on Sep 26th, 2013 in Pricing & Rates | 9 comments
 

The U.S. Postal Service’s governing body, the Board of Governors, voted this week to request permission to raise postage prices above the inflation-based price cap to generate $2 billion in revenue in 2014. It is asking the regulator, the Postal Regulatory Commission (PRC), to allow the Postal Service to raise the price of a stamp by 3 cents (to 49 cents), which is 2 cents more than the annual inflationary increase. Prices on other single-piece and commercial mail products would also increase. This request is known as an “exigent” price increase because it will exceed the statutorily mandated price cap that is tied to growth in the Consumer Price Index (CPI).

By law, the Postal Service can only raise prices on its market-dominant products, such as First-Class Mail, advertising mail, and magazines, by the annual growth in inflation. The law allows it to ask the regulator for a price increase above inflation for “exceptional or extraordinary” circumstances. In a public letter to customers, Board Chairman Mickey Barnett described the “precarious financial condition” of the Postal Service and the “uncertain path toward enactment of postal reform legislation” as primary reasons for seeking price changes above inflation. Barnett said if comprehensive postal reform legislation were to pass, the Postal Service would reconsider its pricing strategy.

The Postal Service filed for an exigent price increase in July 2010, saying the economic recession was an exceptional circumstance that threatened its viability. The PRC rejected the proposal and the Postal Service challenged the rejection in federal appeals court. The court remanded the original case back to the PRC, but at that time, the Postal Service did not pursue it.

If the PRC were to approve this current request, the Postal Service would raise prices on January 14, 2014. On average, postage rates would increase 5.9 percent – or 4.3 percent above CPI. Mailer groups are expected to oppose the exigent price increase. The PRC has 90 days to issue an opinion on the Postal Service’s exigent price increase proposal.

What do you think? Share your thoughts on the proposed exigent price increase.

9 Comments


You're not really serious are you?
Did any of you watch the recent Postal reform hearings?

Your mailers are the only customer/vendors you've got left?

"Cutting off the nose to spit the face".

"Passports"? What do you think the life expectancy of a Passport is in this age of Bit-Coins?
Your transportation network leadership or front line personnel do not even know how to exploit the wireless networks you own and operate, in some of the most radio frequency penetrated geographic zones in North America!

i could see if they did a good job but they r getting worse .my mail gets delivered all over my neighbors .
they cant do a good job any more .wished they would close down and it would be privatice they would not get pay for doing a bad job .they always got too much money for doing nothing they also dont answer their phones.so what good r they

Well, I disagree to a degree. I have observed "many" of the employees that do a great job!
Sadly, it's not the 5-10%-20% rule though. And, definitely evident in other places in givernment, where it's the same, or much much worse.
As you probably noticed during the giverment shut down, 50%-60% of the world didn't really care.
Universal Service does not mean to take a tractor and a 37' trailer, and a helper employee, and drive 23.9 miles through morning traffic to deliver
a political post card to a post office after 0950 when the carriers have already left and give it to the Supervisor of subject PO for delivery, then repeat that action
to several other PO's and return to P&DC to collect OT after tour, while MVS Supervisors drink coffee & eat cake! BTW, this would be an ideal time (elections) to observe this practice, unless of course, the winds of change have actually had some effect on this circus act!
All the while during a consolidation period when an existing smaller PO in same district is closing, and the attendant clerk at subject PO, who spent 16 years,
and never would have considered taking a sick day, or other day off, as work ethic would not permit; Is being excess-ed to various other PO's as Pist Poor management
sees fit. It's everywhere in giverment, or academia, among other large private sector companies w/1000 or more employees, where the concept of an enterprise is not the business model! And, you're right Martha! I don't receive 80% of mail anymore, except that which I somehow cannot exclude from the mails system by virtue of default via Universal Service technology restrictions or government exclusions. And, they still put the wrong mail in my box, or I never get the mail which was processed? Who would know? As my kids retort.., Jus sayn!!!

The current rate system has several problems as I discussed in this recent article on STPO: http://www.savethepostoffice.com/groundhog-day-post-office-time-exigent-rate-increase-again

General Williams recent testimony to Congress discussed the issue of elasticity specifically and rates more generally. It seems that the current request is something of a political action designed to get the mailers upset and have them push Congress for reform legislation.
Maintaining postal services in this country and maintaining and improving the postal network and postal infrastructure is going to require an appropriate rat system. Th current request may raise some revenues in the short term but in the long term the system still has problem. The current rate system and the logic supporting it is embedded with privilege and preference. It is a system which does not recognize the value of the postal network as national infrastructure but instead views it as capacity captured by and serving some rather narrow industry interests.
If we want to preserve the aspects of postal services that support universal service as well as some of the intangible values inherent in universal service then we'll need to move to a rate system that reflects those values. The current request is merely tactics that don't serve any useful strategic vision.

Since Congress couldn't pass or even agree on a Postal Reform Plan, the USPS had no other choice but to ask for a rate increase. Will it hurt business mailers - you bet. Under the rules set by Congress the USPS is in between and rock and a hard place.

I agree, the Postal Service has few choices. It has 5 days of cash on hand and limited ability to raise sufficient funds with a price cap, or aggressively cut costs or reduce services to adjust supply with demand given the constant congressional interference. I suspect this modest "exigent" price increase will not drive customers away. Certainly, most stamp users are asking "why not just raise it to 50 cents and leave me alone for a while?" (They don't understand the price cap, nor should we expect them to. Convenience is on the mind of retail customers.) Business mailers will complain, but in all likelihood, a roughly 6% increase will not drive them completely away, although we might see volumes dip a bit initially. Perhaps this price increase results in the Postal Service losing some of those "below cost" products and ends up saving money by losing this costly mail.

You need some out of the box thinking instead of the old stodgy run of the mill "we need money, raise prices" thinking.

I own a small business. Not just small, but tiny. A nano-business if you will. At today's current postal rates, plus adding in printing costs, I can't afford to send out mailers. Raising prices means potentially losing customers - and even if you don't lose customers you certainly don't gain new ones. Then you'll just have the same problem again in maybe a few years. It's a band-aid that won't hold for long.

Here's an idea that goes against common thinking. CUT the rates. WHAT? Yeah, lower the rates - take the Walmart approach and increase the volume. It works for Walmart. If I could afford to send out direct mail - I would. Instead I use free Internet sources to advertise. I have to wonder how many other nano-businesses are in that boat. Make a massive cut so that anyone could afford it. Think about the guy running a business on a shoestring (that's me). I don't have $500 to spend on advertising. Scraping together $100 would be tough. Make it $50 or less for me to get the word out to 10,000 prospects and I'll keep coming back! That $50 needs to include printing.

Ink a deal with a printing service to get cut rate printing for postal customers. Pump up the volume with synergy. More business for the printer, more business for the post office... more business for me. More business for me (and you) means more cash available to spend which means more growth for me, you and the printer.

Another possibility is to facilitate sharing of ad space. Provide a service to we nano-businesses whereby we each get a portion of a page, and we all share in the cost. Instead of me having to go find another business owner that would be amenable to the idea the PO can offer it as a free service (the pairing of 2 or more businesses). Contract out the graphic design work (the placing of multiple ads on a page - a very simple task) to a printer who provides cut rate services as described above. Voila! Everybody wins.

Or take the vistaprint.com approach. FREE! For about a year they gave me FREE products! Larger quantities were available for a price, but they got my attention - and my business by letting me have significant quantities of free products that were useful to me (like all kinds of marketing materials - business cards, banners, magnetic signs, post cards, etc. etc. etc.). You could offer a similar promotion, letting me have free delivery of my mailers for a healthy time period (like a year or two) so that I can generate meaningful sales - coupled with a significant discount from a printer that you contract with to get us all a volume discount. Give me enough time to generate some sales so I can start affording to pay higher rates. If you help me make sales, I'm not going to mind paying for your services - but I need a leg up. Give me that leg up and I'm going to give you my business. I suspect a lot of others have similar views - all businesses need to advertise but not all businesses have the upfront cash to spend so we don't do very well because of it. Help us grow, and the entire country - including the postal service - benefits!

No...I cannot see postal prices continuing to climb. I see, first-hand, how mail, packages, etc. are handled by the USPS and I dislike what I see. Lost letters, lost packages, damaged mail, damaged packages over and over with no improvement. The service gets worse and yet USPS keeps pressing for more money...I have witnessed USPS emnployees handling mail and packages---tossing them through the air like balls, ripping open mail going through sorting machines...complete carelessness and irresponsibility. And to see service like this at the salaries they make---it it disgusting!!

I really miss not being able to send/receive real-life letters or cards. With the price of materials PLUS the postage, mailing them has broken my bank. My Christmas mailings use to top 200 pieces and slowly I cut back. For the first time, 2013 I resorted to eCards to all friends and most family for Christmas. I realize the costs, i.e. labor etc. for the postal services (I'm including UPS, FEDX, etc) has to keep pace and like the candy bar whose price has remained consistent, the size has diminished much to the chagrin of customers. Herein lies my point. If the cost to mail cards was not so exorbitant, maybe more customers could be enticed to generate more business. I pose this question: How can the post office grow their business through its customer base? Being competitive in services and quality is only part of the answer. Having been in the postal business longer than any other, who but USPS has a better understanding of customer needs. The only other area is price that will attract lost revenue back. So, until there is a less costly way, I reluctantly attach $.86 to a birthday card to my son and gulp as I realize the +$12 for a package of home made cookies to ship parcel to my brother that is due to arrive ten days stale. Next year I may have to save myself the time to bake by ordering online a baked goods delivery thus freeing up the extra time to drive an hour to hand deliver a card plus a hug to my boy.

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