Pushing the Envelope Blog

  • What Customers Really Value

    on Feb 23rd, 2015 in Strategy & Public Policy | 7 comments

    Don’t let the decline in mail volumes over the past few years fool you. People still place a high value on postal services. Postal customers especially value being able to interact with postal employees at a Post Office as compared to other retail alternatives. And while some people might be indifferent to Saturday delivery of letters, they still value Saturday delivery for packages.

    These discoveries are among the key findings in our first-in-the-U.S quantitative survey on the value people place on the services the U.S. Postal Service provides as part of its universal service obligation (USO). In our earlier report on the USO, which looked at the collection of requirements that ensure all users of postal services receive a minimum level of service, we pointed out the need for a quantitative study – one that asks people if a higher level of service is valued enough to warrant the additional cost. We recently conducted such a study, What Postal Services Do People Value the Most?, with market research firm Gallup and postal economist Michael Bradley.

    The new study asked respondents to consider four aspects of the USO:

    • Mode of delivery;
    • Access to postal services;
    • Frequency of delivery; and
    • Price.

    We learned household customers place a high value on getting mail delivered to their door or to a curbside box rather than to cluster boxes or parcel lockers. Even for parcels, household consumers don’t like cluster box or parcel locker delivery, our survey found. At the highest parcel price in the survey, more than half of consumers would prefer paying the higher price to have delivery to the door, suggesting convenience trumps other factors for customers.

    And it turns out that people really like to go to the Post Office. Both households and businesses have a strong preference for visiting post offices for retail services over alternative access points, including kiosks. However, respondents were satisfied with keeping post offices open for just a few hours, and placed minimal value on normal business hours.

    Yet for all services, respondents indicated a limit to the amount of postage they would pay as a trade-off for higher levels of service. It seems both household and business customers value lower prices and might be willing to accept lower levels of service to keep prices from rising sharply.

    We welcome your input on our survey results. What aspects of the USO are most important to you? What levels of service do you feel the Postal Service should continue to provide? 

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  • Be Careful What You Assume
    on Feb 16th, 2015 in Finances: Cost & Revenue | 24 comments

    What if your credit card company told you: “You will charge a million dollars on your credit card during your life; please enclose the million dollars in your next bill payment. It’s the responsible thing to do.” Doesn’t seem quite right, does it?

    Well, that’s what the U.S. Postal Service’s requirement to prefund its long-term pension and healthcare liabilities is like. The Postal Service is required to pay the full estimate of its liabilities, currently estimated at nearly $404 billion, even as that estimate moves around and is based on assumptions that are highly uncertain and can frequently change over the life of the liability. Our recent white paper, Considerations in Structuring Estimated Liabilities, evaluates these assumptions and other considerations and shows the Postal Service is closer to being fully funded, or potentially overfunded, when certain assumptions are reasonably adjusted or considered.

    First, let’s look at current funding levels. The Postal Service has set-aside cash totals of more than $335 billion for its pensions and retiree healthcare, exceeding 83 percent of estimated future payouts. Its pension plans are nearly completely funded and its retiree healthcare liability is 50 percent funded – much better than the rest of the federal government. But getting to this well-funded position has been painful. The Postal Service’s $15 billion debt is a direct result of the mandate that it must pay about $5.6 billion a year for 10 years to prefund the retiree healthcare plan. This requirement has deprived the Postal Service of the opportunity to invest in capital projects and research and development.

    As things stand now, retiree healthcare, pensions, and workers’ compensation are unfunded by about $86.6 billion. But our paper says any discussion of unfunded liabilities should take into consideration assets that could be used to satisfy the liabilities, such as real estate. The Postal Service’s real estate assets have a net book value of $13.2 billion. But fair market value of these properties is estimated as high as $85 billion. Neither is factored into the Postal Service’s ability to meet future liabilities.

    In addition, the liabilities are not exact or static amounts and they require certain assumptions, such as interest rates and demographic inputs, to estimate the future costs of these programs. For example, interest rates are at historic lows. Even slightly higher interest rate assumptions would reduce or eliminate the estimated liabilities.

    Our paper details how different assumptions and considerations would affect the liabilities. Basically, if the Postal Service’s real estate assets were considered and one other assumption adjusted, the long-term liabilities would be overfunded.

    Mandating 100 percent prefunding of future liabilities that are frequently changing and highly uncertain could unnecessarily damage the Postal Service, inflate prices, and overfund future liabilities.

    Share your thoughts on our paper. Do you agree or disagree with the overall premise of the paper or have additional insight to share? 

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  • The Bill is (Still) in the Mail

    on Feb 9th, 2015 in Products & Services | 3 comments

    People may not like getting bills, but they prefer to receive them in the mail and pay them online.

    That’s the finding of our study on transactional mail, which is made up mostly of household bills and payments moving as First-Class Mail.

    We collaborated with the consulting firm InfoTrends to analyze 3 months’ worth of customer billing data from a major U. S. utility. We also jointly interviewed executives who manage bill delivery and payment processing to help determine how the utility’s delivery-and-payment costs and customer preferences compare with those at other utilities and even in other industries.

    As you can see in our new white paper, Will the Check Be in the Mail? An Examination of Paper and Electronic Transactional Mail, we found that despite a clear preference to pay bills online, 91 percent of customers prefer receiving their bills by mail. Even among the utility’s newest customers — those expected to be more digitally savvy — an average of 89 percent opted to have their bills mailed to them, though, like the others, most preferred paying online.

    The reasons are pretty simple. People like having a physical mailpiece as a reminder to pay and as a record-keeping tool. The execs we spoke with said our results are consistent with what they’ve been seeing and hearing.

    It’s also consistent with another clear directive from consumers: they want options in just about everything, including bill delivery and payment. So, in addition to being good news for mail, our findings suggest that a company offering a variety of bill delivery and payment options will keep customers happy.

    Do you prefer receiving your bills via regular mail or email/text? How about paying – do you pay online or ‘is the check in the mail’? 

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