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No Value Added
Apr 1, 2006 12:00 PM , GENE A. DEL POLITO
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Not long ago, the U.S. Postal Service created quite a fury in the business mailing community by proposing to charge marketers a premium if they wanted to use the equivalent of Post-it Notes on mail pieces. The argument was that it was offering a “value added” service that warranted a higher fee even though this had long been mailers' practice — and one that didn't impose any additional costs on the USPS.

I read a recent commentary on about an argument between the telephone companies and Google and Yahoo! over a similar value-added logic. I'd like to use that analogy here.

Assume for a moment that the postal service is a gas company. Assume also that mailers using repositionable notes (such as Post-its) are cookie bakers. The gas companies provide the fuel that the bakers use to make cookies. Of course, the bakers pay for all the gas they use in accordance with the rate schedule the gas company itself has set.

Lo and behold, the bakers turn out a delicious product that's in high demand. Sharp businesses that they are, they're making a bundle on cookie sales.

The gas company gets a little jealous of the bakers' success. It concludes that it deserves a greater piece of the cookie-making action, and decides to charge the bakers a per-cookie add-on.

The cookie bakers go nuts. As far as they're concerned they've already paid for the gas they use, so why should they pay anymore? And they have a point. They're assuming all the risk associated with their product, but the gas company wants a part of the take. Instead of weasling in areas where it doesn't belong, the bakers want the gas company to focus on more efficient methods for generating and distributing gas.

But if the gas company is willing to accept some of the risk the bakers face in the market, the bakers might agree to share some of the profits that come from cookie sales.

Get the message? The USPS should give up the idea of value- added pricing if all it wants to do is pick mailers' pockets without exposing itself to risk.


GENE A. DEL POLITO is president of the Association for Postal Commerce (PostCom) in Arlington, VA.



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