A Pterodactyl and an iPad walked into a bar…

So, the US Postal Service submitted a request to raise first class rates again this week and got shot down.  And, I thought to myself “what’s the point?”.  The USPS will lose about seven billion dollars this year, up from around four billion last year; even after eliminating over 35,000 jobs.

Sorry folks, but this dinosaur is ready for the tar pits.

Is it fair that the USPS is forced to deliver junk mail to the most rural, remote reaches of this country that goes directly from the mailbox to the recycling bin?  No.  Is it reasonable that US Postal workers receive the kind of retirement benefits that leave most of us green with envy?  Depends on your perspective.

But, what makes no sense to me is why there has been absolutely no receptivity within the Federal government to allowing the postal service to evolve.  What would have happened if the Postal Service was privatized as some have argued for years?  I’m guessing the business model would look nothing like it does today.  And I’m guessing the customer experience would be just a wee bit more engaging.

Post Privatization Business Plan

Day one: outsource delivery, sorting, collecting and processing of mail.
Day two: focus on developing and bringing to market value-added services that help direct marketers (the biggest customer of the USPS) find more profitable methods for reaching their target consumers.

Need a role model? I offer you Deluxe Corporation.

Who is Deluxe? 

Those are the guys that used to print your checks from your bank.  “Today’s Deluxe is the indispensable partner for unleashing the growth potential of small businesses and financial institutions” 

Seems like Deluxe was looking out the windshield instead of the rearview mirror and saw the way that whole check printing business was going.  Good for them!

Do they still print checks?  Yes.  Specialized checks for people that want the souvenir.  But, the drivers of their business include such things as branding services, promotional products, fraud protection services, cash management. Knowledge management!  ON LINE SOCIAL COMMUNITY HOSTING!!! Get out!

This ain’t your grandfather’s Deluxe Corp. 

This is a really cool story of a company that came to a fork in the road on its business sojourn and had two choices.  Do things the way they’ve always been done because thats what they know.  That’s what’s worked.  That’s what’s safe.  Or do something completely different.  Which is more risky?

Business doesn’t have to change, survival is not a requirement.  Deluxe not only decided to survive.  It decided to thrive.

Remember Apple 15 years ago?  Is your business the pterodactyl or the iPad?

Comments

  1. I agree that USPS needs to evolve, but in this case, I think privatization may be an oversimplification.

    Not every customer costs the same to provide basic service in a network based service. As such, some customers (urbanites) end up heavily subsidizing others (remote rural). if privatized, the for-profit company would immediately reassess the cost structure of their network and implement a scaled pricing model more reflective of the cost to serve those customers. Those rural customers that pay pennies now might end-up paying literally hundreds to offset the remote mail pick-up and delivery costs.

    Many customers would be unwilling to pay the scaled rates, and the pick-up density in remote areas would get even worse, leaning ever more heavily on the remaining customers. At some point, it isn't cost effective to serve those small customers at any price, and service is discontinued.

    So what, you might say. The rural areas will convert to FedEx or email. In either scenario, the cost burden of living in rural areas becomes punitive, and some of our poorest regions effectively are made the worse.

    Now take this model out of mail delivery, and into say, energy delivery. Delivering power to remote areas is every bit as costly in a relative sense as is mail service. But rather than a viable alternative, rural areas may see their homes forced off-grid, leaving them without an alternative for electricity.

    I'm seldom for regulation, but in the case where costs in a network-based public service (utilities, mail) are disproportionately distributed, I do believe that subsization to the point where everyone has access to basic service is a necessity.

    USPS has a lot of innovation to do in order to get them cometitive, but I don't think that privatization is the direction they need to go.

  2. Seriously with the alignment of privatization and a moving scale rate model? Because that's what you saw AT&T; do with their service model for remote customers who also cost more to deliver services to?

    And the Post Office doesn't already have a similar model where really rural people have to have a PO box that they come to?

    Seriously…pick a better comeback.

  3. Paula,
    So, I interpreted your response as disagreement with Chris. Or maybe both of us. If you could clarify, that would be very valuable and additive to the conversation.

    hope to see you back. thanks for the comment
    Barry

  4. Chris,
    You made some excellent points. First, let me clarify. My suggestion of privatization was just one method through which I see the USPS having the ability to evolve as a business. The needed change in their business model could still happen as a public entity, but just not under the existing charter.

    The main point I may not have been clear on is that the business model must change. Actually, it is past time for the business model to change. The USPS has missed many leading indicators and many opportunities to evolve its business model.

    To that point, the suggestions you made re: tiered pricing would have been excellent options to consider 20 or more years ago. The problem I see with that is it still doesn't go far enough. It still doesn't address the changing market dynamics. The revolution in communication enabled by the internet,web 2.0, etc. Scaled pricing is an incremental strategy applied to a fundamental market shift.

    In this scenario, here's what would anticipate, although I haven't modeled the price elasticity for mail delivery or what that tiered structure would have to be in order to make the USPS profitable.

    1) Assumption: overall mail volume is declining
    2) The rural pricing would have to be so high as you suggest, that it would drive rural customers, for what they actually receive in the mail, to refuse service, go on line for the important things like bill paying and say no thanks to the junk mail that's left in the mail box, as you indicated.
    3) the convergence of these drivers will continue to drive revenue down, whether the USPS is pubic or private. SO, ultimately they could be left with a tiered pricing model with no customers. And someone else has come in to help those direct marketers figure out more effective and efficient means to deliver their message to prospective customers.

    I think, private or public, the USPS needs to think Blue Ocean and completely reinvent its value proposition, better understand its customers' needs and develop and deliver new value-creating solutions. Its not about delivering the mail better or more profitably. Its about delivering a superior value creation for its customers. (btw – its important customers are not households, its the people that send all that volume of mail)

    Hope that makes sense. and thanks for the comment. As always you make me think differently.

    Barry

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