US Postal Service 2008 Annual Report Download - page 22

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22 | 2008 Annual Report United States Postal Service
Money Orders — Are a special service that offer a safe,
convenient, and economical alternative to sending cash
through the mail. They can be purchased at any Post Of-
fice or from any rural route carrier. Postal money orders are
available for any amount up to $1,000. Money orders can
be cashed at any Post Office or can be deposited or nego-
tiated at financial institutions. Money orders are replaced if
damaged, lost, or stolen.
Shipping Services
Priority Mail — Priority Mail is offered in both the United
States and abroad. The domestic offering is a 1–3 day non-
guaranteed delivery service and is typically used to send
documents, gifts, and merchandise. Priority Mail Interna-
tional provides customers with a reliable and economical
means of sending correspondence and merchandise up to
70 pounds to over 190 countries and territories worldwide.
Express Mail — Includes Express Mail and Express Mail
International. Express Mail is the domestic offering. This
overnight, money-back guaranteed service includes track-
ing, proof of delivery, and insurance up to $100. Delivery is
offered to most destinations and is available 365 days a year.
A surcharge is added to the price for Sunday and holiday de-
livery. Commercial prices and volume rebates are available to
customers meeting certain volume thresholds. Express Mail
International offers fast delivery service to over 190 countries
with service guaranteed to select destinations.
Parcels — Parcel Select and Parcel Return Service are two
programs designed to provide economical means of ship-
ping packages. By taking advantage of the “first mile and
last mile” aspect of the Postal Service, Parcel Select saves
customers money by sorting packages closer to their ul-
timate destination; while Parcel Return Service is a work-
share discount program where our customers go to select-
ed sites to retrieve packages sent back to them from their
customers. Parcel Select and Parcel Return Service allow
us to partner with other companies to serve our respective
customers’ needs.
Details on our revenue by mailing, shipping, and other cat-
egories are found on the Operating Statistics Section, on
page 62 of this report.
Pricing and Classification Activity
P.L. 109-435 gave the Postal Service new flexibility in set-
ting price and classification changes. Prices are set by the
Governors and are approved by the PRC to be in compli-
ance with the new regulations enacted as part of the law.
We plan to adjust prices for our Mailing Services annually in
May, with increases no higher than that of the rate of infla-
tion. We plan to provide at least 90 days’ notice of the new
prices for Mailing Services.
On February 11, 2008, we announced a May 12, 2008
price adjustment for Mailing Services — First-Class Mail,
Standard Mail, Periodicals, Package Services, and Special
Services. The average increase by class of mail was at or
below the 2.9% rate of inflation, calculated using the CPI-
U for the past 12 months using an averaging method ap-
proved by the PRC. The First-Class Mail stamp price was
increased from 41 cents to 42 cents. For the first time, cus-
tomers could use the Forever Stamps they purchased be-
fore the price change, after the price change without add-
ing additional postage.
Prices for Shipping Services must cover each product’s at-
tributable costs, as well as an appropriate share of the insti-
tutional costs of the Postal Service. For 2008, the institution-
al cost coverage percentage, determined by the PRC, was
5.5%. The new pricing flexibility provided by the law allows
us for the first time to utilize contract prices, rebates, online
price reductions, and other incentives to encourage growth.
Prices must be announced at least 30 days prior to the im-
plementation date. We provided 60 days notice prior to the
May 12, 2008, price adjustment for Shipping Services.
Highlights of the Shipping Services price adjustments are
described below. Express Mail was changed to a zone-
based pricing system, with customers paying less for near-
by destinations. Customers also receive a 3% price reduc-
tion for purchasing Express Mail online or through corporate
accounts. Additional price reductions became available for
those who ship quarterly minimum volumes. Priority Mail
offers a 3.5% savings for customers who use electronic
postage or meet other requirements. Parcel Select — our
“last mile” delivery to every door — features pricing and
volume incentives for large and medium shippers. Parcel
Return Service moved entirely to a weight-based pricing
system, resulting in significant price reductions for many
lighter packages.