Informed Pricing & Product Simplification
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2 Informed Pricing & Product Simplification Sharon Owens Vice President, Pricing & Costing USPS Steve Monteith Vice President, Marketing USPS
3 Agenda Ø History Ø Current State Ø Proposed for 2018
4 Informed Pricing & Product Simplification History
5 Simplify pricing & product offerings: Ø Make it Easier for Customers Ø Improve Profitability Ø Improve Network Efficiency Ø Reduce Costs Ø Stimulate Interest in Mail Ø Add Value to Print Note: Solutions offered do not always simplify for all customers
6 Simplify pricing & product offerings can be accomplished a number of ways: Ø Mail Preparation and Entry Ø Pricing Ø Systems and Programming Ø Product Features
7 Process: Ø Evaluate Potential Initiative against Objectives o o Socialize with Industry Determine which ideas to pursue Ø Determine Timing o In for January 2017 o Implement at a Future Date Ø Share Structural Changes July/August Ø PRC Filing in October
8 FY 2017 Changes First Class Classification Changes Ø Eliminate 3-Digit Automation Letters for First-Class Presort Ø 3 & 3.5 Ounces free for First-Class Commercial Letters Ø Alternate Postage simplified and rebranded as Share Mail Marketing Mail Classification Changes Ø Standard Mail name change to USPS Marketing Mail Ø Eliminate 3-Digit Automation Letters presort level for Standard Mail Presort Ø Reduces incentives to dropship letters Ø Increase Marketing Mail flats piece price weight break from 3.3 to 4.0 ozs. Ø FSS Marketing Mail reverts to previous structure Ø Encourage more Carrier Route Bundles on 5-Digit Pallets in non-fss zones
9 Informed Pricing & Product Simplification Current State
10 Ø Continuing Transparency Ø Ensuring No Unintended Consequences Ø Continued Simplification Ø Soliciting Growth Ideas Ø Regulatory Uncertainty
11 PAEA requires contribution from Competitive products to cover 5.5% of Institutional Costs Appropriate share Ø Postal Regulatory Commission reviews every 5 years and is currently under review. ØContribution from competitive products covered 16.5% of institutional costs in FY16 vs. 13.3% in FY15. ØSmall number of major shippers responsible for majority of growth. All are building the capability which would enable them to deliver their own product. This would result in less density and lower contribution to overhead. ØUSPS has recommended the appropriate share should be reduced to zero percent, and that it certainly should not be raised
12 10 Year Review Is system meeting objectives? 1. To maximize incentives to reduce costs and increase efficiency 2. To create predictability and stability in rates 3. To maintain high quality service standards 4. To allow the Postal Service pricing flexibility 5. To assure adequate revenues, including retained earnings, to maintain financial stability 6. To reduce the administrative burden and increase the transparency of the ratemaking process 7. To enhance mail security and deter terrorism 8. To establish and maintain a just and reasonable schedule for rates and classifications, however this shall not be construed to prohibit the Postal Service from making changes of unequal magnitude within, between, or among classes of mail 9. To allocate the total institutional costs of the Postal Service appropriately between market dominant and competitive products
13 10-year Review - USPS Position Ø Current system not meeting objectives Ø Cap is unworkable in a network industry with growing delivery points and declining volumes Ø Need pricing flexibility to ensure financial stability, but we can t price our way out of current financial situation; need legislative reform and continued cost control
14 Informed Pricing & Product Simplification Proposed for 2018 *All discussions around 2018 Product Concepts and Potential Structural Changes are to be considered preliminary and nonbinding as they are still under consideration and are pending USPS senior leadership approval. Final Prices and Product decisions are within the sole authority of Governors and subject to PRC approval.
15 First-Class Mail Ø Simplify Single-Piece Residual Ø One price up to 3.5 ounces for Single Piece FCM letters Ø Simplify the pricing structure for Picture Permit Marketing Mail Ø 2018 Promotions Ø Further incent bundles on 5-Digit pallets Ø EDDM Letters Ø Simplify the pricing structure for Picture Permit
16 Periodicals Ø Periodicals Sack/Tray Pricing Ø Further incent bundles on 5-Digit pallets Package Services Ø Allow co-mail for DSCF and DDU BPM Flats Extra Services Ø Permit Simplification Ø Deliver PO Box addressed mail to Street Address Ø Returns Simplification
17 Resources ØPostal Explorer - pe.usps.com Ø Current prices: including downloadable price files in Excel and CSV formats Ø Federal Register Notices Ø Domestic Mail Manual & International Mail Manual ØBMA page: ØRIBBS: ØPostalPro:
18 Questions?
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