The nonprofit industry accounts for 10 percent of all mail volume in the U.S. Thus, I’ve been keeping a close eye on recent developments at the U.S Postal Service.
And we just got a big piece of news on this front.
Postmaster General Louis DeJoy announced his 10-year plan to achieve financial stability for the USPS, which is projected to lose $160 billion in the next decade.
The good news is that the USPS is serious about getting its house in order. The bad news, of course, is the timing of the solution and the impact on nonprofit organizations.
The USPS has been operating at a net loss for more than a decade, so preparations to change this broken business model should come as little surprise.
The heart of the problem is twofold.
First-class mail is the Postal Service’s top source of profit, and people are mailing far fewer letters and bills today than they once did. 40 billion fewer pieces were mailed in 2020 than in 2008, in fact.
On top of that, the USPS is required to prefund healthcare costs for its employees—something no other company does.
In order to offset these losses, the strategic plan calls for:
DeJoy calls this “a very positive vision” that will bring stability to the USPS.
Improvements to reliability and deliverability are good things. The Postal Service hasn’t hit its goal of 96% delivered on time in five years, and that rate dropped as low as 38% during the 2020 holiday season.
Ultimately, it’s reassuring to know that the USPS isn’t going anywhere. And it’s easier to plan direct mail campaigns if we know when the mail will be delivered.
But there is a significant downside.
This strategic plan hits at a time when many nonprofit organizations are still struggling to survive financially.
While many organizations saw record-breaking fundraising results in 2020, they also saw a record-breaking need for their services. And nonprofits typically don’t have more than a few months of cash in operative reserves.
That means money is always tight.
Nonprofit mailers now face an increase in postal rates of 6 to 8.5% that will likely take effect this summer.
These cost increases are a matter of serious concern. Direct mail is still alive and well as a fundraising channel, and nonprofits can ill-afford to pay these ratcheted-up postage rates.
For nonprofit fundraisers, this puts an even stronger emphasis on data-driven strategies.
With a strong foundation in data, nonprofits can be smarter about direct mail. Through advanced analytics, they can understand the behavior and motivations of their donors. Then, they can optimize their approach and be more efficient about their mail quantity.
A problem for the post office also means an opportunity for digital.
We’ve seen online giving grow slowly but steadily for years, but it accelerated rapidly during the COVID-19 pandemic—20.7% growth year over year, according to the Blackbaud Institute. If we learned anything throughout COVID, it’s that nonprofits that were digitally prepared did remarkably well.
Cost increases in mail will lead nonprofits to leverage digital to a greater extent than ever before.
It’s a simple formula, right? If one channel is getting prohibitively expensive (direct mail), then we need to be much more efficient and optimized. If other channels are on the rise (digital), then let’s keep doing more of that.
Here we come back around to data again.
When resources are scarce, you can’t afford to misunderstand how your dollars are allocated. Only with a holistic view of their data, can nonprofits truly find the right balance of channel investment.
As we await the final outcome of these postage increases, I urge the nonprofit industry to support trade groups like the Alliance of Nonprofit Mailers and The Nonprofit Alliance. These organizations are petitioning the Postal Service on our behalf to hold the line.