Shape-based pricing – Not your standard postage increase

Jason H. Smith
BuyerZone Editorial Staff

Take notice: postage rates have risen again. But this time, it's more than just a straightforward increase. The new pricing method known as shape-based pricing uses weight, size, and thickness to determine the postage for individual mail pieces. This change, which went into effect on May 14, 2007, increased postage costs by an average of 7.6% and impacted the way most businesses send their mail.

Understanding shape-based pricing

Until the introduction of shape-based pricing, the U.S. Postal Service (USPS) charged the same rate for all letters, flats, and parcels of the same weight. However, pricing based on weight alone didn't accurately reflect the USPS's actual processing and delivery costs since processing awkwardly-shaped items required more resources and cut into productivity.

Now with shape-based pricing in effect, everyone using mail must measure the dimensions of each mail piece in addition to weighing it. These changes encourage businesses to use mailers that easily pass through the USPS's automated mailing machines. The more your mail complies with their standards, the more you can save in the long run.

As part of the shape-based pricing initiative, the USPS also introduced the highly-anticipated Forever Stamp. The stamp does not have a denomination. Rather, customers pay the first-class rate at the time of purchase and can use the stamps to mail letters even after postage rates increase. The Forever Stamp eliminates the need to add small-denomination stamps to first-class postage each time the rates change.

How does this impact my business?

Shape-based pricing impacts businesses differently depending on the quantity and frequency of their mailings.

• Businesses that only send small numbers of letters will see a standard increase in postage costs.
• Businesses with a heavy volume of mail may want to reduce the size of their mail pieces and purchase automated equipment to reduce costs.
• Businesses that send thousands of mail pieces per month will be affected the most, and may have to invest in automated equipment, new technology, and personnel to deal with these changes.

Preparing for shape-based pricing

If you depend on the USPS, there's no way to get around shape-based pricing: it's a necessary component of doing business. Even if you haven't yet prepared for these changes, you can still reduce your expenses and make it a more seamless transition.

Start by assessing how your business sends mail. Can mail currently sent as flats be reconfigured to fit into easier-to-process letter-sized envelopes? Are you using parcels to send materials that could be sent as flats? By changing the size and shape of your mail, you could qualify for lower rates. You may even wind up paying less than you did before the changes. See New postage rates for shape-based pricing for more details.

You can also make some adjustments to your mailings to reduce your costs:

• If you typically send multiple pieces of mail to the same customers each month, combine them into a single mailing to cut postage costs.
• Print on both sides of multi-page documents to reduce weight and thickness.
• Switch from bulky folders and brochures to slimmer flyers and coupons.
• Invest in addressing machines and letter folding equipment to cut mail processing costs and reduce staff time spent preparing your mail.
• Use address-validation tools, offered by the USPS, to ensure your addresses are correct and to help reduce undeliverable mail.
• Offer small rewards to customers who agree to accept documents by fax or email instead of physical mail.
• For larger parcels, consider shipping options such as FedEx, DHL, or UPS, who aren't currently subject to shape-based pricing.

Shape-based pricing equipment

With the rate increases, the last thing you want to do is add to your costs by miscalculating postage. You could take a ruler to each piece of mail, but that's only helpful for very small quantities. To accurately determine postage for large mailings, look into a template or a dynamic weighing platform.

If you work with relatively small amounts of mail, you may find a shape-based template helpful. This device, offered by the USPS and various postage meter dealers, costs about $75 to $200 and allows you to measure the dimensions of each piece of mail by hand. The tool features slots to check thickness and rulers to measure the other dimensions. You then look up the total cost based on your measurements and the package weight.

The template is impractical for large quantities of mail, though. For high mail volumes, consider a dynamic weighing platform (DWP). A DWP automatically measures and weighs your packages to accurately calculate postage. They're expensive – $4,000 to $5,000 or more – but they let you automate large amounts of mail quickly. They should also connect directly to your postage meter to further speed the mailing process.

For additional information about shape-based pricing, visit http://www.usps.com.