. I’ll get to Lysander in a while (or, to paraphrase James Thurber, you could google him). It is one in a series that follows the effort involved in creating a direct mail piece for the first time, which I did in the months leading up to Graph Expo.
By May, thanks to the fine efforts of Prinova, I had three really good designs targeted to the three constituencies I hoped to attract to our booth: operations personnel, marketers, and executives. I purchased a list of names from a list broker of people who had attended Graph in 2006. The list broker segmented the list for me into A, B and C so that all I had to do was merge the letters with the fields on the appropriate template and I was set to print. I had engaged Kodak GCG out in Dayton to print the mailing and had a very Barney type of three-way teleconference with Prinova and Kodak where we discussed our objectives and procedures and everything seemed to be progressing smoothly. And it seemed all was well.
Until the next day after the conference call when Kodak’s Roger Parrett sent me an email asking how I was handling postage. I outlined my plan succinctly: I had no idea.
Now here’s the thing about postage: you have to show that you paid for it. This is known in postal circles as “postage evidencing.”
So I looked at my envelope design: no evidence of any kind of postage.
And I knew from past experience that I had three basic options: stamps, meter or permit.
My mailing list contained about six thousand souls: I figured out immediately that I wasn’t going to use stamps. I have a small staff and I’d lose them if they had to affix that many stamps. I know there are machines that affix stamps but I don’t happen to own one and I wasn’t going to buy one for this particular project.
Meters were an option (full disclosure: I used to work for Pitney Bowes) but I wasn’t sure how the metered indicia would look or, more importantly, be read, on my very colorful envelopes. So I decided on permit mail. My plan was to buy a permit and get an indicia in black that would look very nice on the envelope. So I went to my local Post Office and got on a line where there was a handwritten sign on 8 1/2 by 11 paper that said, “Business Solutions” taped up on the wall next to the window. It was a business solution that I was after.
When it was my turn I told the man that I was interested in applying for a postal permit in order to do some direct mail. He rang up a colleague of his on the phone who came right out and escorted me through the back of the post office, past the sorters and the little boxes and all kinds of bins full of magazines and catalogues to a little office. There he showed me a sheet of indicias that I could choose from and pulled out a form that he began to fill out for me. And it became very clear fast that either I didn’t have enough information about the mailing size and drop location or that acquiring a permit was a very complicated piece of business.
And this is where Lysander Spooner comes in.
Nineteenth Century abolitionist, libertarian, entreprenueur, political philosopher and legal theorist, Lysander Spooner was the type of guy that personifies America at its very best and sometimes worst: the rugged individualist. Although he never attended college he became a layman lawyer and was smart enough to influence Frederick Douglass about the unconstitutionality of slavery (and, in doing so, nearly split the abolutionist movement in half). Later, though he always denounced its embrace of slavery, Spooner sided with the Confederacy’s right to secede on the basis that they were choosing to exercise government by consent. And, along the way, he somehow found time to think about the mail.
Apparently, in 1844 spiraling postal rates were accompanied by scandalously slow service. It cost 18 3/4 cents to send a letter from Boston to New York and 25 cents to send it to Washington, D.C. A letter sent from Boston to Albany, NY written on a 1/4-ounce sheet of paper, carried by the Western Railroad, cost 2/3 as much as the freight charge for carrying a barrel of flour the same distance. Spooner was decisive: a high cost for poor service could only be remedied by competition.
Spooner knew that the Constitution compelled Congress to provide for mail delivery, which led to the founding of the postal service. Yet he made the claim that the postal department was an unconstitutional monopoly because the Constitution did not specifically declare that a private citizen could not do likewise. And so he founded the American Mail Company as a direct competitor of the US Postal Department.
Spooner offered to deliver letters with no limit on weight at reduced rates. He ran ads on the front page of the newspapers offering daily delivery to and from DC, NYC, Boston and Philadelphia--twice a day between New York and Philadelphia. Postage was 6 1/4 cents per each half-ounce. Twenty stamps for a dollar.
He proposed to carry letters by the most rapid conveyances of the day--railroads and canal barges--and at the cheapest rates, and to extend the operation over the principal routes of the country as needed at a uniform and minimal rate.
The public enthusiastically approved the venture. But the Postal Department and members of Congress were outraged. They sent a warning to railroad executives that government mails would be removed from their lines unless space and passage were refused to private letter carriers. They arrested one of Spooner’s agents for illegally transporting mail on a railroad. And soon the matter went to court.
The U.S. Circuit Court expressed doubt that the government had the right to monopolize the transportation of mail. Faced with competition for the first time in its’ history, the Postmaster General went before Congress to plead for lower postage rates.
In March, 1845, a reduction of postal rates was approved. Letters weighing less than a half ounce could be sent any distance under 300 miles for five cents. The rates for newspapers were reevaluated and changed so they could be mailed without charge within a 30-mile radius. Spooner had won an important victory. But he still wasn’t satisfied. He responded by lowering his rates even more.
In 1851 Congress responded by again lowering postage rates to three cents for delivery anywhere in the country and simultaneously enacted a law to protect the government's monopoly on the distribution of mail. The public won but Spooner’s company was defeated. He died in 1887: a forgotten man.
From 1851 until 1958 postage remained fixed at three cents. In 1958 postage climbed to four cents and it has not stopped climbing ever since. In fact, the latest postal reform legislation that passed last year allows the Postal Service to raise rates annually, as long as the increase doesn’t exceed Consumer Price Index. Mailers should probably plan for annual postal rate increases from now on. According www.lysanderspooner.org some 72% of those polled agree with Spooner that the postal service is an unfair and unconstitutional monopoly. Food for thought.
But here’s the point of this digression: high postage is one of the most regressive taxes levied on businesses today. It hurts small businesses much more than large ones and in the long run ends up stifling competition. It drives down profit margins and makes volume the major success factor for mailers, which in turn leads to industry consolidation as larger players buy up smaller firms and merge to create super-companies. We have seen mergers and acquisitions skyrocket largely because the cost of postage is so high (approximately 70% of the cost of an entire mail operation).
And who can say that the Postal Service even benefits from the increase? The 2008 USPS Board-of-Governors recently approved a financial plan that anticipates a loss of $600 million. In addition, the “expected” $78.2 billion income figure (an increase of $3.2 billion) is based on having the May 2007 rates in effect for a full year, plus an anticipated increase in mail volume—this despite the fact that most everyone involved anticipates reduced mail volume due to those higher postage prices. So the loss can actually be more like $800 million to a billion.
High-volume mailers actually derive some benefit from the rate increase because the cost of sending an additional ounce of first-class mail actually decreased from 24 cents to 17 cents on an individual piece, which should boost the volume of “transpromo” mail at the expense of the less profitable (for the USPS) direct mail, which is usually sent standard class (which increased by one cent). Of course, this only makes the postage tax more regressive, not less so. But maybe what the USPS needs to do is lower postage rates and drive volume up. Just a thought.
But in the meantime what are we to do? As always, make each mailpiece count. Make sure the address is correct and the barcodes are machine readable. Get the best discounts available. What I did, to get back to my story, is I called PSI (this is where that earlier disclosure comes in handy). The smartest thing Mike Critelli ever did at PBI was purchase PSI in 2002 for $130 million. While the current business model won’t hold up as hybrid mail technology takes root, PSI has certainly been a winner.
After some initial discussion with Robert Glica and Brian Kelly from PSI about mail volume and the size and shape of the envelopes, I received an indicia to pass along to Prinova to include on the envelope along with instructions on clearing space on the bottom of the envelope face for a postal bar code. This meant that the piece needed to be re-designed to account for the bar code. At about the same time, I decided that I wanted each piece to be even more personalized to have more impact. But that’s a story for my next column.