Troubling Pricing Signals

May 27, 2015

The pricing signals that the USPS is sending to its customers are troubling and we think damaging to the future of USPS for many reasons:

• They are excessively large and will cause mail to leave the postal system.
• They greatly exceed the rate of the Consumer Price Index (CPI) that mailers use to help budget and predict future rate changes.
• They were done with little or no forewarning or consultation with customers.
• They were part of a rate case that took three attempts to gain regulatory approval, further increasing uncertainty and confusion.
• They completely obviate, nullify and circumvent one of the main goals of the landmark 2006 postal reform legislation—to increase predictability and reduce uncertainty.
• They are being done during a period overshadowed by a 4.3 percent temporary surcharge costing customer $3.2 billion at a minimum, that the USPS went to federal court to try to make permanent.
• They do not send a clear signal as to what exactly customers and their mail service providers should do to become “more efficient” which is the USPS’s stated purpose.
• They are negatively affecting the types of customers the USPS should want to keep in the mail stream because they create quality, desirable content that American households still want to receive in the mail. In many cases, households request and pay to receive this mail. In many cases this mail most closely reflects what households care about and are drawn to their mailbox to receive.
• From a public policy perspective, the USPS is pushing away exactly the kind of quality mail it needs to survive as a monopoly government entity mandated to “bind the nation together” while it competes to gain market share in the package shipping business that is well served by the private sector.
• These prices are occurring in an environment in which the USPS is urging its customers to agree to new legislation that would lift or eliminate the CPI cap and greatly reduce the regulatory power of the Postal Regulatory Commission. The Postal Service says it needs more pricing freedom at a time in which its misuse of the flexibility it already has is damaging its longtime customer relationships and volumes.

The main justification provided by the USPS for the unusually wide ranges of price changes was that it needed to send aggressive “pricing signals” to customers in order to improve the cost coverage or profitability of Periodicals and Standard Mail flats. While this is an important goal, it needs to be approached carefully and judiciously. This rate case looked more like rearranging the cost coverage deck chairs while the USPS ocean liner should be focusing on dodging icebergs by retaining and growing its longtime customers. We are hopeful that the new Postmaster General Megan Brennan and her new Chief Marketing and Sales Officer Jim Cochrane will not let such a short-sighted and ill-conceived rate case happen again. Unfortunately, much damage has been done already.

(c) 2015 Alliance of Nonprofit Mailers