The office technology industry is changing. You don’t need me to tell you that. It’s been stated and restated, and driven home in numerous articles, webcasts, and in-person meetings. You’re aware of the issues and know you have a lot of options for overcoming them. Let’s be honest, you probably know that I’m going to tell you that postage machines are one great addition to a product lineup. What you may not be aware of is the numerous other problems postage systems can overcome, and how many of the industry’s challenges are tied together — for instance, the decertification of non-Intelligent Mail Indicia (IMI) compliant postage meters and declining office print and direct mail. The good news is that for every challenge, there is a solution, and from my perspective, many of those solutions involve mailing solutions. How? Let’s take a look.
The impending USPS decertification: The IMI-compliant solution
You may have heard, if you’re involved in the mailing business or simply do in-house mailing, that Information-Based Indicia (IBI) postage meters are set to become obsolete. The USPS has announced that all non-IMI compliant postage meters will need to be removed from the field by December 31, 2024; the last date non-IMI indicia will be accepted for postage, or for refunds, will be June 30, 2025. This change has the potential to disrupt business operations significantly, particularly for companies relying heavily on mail services.
What’s the difference between the two systems? Both are digitally based metering systems, but IBI technology was introduced in 1999, so is reflective of that era of technology. It uses two-dimensional barcodes that are encoded with information like the postage amount, origin and destination zip codes, class of mail, weight, confirmation and tracking numbers, and a cryptographic signature, as well as human-readable information. IMI is a more modern technology that captures significantly more data, and data is king for the USPS just as it is for everyone else these days. The additional data collected will enable the USPS to manage logistics and optimize the movement of mail throughout the mail system, as well as enabling it to automate, streamline, and improve security — another need we’re all familiar with.
So, where’s the challenge? At the beginning of the decertification, more than 800,000 IBI postage meters needed to be changed over. Fortunately, you hold the solution in your hands — transitioning customers to IMI-compliant postage meters. Investing in IMI-compliant postage meters is, therefore, not just about regulatory compliance; it is a strategic move toward improving business operations, solving a couple of problems at once.
Expanding the product line: The recurring revenue solution
The decline in office print is another challenge confronting the office technology industry that I’m sure you’re well aware of. As businesses shift towards digital solutions, the demand for traditional office printing has seen a slight downturn, making it necessary for dealers to expand their product lines to sustain revenue generation.
The closer we get to the USPS deadline for decertification, the greater the demand for those IMI-compliant postage meters, leading to a significant market opportunity. Many businesses that heavily rely on mailing services will likely be investing in new IMI-compliant meters, and they may also be looking for new suppliers in the process, making the opportunity go beyond simply replacing machines with existing customers.
However, the benefits of these devices extend beyond merely product diversification. The nature of the postage meter’s operation also implies that businesses will regularly need to purchase consumables to operate and send their mail. This aspect leads to a consistent revenue stream for dealers.
Maintenance and support services for postage meters are another potential source of income. Like any sophisticated device, postage meters require regular upkeep and may need occasional troubleshooting or repairs. By offering maintenance contracts or support services, dealers can ensure another consistent line of revenue. This recurring income can be particularly valuable, given that it can help maintain cash flow even once sales of new machines slow down.
Finally, as businesses grow and their mailing needs increase, there may be opportunities for dealers to upsell more advanced postage meters or related accessories. This potential for growth can further enhance the profitability of the postage meter segment of a dealer’s product line.
Reviving the decline in printed direct mail: The marketing solution
We’ve clearly established existing opportunities for mailing systems. You may be wondering, is there a potential for growth? After all, mail is in a slight decline, and that decline in printed direct mail is generally viewed as yet another challenge, not an opportunity. But let’s look at it a different way. According to the USPS’s latest financial report (yes, the post office has to release financials too), although first-class mail volume declined by 1.1 billion pieces, or 8.1% percent year over year, revenue increased $33 million, or 0.5% percent (hello, postage rate increases). Meanwhile, marketing mail declined, with revenue down by 4.3% on a volume decline of 1.7 billion pieces, or 11% compared to the same quarter last year. Is this downturn worrisome for dealers selling postage systems? Well, 28.6 billion pieces of mail is still a whole lot of mail.
Let’s look at that marketing mail segment. We’ve already outlined the case for direct marketing mail. There’s plenty of research to indicate that direct mail has excellent response rates, that consumers prefer snail mail over other marketing channels, and that the cost per acquisition of new customers is less expensive than it is via direct search and internet display ads, for example.
Let’s put this all together for dealers seeking new revenue streams that are still print-related. By encouraging customers to print and send more mail in-house using their postage machines, dealers can help businesses not only reduce their marketing and advertising costs, but their postage costs as well. Printing those marketing pieces — often specialized pieces with foils or embossing on special substrates — in-house on the specialty printers you sell them is another angle to the cost savings. You just need to demonstrate that direct mail is still a highly effective marketing tool; that a well-executed direct mail campaign can drive customer engagement and yield a high return on investment. By promoting the use of devices for printing and mailing, dealers can help their customers tap into this potential. In other words, you can help your customers become a well-oiled marketing machine, using in-house creative, printing and mailing services that can save long-term costs and drive new business.
So yes, the office technology industry is undoubtedly facing substantial challenges. However, with strategic planning and product diversification, these challenges can be effectively overcome. IMI-compliant postage meters, with their numerous benefits, can serve as the linchpin in this strategy, helping businesses navigate the changing landscape while ensuring continued growth and success.
Michael B. Hannon is an executive leader with extensive experience within the mailing equipment and financial services industries. Taking on the role of managing director in early 2020, he is responsible for all aspects of FP’s North American regional operations. Having moved up through the company, beginning in sales in 2007, he has a very hands-on, customer-centric and sales-focused approach. Gaining knowledge of the industry throughout his career, he has been able to develop and implement numerous processes and programs, like FP Finance and sales process automation, that have improved both sales and operations, leading to FP’s continuous growth in the region.
