• on Feb 2nd, 2015 in Ideas Worth Exploring | 9 comments

    You can’t cut your way to prosperity. It’s a common saying in business circles, particularly in the mailing industry. The U.S. Postal Service has done a good job cutting costs, yet still needs to grow revenue with new products and services.

    Indeed, recent reports suggest a sure way for a post to boost revenue is by offering customers a range of innovative products, such as parcels, logistics, banking, insurance, and digital services. Many of our papers have encouraged the Postal Service to explore these kinds of revenue-generating products and services.

    Yet diversification doesn’t necessarily mean wandering too far from the mission, or reinventing the wheel. Good ideas can be found close to home, using existing assets. Our most recent paper, Revenue Opportunities for Innovative Mail Services, presented some ideas that could take advantage of the Postal Service’s existing network, brand, excess facilities, equipment, or other assets.

    For example, we looked at International Mail Forwarding (IMF), a service that provides recipients a U.S. address from which packages and mail can be collected, held, digitally scanned, or shipped anywhere in the world. This booming business – a current U.S. market of over $1 billion from service and shipping revenue – is expected to grow even more because foreigners need a U.S.-based address to buy online from U.S. companies. Given the Postal Service’s reputation for being secure and trustworthy, and its experience in international delivery, it could grow quickly in the IMF market, our research indicated.

    We saw another opportunity in continuity shipping, a service where a consumer agrees to receive merchandise automatically at regular intervals until canceling the shipments. This established and growing segment of the retail industry is an integral part of eCommerce fulfillment because it helps automate merchandise shipment and return. Given the Postal Service’s expansive facility and transportation networks, and experience with parcels, it is in a strategic position to offer continuity shipping services.

    These types of products would take advantage of the Postal Service’s existing assets and experience. In addition, they open the door to further innovation and value-added services. Are there other innovative ideas that are similarly “close to home” and worth exploring? Do you think these types of ideas have merit? Is there value in smaller revenue products or should the Postal Service not waste time on smaller projects? 

  • on Jan 28th, 2015 in Products & Services | 5 comments

    The sometimes elusive concept of “brand” is very real and useful to businesses and organizations of all kinds and sizes. A brand encompasses an array of tangible and intangible elements, from a company’s name and logo to consumers’ expectations of a particular product or service. For instance, the names and logos of Mercedes Benz and Lexus usually make people think of reliable, well-built, luxury cars. Wal-Mart and Target are most often associated with large inventories of everyday goods at discounted prices.

    The U.S. Postal Service has a brand, too. Its attributes include reliability, convenience, value, and tradition. Where the Postal Service differs from many other businesses and organizations is in the management of its brand: To get the most financial value out of their brands, successful firms treat them like other assets and carefully measure and monitor them. Brand valuation is an important management tool used to do this. But while the Postal Service has worked to enhance some of its brand attributes, it has never conducted a formal brand valuation.

    We worked with Premier Quantitative Consulting (PQC), experts in brand valuation, to develop an estimate of the Postal Service’s brand value. Based on extensive research and analysis detailed in our new white paper, The Value of the U.S. Postal Service Brand, PQC conservatively estimates the Postal Service brand value is $3.6 billion, based on fiscal year 2013 financial data (the most recent available when PQC performed its study). This means the Postal Service would forego at least an additional $3.6 billion in future cash flows if it had no discernable brand. In other words, if the Postal Service were indistinguishable from a generic delivery brand, it would not realize these significant cash flows.

    PQC also suggested some ways the Postal Service could further enhance its brand. For example, the organization could (1) aggressively respond to inaccurate “doomsday” reports and predictions about its future, (2) involve employees – who are truly “the face of the brand” – in implementing brand strategies, and (3) expand licensing activities.

    Do you think the Postal Service brand is important? What could the Postal Service do to enhance its brand? What are some attributes you associate with various brands? 

  • on Jan 26th, 2015 in Pricing & Rates | 2 comments

    Steve Jobs was famous for the ingenious simplicity of his designs. And, of course, his single button iPhone, now the standard in smart phoning, is a great testament to the value of simplicity.

    As in design, simplicity in pricing, and a related simplicity of choices, are appealing to consumers. There is even empirical evidence that consumers will buy more when they aren’t overwhelmed with too much clutter and too many choices.

    The U.S. Postal Service has enjoyed some success with simple pricing. The best example is the Flat Rate Box. The combination of uncomplicated messaging – “If it fits, it ships” – and ease of use – a handful of shape offerings, each with a single price attached to it – have made the Flat Rate Box a critical piece of the Postal Service’s growing package business.

    And so far, the Postal Service is sticking primarily with weight-based pricing for packages, and not introducing any further dimensional (DIM) weight package rates. FedEx and UPS both just moved to the more-difficult-to-calculate DIM weight pricing scheme on ground shipments.

    Still, most Postal Service pricing is far from simple. There were 8,779 different package prices alone in fiscal year 2014, up 22 percent from two years earlier. Of that total, a quarter are retail prices and three-quarters are commercial prices. Furthermore, nearly 1,100 Parcel Select prices are not used, and 5,840 prices for packages weighing more than 20 pounds are never or rarely used. We recently looked at package pricing at the Postal Service and found its complexity might intimidate customers. We urged the organization to consider eliminating prices that are rarely or never used. We also suggested periodic evaluation of market demand to see if it makes sense to introduce other Flat Rate products.

    But, it’s also worth considering whether pricing can be too simple, at least for commercial customers. While individuals welcome pricing that’s easy to calculate, businesses that ship large volumes can benefit from a range of options, which gets them closer to customized pricing. It also helps them shave off every possible penny of shipping expenses. And, of course, some degree of complexity is necessary so prices appropriately reflect costs. Such is the case with zoned rates for Priority Mail, because packages traveling across regions or zones cost more to deliver than those moving within a zone.

    So, turns out pricing simplicity may not be quite that simple.

    Do the Postal Service’s pricing options meet your shipping needs? Do you find pricing too complex? Or, do you wish there were more options? Should the Postal Service introduce more Flat Rate Box or other specialty packaging items? 

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