• on Aug 20th, 2012 in Pricing & Rates | 5 comments
    Since the beginning of the Post Office and the Postal Act of 1792, certain types of mail have qualified for lower postage through preferred rates. It was assumed that these types of mailings yield social benefits for senders, recipients, and more importantly, a large nation. Preferred rates’ roots trace to the first federal postal policy, which recognized that disseminating newspapers at below-cost postage would advance the important social goal of educating the electorate. Soon after, magazines received special rates. For its first 50 years, the Post Office was predominantly a newspaper circulation service, because of the high cost of sending letter mail. (Sending a one-sheet letter 500 miles cost 25 cents, while sending a newspaper that distance cost only 1½ cents.) As the Post Office evolved over the next century, so too did the rates it charged for various types of mail. Regular letter mail rates were lowered to be more in line with the newspaper rate. Still, Congress considered a preferred rate for socially important mail to be so crucial it extended eligibility to more types of mail. A class structure was introduced to organize the types of mail. In 1894, Congress allowed nonprofit organizations to send their publications at second-class rates, the rates for newspapers and magazines. That statutory language evolved to create the nonprofit subclass in Second Class, a class now known as Periodicals. In the late 1920s, Congress added Library Mail as a preferred rate for mail sent to or from libraries. In the 1930s, President Roosevelt created a preferred rate for all books that is now known as Media Mail. In 1951, after 2 years of deliberation and strong appeals by charities and philanthropic groups, Congress created a nonprofit subclass in Third Class, today’s Standard Mail. When all of these preferred rates were established, congressional appropriations funded the Postal Service’s operations. And even until 1993, Congress appropriated funds to reimburse the Postal Service for revenues it lost by providing below-cost rates for certain types of preferred mail. Today, the Postal Service receives only a small appropriation for free mail for the blind and overseas voting. All other costs are borne by mailers. At times, Congress has reconsidered the public policy benefits of preferred mail in light of the potential for abuse and in consideration of the Postal Service’s financial condition. As we again dive into reform of the Postal Service, is it time to reconsider the modern application of preferred postage rates? Since the Postal Service uses revenues from postage to fund operations, can it afford to offer some types of mailings reduced postage through preferred rates? Or, does the nation continue to benefit when certain types of mail qualify for preferred rates? How should preferred categories be selected? Do you agree with the current categories or should other types of mail qualify for preferred rates?
  • on Aug 13th, 2012 in Products & Services | 29 comments
    More than 40 million Americans change their address each year, which means the U.S. Postal Service forwards an awful lot of mail. In fiscal year 2010, it forwarded 1.2 billion pieces. Under the Postal Service’s regulations, customers who fill out a change of address form have their mail forwarded to their new address for 12 months after the move. Mail forwarding costs the Postal Service almost $300 million a year. The cost to return mail to sender is another $800 million. The cost of mail forwarding – and returning to sender and treating as waste -- is baked into the overall First Class Mail rates, so all customers effectively pay for this service whether they use it or not. Canada Post has taken a different approach to mail forwarding, charging recipients either an annual or semi-annual fee when they move. Residential customers pay $75 for 12 months of forwarding and business customers pay $235. These prices increase slightly if the person or business moves to another province. The Canada Post model extricates the costs from the overall First Class Mail rate and is structured so recipients pay for the service, but only if they use it. Some U.S. business customers have requested that the Postal Service explore new pricing and product options to reduce the costs of forwarding and returning mail to sender. Would a model similar to the Canada Post one work in the U.S. or would residential recipients, in particular, feel like they were being charged for a service they thought was free? Should the sender pay for forwarding instead of the recipients? What would happen if recipients or senders decided against paying for forwarding? Would total costs merely go up since return to sender mail costs more than twice as much as forwarding per piece? Are there other alternatives? Share your thoughts below.
  • on Aug 6th, 2012 in Finances: Cost & Revenue | 10 comments
    The Postal Service has built a strong brand name around service, trust, and security. Few other organizations can lay claim to such a strong brand, one with more than 200 years of history and cultivated by the Postal Service’s consistent fulfillment of its mission to securely deliver mail to every American, regardless of location, at a reasonable price. For 6 straight years, the Ponemon Institute has named the Postal Service the most trusted government agency and one of the top 10 most trusted businesses in the nation. Many postal observers have encouraged the Postal Service to leverage this “trusted brand” to expand its offerings in the digital market. But a steady drumbeat of bad news over the past few years around its financial situation, potential cuts in service, and uncertainty over its retail and network downsizing plans has unsettled stakeholders. The question many of them ask is whether the ongoing negative news coverage could be hurting the overall brand. Even the PMG noted earlier this year that the mailing industry is experiencing a “crisis in confidence.” Lingering uncertainty about the Postal Service’s future could further erode confidence. Further, competitors can use the turmoil to their advantage, touting their own services as easy and reliable in the face of uncertainty. What do you think? Have the ongoing news reports about the Postal Service’s finances and uncertain future affected your view of the organization? Do you think these reports hurt the Postal Service brand? Or is the Postal Service doing the best it can under the circumstances?

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