Mailers’ Technical Advisory Committee

Stephen M. KearneyVice PresidentPricing & ClassificationOctober 28, 2004

Marketing Update:The Importance of Pricing

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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

To Grow Our Core Business

Simplify Customize

EncourageEfficiency

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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 decisionsConsumer and small business versions are a hitCommercial 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: $7.70Implement November 20, 2004

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SimplifyElectronic Return Receipts

Electronic option to replace green cardReceive e-mail notification with signatureBulk version too$1.30 versus $1.75 green cardImplemented September 9, 2004

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Customize

Negotiated Service AgreementsConsistency in Mailing StandardsParcel Return ServicesCustomized MarketMail

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CustomizeNegotiated Service Agreements (NSAs)

Designed to introduce customized, negotiated pricing to incent more volumeFirst NSA exceeding expectationsTwo new equivalent agreements: Bank One and DiscoverImplement Discover NSA January 1, 2005Much customer interest in spite of uncertainty

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CustomizeConsistency in Mailing Standards

Important to retain and build businessMTAC work groupP&C Communications via e-mailNew First-Class Mail and Standard Mail content languagePCSC in New York

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CustomizeParcel Return Services

Returns becoming a key strategyLeverage first and last mileEase of use and partnershipStarted 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 mailStarted August 10, 2003278 mailings, 3.2 million pieces mailed, $2.21 million revenue the first year

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Encourage Efficiency

Annual Price ChangesPeriodicals Co-Palletization

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Encourage EfficiencyAnnual Price Changes

Predictability for customers and our planningLower cost of uncertaintySame time, each year, known in advance2-year phasing with equal increments

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Encourage EfficiencyPeriodicals Co-Palletization

Testing new price incentives to increase Periodicals efficiencyPublications working with printers to combine on palletsStarted April 20, 20031.7 million sacks eliminated, 72.7 million pieces moved to pallets through September 20042-year experiment to include heavy journals implemented on October 3, 2004

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The Importance of Pricing

Simplify Customize

EncourageEfficiency

To Grow Our Core Business