Marketing Update: The Importance of Pricing

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Marketing UpdateThe Importance of Pricing
Mailers Technical Advisory Committee
Stephen M. Kearney Vice President Pricing
Classification October 28, 2004
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The Importance of Pricing

• Pricing is the moment of truth all of
  marketing comes to focus in the pricing
  decision.
• E. Raymond Corey, Industrial Marketing Cases and
  Concepts
• (Englewood Cliffs N.J. Prentice Hall, 1962)

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Pricing Delivers Results

• Simplify
• 99-Cent Menu
• Customize
• Value Meals
• Encourage Efficiency
• 2 for 2.22

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Pricing Delivers Results

• Simplify
• PCs come equipped
  with basic software
  installed
• Customize
• Enhance systems via downloads
• Encourage Efficiency
• Specific suites for home, office, business,
  educators, developers, and professionals

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USPS Pricing Strategy
Simplify
Customize
Encourage Efficiency

• To Grow Our Core Business

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Simplify

• DMM Transformation
• Priority Mail Flat Rate Box
• Electronic Return Receipts

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SimplifyDMM Transformation

• Clear pathways to confident decisions
• Consumer and small business versions are a hit
• Commercial version coming in early 2005

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SimplifyPriority Mail Flat Rate Box

• Focus on convenience
• Two shapes (garment, shoes), one price
• Boxes go anywhere in US 7.70
• Implement November 20, 2004

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SimplifyElectronic Return Receipts

• Electronic option to replace green card
• Receive e-mail notification with signature
• Bulk version too
• 1.30 versus 1.75 green card
• Implemented September 9, 2004

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Customize

• Negotiated Service Agreements
• Consistency in Mailing Standards
• Parcel Return Services
• Customized MarketMail

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CustomizeNegotiated Service Agreements (NSAs)

• Designed to introduce customized, negotiated
  pricing to incent more volume
• First NSA exceeding expectations
• Two new equivalent agreements Bank
  One and Discover
• Implement Discover NSA January 1, 2005
• Much customer interest in spite of uncertainty

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CustomizeConsistency in Mailing Standards

• Important to retain and build business
• MTAC work group
• PC Communications via e-mail
• New First-Class Mail and Standard Mail content
  language
• PCSC in New York

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CustomizeParcel Return Services

• Returns becoming a key strategy
• Leverage first and last mile
• Ease of use and partnership
• Started October 19, 2003 as an experiment
• 14 million revenue through the second week of
  October 2004

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CustomizeCustomized MarketMail

• Adding excitement and creativity to direct mail
• Started August 10, 2003
• 278 mailings, 3.2 million pieces mailed, 2.21
  million revenue the first year

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Encourage Efficiency

• Annual Price Changes
• Periodicals Co-Palletization

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Encourage EfficiencyAnnual Price Changes

• Predictability for customers and our planning
• Lower cost of uncertainty
• Same time, each year, known in advance
• 2-year phasing with equal increments

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Encourage EfficiencyPeriodicals Co-Palletization

• Testing new price incentives to increase
  Periodicals efficiency
• Publications working with printers to combine on
  pallets
• Started April 20, 2003
• 1.7 million sacks eliminated, 72.7 million pieces
  moved to pallets through September 2004
• 2-year experiment to include heavy journals
  implemented on October 3, 2004

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The Importance of Pricing
Simplify
Customize
Encourage Efficiency
To Grow Our Core Business