NSA Detailed at Forum

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BOSTON -- Postal officials unveiled details of the negotiated service agreement filed with the Postal Rate Commission this month and discussed future NSAs with mailers at the Fall 2002 National Postal Forum here this week.

The case seeks a three-year test between the U.S. Postal Service and Capital One Services Inc., the largest producer of First-Class mail for the USPS. It was filed as an experimental case, which means that it could be handled in a quicker fashion than other cases.

NSAs are special service and rate arrangements between the USPS and a mailer or group of mailers. Proponents say NSAs provide variable pricing incentives that encourage greater volume and reward the postal service's largest customers.

Some mailers at the forum were concerned that NSAs might offer larger mailers an edge over smaller mailers. Still, most attendees were interested in the agreement and thought it showed that the USPS was working to offer customers what they want.

"If you are going to do an NSA, it has to be unique," said Stephen M. Kearney, USPS vice president, pricing and classification. "They are not based on volume. They are based on unique or specialized situations with individual customers. If you want to do something with us that reduces costs or creates an incentive for more mail ... we are looking at all sorts of possibilities, large and small, all types of mail."

If the NSA with Capital One is approved by the PRC and the USPS Board of Governors, it would include discounts for Capital One First-Class volume above an annual threshold of 1.225 billion pieces. The discounts range from 3 to 6 cents for each piece over the threshold and are higher than those given mailers for automatable First-Class letters presorted by ZIP code and carrier route.

In addition, the USPS will return data on undeliverable mail to Capital One electronically. Physical returns are forecast to be reduced by almost 200 million pieces over the three-year agreement. Currently, Capital One does not receive returns electronically.

Capital One would have to maintain certain standards. For example, the company has committed to maintaining specific address quality and mailing standards at mail production facilities. Capital One also agreed to run its database through the National Change of Address program every 30 days and within 60 days of prospect mailings. Postal regulations require companies to verify their databases with NCOA every 180 days, though there are discussions to change this to every 90 days.

The USPS expects to save $8.2 million in the first year of the agreement, and Capital One projects a savings of $6 million to $8 million.

Since the agreement calls for a certain amount of First-Class mail to be used, Capital One might switch more of its advertising mail from the Standard class to First-Class.

"We make these kinds of decisions every week," said Bob Shippee, group manager, direct marketing center, Capital One Services, Glen Allen, VA. "We use Standard mail today for advertising purposes, and we use First-Class mail. What this does is it changes the equation ... and we will make those decisions with each marketing campaign."

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