Pricing Challenge – US Postal Service

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Cost allocating is sending the Post Office down the drain – and a whole lot of our money with it. Pricing has nothing to do with cost. It is set by the market as a function of the value created relative to the value proposition of the competition. It is destructive thinking to believe that COST + PROFIT = PRICE.

So long as the government institutionalizes the wrong formula, the Post Office is doomed.Allocating costs leads to silly conclusions like believing delivering magazines is unprofitable, which leads to price increases, which leads to lower volumes, which leads to allocating the same fixed costs over smaller volumes, which leads to cost increases, which leads to further price increases … you get the picture.

via Innovation Excellence | Pricing Challenge – US Postal Service.

Written by Lisa.Bowes

October 25th, 2011 at 5:22 am

Posted in USPS

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