Mailing Services Prices Mailers’ Technical Advisory Committee February 19, 2009 Maura Robinson VP Pricing

2 Challenges  Tough economic times  Mail volume declines  Projected billion piece decline FY 09  Aggressive cost reductions  $5.9 billion over FY 09 – FY 10  Continue to provide high levels of service New Mailing Services Prices – May 11, 2009

3 Challenges – Total Mail Volume New Mailing Services Prices – May 11, Quarter Moving Average Growth Rates % SPLY FY 06FY 07FY 08 FY 09

4 Focus on Profitable Growth  Identify opportunities in all segments  Best value in shipping  Better customer experience  New technologies (IMb and FSS) New Mailing Services Prices – May 11, 2009

5 Mailing Services $65.6 Billion FY 08 Revenue (89% of total) New Mailing Services Prices – May 11, 2009 First-Class Mail $38B Special Services $3.1B Standard Mail $20.6B Periodicals $2.3B Package Services $1.85B 58% 31% 4% 3%

6 CPI Cap (12 month moving average) New Mailing Services Prices – May 11, Cap 2009 Cap 2.9% 3.8%

7 First-Class Mail  Average +3.78% New Mailing Services Prices – May 11, 2009 Product% Change Single-Piece Letters & Cards4.62 Presort Letters & Cards3.08 Flats3.83 Parcels2.57 International4.07

8 First-Class Mail – Single-Piece  Stamp price increases 2¢ (4.8% )  Forever stamps ease change  Above average cap increase  Unchanged  Additional ounce price  Nonmachinable surcharge New Mailing Services Prices – May 11, 2009

9  High margin  Large customers influence large volumes  Economic pressure in financial industry  Lower than average increase for letters  Maintain 2.2¢ incentive for 5-D auto letters  No change in additional ounce price First-Class Mail – Commercial New Mailing Services Prices – May 11, 2009

10  Align auto and machinable letter characteristics  Provide choices  Optional preparation for auto letters  Auto flats  Tray-based preparation required First-Class Mail – Commercial New Mailing Services Prices – May 11, 2009

11 Standard Mail  Average +3.78% Product% Change Letters3.83 Flats2.31 Parcels and NFMs16.40 High Density / Saturation Letters1.25 High Density / Saturation Flats and Parcels2.23 Carrier Route Basic Letters, Flats, and Parcels4.31 New Mailing Services Prices – May 11, 2009

12  All advertising mail vulnerable  Focus on growth incentives  Saturation mail  Catalog prices  Provide choices  Optional preparation for letters  Standard Mail parcels underperforming  Move Update compliance Standard Mail New Mailing Services Prices – May 11, 2009

13  Case study for new approach  Work with customers to identify opportunities  Evaluate potential ideas  Meets customer needs?  Financially sound for customers and Postal Service?  Eliminate ideas that don’t work  Refine high potential opportunities Standard Mail New Mailing Services Prices – May 11, 2009

14  Encourage volume growth  Additional pieces  More frequency  Incentives for new volume  4.0 ¢ flats  3.7 ¢ letters  One-year program  Enrollment through June 11, 2009  Evaluate versus expectations Standard Mail – Saturation Mail New Mailing Services Prices – May 11, 2009

15  Depend on mail for core business  Retail catalogs seriously hurt by economy  Reducing content (pages) may discourage sales  Additional catalogs attract new customers  Lowered pound rate to e ncourage more content  Lower than average price increase  Additional opportunities? Standard Mail – Catalogs New Mailing Services Prices – May 11, 2009

16 Periodicals  Average +3.97% Product% Change Outside-County3.97 In-County3.80 New Mailing Services Prices – May 11, 2009

17  Financial challenges for customers and Postal Service  83 percent cost coverage  Limit relative price changes  Steps towards increasing efficiency Periodicals New Mailing Services Prices – May 11, 2009

18  Encourage efficiency  Piece handlings have larger cost effect  Lower role of weight in prices  Larger containers more cost effective  Recognize pallet handling costs more  With FSS, value of carrier route sortation falls Periodicals New Mailing Services Prices – May 11, 2009

19 Periodicals – Outside-County Percentage Increases New Mailing Services Prices – May 11, 2009 Volume per Issue

20 Periodicals – Outside-County New Mailing Services Prices – May 11, 2009

21 Package Services  Average +3.80% Product% Change Parcel Post (retail)4.45 BPM Flats-2.00 BPM Parcels2.50 Media Mail and Library Mail7.47 New Mailing Services Prices – May 11, 2009

22 Package Services  Improve margin  Lower the price of BPM flats  Consistent with Standard Mail catalog strategy  Simplify Parcel Post  Remove BMC designations, Local Zone, and nonmachinable surcharge New Mailing Services Prices – May 11, 2009

23 Full Service Intelligent Mail  Long term benefits  End-to-end visibility  Actionable information – Operations, marketing, and finance  Paperless documentation New Mailing Services Prices – May 11, 2009

24 Full Service Intelligent Mail  Phase in over time  Immediate benefits in May  Free Address Correction Service  Start-the-clock information  Full-service prices (November 29)  0.3¢ for First-Class Mail  0.1¢ for Standard Mail and Periodicals New Mailing Services Prices – May 11, 2009

25 Resources  USPS.com/prices  New Price List  Downloadable price files  Federal Register notices  Postal Explorer (pe.usps.com)  DMM Advisory  PCC Insider  MailPro (usps.com/mailpro) New Mailing Services Prices – Mail 11, 2009