USPS Pricing October 24, 2011 | 12:30 – 1:30 pm Eastern Time Presenter: Maura Robinson, Vice President – Pricing, USPS Sponsored by:

Welcome RR Donnelley Logistics – Postal Webinar Series sponsored by: Welcome RR Donnelley Logistics – Transforming Postal Policies into Savings Opportunities

USPS Pricing October 24, 2011 | 12:30 – 1:30 pm Eastern Time Presenter: Maura Robinson, Vice President – Pricing, USPS Sponsored by:

Mailing Services Price Change January 2012 Mailing Services Price Change MFSA October 24, 2011

January 2012 Mailing Service Price Change 5 Market Dominant Market Dominant Classes First-Class Mail Standard Mail Periodicals Package Services Special Services January 2012 Mailing Service Price Change 5

January 2012 Mailing Service Price Change 6 Price Cap The Price Cap Based on Consumer Price Index Price cap is 2.133% January 2012 Mailing Service Price Change 6

January 2012 Mailing Service Price Change 7 FCM Single-Piece First-Class Mail Single-Piece Key Initiatives Stamp price increase to 45¢ (2.3%) Increase postcard prices 3¢ to 32¢ (10.3%) Additional ounce price remains at 20¢ Retail parcels increase more than average to improve cost coverage Volume decline assumed to continue January 2012 Mailing Service Price Change 7

January 2012 Mailing Service Price Change 8 FCM Presort First-Class Mail Presort Key Initiatives Retention and cost improvement Second ounce free for presorted letters Align prices with operational capacity Letters Most 1-oz. prices increase by 0.6¢ to 1.4¢ 2nd ounce free to increase value, retain volume Reflect operating conditions Use excess network capacity → Want AADC or 3-D sort Little additional value for 3-D sort vs. AADC sort January 2012 Mailing Service Price Change 8

5-digit discount remains 10¢ FCM Letters First-Class Mail Letters 5-digit discount remains 10¢ Prices equal 50 45¢ 45 +1.0¢ 40.4¢ 40 +1.4¢ 37.4¢ 37.4¢ 35.0¢ 35 +0.6¢ +0.9¢ +1.0¢ 30 cents 25 20 15 10 5 Single- MAADC AADC 3-Digit 5-Digit piece January 2012 Mailing Service Price Change 9

Second Ounce Free First-Class Mail Use bill & statement mailings for marketing Capture value of advertising to targeted customers Piece weighing up to 2 oz pays 1 oz price Add value to First-Class Mail Slow diversion to electronic alternatives January 2012 Mailing Service Price Change 10

January 2012 Mailing Service Price Change 11 First-Class Mail Align Prices with Operational Capacity Set stage for network optimization “Plant” vs. “network” Little operational value for 3-digit sortation Final network design will define sortations Short-term: set 3-digit = AADC Both 3-digit and AADC sortation allowed 3-Digit 201xx 226xx 227xx AADC Dulles Plant January 2012 Mailing Service Price Change 11

January 2012 Mailing Service Price Change 12 First-Class Mail First-Class Mail Product % Change Single-Piece Letters & Cards 2.5 Presort Letters & Cards 1.6 Flats Parcels 10.9 International (Outbound & Inbound) 4.7 January 2012 Mailing Service Price Change 12

January 2012 Mailing Service Price Change 13 Standard Mail Standard Mail Key Initiatives Concern about customer effect in weak economy Recognize competition exists Grow advertising mail Engage consumers in using mobile technology, social media, etc January 2012 Mailing Service Price Change 13

January 2012 Mailing Service Price Change 14 Standard Mail Standard Mail Key Initiatives Focus on small business and new growth Increase convenience/ease of use Free Permits for Full Service IMb, free Delivery Confirmation January 2012 Mailing Service Price Change 14

January 2012 Mailing Service Price Change 15 Standard Mail Standard Mail Pricing Letters: Modest price increases (1.9%) Flats Cost Challenges Driving operational efficiencies High Density/Saturation Detached address label price increases to 5¢ Nonprofit: Small letter price reductions and small increases in flat prices Parcels “Standard Mail” parcel prices announced later this fall January 2012 Mailing Service Price Change 15

January 2012 Mailing Service Price Change 16 Standard Mail Standard Mail Product % Change Letters 1.9 Flats 2.2 Carrier Route Basic Letters, Flats, and Parcels 2.4 High Density / Saturation Letters 2.3 High Density / Saturation Flats and Parcels 2.9 January 2012 Mailing Service Price Change 16

January 2012 Mailing Service Price Change 17 Periodicals Periodicals 75% cost coverage in FY 10 Operational changes to drive mail to automation Special (“Hot Pubs”) handling eliminated Limit price swings Price to encourage efficiency Mixed ADC Pallet new price Origin entered pallets above average increase Entry closer to destination January 2012 Mailing Service Price Change 17

January 2012 Mailing Service Price Change 18 Periodicals Periodicals Product % Change Outside County 2.1 Inside County January 2012 Mailing Service Price Change 18

January 2012 Mailing Service Price Change 19 Package Services Package Services Manage costs Only BPM flats cover costs Higher price increases for parcels Eliminate 3¢ barcode discount on parcels All mail will be required to have a barcode in the near future Discount will be obsolete. January 2012 Mailing Service Price Change 19

January 2012 Mailing Service Price Change 20 Package Services Package Services Product % Change Single-piece Parcel Post 2.5 BPM Flats 0.5 BPM Parcels 1.9 Media Mail (including Library Mail) 2.6 January 2012 Mailing Service Price Change 20

January 2012 Mailing Service Price Change 21 Special Services Special Services Larger increases for higher-value services Add value for host mail piece Free permit fees for Full Service IMb Industry standard tracking & scanning Offering free electronic Delivery Confirmation for First-Class Mail “Confirm” fees equal zero January 2012 Mailing Service Price Change 21

January 2012 Mailing Service Price Change 22 Special Services Special Services PO Boxes New 3-Month pricing option For Short-term transitional market January 2012 Mailing Service Price Change 22

January 2012 Mailing Service Price Change 23 Special Services Special Services Product % Change Certified 3.5 Registered 1.4 Insurance 2.6 Return Receipt 2.1 PO Boxes 2.4 January 2012 Mailing Service Price Change 23

January 2012 Mailing Service Price Change 24 Timeline Timeline Notify PRC Oct 18 Jan 22, 2012 Preparation Regulatory Review Implementation Title Price development 45 days 45 days PRC Determination January 2012 Mailing Service Price Change 24

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USPS Pricing October 24, 2011 | 12:30 – 1:30 pm Eastern Time Presenter: Maura Robinson, Vice President – Pricing, USPS Sponsored by: