The Postal Regulatory Commission unanimously approved the US Postal Service’s summer sale, formally known as the Standard Mail Volume Incentive Pricing Program, on June 4. The 30% rebate on postage used during a three-month period for eligible mailers is an effort by the USPS to address dramatic mail volume reductions and support the mail industry during a period of economic downturn.
From July 1, 2009 until September 30, 2009, mailers who are permit holders and who had a demonstrable volume of at least 1 million Standard Mail letters and flats from the period of October 1, 2007 to March 31, 2008 will be eligible for the rebate. The eligibility structure was designed to support the largest mailers, prevent undue administrative costs and prevent program abuse.
“We wanted to make sure that there aren’t any manipulations or gaming of the system,” explained Dan Blair, chairman of the PRC. He said that his office had received feedback during the open comment period regarding mailers’ desire for a broader eligibility base of customers. Of the 23 comments that the PRC received, no comments opposed it entirely.
In its filing to the Commission, the USPS noted that smaller mailers would not benefit as much from the proposed rebate if they were eligible. According the PRC decision, the USPS “estimates that the average small business would only save $42, which probably would not be worth the businesses’ time and trouble.”
The decision also noted it was “sensitive to mailers who wish to participate but do not meet the volume minimum…however, recognizing this is a first effort to test a ‘sale’ price, the Postal Service has provided a reasonable rationale for the threshold.”
First-Class Mail was not considered for eligibility because the USPS “could not reasonably segregate First-Class advertising mail from other First-Class Mail,” according to the PRC decision.
The USPS estimates the administrative cost of the incentive program at $977,000. Currently, the agency faces a 17.8% decrease in Standard Mail over the same period last year, according to its latest reports. And total revenue is down about 41.7 billion year-to-date from what it was last year.
“This [incentive program] alone will not turnaround the postal service’s financial situation – but they have predicted [the summer sale] will have a favorable outcome and we support this effort,” Blair said.
The short-term pricing change was able to take effect due to the The Postal Accountability and Enhancement Act of 2006, which gave the USPS more flexibility to respond to changing market conditions.
“I don’t see how you could have done it in the short time that was available before the PAEA,” Blair said. “Under the old legislation, it would have taken at least 10 months to make a decision.”
A key piece to the PRC’s decision was requesting metrics and post-sale analysis to determine whether the program worked effectively. The PRC has requested that the USPS report on the program 15 days after it credits the rebates. The USPS has estimated that the volume with increase 2% to 5.15% over threshold levels due to this rebate.
“We look forward to reviewing the results that come out of this,” Blair said. “It’s coming at a good time because of the struggling economy.”
