• on May 22nd, 2009 in Pricing & Rates | 3 comments
    Sale is not a word usually associated with the Postal Service, but there is a first time for everything. Mail volume has dropped significantly this year, and the Postal Service is proposing a “Summer Sale” to encourage mailers to send more Standard Mail. The Postal Service believes it can use its excess capacity to deliver the additional mail volume at a relatively low cost.

    How will the proposed Summer Sale work? Qualifying mailers will receive a 30 percent rebate on any Standard Mail letters and flats sent from July 1 through September 30 this year above their individual threshold. Only mailers that sent at least 1 million Standard Mail letters and flats between October 1, 2007, and March 31, 2008 can participate, and mail service providers — companies that consolidate mail for others — are not eligible for the program. The threshold for each mailer will be based on the mailer’s previous summer volume and current volume trend. The Postal Service will also double check each participating mailer’s October 2009 volume against its trend. If it appears as though mailers shifted volume to the summer and mailed less in October, the Postal Service will reduce the rebates to account for the lost October volume.

    The Summer Sale is designed to increase mail volume and help the Postal Service gain some knowledge about how to improve its data systems and become more efficient at developing and implementing new offerings in the future. The Postal Service believes the program will provide an incentive for profitable new mail and boost a key customer segment, while enhancing its financial position.

    However, the Summer Sale is not without risks. If mailers simply shift volume to the summer months or switch advertising pieces they used to send as First-Class Mail to Standard Mail, the Postal Service will be giving discounts for mail volume that would have been sent anyway. Another potential risk is the administrative costs of the sale. The Postal Service expects these to be less than $1 million compared to potential revenue gains of $38 to $95 million; however, if its estimates prove inaccurate, it is possible the costs of the program could exceed the benefits.

    The Postal Service notified the Postal Regulatory Commission about the program on May 1, 2009, and the case (Docket No. R2009-3) is currently pending. What do you think about the proposed Summer Sale? Will it succeed? Do you foresee any difficulties in administering the program?

    This topic is hosted by the OIG's Cost, Revenue and Rates directorate.

  • on May 18th, 2009 in Products & Services | 29 comments
    Do you know why some magazines include postcards in the middle? Or have you mailed a letter back to a company in their envelope without having to put a stamp on it? Did you ever wonder how this service works?

    The Postal Service offers a service called Business Reply Mail (BRM). By opening an account with the local Post Office, a business may supply their customers with return envelopes or labels. This allows customers to send a reply via First-Class Mail or Priority Mail. The business pays the postage and a per piece fee only for the pieces returned. To ensure the postage is collected, clerks at the delivery Post Office calculate the amount due and withdraw the money from a customer account. In some cases, carriers collect the postage when they deliver the pieces to the business. Generally, BRM pieces are identified through automation process; however, the Postal Service relies on clerks and carriers to identify and hold out any BRM pieces that have not been isolated through automation.

    Recent changes in the public’s mailing habits alongside increased use of the internet to communicate with customers have led to reductions in BRM volume. This coupled with a smaller workforce with greater responsibilities may increase the risk to the Postal Service of not collecting all revenue from BRM.

    Do you think a change in the way the Postal Service charges for these pieces would increase the mailing volume while also helping the Postal Service reduce work hours? Is a flat rate based on quarterly volume estimates a more attractive option? Share your thoughts on BRM.

    This blog topic is hosted by the OIG's Field Financial East directorate.

  • on May 11th, 2009 in Products & Services | 9 comments
    While 2008 was not a good year for mail volume in general, one source of optimism for the future is the continued growth in mail tied to spending on political campaigns. This is spending during political campaigns on direct mail to promote candidates or issues and to raise funds. Fundraising requests can also generate single-piece First-Class Mail responses. Although in the recent election there was much discussion of President Obama’s creative use of the Internet to communicate with supporters and raise funds electronically, for election campaigns below the national level direct mail is still the most effective tool for reaching localized areas. In an article in DMNews, William Berry, president of William Berry Campaigns, was quoted as saying, “Right now there’s just no effective way to really localize new media direct marketing. Remember, 98 percent of candidates are running for offices such as city council or state assembly and 85 percent of their ad budgets are still direct mail — it would be malpractice to recommend anything else.”

    The revenue potential of expanding voting by mail has received attention, but campaign direct mail may offer even greater opportunities for the Postal Service. Spending on campaigns has gone up every election year, even in years when there was not a national election. Campaign spending on election mail amounted to $648 million in 2004 and $707 million in 2006, before rising to just over $1 billion in 2008. While there have been efforts to market election mail (voting by mail), the revenue potential is not as significant as local campaign mail. For example, if the entire country were to adopt voting by mail, and even if as many as five mailpieces (registration, confirmation, voter guide, the ballot, and return of the ballot) went to or from each of 180 million registered voters, the number of mailpieces would not surpass a billion. The associated revenue would only be several hundred million dollars. Additionally, there is a risk that Congress could mandate that the Postal Service carry election ballots at a discounted rate or for free. The Postal Service has made a special effort to target official election mail, but a focus on campaign direct mail could have a higher revenue potential.

    How should the Postal Service reach out to campaign mailers and political advertisers to generate more revenue?

    This topic is hosted by the OIG's Sales & Service directorate.

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