Recommendation Recap

The Task Force applauded the decision by the Postal Service to include development of a “corporate pricing plan” as an objective in its 2002 Transformation Plan. Effective pricing, Task Force members agreed, would help the Postal Service become more businesslike, more efficient and more responsive to the needs of USPS customers.

• A “breakthrough pricing” workshop involving over 40 USPS staff from all departments.

• Interviews with USPS senior executives, Postal Rate Commission staff, Task Force participants and pricing experts.

• A review of all previous USPS pricing activity.

• Compilation of 50 profiles of best-practice pricing companies.

• Several brainstorming sessions.

The Postal Service’s pricing organization is currently analyzing and prioritizing the generated ideas, based on their feasibility and potential economic impact. The focus of the plan, postal executives have told the Task Force, will be in six areas that characterize “world-class” organizations: creativity, customer value, detailed economics, perceptions, competitive dynamics and transactional capabilities. The principal filters through which each pricing idea will be assessed are its potential contribution to Postal Service revenues, its operational simplicity, and its regulatory feasibility.

Coming out of the pricing research and analysis were two targeted pricing initiatives that are designed to encourage greater efficiencies and to take advantage of the Postal Service’s existing pricing flexibility. Both were approved by the Board of Governors on September 6 and will be filed with the Rate Commission. The first is an experimental niche classification for Periodicals. The other supports a negotiated service agreement (NSA) between the Postal Service and Capital One Services, Inc., its fourth largest customer and the largest single producer of First-Class Mail.

“We believe that the NSA will produce benefits for all postal users,” Vice President Kearney told the Task Force. “It protects citizens in this way. If we grow volume or increase revenues, that will lessen the cost burden on individual users of mail.” NSAs, the Task Force was told, needed to be large enough in value to be worth the parties’ investment in litigation and satisfy the Rate Commission requirement that NSAs be at worst contribution-neutral. The Task Force determined that there is, in fact, no specific “NSA process.” Rather, the Postal Service will likely seek to apply the rules for expedited classification filings, and may consider asking the Rate Commission to establish specific rules for NSA proceedings.

The filings reinforce the Task Force’s conclusion that the pricing plan has great potential to realize the objective set by the pricing strategy recommendation.

Streamlined Ratesetting. Task Force members participated in two ratemaking “summits” jointly sponsored by the Postal Service and the Rate Commission over the past summer. Discussion topics included how to phase in rates, development and implementation of negotiated service agreements, niche classifications, and how ratesetting might be expedited.

CONFIRM is an example of how a negotiated rate case can expedite the process, as well as a demonstration of value-based pricing with three price levels and service options. Due to be officially launched in September, CONFIRM was first presented to the Rate Commission in April, and approved by the Governors in August. Postal officials have also told the Task Force that they anticipate that the next omnibus rate case will included phased-in rates.

• Collaborate with Postal Service pricing specialists to continue to develop new pricing ideas for economic and operational feasibility testing. Specifically, support consideration of time-based and bundled pricing schemes.

• Help identify additional candidates for negotiated service agreements, and encourage the creation of a uniform process for structuring and implementing NSAs.

• Develop consumer-focused pricing initiatives.

• Direct its pricing subcommittee to meet on an as-needed basis, since the recommendation to develop and implement a competitive pricing strategy is underway.