Should the Postal Service Close All Post Offices?

Note: This blog post contains my first attempt to include pictures and videos. If you are having trouble viewing the videos they are all on YouTube and can be found by searching DHL and either Packstation or paketbox. I would appreciate feedback on workarounds for readers behind corporate firewalls from the more technically minded to the problem that many are having viewing the videos. For those that cannot see the videos at work, multiple readers have indicated that the blog is readable through virtually all ISP's on home computers. Thank you for your understanding. I will remove this paragraph once a workaround is found.

The Postal Service created a major political storm by proposing to close less than 700 retail locations. In addition to forcing every member of Congress to deal with irate citizens and Postal employees, the Postal Service must go though a laborious regulatory and public outreach process to make a rather small tweak in its retail network.

Deutsche Post, the German post office has just proposed closing its remaining company owned post offices. Does this mean that there is no retail access to postal services? No, in fact Deutsche Post guarantees that every town with greater than 2,000 population have a postal retail facility and in urban areas, no customer would be more than 2 kilometers (1.24 miles) from a retail facility.

How does Deutsche Post do this?

1. Deutsche Post simplified its pricing structure for all letter and parcel products used by retail customers. The prices can be found on two Deutsche Post web pages.

Letters flats, and smaller light weight parcels

Parcels of any weight with size maximums beyond those set for parcels under 2 kilograms (4.4 pounds) with certain size maximums

Deutsche Post's price list for shipments of parcels of any size contains only seven different prices for shipments within Germany and only 20 different prices for shipments anyplace in the world. (If you look at the website, Deutsche Post uses the word "paket" for parcel and "päckchen" for small parcel.) It does this by nearly eliminating a customer's need to weigh the parcel that they are shipping. If a customer does not have the weigh a parcel to get a precise weight, they do not need a retail facility to weigh and price the shipment.

For domestic cards, letters, flats, and flat shaped parcels up to 2" thick there are five total rate levels . Besides the single rate for cards, there are four other rates: standard letters, heavy letters, standard flats and thick/heavy flats. Letters over 2 ounces are priced within one of the two flat categories.

For domestic parcels, customers only need to know the parcel's dimensions and whether the parcel weighs less than one of four weight band maximums. (Most parcels are handled by the DHL subsidiary.)

* 2 kilo (4.4 pounds) and no larger than 23.6" x 11.8" x 5.9" (60cm x 30 cm x15cm)
* 10 kilo (22 pounds) and no larger than 47.2" x 23.6" x 23.6" (120mm x 60mm x 60"
* 20 Kil0 (44 pounds) and no larger than 47.2" x 23.6" x 23.6" (120mm x 60mm x 60"
* 31.5 kilo (69 pounds) and no larger than 47.2" x 23.6" x 23.6" (120mm x 60mm x 60

For international parcel shipments, Deutsche Post has a pricing structure with a similar simple structure that has a total of 18 possible rates. Small parcels (parcels whose dimensions are such that width+ height+ length <= 35.5 inches) have two rates depending on whether they are destined within the European Union (EU) or the rest of the world. Larger parcels have rates within four weight-based price bands that are determined by destination country. Countries are grouped into four categories: the EU; rest of Europe; Middle East; and North America; and the rest of the world. For each country group, the weight based limits within each price bands are:

* 5 kilo (11 pounds)

* 10 kilo (22 pounds)

* 20 kilo (44 pounds)

* 30 kilo (66 pounds)

2.Deutsche Post contracts out all of its retail operations to either its former subsidiary, PostBank, independent providers of mail services or independent sellers of postage. Eliminating the need for precise mail weight simplifies the sale of postage. The simplicity of the transaction allows even the smallest kiosks and convenience stores can sell postage without the need for sophisticated point-of-sale terminals or revenue protection efforts that would be required with a more complicated tariff. Retailers can sell postage with the same level of effort they employ to sell scratch-off lottery tickets. By simplifying the product sold, Deutsche Post also simplifies the record-keeping, and security challenges with ensuring that non-corporate outlets do not pay for the postage sold, using models that work for lottery tickets and consignment items.

to the extent that weighing is necessary, a customer can go to an outlet that has a clerk that weighs the parcel. That is the service that the PostBank outlets can provide. However, the simplified tariff would allow a customer to go to an outlet that only sells stamps to buy the appropriate postage and determine the weight by using a scale the outlet provides for customer use, do the weighing themselves at home, or even just guess the weight prior to purchasing postage. The simplicity of the tariff allow individuals with limited training to determine the Deutsche Post postage stamp that would be appropriate for their letter, flat or parcel.

3.Deutsche Post has a significant technology program for self-service acceptance and delivery of parcels. They have developed two devices: paketboxes that can only accept parcels and packstations that can accept or delivery parcels. A simplified parcel tariff, on-line postage, and independent sellers of postage are clearly critical for the technology program to work. Paketboxes are larger version of the postal drop box and can be used for items that have postage already applied. Pictures on the web indicate that they are located in places not much different than where UPS or FedEx may have their drop boxes in the United States.

The video of the paketbox shows how it is used

Packstations are automated, large parcel lockers that can both collect and deliver parcels. They can deliver parcels to customers that are either not at home when the carrier arrives or for those customers that prefer to use the automated facility. They are located either in stand alone locations like cluster boxes in the United States or within buildings.

The following video shows how the packstation is used to accept parcels. (The process starts at the 20 second mark.)

The following video, most likely created by eBay and Deutsche Post, illustrates not only the use of a paketbox to tender a parcel and a packstation to pick up the parcel but the entire sortation process for parcels. The use of the paketbox by a customer and a Deutsche Post employee can be seen around 40 seconds from the beginning and the use of of the packstation can be seen at the 8 minute mark. All filming appear to have been done at PostBank or DHL facilities.




Could this be duplicated in the United States? Absolutely, but traditional thinking, regulatory processes and financial impediments prevent the Postal Service from doing so.

Traditional thinking prevents the simplification of the mail prices for retail customers to the extent that Deutsche Post has. The traditional approach to postal costing is to develop detailed tariffs with different rates for every characteristic of the item to be delivered that affects its costs. Shape based rates reflect a rationalization of this approach but did not change the complicated traditional weight and distance based tariff significantly. The Postal Service has two products that take a non-traditional approach to pricing: Express Mail envelopes and Priority Mail flat-rate boxes. The forever stamp is an example of a non-traditional way of selling postage for letters. While the market has shown that the success of these products in the retail market, traditional thinking prevent using these successes to expand the simplification of prices for retail customers.

Regulatory processes act to protect existing service locations, ways of serving customers and rate relationships. Changing to a simplified, self-service model would change where postal services are bought and parcels are tendered and would require abandoning any linkage between rates charged to retail customers and business customers of the Postal Service. By moving toward a simplified, self-service model, most traditional post offices would be unnecessary except to protect the jobs of existing employees and the social benefits that they now provide. As the current controversy over closing less than 1,000 post offices shows, both postal employees and citizens seeing changes in cherished routines are quite effective in making their interests known to Congress and the PRC. Similarly, de-linking the rate relationships between retail and business customers of the Postal Service would require overturning nearly forty years of regulatory precedent that has tried to balance the share of overhead that these two types of customers should bear, let alone how the overhead costs should be born among the various types of business customers. De-linking rates charged to retail and business customers would put the PRC in the uncharted territory of choosing market based rates over cost model based rates. The rulemaking on workshare discounts illustrates how wedded customers are to the regulator process, the concept that historical rate relationships matter, and the search for cost theories that would justify new rates and a regulator set advantage over competitors or the Postal Service. Weaning customers off of PRC protection and de-linking the prices of retail and business customers could create a ruckus just as loud as what now exists for closing a few post offices.

The Postal Service weak financial position and near-total lack of capital financing options leave a real retail restructuring beyond the reach of Postal Management. Over the next two years, the Postal Service does not have the cash to pay all of its mandated obligations for retiree benefits and will use most of an expanded borrowing capability to just cover operating losses. The financial requirements of a program that is the magnitude of what Deutsche Post did would dwarf the Postal Service's investment in Automated Postal Centers and would also have to deal with start-up costs of restructuring the concept of retail and covering costs of excessing both employees and facilities. Postal management position is not much different that scene in many Christmas movies where poor children can see the toys in store window but have no hope of seeing them under the tree.

Eliminating all post offices, therefore, is just a fantasy. Unfortunately, so is developing a modern customer-focused model for serving the Postal Service's retail customers.

Advertising Delivery: A Governmental Function?

In his thought provoking piece, APWU President William Burris summarized the challenge facing the Postal Service and its employees succinctly. I would like to focus on two quotes from his piece that highlight the challenge that he and his membership as well as all postal stakeholders will have to struggle with as Congress rethinks the business model for the Postal Service. Both of these quotes will like be central to one question that Congress will likely to debate: "Is the Postal Service's business still a governmental function?"

His first quote goes to the heart of what will be the policy debate, the core business of the Postal Service and governmental responsibility for ensuring that a provider exists to serve that market.

"Mail is what we process, transport, and deliver, but as the dominance of business mail demonstrates, the Postal Service is in the advertising business." [emphasis from original]

Mail advertising constitutes the bulk of the volume the Postal Service handles in its non-parcel postal products. Even bills and statements contain advertising.

No other advertising delivery business in the United States is government owned. The one possible exception is the Corporation for Public Broadcasting which allows sponsors of program to craft advertisements that are included at the end and beginning of programs.

No other advertising media is regulated to the extent that the Postal Service is regulated. Newspapers and periodicals that use newsstand, supermarket or home delivery are not subject to any regulation regarding what they can charge advertisers or the reading public, and are not subject to regulation as to how, where, and when those delivered to the household must be delivered. There is limited regulation of the broadcast industry but broadcast networks and local stations are free to set prices that they charge advertisers. Cable operators have some regulation regarding what they can charge customers and the range of their service offerings but do not have to submit to a regulatory process like the Postal Service.

The second quote focuses on the issue of business constraints.

"The Postal Service could do so much more to actively encourage citizens and business owners to use the USPS Web site to create customized messages for delivery by the Postal Service. Invitations to weddings or birthday parties; announcements of new business ventures; promotions of products and services — the possibilities are endless, constrained only by the imagination. Why isn’t the USPS advancing this concept rather than relying so heavily on messages developed by others?

We must use advertising as a tool that generates mail. The USPS has the potential to become a full-fledged advertising giant that, with extensive use of electronic media, creates volume."

The Postal Service is constrained to only provide "postal services" as defined by the Postal Regulatory Commission. This constraint prevents the Postal Service from doing what President Burris suggests. The constraints exist because competitors do not want the Postal Service, a governmental entity to compete with the private sector.

Removing the business constraints on the Postal Service that would allow it to enter businesses that relate to the delivery of advertising would create a more vertically integrated process, and possibly a lower cost process from conception to delivery. However, removing the constraint creates a significant policy quandary. If survival of the Postal Service requires it to enter a broader range of businesses related to advertising delivery that puts it in direct competition with private sector firms, should its existence as a governmental enterprise change?

I d0 not think that President Burris or APWU membership is prepared to accept the privatization option that might be required to fully take advantage of the Postal Service's capabilities as a deliverer of advertising. For too long privatization has been tied to cutbacks in jobs and reductions in compensation for APWU members or leadership to accept. However, the current financial challenges of the Postal Service suggest that those cutbacks and compensation reductions may come even without privatization. President Burris' message to his members suggests that it may be the time for the APWU to seriously invest resources to flesh out how a Postal Service free to pursue all opportunities relating to advertising delivery, and for that matter any business that could use the capabilities of postal employees and network of sortation and retail facilities, could improve the long-term prospects of the Postal Service and the APWU members that it employees.

Postal Service and the Federal Budget

More than anything else, the greatest political obstacle to a new business model for the Postal Service is the Federal budget deficit. Every legislative action to maintain postal services in light of current financial losses, and fund the transition that will create a new business model will have budgetary implications. Thee budgetary implications will likely become the primary arguments of postal competitors and other opponents of reform for delaying necessary changes that would make the Postal Service a viable and customer-focused provider of delivery and delivery related services.

Currently, the Postal Service is seeking relief from the demand of the Office of Personnel Management as included in the Postal Reorganization and Enhancement Act (PAEA) for accelerated funding of retiree benefit. The accelerated payments had a positive budget impact that smoothed the passage of the PAEA. However, the accelerated payment schedule reflected three misconceptions about the Postal Service that made the accelerated schedule seem reasonable.

• First, demand trends for mail were sufficiently strong to generate the revenue necessary to cover the payments. Congress, like many governmental and business executives at the time assumed the rosiest scenario for the Postal market and in particular demand for advertising mail and the mail revenue that it generated. When the recession hit and the revenue disappeared, the Postal Service lost its ability to meet the new payment terms.
  
  
• Second, the Postal Service was sufficiently capitalized to continually modernize its distribution and retail networks to reduce costs and improve service. The Postal Service had aggressively reduced its debt through the good fortune of strong demand for advertising mail, improved management of operating costs, and parsimonious spending on capital projects. Congress did not have an independent assessment of the true capital and cash needs of the Postal Service, particularly as they related to the legislation demand for improved cost management and network realignment.
  
  
• Third, cutting operating costs does not require significant one-time expenses if they are to be done quickly in ways that are transparent to customers. Both Congress and the Postal Service assumed that it had the time to reduce its workforce and streamline its network through the nearly costless method of employee attrition and minimal capital spending to move postal operations to locations that better fit today's mail distribution patterns. With no funds to reduce the workforce, the Postal Service is limited to those streamlining efforts that can be accommodated through moving employees to new jobs within the network that will not require payment of moving expenses.
  
  Unfortunately, markets can and did change more rapidly than either historical attrition rates or the slower attrition rates caused by the sagging stock market and economy. Accelerating reductions in the workforce, including supervisors and management at all levels, requires either early retirement incentives or severance pay. With an average hourly wage ranging from $25.70 for bargaining unit employees to $42.10 for headquarters employees, these incentives or severance payments can be a significant challenge for a Postal Service with limited or no cash reserves and the need to reduce its workforce faster than what attrition will allow.
  
  Similarly, limited cash reserves restricts both planning for and funding capital projects that can improve the placement of postal facilities in an effort to both reduce costs and improve service. While no company managing an operating network would replace an operating network with a new green-field one, all well capitalized transportation companies know that a continuously improving network requires having sufficient capital to fund moving operations over time as demand, technology and distribution patterns shift.
  

Right now, the increasing visibility of deficit politics affects the viability of proposals designed to enable the Postal Service to survive the next two years. In requesting that the GAO complete its report on potential business models in April, the Senate appears to acknowledge that more needs to be done. Given the political calender, dealing with the misconceptions of the PAEA and the financial reality of funding the needed transformation that each alternative business model suggested by GAO would require could put the impact that proposed alternatives will have on the deficit right in the middle of the 2010 political debate. If that happens, developing a long-term solution that the Postal Service continues to meet the needs of its customers will be far more politically charged than any previous efforts at postal reform.

Winning in Turbulence

Business Week has just posted a review of a new book by Darryl Rigby, the former head of Bain & Co.'s retail practice. Entitled, "Winning in Turbulence," the book looks at what strategies work in surviving a downturn.

While, I am in general a skeptic of the quality of many business books, especially those written (or ghost written) by retired chief executives, I have found that economic history provides valuable insight when today's challenges are beyond the experience of those trying to deal with them. I am a particular fan of the late Robert Sobel, who chronicled business failures in his book, "When Giants Stumble" which was one of dozens of books he wrote chronicling business during changing times. I hope that Mr. Rigby has joined the late Dr. Sobel in providing us with a clearer understanding about how companies have dealt with downturns in the past and identified strategies that worked and those that did not work. If he did this, then Mr. Rigby has provided postal managers and policymakers with some useful ideas on the potential impact of decisions that the Postal Service may have to make to survive if postal policy is not changed.

The following paragraphs summarize what I took away from the Business Week review that will likely cause me to buy the book.

The review states that a key to Mr. Rigby's view on surviving turbulence is the company's position prior to economic challenges. A company's ability to survive economic turbulence depends on their financial position going into the turbulence. If the firm is financially sound going in, it is more likely to come out of the turbulence a survivor.

The article identities three traps, that Mr. Rigby identified, that management has to avoid if possible as it works through turbulence

1. Going after new customers through price cutting as these customers may abandon you once the recover occurs and pricing becomes more rational.
2. Cutting costs in ways that core customers notice.
3. Curtailing customer focused innovation
   

As it appears logical that a firm's financial position prior to economic turbulence will affect its survival afterward, the question remains as to how a company can avoid Mr. Rigby's traps when they are not financially strong. My hope is that reading his book will answer this question.

Postal Service Bankruptcy

The headline says it all, "The U.S. Postal Service: Our Next Bankruptcy?" While the stark headline is startling, the potential impact is even more so. The article by Delia Lloyd was published on the website Politics Daily, a new politics website that now attracts 3.6 million unique users every month. It is not clear whether the article and the millions that will read it will sufficiently raise awareness of the Postal Service's difficulties to move postal policy higher on the agenda of Congress and the White House.

The problem right now for the Postal Service is that its troubles have been moved into the high pitched debate over health care reform. By mentioning the troubles of the Postal Service at two health care forums, President Obama made an easy but ill-informed comparison of the Postal Service with its largest private sector rivals FedEx and United Parcel Service.

While it is true that FedEx and United Parcel Service are weathering the economic storm, a more realistic comparison would be with the printing, mail preparation, and advertising industries that generate mail that represent over 80% of the Postal Service's revenue. The more realistic comparison would also include foreign postal operators whose business mix more closely matches the Postal Service's revenue sources.

An examination of the mailing industry worldwide clearly shows that the industry is suffering and that entities that plan to survive and continue to serve their customers and meet universal service obligations are making significant changes quickly. Both large and small printers have declared bankruptcy and some have liquidated. Advertising agencies are hurting so badly that some have begun to offer services at no cost just to keep talented employees on staff until the economy turns around. Throughout the industry, production facilities are shutting down and businesses are shrinking to levels that management believes will allow the enterprise to survive.

Overseas, postal operators have reacted aggressively to deal with the changing mail market and economic conditions. Postal operators in Great Britain and the Netherlands are taking a hard-line in their labor negotiations with their ability to settle with their unions depending upon how well labor understands that bailout of the postal operator to save jobs is unlikely. Deutsche Post is closing its remaining stand-alone post offices and replacing them with contract offices run by either its former subsidiary Poste Bank or other contractors. Operators in numerous countries are redoubling their efforts to streamline processing networks and optimize their delivery operations. Privatization proposals are popping up in Japan, Denmark, Sweden, and Latvia as the capital needs of dealing with the changing marketplace and modernizing operations become greater than what governments are willing to provide or what the operators can raise through postage rates without affecting demand so much to threaten the continuation of universal service.

But realizing that the entire American mail industry is in trouble, does not excuse Congress for creating a postal policy that has resulted in the Postal Service being the only western postal operator that is in such a precarious financial position and without the means to weather the economic downturn. In many ways, the modification of Postal Policy is reminiscent of Congress's initial foray into reforming railroad policy with the passage of the Regional Rail Reorganization Act of 1973. That act opened up some flexibility in pricing and service just as the Postal Accountability and Enhancement Act did but did not fully recognize the extent of change required to ensure that railroads could survive the technological and competitive changes that they faced. It took additional trauma in the railroad industry and two more legislative efforts before the modern framework for the railroad industry developed within which railroads are profitable, growing and able to provide substantial number of highly paid jobs.

By raising the concept of bankruptcy, Delia Lloyd illustrates how Congress has to rethink postal policy. In a bankruptcy reorganization, the objective is to create a new company that will be a viable enterprise with the prospect of paying back its creditors and new investors who provide the debtor-in-possession financing that funds the restructuring necessary to fund the restructuring and operating losses during the transition. In bankruptcy, creditors have it in their interest that all contracts entered into prior to bankruptcy are subject to renegotiation. Renegotiation of labor contracts is often critical because creditors are unlikely to fund the transition unless they believe that labor agreements reflect the new business reality. This is exactly what happened in the GM and Chrysler bankruptcies and the Federal Government's loans were dependent upon new agreements with suppliers, dealers, and organized labor. Creditors have significant leverage over bankrupt companies and their employees as they can raise the threat of liquidation if the company's management cannot develop a viable path through reorganization.

As the Postal Service's largest creditor, Congress is on the hook for scores of billions of dollars for retirement health benefits, workers compensation payments, and postal debt. Its financial interest is similar to the interest that creditors have in companies undergoing bankruptcy reorganization.

The one challenge to the bankruptcy model is the Postal Service's universal service obligation, as that for all intents and purposes takes the liquidation threat off the table. The Federal government has a constitutional responsibility to ensure the continuation of mail service, let alone the responsibility to ensure that mailer needs are met. Fortunately, there are models that deal with the challenges of reorganizing a financially bankrupt company whose business is such that liquidation is not an option. These models are the models that have been used to restructure railroads, shareholder-owned public utilities, and government-owned public utilities.

As the postal policy debate moves forward, the term "bankruptcy" will likely remain a favorite of editorial pages, columnists, headline writers, and politicians. While a real Postal Service "bankruptcy" is unlikely to move beyond the rhetoric of postal policy, the use of term will likely force postal stakeholders to make changes in all of their business and contractual relationships with the Postal Service as a condition for giving the Postal Service the time flexibility, and the resources needed to ensure that Congress's financial interests are secured.

Opening the mailbox

At yesterday's MTAC meeting, a mailer asked if mailers could have access to the mailbox for delivering periodicals, newspapers, and advertising on Saturday if the Postal Service stopped delivering on that day. While the hypothetical question was dismissed, it illustrates the risks that reducing delivering on that day could have for the Postal Service. Currently, access to the mailbox is restricted but reductions in the service that the Postal Service offers could create real demand for access that was just theoretical in the past.

The Postal Regulatory Commission's report on Universal Service dealt with the question of mailbox access in its report on Universal Service. However, it did not deal with the question of mailbox access if the Postal Service no longer used the mailbox on a particular day or at all.

Mailbox access is one of the most contentious issues in postal policy as it raises issues of privacy and the security of the mail. Mailbox access is generally not an issue at business addresses, as those addresses have doors that can accept delivery without violating the Postal monopoly on the mailbox. Mailbox access also creates a situation that UPS, FedEx, and newspapers have to either drop off their items on the stoop or set up their own box for their own items. Cluster boxes and post office boxes create a different issue as they are not attached to the residence of business and have more characteristics of a privately provided delivery point.

To date, the Postal Service has completed a significant amount of planning regarding operational changes and the impact on the workforce. It has just begun the process to understand how the change would affect senders of mail and total Postal revenue. The Postal Service is just now conducting the market research necessary to determine the impact of the change on senders of mail and their spending on Postal products. Once this research is complete, the Postal Service should know what is the market for Saturday delivery and more broadly what is the market for postal operations on Saturday.

In listening to the challenges that the Postal Service has in dealing with the proposed change to 5-day service, and mailer questions about how the change would affect them, three distinct groups of customers seem to be affected.

• Customers who use retail services on Saturday - Postal retail services like all other retail services serve customers on Saturday whose work or school schedule prevent using the service during business hours between Monday and Friday. This includes people who want to pick up parcels that could not be signed for during the regular delivery schedule, and those who need to tender mail and parcels. An important user of retail services on Saturday are larger billers who use caller service or Post Office boxes to receive remittances and losing a day of delivery slows down the process of depositing payments and increases the cost of using the mail for billing and payments.
  
  
• Customers who require Saturday delivery - As the question illustrated, Saturday delivery is important to senders of daily and weekly periodicals, and advertisements. Saturday delivery is a direct competitor with advertising placed in the Sunday paper. As newspaper circulation declines, many newspapers use mail deliveries to serve those addresses that do not receive the paper, the advertisement would have to be delivered either on Friday or Monday and it is not clear that the advertisement would be as effective on a day when customers have less time to look at what they receive. Loss of Saturday delivery will have the greatest impact on advertisers in those areas of the country where newspaper circulation has the least coverage of all households. Loss of Saturday delivery would also impact political campaigns that try to have the last critical mailing arrive on the Saturday before the election to coordinate with other media.
  
  Saturday delivery is also important for senders of bills. Bill senders have a printing cycle set to a 6-day delivery time. When the bill arrives has an impact on when the bill is paid. Changing the delivery schedule will affect when the company receives the money they are due. Saturday delivery is also important for billers when they accept the payments. As most large billers pick up their mail at the Post Office, the Postal Service will continue this service.
  
  
• Customers who require Saturday Processing - Saturday processing affects mailers with strict delivery requirements on Monday or Tuesday of the following week. Saturday processing also affects billers as it affects the speed at which bills are processed and therefore received. While allowing billers to collect payments on Saturday allows them to quickly deposit payments that have arrived at the local office, it slows the arrival of bills that are elsewhere in the system.
  
  Eliminating Saturday processing affects small business and individual mailers in two ways. For bills, it would require them to mail earlier to ensure that bills arrive on time. For parcel shippers, it eliminates the advantage that the Postal Service has over its private sector competitors for orders shipped late in the week and on Saturday.
  
  Finally, eliminating Saturday processing affects the delivery of fresh produce, live plants and animals. Losing a processing day increases the chance that the produce, plant or animal will not arrive as the sender intended. Creating significant problems for the small group of senders whom the Postal Service serves in this market.
  

While the market research that the Postal Service does now will be helpful, it will not likely describe the full impact of the change. If the Postal Service changes to 5-day a week delivery, every local and national television news program, radio station, and newspaper will be covering the change as a top story for an extended period. Stories will be presented on alternatives to mail to pay bills and ship parcels. Awareness of alternatives and their advantages will increase substantially and the relative impression of the Postal Service's products compared to electronic and physical delivery alternatives will be diminished.

The massive free media on the switch to 5-day delivery will complicate the Postal Service's marketing challenges. The Postal Service will have to deal with increased marketing pressure from electronic and physical delivery alternatives as well as local newspapers. This marketing effort will highlight why their service is now a better deal than the Postal Service.

Banks and others sending bills and receiving payments will use the change to highlight the advantages of electronic bill presentment and payment. Some will introduce or increase fees for hard copy bills and increase incentives for electronic payment, knowing the free media will reduce the size of the fee change or incentive offered to cause a customer switch delivery mode. Weekly newsletters and periodicals with Friday or Saturday deadlines will also expand their effort to move their customers to electronic delivery, again using the free media to reinforce this effort.

Countering this effort will be expensive and difficult. The Postal Service's marketing effort will need to be as detailed as its operating plan and in addition to advertising would require that every available person with some sales or marketing responsibility contact customers in person in order to retain their business. With millions of customers, large and small affected by the change, the success of the transition requires that the high-touch business retention effort that is required succeeds.

President Obama and the Postal Service

At today's health care summit, President Obama made this comment when trying to explain how private insurers could compete with a public plan.

"If you think about it, UPS and FedEx are doing just fine. It's the Post Office that's always having problems."

This quote was taken from Politico.com's website's Politico44 page and they report that it occurred at 1:50 pm. The Wall Street Journal's live blog places the quote at 1:45.

The President's remark makes you think that the Postal Service may have made it onto his daily briefing.