Major Mailers Association October 4, 2012 Gary Reblin Vice President Domestic Products U.S. Postal Service

2 USPS Product Performance FY12 August YTD Revenue–Variation to SPLY (%) Notes: International Mail includes all In/Outbound Mail and International Ancillary/Special Services. Some First-Class Mail and Marketing products have been included under Shipping Services on this chart. -3.6% -3.9% 8.6% 8.1% -0.8% First Class MailMarketing Mail Shipping ServicesInternational Total $26.7B $16.8B $10.4B $2.5B

Volume Trends of Single-Piece and Presort are IMPROVING! First-Class Mail

Transaction Mail Statements = less than half the rate of decline compared with bill payments!  75% of consumers request bills and statements in print  First-Class Transaction Mail 95% open rate

Saturation and Simplified Flats +$108M Incremental Revenue so far in FY’12…

Lightweight Shipping +$354M Incremental Revenue so far in FY’12

7 Mail Evolving & Adapting Digital Diversion Mobile Explosion Ecommerce Growth Small Business

80% look at their mail daily – as a valuable news resource 75% like to see what’s in the mail 63% of mail is kept at least 2 days Insight: Mail is still highly valued Source: USPS Mail Moment Survey

 People are bombarded with media messages and ads!  Avg. person is exposed to 2,904 media messages, pays attention to 52, and remembers 4*  Avg. household gets 2 pieces of Direct Mail vs s daily radio social media texts web mobile The Media Explosion! television 9

10 Mail breaks through the clutter!

11 Mailing & Shipping Strategies Shape the Future First-Class Mail Marketing Mail Shipping Services Slow diversion by differentiating hard copy from digital Embrace new opportunities from digital and social media Simplify using marketing mail Promote emerging technologies Develop solutions for growing ecommerce market

12 2nd Ounce Free!  Permanent price change  Strengthen customer relations  Advertise brand  Sell additional services  Turn mail from cost to profit center Building New Value

13 Commercial Single-Piece Rate  Establish rate for commercial Single-Piece non- automation letters up to 2 ounces  Responds to feedback from First-Class Mail customers on 2 nd Ounce Free  Designed to simplify preparation for residual First-Class Mail letters  Under consideration for January 2013

14  Digital-to-print apps  Apple Card mobile app (iPhone, iPad)  SendOut Cards 5M pieces  Facebook  Picture Permit Imprint Indicia  Prime “real estate”  Advertise, build brand  Product live June 24  Hallmark Alternate Postage pilot  Payment triggered w/IMb scan Harnessing Digital/Social Permit No City, State, Zip Code US POSTAGE PAID FIRST-CLASS MAIL PRESORTED

New Technology Creating Opportunity & Excitement 15

In the US:  8.2% Internet traffic driven by non-computer devices  25% web users are mobile only  More smartphones purchased than PCs in 2011 Desktop Mobile US mobile internet users will grow at a rate of 16.6% between 2010 and 2015 Mobility Trends Sources: On Device Research via MobiThinking, comScore Device Essentials Dec 2011 and IDC Worldwide New Media Market Model, MobileFutureOn Device Research IDC MobileFuture 16

Mobility Trends Source: Cisco, DigiTimesCiscoDigiTimes Devices are rapidly shrinking in size while the number of mobile connections per person rises dramatically B people 500M connected devices 0.08 devices per person B people 12.5B connected devices 1.84 devices per person B people 25B connected devices 3.47 devices per person B people 50B connected devices 6.58 devices per person Devices have gone from “movable” to “mobile” to “pocketable”

U.S. Market ‘Mobilizing’  45% use mobile marketing  70% say mobile budgets will increase  Most popular applications:  Quick response codes (79%)  Mobile websites (70%)  Mobile applications (55%) StrongMail April Survey 800 Executives

Mobile Barcodes Opens web page when scanned by mobile device equipped with reader application:  Open-sourced barcodes (QR Code®, Datamatrix)  Proprietary barcode or tag (SnapTags, MS Tags)  Image embedded with a digital watermark  Image utilizing intelligent print recognition 19

20 NFC  Near Field Communications (NFC) enabled devices (smartphones)  Mailers encode “tags” or “chips” to deliver information  Tap mailpiece to download coupons  Use mailpiece in to activate personalized offers  Track responses % devices enabled % devices enabled

Authentication Picture / Face Voice Iris Fingerprints Veins, Hands, etc. DNA Are Cell Phones Pin Generation Tokens Digital Certificates Smart Cards Mail Have User Names Passwords Shared Secrets “Out of Wallet” Know Level of Security Mobile phones can serve as a method of authentication by confirming something you: Choosing the right level of authentication depends on…  Population  Cost/Benefit  Security  Support  Publicity  Privacy/Policy

New Promotions New Products New Pricing Creating Opportunity & Excitement 22

Embrace technology, encourage mail integration Drive long-term product value  Relevance  Effectiveness/Response  Engagement Drive Innovation Accelerate best practices Drive awareness and engagement Consumers Residents Marketers Business Gov. USPS Strategy 23

Call to ActionCaptureResulting Action Mobile-on-Mail Mobile-on-Mail campaigns requires a call-to-action, specific technologies to capture it, and a value added result Scan QR Code, SnapTag, Watermark Tap NFC Dial Phone Number, Star-Star Dial Feature Phone Dialer, SMS Smart Phone/ Tablet Camera, Applications (3 rd Party, Retailer or USPS) Learn Instructions, Reviews, Information, Augmented Reality Save Coupon, Loyalty Card Share Social Media, Blogs, , Pinterest Text Short Code Next Gen Device NFC Chip, In2Pay iCAISSE Pay Purchase, Bill Pay, Donation, Postage Contact Customer Service, Confirm Receipt of Mail Play Sweepstakes, Games Authenticate Signature, Account Login 24

Holiday Mobile Shopping  Short-term promotion Nov. 7-21, 2012  Build mobile-on-mail connection during holiday shopping season  Lead to Black Friday, Small Business Saturday, Cyber Monday  Two opportunities to save: 1.2% discount on First-Class and Standard Mail with mobile barcode enabling mobile shopping 2.Retailers using Priority Mail to deliver merchandise may receive additional 1% discount on mail (not parcels) US Mobile Commerce sales will grow 98.6% over 2011 to reach $20.85B Internet Retailer Sept ‘12

Lead Industry & Encourage Best Practices 2013 Promotions Calendar* APRIL-JUNE Earned Value Reply Mail -Financials, Catalogers, Publishers MARCH-APRIL Mobile Coupons -Local & national retailers & businesses Click-to-Call -Insurance, Financial NOVEMBER-DECEMBER Mobile Buy-It-Now - Retailers, e-tailers & catalogers AUGUST-SEPTEMBER Emerging Technologies -Retailers, e-tailers & catalogers Product Samples -CPGs, Retailers Picture Permit -Existing customers 26 * PRC approval pending

27 Mobile Coupon and Click to Call*  Mobile Coupon: Mail contains mobile technology that delivers a coupon redeemable in-store or online when scanned  Click-to-call: Mail links directly to a mobile optimized website with a “click to call” or brings up a phone number automatically in the users phone  Registration Period: Jan April 30, 2013  Program Period:March 1 - April 30, 2013  Discount:Upfront 2 % postage * PRC approval pending (all dates subject to change)

28 Earned Value Reply Mail*  Mailers earn credit for BRM and CRM counted during normal mail processing  Registered permits and Mailer IDs required  Credit applied post-promotion to Permit Imprint account for future mailing  Registration Period: Jan. 1, March 31, 2013  Program Period:April 1 - June 30, 2013  Credit Amount: $0.02 per mailpiece scanned * PRC approval pending (all dates subject to change)

29 Emerging Technologies*  Near-Field Communication: Mail contains NFC smart tag or RFID chip enabling info transmission to mobile device  Augmented Reality: Mail facilitates a user experience combining virtual & real time interactive, registered in 3-D  Identification Component: Mail enables user to complete identity/authentication process  Registration Begins: June 1, 2013  Program Period:Aug. 1 – Sept. 30, 2013  Discount Amount: 2% of eligible postage * PRC approval pending (all dates subject to change)

30 Picture Permit*  Mail contains customized permit indicia area with company logos, trademarks or brands (color images only)  Pre-testing and design approval required  Registration Begins: June 1, 2013  Program Period:Aug. 1 – Sept. 30, 2013  Discount Amount: Per piece fee waived * PRC approval pending (all dates subject to change)

31 Product Samples*  Standard Mail® regular and Nonprofit marketing parcels containing product samples  Trial size product (or other item) to incite recipients to purchase a product/service, form a belief/opinion, or take an action  Registration Begins: June 1, 2013  Program Period:Aug. 1 – Sept. 30, 2013  Discount Amount: 5% off eligible postage * PRC approval pending, promotion will include new Product Samples offering available Jan (all dates subject to change)

32 Mobile Buy It Now*  Mobile barcode or similar print technology takes consumer to mobile optimized site for product purchase  Tangible items that can be shipped via USPS products (delivery by the USPS not required).  Registration Begins: September 15, 2013  Program Period:Nov. 1 – Dec. 31, 2013  Discount Amount: 2% off total postage * PRC approval pending (all dates subject to change)

33 “ The USPS seems to have changed the way merchants look at QR codes as a part of their marketing campaigns.” MultiChannel Merchant, Outlook : Ecommerce

Thank you! 34