Alliance Report — August 12, 2015
Every quarter, U.S. Postal Service (USPS) leadership meets with representatives of its customers and mail service providers who participate in the Mailers Technical Advisory Committee (MTAC) which is celebrating its 50th anniversary. While it has “technical” in its name, MTAC covers more strategic issues and often features presentations and discussion with senior leaders of USPS.
This week, chief operating officer David Williams gave a presentation that showed quick improvements in delivery service times from the drop-off that occurred during the winter. He attributed the decline in service to massive operating changes that the USPS chose to implement in early January, all on one day, and to the bad winter weather. Dave expressed his firm commitment to achieving and maintaining excellent service through “continuous improvement” and “lean” process management. He did allow that he is disappointed that periodicals delivery service has not improved as much as other mail categories and pledged to keep working on it.
Chris Karpenko who is the USPS brand manager for mail gave a presentation on three strategies the USPS is using to try to grow mail volume. One involves a personal correspondence partnership with Scholastic whose mission is “To encourage the intellectual and personal growth of all children, beginning with literacy.” Chris cited very encouraging statistics about the usage of the USPS/Scholastic materials by teachers and students in conjunction with National Card and Letter Writing Month in April. You can see some of the materials here. Single-Piece First Class Mail continues to be the fastest-declining category of mail for the USPS, and it also is one of the most-liked things for anyone to receive in their mailbox. Efforts like this to encourage letter writing starting at a young age are very important and we wish them well.
Chris’ second strategy was very relevant and familiar to nonprofit mailers: encouraging the use of direct mail within integrated marketing. He described efforts by the USPS to improve data and analytics surrounding mail to help it get the type of recognition and consideration that other forms of marketing get, such as digital and television. One of the most interesting tactics is the new USPS iPad tool to help measure the return on investment (ROI) of a direct mailing, which is just now rolling out to its internal sales force. When asked by an audience member about sharing the use of the ROI tool with all of the USPS business partners who are also out there trying to sell direct mail to customers, Chris said that is an interesting idea. He was hesitant to promise it, as he said the USPS sales folks are getting detailed instructions to ensure that they don’t mistakenly enter the wrong numbers which can lead to disastrous results. We hope that the USPS generates much success with the new tool and also quickly finds a way to work collaboratively with its mail service providers to spread the benefit as widely as possible.
Finally, Chris described the USPS goal to gain a larger share of the 8-figure amounts expected to be spent on the upcoming presidential election. The USPS goal is to receive double the half billion dollars of postage revenue that was spent on the last election. That certainly seems attainable, as Chris recalled that other media such as television reached the saturation point in the last election.
Next, acting chief marketing and sales officer Jim Cochrane engaged the audience in a series of questions and answers. Jim is very well-liked by customers and has had an outstanding 41-year career at the USPS that you can read about here. It seems that when it comes to chief marketing officers, the USPS swings between veterans who know the Postal Service very well but have limited marketing experience elsewhere, and outside professionals who arrive with little postal knowledge and seem surprised with the complexity and unique attributes. Nevertheless, if any insider has a chance to do well as CMSO, Jim Cochrane could be the one.
Jim gave many great answers to questions. He is bringing back product managers to USPS headquarters, and seems excited to be able to soon announce who will lead them. Jim’s main goal is to fill the mailbox. While he seemed surprised when a member suggested making it easy to reach the right person at the USPS, he pledged to take it on.
When asked about pricing changes, Jim answered that he will be working on a longer advance notice process for upcoming price changes, especially when “structural” changes are involved. He harkened back to his days as CIO and said he knows how much work is involved in changing systems and software. Jim said he will “ignore” the legal requirements for advance notice, meaning he will strive to give even more notice than required.
While longer notice will help customers, Jim seemed to whiff on a follow-up question/comment regarding wide ranges of price changes around the CPI average that cause customers big problems. The questioner no doubt was referring to the last rate case in which the actual pricing structure was even more of the problem than the opaque, surprise-attack process of letting customers know what was happening. Jim did not really discuss the need to involve customers and mail service providers in the actual development of new prices in addition to giving more notice of what the final changes are. We hope that was just an oversight.
USPS chief financial officer Joe Corbett appeared next to give a financial update through the third fiscal quarter ending June 30. Following his obligatory corny shark jokes that he picked up at his recent vacation at the Jersey Shore, Joe began with the slide he has used first in all recent financial presentations. The use of the balance sheet slide to make the point that USPS is in a financial hole is becoming, frankly, puzzling to Postal Service customers.
Always leading with the balance sheet slide is confusing for at least two reasons. First, why is it getting lead billing when current operating results are very profitable and cash is strong? USPS is profitable in large part because customers are paying a 4.3 percent surcharge and many are maintaining or increasing their volume as the economy recovers. And packages are growing due to ecommerce. We believe USPS is missing a great opportunity to thank its customers for helping it out of a liquidity crisis, and to use the improvements to begin to build a better future together.
Second, the constant use of generally accepted accounting principles (GAAP) to describe the condition of this government agency is not the most accurate depiction. The Postal Service is required to report with GAAP, and it must file Securities and Exchange Commission (SEC) documents 10-Q and 10-K, but these are measurements for private-sector, shareholder-owned corporations. The USPS is not trying, nor is it able, to maximize shareholder value which is the main goal of the companies that file SEC disclosures and use GAAP.
Let’s not forget the official mission of the USPS: “The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities.”
Near the end of his Q and A, Joe was asked about how much the U.S. Treasury nudges him to make the health care pre-funding payments that USPS has not been making. He answered that “we are all in this together” and the Treasury knows what is going on with USPS. Joe also stated correctly that the USPS deficits and liabilities are a “rounding error” to the U.S. Treasury that faces national debt exceeding $18 trillion.
Gary Reblin, vice president, new products and innovation gave an interesting talk on an expanding pilot test of a new service called Real Mail Notification. Households sign up for online access to the mail that arrives in their mailbox each day. Direct marketers and fundraisers are expected to increase response rates by embedding click-through buttons and enhanced images in the digital copies of the real mail in the mailbox. Gary described outstanding results from a Northern Virginia test in about 4,400 households and is excited about plans to expand the test to 200,000 households in the New York Metro Area. Direct mailers can contact the project lead Robert.E.Dixon@usps.gov or the sales lead Matthew.M.Holben@usps.gov to ask about participating in the pilot.