Quadracci: Put USPS on Path to Sustainability

SUSSEX, WI—Quad/Graphics Chairman, President and CEO Joel Quadracci urged Congress to move swiftly to put the U.S. Postal Service (USPS) on a path to sustainability, noting that the $65 billion Postal Service is at the core of a $1.3 trillion mailing industry that provides family-supporting jobs for 8.4 million Americans, nearly 200,000 of whom live and work in Wisconsin.

Quadracci shared his insights on the importance of the U.S. Postal Service (USPS) to private industry and the U.S. economy at the Senate Homeland Security and Governmental Affairs Committee’s hearing on "Solutions to the Crisis Facing the U.S. Postal Service" on Feb. 13. He was the only printer and member of private industry invited to testify.

"The Postal Service is the backbone for a large portion of the private sector and plays an integral role in our economy, extending across every type of mailer and the printing, paper and technology industries that supply them," Quadracci said in written testimony provided in advance of the hearing. "These businesses support services in a marketplace that include cost-effective advertising, magazines, catalogs, e-commerce and prescription drug fulfillment, as well as what is still a huge amount of statements, bills and greeting cards, and an expanding package delivery segment."

Quadracci believes ensuring the viability of the USPS is not a partisan issue and that Congress has the ability to not only save a proud American institution, but also support and promote a vibrant private sector.

It is interesting to note that both of Wisconsin's senators serve on the Homeland Security and Government Affairs Committee. In fact, Senator Tammy Baldwin (D-WI) met directly with Quadracci following the hearing to better understand the importance of the Postal Service to the Wisconsin business community and the U.S. economy as a whole.

During his testimony, Quadracci said that while print is changing and will continue to evolve in our multichannel world, it is still an effective marketing and communications medium—and one that connects and integrates well with other media channels. However, as marketers lose confidence in the long-term sustainability of the Postal Service, they may choose to redirect their marketing spend to other channels.

"The uncertainty is there and they’re not sure what to do," he said of marketers who are seeking the best channels for maximizing response rates and revenues. If postage costs begin to outweigh the benefits from increased response, for example, marketers may move away from printed mailings to other media channels, he explained.

"The competition is real and it is out there," Quadracci told the committee.

Among the core elements of postal reform Quadracci would like Congress to implement are:

• Ensuring the USPS has the authority to streamline its operations. The USPS has infrastructure and capacity to handle and process 300 billion pieces of mail annually. According to USPS estimates, mail volume will only be 153 billion pieces in 2013. It’s important that the USPS be able to right-size its operations, Quadracci said.

• Lengthening the amount of time the USPS has to pre-fund healthcare benefits for retirees. The current 10-year amortization schedule has resulted in unaffordable $5.5 billion annual payments on which the USPS has already defaulted twice. Extending payments over a longer period of time would relieve some short-term financial pressure while still enabling the USPS to meet its retiree benefit obligations long-term.

• Providing the USPS the flexibility to manage escalating healthcare costs without disadvantaging employees or retirees. Quadracci shared that it is possible to improve the quality of healthcare while reducing costs. "Too much of healthcare talk has been about who pays for what as opposed to how do you pull the costs out. There are ways to pull out costs," Quadracci said, citing Quad/Graphics' own success with focusing on preventive care through its 23-year-old QuadMed subsidiary.

• Addressing volume declines by maintaining the postage rate caps and pricing flexibility the USPS needs to develop new products and services and, ultimately, attract more business. Quadracci noted that the USPS' use of pricing incentives to promote QR-coded mail works. He cited the example of a client who used a QR code on a mailer to link shoppers to a product demonstration video. The client saw an approximate 20 percent increase in sales of the featured product.

Acknowledging that postal reform is a complex issue, Quadracci nonetheless urged the committee to move forward as fast as possible to solidify the USPS' future. The long-term success of the USPS is critically important for the United States, he said.