PRC APPROVES SUMMER SALE 2010

THE POSTAL REGULATORY COMMISSION in April approved the U.S. Postal Service’s plan to conduct a Standard Mail Pricing Initiative (also known as the “Summer Sale”) this year. This is a followup to last summer’s inaugural program.

To qualify for the discounts, customers must have mailed more than 350,000 Standard Mail pieces in the baseline period of July 1 to Sept. 30, 2009. This covers about 3,525 customers, or 67% of Standard Mailers. Mail service providers that execute mail and give it to the USPS are not eligible to aggregate volume on behalf of their customers.

The USPS will offer qualifying mailers discounts of 30% on volume increases of more than 5% over summer 2009 Standard Mail letter and flat volumes.

Using a new technique for projecting mailer response to proposed discounts, the USPS estimates that possible outcomes range from a loss of $3.5 million to a gain of $25.3 million. The potential loss in contribution is counterbalanced by the initiative’s utility, according to the Postal Rate Commission’s ruling.

This case provides an opportunity to observe participating Standard Mail users’ responses to short-term price changes, while monitoring other nonparticipating mailer behavior.

Unlike data from a general rate change, the panel data that this initiative may generate will inform the Postal Service and the PRC about the effect on volume of short-term price changes. The data will also help further refine the USPS’s trend analysis or the PRC’s elasticity analysis used to predict mailer response to price changes.

The good news is that catalogers have more time to prepare for the Summer Sale 2010 — about three months this year vs. less than a month to prepare for the program in 2009. But Robert Webb, senior vice president of marketing for Potpourri Group, still thinks catalogers need more time to align merchandising and operations to be able to fully take advantage of the program.

“We were very disappointed because we were able to mail only a fraction of what we wanted to [last year],” Webb told attendees at the American Catalog Mailers Association’s National Catalog Forum last month in Nashville. “We need a minimum of six months to prepare,” he said.

Hamilton Davison, executive director for the American Catalog Mailers Association, says many ACMA members can’t make the program work for them — either because they don’t mail enough catalogs or they can’t mail 5% more catalogs during the sale’s time frame than they did last year.

Still, Davison says, mailers should be pleased with this outcome, “because it’s the beginning of better, more far-reaching mailing incentives to follow.”

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