Abandoning the mail

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Abandoning the mail
Abandoning the mail

If an “exigent” rate increase had been approved for 2011, Verizon would have adjusted its marketing and billing strategy appropriately, adds Studness, who declined to give specific percentages. In September, the Postal Regulatory Commission denied USPS its request for the exigent increase. The USPS said last month it plans to appeal the decision.

“Naturally, as with any of our suppliers, when the cost of doing business is increased, we look at it from a 360-degree perspective and analyze how we best handle price increases,” he says. “We would naturally do the cost-benefit analysis.” 

Prompted by its precarious financial position − the USPS is set to lose about $6 billion this year after losing $3.8 billion in FY 2009 − the US Postal Service has proposed landmark changes to its bedrock services. It attempted to enact an exigent price increase, claiming that extreme circumstances forced its hand, which would have raised prices by 5.6% on average. Meanwhile, it has asked regulators and lawmakers for permission to move to a five-day home delivery schedule, chopping Saturday delivery to consumers from its list of services. Facing what it believes to be an unfair annual payment in the billions of dollars to its retiree pension funds, Postal Service officials have warned that the organization might not be able to meet its financial obligations for 2011 without significant structural changes. 

Postal timeline

Tracking the financial crisis

November 16, 2009

The Postal Service reports a FY 2009 loss of $3.8 billion. It also discloses a nearly 9.1% drop in operating revenue to $68.1 billion.

March 2, 2010

The USPS reveals its 10-year plan to return to financial stability, including five-day home delivery, a series of price increases and expanded services.

March 17, 2010

The USPS hires consultants to examine its pension-payment system after an investigation reveals it overpaid pension funds by $75 billion since 1972.

September 23, 2010

Sen. Thomas Carper (D-DE) introduces a bill that would allow the USPS to move to five-day home delivery, close sites and reform its pension system.

September 30, 2010

The Postal Regulatory Commission denies the USPS' request to enact an “exigent” rate increase

Paul Vogel, who was named president of mailing and shipping services at the USPS in August, said that the organization's financial situation would be greatly improved by legislative action to reform its retirement and pension payment requirements.

“If there was a reconciliation, and if we were re-compensated for the overfundings, we wouldn't have had a problem,” he said, adding that the Postal Service works to reassure outside companies that it is a vibrant part of the trillion-dollar mailing industry and it is working to stay that way. 

 Vogel added that he believes consumer-targeting mail volumes will rebound as inboxes and social media messages become increasingly cluttered. 

“There's too much electronic messaging out there, and I think people will see greater value in personalized, focused messaging to me as an individual − messaging that is relevant to me and that doesn't clutter my electronic messages,” he says. 

Yet, Postmaster General John Potter, said in a video message to employees in March that projected mail totals are “very sobering.” “Mail volume is not going to come back,” he said at the time, adding that if the
USPS does not make any changes, it would lose $33 billion in its 2020 fiscal year. 

In response, marketers are anticipating a smaller and fundamentally different Postal Service to emerge from the organization that is now equipped to deliver hundreds of billions of pieces of mail annually. 

“I think we will see a very different, but financially viable, entity. It will be much more competitive in parcels, have a much smaller workforce and a footprint with fewer distribution centers,” says Jerry Cera-sale, SVP of government affairs at the DMA. “Since it will have a much smaller workforce, it's unlikely the days of delivery will be at six, but no one knows how many it will be. I don't know how far down the days of delivery will go.” 

Many marketers have said they would prefer a reduction in delivery days to a significant rate increase. Cerasale, though, says that the DMA's membership is divided on five-day home delivery. Home entertainment company Netflix, which became a household name through the success of its DVD mail delivery service, supports the USPS' 10-year plan for financial recovery in total, including the reduction in delivery and the now-dismissed rate increases. 

“When we testified before Congress, we said that we don't see a big effect. We used to only deliver five days a week. We think people will just adjust their behavior,” says Steve Swasey, VP of corporate communications at Netflix. “We don't support five-day delivery in a vacuum; we know they need to make significant changes to the Post Office to be viable, and we think everyone should share that burden.”

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