Discussion - Member to Member Sales - Research Center
Discussion - Member to Member Sales - Research Center
I received this in today's mail -
You will notice that the paid rate was 22.5¢;
It was quite heavy, so I weighed it - 2.6 oz!!!
WHAT?!?
It was from VISA......and the envelope was packed full of glossy advertising.
Now why is it that they can get away so cheap on postage??
No wonder the USPS is in the red.
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The mailpiece weighs less than 3.5 oz, and is considered commercial marketing mail. It is using 5-digit ZIP Code, and it is automated through the pre-sorted standard mail indicia. The non-automated price per such piece is $0.228. With automation through being pre-sorted, the mailpieces do not have to go through the USPS mail sorting machines. The mailer gets a $0.003 discount, thus the $0.225 postage rate.
This was no doubt a massive mail marketing campaign. The USPS made alot of money on it.
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'
I was similarly amazed to see a magazine subscription solicitation also come thru with U$D 0.22x postage ... I was setting it aside to scan for the illegal covers thread when I realized that it was probably just another heavily-discounted bulk mail rate ... we are accustomed to seeing these pieces come thru with just the permit number ... it is 'new to me' to see the actual postage paid.
Cheers,
/s/ ikeyPikey
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"Whatever the technical explanation may be, it is clear that the 22.5 cents does not cover the actual cost to process and ship 100 grams of paper across the country."
Pretty much sums up my opinion as well.
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Given all the infrastructure is already in place and so assuming no additional staffing is required these are all sunk costs. The revenue from the mail out is primarily extra margin so its a positive from usps perspective. Whether they could charge more would be an exercise in determining what the net effect would be on volume.
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07:57:04am
I am not so sure about it being less than cost. I believe
I may have read that to get it the mailings must be bundled
and have more than 500 items or so in order of delivery.
To an advertiser like "VISA" 300 or 500 items is a drop in
the figurative bucket. If a particular Zip code zone has
10,000 households, that mailing may be to all or nearly all
of them all bundled together.
10,000 items at $22.5 is a sizeable chunk of change.
Perhaps someone can research the cost of shipping 1,600
.?pounds cross country in a bulk shipment.
I bet the bean counters at l'Enfant Plaza have already
done that quite carefully.
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"... it is clear that the 22.5 cents does not cover the actual cost to process and ship 100 grams of paper across the country ..."
Well, it was clear to the dozens of bean-counters who set that rate that this is the fair cost for that item.
For example, one cost that this class of item should not pay is the cost of sorting & routing random bits of mail to their respective destinations.
The stuff arrived at a postal facility palletized by the destination regional center; within, it might have been packed by five-digit zip, or by nine-digit zip, or sequenced 'serve-by-serve' into the letter carrier's route ... each level of pre-sorting reduced the cost to the USPS, which reduces the cost to the sender, which is how you get from 55c to 22c.
The cost of carrying one more bDay card is not half-a-buck, either; the marginal cost is best measured in pennies, while both the 22c & 55c rates must account for an ocean of fixed costs, including the salaries of the aforementioned bean-counters.
Cheers,
/s/ ikeyPikey
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03:50:33pm
" ... Well, it was clear to the dozens of bean-counters who set that rate that this is the fair cost for that item. ..."
And clear to me that there must be dozens of bean counters involved. Just about anyone who has ever established and operated a successful business for any time is aware that all the fixed costs of marketing some goods and services need to be considered. Some expenses are somewhat obscure, but need to be considered. Those who fail in that part of the job are soon presiding over a closed shop as they begin to study the local newspaper's "Help Wanted" columns.
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USPS is generally in a positive flow with 2 exceptions. Periodicals which cover only about 67% of costs and the big loser which is inbound international mail which in 2018 was about 150 million pounds of mail at about 80% of cost. Hence the notice to leave the UPU which forces the US to subsidize certain categories of foreign mail.
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"Well, it was clear to the dozens of bean-counters who set that rate that this is the fair cost for that item."
I am a bean counter too and this was my gut feeling that the 22.5 cents on a 100g item is below cost.
I have no idea of their calculations. Still if it takes $200 to ship 100Kg cargo by air, this will be 20 cents for the 100 gram item. But the air cost must be only a fraction of the total cost. I anticipate that the highest cost is in delivering the letter from the post office to the recipient. Then the costs of transportation between post office, airport and back to post office, sorting etc.
I actually think the bean counters do not have a good idea of how much it costs to have the letter shipped and delivered, but they offer promotional rates in some areas and then overcharge the customers in other areas (parcels) and this is how the system survives.
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To be accurate, 2.6 oz. is actually a little
less than 75 grams....
...but anyway...
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Ah - I see!
Thank you for the clarification, Jules!
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02:59:34am
It could also be that such mail is carried along with more profitable items that there would not, by themselves, be enough to justify the transportation charges.
An example of a principle, for years my wife and daughters have operated a business involving home health care in Florida. Payments per hour of various services are set through Medicare and/or Medicaid and awarded by the State agencies. One service was "companion" involving accompanying the client to church, the bowling alley or a library, even just taking them to the park. The fee paid was 10¢ or 15¢ less than what they paid their employees, however the client/patient also was always entitled to several other services that paid a substantial profit so it was considered a part of the package and as long as there were many more hours involved the agency took them together. Between the state and our agency were supervising providers who had to find and choose an agency. By accepting those loss hours we gained access to very profitable clients.
Another example. Suppose a company runs a factory at about 75% or so capacity making widgets which sell well in hardware stores. that percentage make a profit and provides employment for the workforce.The managers begin to produce a less expensive unbranded line of widgets using the same equipment that sells for less since many of the fixed costs would be idle and the output rises to 95% of capacity.
A person looks at the cheaper itm and wonders how it can be sold at the asking price.
This is why you often see multiple brand names on what is essentially the same product. It even happens with supermarket food production, especially as robotic equipment has been developed that needs few expensive humans paid at union scales.
Such production principles apply to mail delivery as well and could easily result in one kind of mail service running at or near cost to subsidise other more profitable services that would be more expensive otherwise.
To most people economic concepts are as clear as mud, but to producers there my be a silver lining.
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Okay, here is the other side of the coin;
I received this in today's mail -
You will notice that the paid rate was 22.5¢;
It was quite heavy, so I weighed it - 2.6 oz!!!
WHAT?!?
It was from VISA......and the envelope was packed full of glossy advertising.
Now why is it that they can get away so cheap on postage??
No wonder the USPS is in the red.
1 Member
likes this post.
Login to Like.
re: Why So Cheap??
The mailpiece weighs less than 3.5 oz, and is considered commercial marketing mail. It is using 5-digit ZIP Code, and it is automated through the pre-sorted standard mail indicia. The non-automated price per such piece is $0.228. With automation through being pre-sorted, the mailpieces do not have to go through the USPS mail sorting machines. The mailer gets a $0.003 discount, thus the $0.225 postage rate.
This was no doubt a massive mail marketing campaign. The USPS made alot of money on it.
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like this post.
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re: Why So Cheap??
'
I was similarly amazed to see a magazine subscription solicitation also come thru with U$D 0.22x postage ... I was setting it aside to scan for the illegal covers thread when I realized that it was probably just another heavily-discounted bulk mail rate ... we are accustomed to seeing these pieces come thru with just the permit number ... it is 'new to me' to see the actual postage paid.
Cheers,
/s/ ikeyPikey
Login to Like
this post
re: Why So Cheap??
"Whatever the technical explanation may be, it is clear that the 22.5 cents does not cover the actual cost to process and ship 100 grams of paper across the country."
Pretty much sums up my opinion as well.
Login to Like
this post
07:55:06am
re: Why So Cheap??
Given all the infrastructure is already in place and so assuming no additional staffing is required these are all sunk costs. The revenue from the mail out is primarily extra margin so its a positive from usps perspective. Whether they could charge more would be an exercise in determining what the net effect would be on volume.
Login to Like
this post
Silence in the face of adversity is the father of complicity and collusion, the first cousins of conspiracy..
11 Oct 2019
07:57:04am
re: Why So Cheap??
I am not so sure about it being less than cost. I believe
I may have read that to get it the mailings must be bundled
and have more than 500 items or so in order of delivery.
To an advertiser like "VISA" 300 or 500 items is a drop in
the figurative bucket. If a particular Zip code zone has
10,000 households, that mailing may be to all or nearly all
of them all bundled together.
10,000 items at $22.5 is a sizeable chunk of change.
Perhaps someone can research the cost of shipping 1,600
.?pounds cross country in a bulk shipment.
I bet the bean counters at l'Enfant Plaza have already
done that quite carefully.
1 Member
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re: Why So Cheap??
"... it is clear that the 22.5 cents does not cover the actual cost to process and ship 100 grams of paper across the country ..."
Well, it was clear to the dozens of bean-counters who set that rate that this is the fair cost for that item.
For example, one cost that this class of item should not pay is the cost of sorting & routing random bits of mail to their respective destinations.
The stuff arrived at a postal facility palletized by the destination regional center; within, it might have been packed by five-digit zip, or by nine-digit zip, or sequenced 'serve-by-serve' into the letter carrier's route ... each level of pre-sorting reduced the cost to the USPS, which reduces the cost to the sender, which is how you get from 55c to 22c.
The cost of carrying one more bDay card is not half-a-buck, either; the marginal cost is best measured in pennies, while both the 22c & 55c rates must account for an ocean of fixed costs, including the salaries of the aforementioned bean-counters.
Cheers,
/s/ ikeyPikey
1 Member
likes this post.
Login to Like.
Silence in the face of adversity is the father of complicity and collusion, the first cousins of conspiracy..
11 Oct 2019
03:50:33pm
re: Why So Cheap??
" ... Well, it was clear to the dozens of bean-counters who set that rate that this is the fair cost for that item. ..."
And clear to me that there must be dozens of bean counters involved. Just about anyone who has ever established and operated a successful business for any time is aware that all the fixed costs of marketing some goods and services need to be considered. Some expenses are somewhat obscure, but need to be considered. Those who fail in that part of the job are soon presiding over a closed shop as they begin to study the local newspaper's "Help Wanted" columns.
Login to Like
this post
04:51:53pm
re: Why So Cheap??
USPS is generally in a positive flow with 2 exceptions. Periodicals which cover only about 67% of costs and the big loser which is inbound international mail which in 2018 was about 150 million pounds of mail at about 80% of cost. Hence the notice to leave the UPU which forces the US to subsidize certain categories of foreign mail.
Login to Like
this post
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re: Why So Cheap??
"Well, it was clear to the dozens of bean-counters who set that rate that this is the fair cost for that item."
I am a bean counter too and this was my gut feeling that the 22.5 cents on a 100g item is below cost.
I have no idea of their calculations. Still if it takes $200 to ship 100Kg cargo by air, this will be 20 cents for the 100 gram item. But the air cost must be only a fraction of the total cost. I anticipate that the highest cost is in delivering the letter from the post office to the recipient. Then the costs of transportation between post office, airport and back to post office, sorting etc.
I actually think the bean counters do not have a good idea of how much it costs to have the letter shipped and delivered, but they offer promotional rates in some areas and then overcharge the customers in other areas (parcels) and this is how the system survives.
Login to Like
this post
re: Why So Cheap??
To be accurate, 2.6 oz. is actually a little
less than 75 grams....
...but anyway...
Login to Like
this post
re: Why So Cheap??
Ah - I see!
Thank you for the clarification, Jules!
Login to Like
this post
Silence in the face of adversity is the father of complicity and collusion, the first cousins of conspiracy..
15 Oct 2019
02:59:34am
re: Why So Cheap??
It could also be that such mail is carried along with more profitable items that there would not, by themselves, be enough to justify the transportation charges.
An example of a principle, for years my wife and daughters have operated a business involving home health care in Florida. Payments per hour of various services are set through Medicare and/or Medicaid and awarded by the State agencies. One service was "companion" involving accompanying the client to church, the bowling alley or a library, even just taking them to the park. The fee paid was 10¢ or 15¢ less than what they paid their employees, however the client/patient also was always entitled to several other services that paid a substantial profit so it was considered a part of the package and as long as there were many more hours involved the agency took them together. Between the state and our agency were supervising providers who had to find and choose an agency. By accepting those loss hours we gained access to very profitable clients.
Another example. Suppose a company runs a factory at about 75% or so capacity making widgets which sell well in hardware stores. that percentage make a profit and provides employment for the workforce.The managers begin to produce a less expensive unbranded line of widgets using the same equipment that sells for less since many of the fixed costs would be idle and the output rises to 95% of capacity.
A person looks at the cheaper itm and wonders how it can be sold at the asking price.
This is why you often see multiple brand names on what is essentially the same product. It even happens with supermarket food production, especially as robotic equipment has been developed that needs few expensive humans paid at union scales.
Such production principles apply to mail delivery as well and could easily result in one kind of mail service running at or near cost to subsidise other more profitable services that would be more expensive otherwise.
To most people economic concepts are as clear as mud, but to producers there my be a silver lining.
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