USPS to simplify pricing policy that offers 7,600 domestic options

The US Postal Service is set to simplify its pricing system from January, after the Inspector General found that it has more than 7,600 different prices for its domestic products alone. Along with international options, the USPS system could provide more than 10,000 different price options in all, according to a new audit.

The Inspector General found that almost half of the prices offered by the Postal Service related to “low to no mail volume” in 2010, with 31% of the price options not being used at all.

In response, USPS said it was bringing in simplified prices for some of its products in the New Year, including a single price for presorted First Class Mail up to two ounces in weight.

US commercial mail customers are currently forced to wade through a 1,700-page Domestic Mail Manual to do business with the Postal Service, the Inspector General said.

Such are the complexities of the system, most major mailers are forced to use software to calculate their postage.

The Inspector General wants to see a more modern, streamlined approach to pricing that might encourage new entrants to make use of the mail, with a “radical” overhaul of the Domestic Mail Manual. The Postal Service auditor believes a new sample pricing table could reduce the number of domestic prices by 97%.

At a time of decreasing mail volumes, the audit suggested the Postal Service had to pull down any unnecessary barriers to new customers.

“We believe customers should not have to use software to calculate their own postage. This complexity does not make it easy to do business with the Postal Service,” said the Inspector General’s report.

The audit also pointed out that the complexity of the pricing system also made it difficult for USPS staff to carry out business with customers, making it challenging to make sure pricing is accurate. The guidance document for USPS employees handling commercial mail is over 200 pages long, the Inspector General noted.

Under a proposal within the report, USPS domestic prices would be reduced to 65 for letters, 71 for flats and 104 for parcels.

The Inspector General’s report also criticised the time it takes the Postal Service to gather daily volume and revenue data to ensure pricing is covering USPS costs. The audit found that it takes 140 days for data to reach management, while USPS rivals have “easily available” real-time product data.

Management

USPS management has said it is aiming to implement simpler pricing options in 2012, and is currently in the process of reviewing its costing systems.

Responding to the Inspector General’s report, USPS vice president of pricing Maura Robinson agreed there was “room for simplification” and that “unnecessary complexity in pricing is undesirable and should be eliminated”.

Along with the single price for USPS First Class Mail, which incorporates the popular “reply rides free” idea in including its second ounce free of charge, USPS is planning on making its Delivery Confirmation service free for certain commercial parcels, and will abandon permit fees for mail from full service Intelligent Mail users.

Further reviews should also lead to “additional simplification opportunities”, Robinson stated.

However, the USPS management also stated its belief that there was value in maintaining options for customers, particularly large commercial customers. “These options help us to cooperatively manage mailing costs,” explained Robinson.