1 Shaping a More Efficient Future Price Change Proposal Mailers’ Technical Advisory Committee Stephen M. Kearney Vice President Pricing & Classification May 17, 2006

2 High-Level Goals  Growth  Efficiency  Cost coverage  Addressing  Positioning for the future

3 High-Level Initiatives  Shape-based pricing –Less emphasis on weight  Incentives –Containers –Drop shipping –Sorting –Packaging  More choices  Forever Stamp  Low-cost Address Change Service

4 Agenda  Review full product line –Strategy –Significant changes –Specific examples  Timeline to 2007  Questions

5 First-Class Mail Strategy  Shape-based pricing schedules –Letters –Flats –Parcels  De-emphasize weight

6 First-Class Mail Significant Changes  Forever Stamp  Single-piece 39¢ ►42¢  Postcards 24¢ ►27¢  Additional ounce 24¢ ►20¢ –Letters over 1 ounce go down –Flats over 6 ounces go down  Similar pattern for workshare  New Business Parcel category

7 First-Class Mail Examples WeightCurrentProposed 1 ounce 39¢42¢ 2 ounce 63¢62¢ 3 ounce 87¢82¢ Letters WeightCurrentProposed 1 ounce 52¢62¢ 7 ounce $1.83$ ounce $3.27$3.02 Flats WeightCurrentProposed 1 ounce 52¢$ ounce $1.83$ ounce $3.27$3.40 Parcels

8 First-Class Mail Examples Item Current Price Proposed Price Opportunity Proposed Price with Modification 6 oz. parcel$1.59$2.00 Reconfigure as a flat $ oz. flat$0.63$0.82 Reconfigure as a letter $ ¢ + 3¢+ 41¢ - 1¢

9 Priority Mail Strategy  Cover costs –Especially large lightweight items  De-emphasize weight for heavier items  Continue to improve convenience

10 Priority Mail Significant Changes  Dimensional weight pricing for Zones 5-8  Lower prices for heavier items  Permanent Flat Rate Box

11 Priority Mail Examples Item CurrentProposed Flat Rate Envelope $4.05$4.65 Flat Rate Box pound (Chicago to Los Angeles) pound (Chicago to Los Angeles)

12 Priority Mail Examples Item Current Price Proposed Price Opportunity Proposed Price with Modification Zone 8, 10 pound, 1.6 cubic foot parcel $20.25$28.75 Reduce size by 25% to 1.2 cubic feet $ $8.50+ $4.60

13 Express Mail Strategy  Low-cost alternative for shipping documents Significant Change  New 1-pound price

14 Express Mail Examples Price change examples CurrentProposed Up to 1/2 Pound & Flat Rate Envelope $14.40$16.25 Over 1/2 Pound, up to 1 Pound Over 1 Pound, up to 2 Pounds

15 Standard Mail Strategy  Align pricing with operations –Encourage growth of efficient, effective mail  Expand shape-based pricing

16 Standard Mail Significant Changes  Increase drop ship incentives  Add more presort options  Create distinct prices for parcels  Add “Not Flat-Machinable” category  Discontinue destination delivery unit rate for letters  Differentiate prices for detached address labels

17 Standard Mail Examples Item CurrentProposed Advertising letter (3-digit auto, DBMC) 19.2¢20.7¢ Non-machinable letter (3-digit, DBMC) 30.3¢39.5¢ Catalog (3-ounces, 3-digit auto, DBMC) 25.3¢30.0¢ Catalog (3-ounces, 5-digit auto, DBMC) 25.3¢27.2¢ Catalog (8-ounces, 5-digit auto, DBMC) 44.1¢44.9¢ Catalog (8-ounces, 5-digit auto, DSCF) 42.8¢43.3¢

18 Standard Mail Examples Item Current Price Proposed Price Opportunity Proposed Price with Modification 8 oz. parcel, basic presort, no drop ship 82.4¢$1.301 Enter at destination BMC $ oz. parcel 3/5-digit presort, DSCF 85.3¢93.9¢ Enter at DDU, 5-digit presort 80.1¢ 4 oz. rigid auto flat, 5-digit presort, DSCF 27.5¢49.1¢ Use auto- compatible flexible packaging 29.1¢ +47.7¢+27.7¢ +8.6¢- 4.2¢ +18.7¢+1.6¢

19 Periodicals Strategy  Encourage efficiency –Containers –Drop ship  Simplify co-palletization rules

20 Periodicals Significant Changes  New 85¢ container charge  Enhanced drop ship incentives –Particularly for high-editorial content

21 Periodicals Examples Item CurrentProposed Weekly news magazine (6 oz., 40% adv., CR-RT, SCF, 2000-piece pallet) 17.9¢20.0 ¢ Opinion journal (5 oz., 10% adv., 3-digit, zone 4, 50-piece sack) 29.5 ¢ 33.6 ¢ Local Newspaper (4 oz., DDU, CR-RT) 8.5 ¢ 10.5 ¢

22 Periodicals Examples Item Current Price Proposed Price Opportunity Proposed Price with Modification 8 oz., 5-digit auto, mailed in sacks (40 pieces per sack) 33.4¢38.1¢ Co-palletize with another magazine (1639 pieces per pallet) 36.1¢ As above, but entered at DADC 31.2¢ + 4.7¢ + 2.7¢ - 2.2¢

23 Package Services Strategy  More efficiency  Streamline product offering

24 Package Services Significant Changes  Discontinue retail Bound Printed Matter  Lower increase for DDU and DSCF entry  Require barcodes on all Parcel Select items

25 Package Services Examples Price change examples CurrentProposed 1-Pound Parcel Post $3.95$ Pound Parcel Post (Chicago to Los Angeles) $9.11$ Pound Parcel Select DDU $1.51$ pound Parcel Select DSCF $3.27$ Pound BPM flat DSCF presort 73.1¢72.8¢ 5-Pound BPM parcel DBMC presorted & barcoded $1.298$1.516

26 Special Services Strategy  Improve address quality  Modernize services Significant Changes  New low-cost One Code Address Change Service for letters  Redesign Insurance  Reduce electronic Return Receipt fee

27 Special Services Examples One Code ACS fees CurrentProposed Automated First-Class Mail (letters only) First two notices, each N/A 0¢0¢ Additional notices, each N/A 5¢5¢ Automated Standard Mail (letters only) First two notices, each N/A 2¢2¢ Additional notices, each N/A 15¢

28 Special Services Examples ACS fees CurrentProposed Electronic ACS notifications (First-Class Mail) 21¢6¢6¢ Electronic ACS notifications (other classes) 21¢25¢ Manual (paper) notifications (all classes) 75¢50¢

29 Special Services Examples Item CurrentProposed Certified Mail $2.40$2.65 Express Mail Insurance ($100 to $200) $1.0575¢ Return Receipt (paper copy) $1.85$2.15 Return Receipt (electronic) $1.3585¢

30 Timeline May Jun July Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Governors Decision (March/April) Implementation (May/June) PRC Recommendation (Early March) Litigation (May through March 2007) Filing Date (May 3, 2006) 10 Months 1 Year

31 Thank You Questions?