oversight

Savings Opportunity for the United States Mint's Promotional Mailings

Published by the Government Accountability Office on 1990-04-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   United    States General Accounting      Office
                   Testimony
GAO

For Release        Savings Opportunity             for the United         States
on Delivery        Mint's  Promotional            Mailings
Expected at
1O:OO a.m. EDT
Wednesday
April   18, 1990




                   Statement  of
                   L. Nye Stevens,  Director
                   Government Business Operations                    Issues
                   General Government Division

                   Before the
                   Subcommittee  on Consumer Affairs   and Coinage
                   Committee on Banking,    Finance, and Urban Affairs
                   House of Representatives




                            @j-9(0;          1. IYIIL   {
                                         I
GAO/T-GGD-90-34                                                               GAO Form 160 (12/87)
           SAVINGS OPPORTUNITY FOR THE UNITED STATES MINT'S
                        PROMOTIONAL MAILINGS
                              SUMMARYOF STATEMENT BY
                                  L. NYE STEVENS
                          DIRECTOR, GOVERNMENTBUSINESS
                                 OPERATIONS ISSUES
                           GENERAL GOVERNMENTDIVISION
                         U.S. GENERAL ACCOUNTING OFFICE

The Mint's      numismatic    programs are operated         essentially     as a
direct     mail business,     through promotional         mailings     to a list   of,
currently,      2.8 million     collectors.      Gross sales attributable          to
the Mint's      direct   marketing      programs peaked at $390.5 million            in
program year 1987 and fell            off to $178.6 million        in 1989.
Profits     from the Mint's      operations     are turned over to the
Treasury,      so that increased        profits  from reducing       Mint's   business
costs could help reduce the federal              deficit.
Like other federal              agencies,     the Mint is required          by law to use
cost-effective          mailing      practices.        The Mint has taken several
actions      to reduce its postage costs.                 For example,       the Mint has
begun using software              to control      the size and quality          of its
mailing      lists    and to obtain presorting             discounts      for its
promotional        mailings.         However, the Mint could reduce by more
than half the $4 million                basic cost of its mass promotional
mailings       if it paid third-class             instead    of first-class       postage
rates.     The higher weight            threshold      of 3.3 ounces for third         class
before an incremental               charge is incurred        would also increase
advertising        flexibility.
Mint management presented                 an array of concerns about third
class.       Because of the value of the rapidly                    expanding       direct
marketing       business,        which makes heavy use of third                class,      USPS
has worked closely              with businesses       to study concerns about the
delivery,        timeliness,        and image of third        class.        The result       is a
large body of evidence                that counters      the Mint's       concerns.         Based
on these study results                and the opinions       of industry         experts,      GAO
believes       that third        class,    with an instruction          on the envelope
that it be forwarded,               is appropriate       for the Mint's          promotional
mailings.          The Mint could save $2.4 million                 annually      by using
third     class for its regular              promotional     mailings.         These savings
would be further             increased      (1) when third       class is used for
special      promotions         using supplementary         mailing     lists,      (2) if the
Mint combined mailings                now restricted       by the additional           charges
incurred       above the 1 ounce first-class                weight limit,         and (3) if
first-class         rates rise more than third-class                 rates in 1991 as
proposed by the Postal Service.
GAO recommends         that the Mint        budget     for   and use third        class    for
its promotional          mailings.
Mr. Chairman           and Members of the Subcommittee:


We are pleased            to be here             today        to discuss              the     results           of our
review,      requested          by this         Subcommittee,               of opportunities                       to
reduce      postage       costs        at the United               States        Mint.           This          work fits
into      our overall          program         of reviewing              mail         management               in a number
of government           agencies.              We were able              to apply             lessons           learned         at
other      agencies       to the Mint.


The Mint       has taken             several      pos itive         steps        to reduce               its     mailing
costs.        However,         all     Mint      promotional             mailings             are sent           first
class.       We believe              the Mint         could       reduce        its     basic,           recurring
postage       cost     of about          $4 million            by $2.4 million                   annually,               as
well      as gain      considerable              marketing           flexibility,                by using           third
class      (bulk      business         rate)         as the commercial                      sector       does.


My comments           today      are based on work that                         we did          primarily           in
January       and February              1990.         Our     review        focused           exclusively                on the
Mint's      numismatic           promotional             mailing         practices.                   We reviewed
documentation            of the Mint             numismatic            mail       operations               to
reconstruct           dollar         costs     and mail           volumes         for        fiscal       years          1985
through       the present,             and Mint          projections              of postage               costs         for
fiscal      years      1990 and 1991.                   We obtained             several           studies          and
opinions       on third-class                 mail      deliverability                  and timeliness                   and
the Mint's           promotional             mailings         through         interviews                with     a number
of Mint,       industry,             and United          States        Postal           Service           (USPS)
                                                              1
officials.


The industry               leaders          we obtained                information          from were key
members of the Mailers'                            Technical            Advisory       Committee,            which        is a
primary        avenue         for     the exchange                 of views          between        USPS and volume
mailers.            From this           organization                we spoke with              the Vice          President
for    Government             Relations             of the Direct              Marketing            Association,               the
Executive           Director          of the National                    Association           of Presort
Mailers,           the     Executive           Director            of the      Third        Class     Mail

Association,               and the          Industry         Chairman          of the First              Class
Standing           Subcommittee,               who is also               a representative                from       the
Federal        Government             Association.


BACKGROUND


The Mint's            numismatic             programs          are operated                essentially           as a
business.             Through         these         programs,            the Mint          produces         coins        and
medals       for      sale,         advertises             these        products       widely,        generates
revenues           from     their          sale,     and deposits              profits         from      these        sales
into      the general               fund     of the Treasury.


The Mint           sells      its     products             through         advertising           targeted           at
special        audiences.               According            to Mint          officials,            gross      sales
attributable               to direct           marketing            programs          peaked        at $390.5
million        in program             year         1987,     and fell          off     to $178.6            million        in
1989.        Figure         1 illustrates                  the Mint's          gross        sales     attributable

                                                                   2
to direct      marketing                  for          program            years      1986 through         1989.


Figure      1: Direct              Marketing                      Gross Sales          Have Declined




               so0




               200




               100




               -I 0                           l--l
                                   A-L                       A.
                         Program     Propm           Ragnm        Pmgnm
                         Yrr         Y9W             Ymr          Y9U
                         1986        lW7             loo8         low
                         Dlnd   Matilng      01or      Sales

               source:    U.S. Mint data




Over the       last        few years                    the Mint           has typically           sent    a promotional
mailing      for      each product                       marketed             during      the year.        Separate
mailings       have been done for                                  the Mint's          uncirculated,        proof,
bullion      proof,             and commemorative                          coins,       along     with    a catalog     for
holiday      sales.              These promotional                            mass     mailings        have been sent
first      class.          Program               year             1989 Mint       data     show that       responses       in

                                                                          3
the form          of orders             ranged            from     about      7.6 percent               for      the holiday
catalog          to 32.7 percent                   for        the proof         coin        promotion.                 The
average          response            rate       was 17 percent                for      five       major        mass mailings
done for          1989 programs.


The Mint's             mailing          list       currently             contains           2.8 million
recipients.                The mailing                 list       has been built                 from prior
customers          and people               who have requested                       that        they     be put            on the
list.        For some mailings,                           the Mint's          list       has been supplemented
with      additional             mailing              lists       targeted          at audiences               expected            to
be interested                  in the          theme of particular                     promotions.                    For
example,          in fiscal             year          1988 the Mint             used mailing                  lists         supplied
by the Olympic                  Committee               to send supplementary                      mailings             to over
10 million              recipients              for       the Olympic           commemorative.                        For the
current          commemorative                  program--          the Eisenhower                 commemorative--the
Mint      plans         to send promotional                        mailings          using        lists        of military
officers          and retired                  military           personnel.


Postage          for     the numismatic                       program      promotions             was $6.7 million
for     fiscal          year         1988-- the year               for      which      we did           our most
extensive              analysis.               The Mint's            postage         for      promotion               costs,       as
submitted              in its         end-of-year                estimate       to USPS for               fiscal            year
1989,      was about                 $5.3 million.                 Mint      officials            project             promotional
mailing          costs         for     fiscal           year      1990 will          amount         to $6.7 million.
The cost          of the Mint's                   promotional               mailings,            based on its                postage
payments          to USPS, is                  illustrated               in figure          2.

                                                                     4
Figure    2: Numismatic          Promotional            Mailing        Costs




                 Fhal- t-z F!z 72
                 YOU
                 1902
                          Ymr
                          lem       lea7    lee0     lee2
                 Promdw     Ndling camt*

             Fkcal Year 1989 page     costs have not been audited of apprwed by USPS.




THE MINT USES SOME MAILING PRACTICES
THAT REDUCE ITS POSTAGE COSTS


Federal    regulations1             and good management                 practices         require   each
federal    agency       to have a mail             management           program         whose objective


1See Federal   Information     Resources Management                              Regulation,        41
C.F.R. Section    201-45.107-2     (1988).
                                                       5
is to provide                    rapid     handling             and accurate               delivery          of mail            at
minimum           cost.           The Mint          has made improvements                          to its         mail
operations                that     have allowed                 it     to reduce           its     postage         costs
significantly.                      In 1988,           the Mint            installed             computer         software              to
standardize                addresses            according              to USPS criteria                  and has used
other        software             to add the             g-digit           ZIP code to its                mailing              lists.
The Mint           obtains            presort          discounts            from         USPS by sorting                  to
various           levels.             According           to agency              officials,             the Mint's
mailing           list       can typically                achieve           the     following            presort           levels:
           --70      percent             of mailings                 are sorted           to the USPS carrier
              route          level.
           --20          percent         of mailings                 are sorted           to the        5-digit           ZIP
              code level.
Agency        officials               say that           the         remaining           10 percent          of mailings
cannot        be sorted               to the          5-digit          ZIP code or carrier                      route

levels.             These are known as residual                                  pieces,          which      are charged
the       first-class               single       piece          rate.


These presort                    levels      are       important            because           USPS offers
substantial                discounts            for      presorting              mail.           Obtaining         a 5-digit
presort           discount            reduces          first-class               postage          charges         for      the
first        ounce by 4 cents                      (16 percent).                  Obtaining             the carrier               route

discount            reduces           first-class               postage          charges          for     the     first          ounce
by 5-l/2            cents          (22 percent).


These cost                reduction          percentages,                  weighted           by the percentage                      of

                                                                       6
presort              levels         that          the Mint           mailings                 attain,        show that             the Mint
is paying               18 percent                 less        for     first-class                   postage       than       it     would
if      it    were not              using          available                software             and not presorting                    its
mail.


THIRD CLASS SHOULD BE USED
FOR PROMOTIONAL MAILINGS


The Mint              could         further              reduce            its     postage           costs       by using           third
class         for       its     promotional                    mailings.                 Doing       so would           increase
profitability,                       increase             contributions                       to the      Treasury,           and,
ultimately,                   help         reduce         the        federal             deficit.


Substantial                   Costs         Could         Be Avoided
By Using              Third         Class


The basic               rate         for         first-class                mail         is     25 cents,         while       the basic
rate         for      third          class          is    16.7        cents --8.3                cents         (33 percent)            less
than         first       class.                  The rate            for         first-class             mail     presorted            to 5
digit          levels          is     21 cents,                while             the     5-digit         rate     for     third        class
is      13.2         cents --7.8                 cents      (37 percent)                      less      than     presorted           first
class.               The rate              for      first-class                   mail        sorted      to the carrier                    route
level          is     19.5      cents,              while        the carrier                    route     rate      for      third       class
is 10.1              cents--g.4                  cents      (48 percent)                      less      than     similarly           sorted
first         class.
The differences                    are quite              significant               when these                figures       are
applied           to the Mint's                  basic          2.8 million               recipient            mailing          list.
As in fiscal                year         1989,      the Mint              typically              has five         major
promotional               mailings,              and two mailings                        weigh     over        1 ounce per
item.        Using          these         mailings           and the Mint's                      current        mix of 70
percent           carrier          route,          20 percent                 S-digit,           and 10 percent                 that
cannot       be sorted              to these              levels,             we estimate              that      the Mint           can
expect       a recurring                  postage          cost       at first-class                    rates      of about              $4
million           for     its      basic         mailing           list        alone.            Using        third-class
rates       for         computing              the Mint's           postage              costs        in the same manner,
we estimate               that      the Mint's               promotional                  mailings            would      cost       $1.6
million,           reducing              its     postage          costs          by about             $2.4 million              (about
60 percent)               for      its         regular          mailing          list.           Additional             savings
would       be achieved                  by using          third          class          for     the Mint's
supplementary                   mailing          lists.            I note          that        Mint     plans         to spend
about       $6.7 million                  on five          major          promotional              mailings             in fiscal
year       1990-- a 68 percent                      higher           spending             level        than we used in
developing               our estimate.


We analyzed               fiscal          year      1988 Mint                 mailing          costs       in detail            because
they       were         the most          recent          that       USPS had verified                        and approved               at
the     time       of our          review.               In 1988 the Mint                      mailed         promotions            that
were mostly               attributable                   to four          programs             and its         holiday
catalog.                Four major              mailings           exceeded              1 ounce         (two mailings                  were
for     the bullion                program)              and incurred                a surcharge               of 20 cents               per
piece.            As noted          earlier,              for      the Olympic                 commemorative              the

                                                                          8
regular          mailing          list      was supplemented                         by other             mailing           lists             so
that      there          were over          10 million                 mailings             for     this       program              in
fiscal       year         1988.           Total        costs          for     the promotional                       mailings              in
fiscal       year         1988 amounted                  to $6.7 million.                          Based on our
analysis,            using        the Mint's               percentage                of presort              rates           it
typically            obtains,            we found              that         the Mint          could        have mailed                    the
promotions               for     $2.3 million                  at third-class                     rates,           reducing             its
postage           cost         by $4.4 million--about                           66 percent.


It      is also          important              to be aware of postage                             rate       increases                 that
will      come into              existence              in the near                 future.           USPS has submitted
a proposed               rate      increase             for     1991 that             would          result          in a greater
increase           per piece              for        first-class              mail      than         third          class.              First-
class       mail         at     the proposed                  rates         would      increase              5 cents              per
piece       for      the first             ounce for               the Mint's               mailings,               while          third
class       rates         at the          same sort             levels          would         increase              by only              2.2
cents       per piece.                   The difference                     in the      increases                  alone,          at a
conservative                   5 mass mailings                  a year,             amounts          to almost               $400,000              a
year.           USPS has also                   proposed           increasing               charges           for      additional
ounces          at first           class         by 3 cents.                  At that             rate,       if      two Mint                mass

mailings            a year         exceed            one ounce,              as they          have in the past,                            the
Mint      will       incur         an additional                   postage           cost         of about           $160,000.


In addition                   to achieving              the cost             reductions              from          using          third
class,           third         class      offers          greater            flexibility.                    The basic               weight
unit      for       third        class          is    3.3 ounces              per piece,              compared               to 1 ounce

                                                                        9
for     first       class,          before        a mail        piece       incurs      a surcharge               for
additional           weight.               The higher          weight        ceiling           for     third      class
would      allow          advertising             more than          one product               in each promotional
mailing          without           incurring          additional            postage       costs.               The Mint
currently           attempts           to do such promoting                        on a limited               basis,
working          within       l-     and 2-ounce              first-class            weights           and by
including           its      advertising              with      other       agencies'           mass mailings
(such      as IRS'           income         tax    refunds).              One Mint        official              agreed      that
being       able      to     include         up to 3.3 ounces                 of material                 in each
mailing          without           incurring          additional            cost     could           generate          a "cross
shopping           effect"          that     might       stimulate           revenues           from          many of its
mailings.


Since       the Mint          uses the            same       basic       mailing       list          to send its
promotional               mailings,            the Mint         could       also     merge some mailings
before          encountering               a surcharge            for     exceeding            the basic          third-
class      weight.            Merged mailings                   would       eliminate            the postage             costs
of some promotional                        mailings          entirely.             Potential           merged mailings
include          the uncirculated                  and proof             mailings,            which       are now mailed
separately            early         in the year,              and the catalog                  and proof          bullion
mailings,           which          are now mailed               separately            in the          fall.




                                                                10
MINT CONCERNS ABOUT USING
THIRD CLASS


During      this      review         Mint      officials             expressed           several         concerns

about      changing          to third          class         for     promotional              mailings.           While
granting       a postage             cost      advantage              from moving             to third         class,
Mint     officials           are concerned                 that       the overall             revenue         impact
might      be negative.               We have given                   the Mint's          concerns            the careful
attention          that      they     deserve,             and we believe                that      each can be
allayed.


Concerns       About         Nondelivery


In discussions               during         this     review,           Mint      officials             expressed
concern       about       nondeliverability                        of mail       sent        at third         class     and
cited      a concern          about         revenue          loss       from     nondelivery             of mail.
Mint     officials           believe          nondelivery               of third-class                 mail    is about
14 percent           and,     applying             that      figure        as lost           sales,      generated
projections           that      indicate            that      they       would        lose      more      revenues        if
third      class      were used than                  they         would      save      in reduced            postage
costs.


Nondelivery           of third-class                 mail          has been a longstanding                       concern
of organizations                in the direct                 marketing              industry.           While        there
have been several                   studies         of this           issue,         we believe          a    study
conducted          by USPS in 1988 most                       closely          matches          the Mint's

                                                              11
mailings.         This      study       was reviewed                and endorsed               by an
independent          consultant            hired     by five           major         mailing          associations--
the Direct        Marketing          Association,                 the Mail           Order       Association               of
America,       the     Third     Class       Mail         Association,               the Mail          Advertising
Service       Association           International,                  and the Alliance                   of Nonprofit
Mailers.        After       reviewing          the study,              design,         methodology,                 and
implementation            on behalf           of the mailing                  associations,                  the
consultant        endorsed          the study             as a reliable               approach           that       the
mailing       associations           and USPS could                   accept         as a valid              indication
of    the amount         of nondelivery                  of mail.


For one test           conducted           by USPS in August                    1988,         the     test      piece
was a properly            addressed           flat--that              is,     an envelope              larger        than
typical       folded      business          letter         size --that           weighed            over      6 ounces
and had no instructions                     on the envelope                   that      it     be forwarded                if
the addressee            had moved.            Only about              30 percent              of the mailing
was sorted        to the carrier               route         level.            (According             to an industry
expert,       the higher          the proportion                  sorted        to carrier             route,        the
lower       the amount         of handling               by USPS and the lower                        the error            rate
in delivery.)             Nondelivery              for     this       mailing         was estimated                 to be
2.6 percent.             USPS and major                  industry           representatives                  have
accepted       2.6 percent           as an accurate                   nondelivery              percentage            for        a
properly       addressed         flat       of this          type.


One industry           expert       said      that        this      2.6 percent               nondelivery            rate
for     the   third-class           test      is not         substantially                   higher      than       the

                                                           12
nondelivery              that     occurs          due to errors                 for     any mass mailings,                           no
matter      what class              of mail          is    used.          This         is because             all     classes
of mass mailings                  are affected               by inadequate                 preparation                of mass
mailings          (primarily              poor     addressing),                 handling         errors             by USPS
during      transit             of products,              carrier         error         (mail     pieces             delivered
to the      incorrect             destination),                 and households                  accepting             mailings
addressed          to other          parties.


We had discussions                    specifically                about         the Mint's             ma     lings         with
the Executive               Director             of the Third             Class         Mail     Association                 and
the Chairman              of the First               Class        Mail      Subcommittee                of the Mailers'
Technical          Advisory          Committee,              who is also                a Federal             Government
Association              representative                  on the Committee.                      According              to these
experts,       a letter-sized                     mail     piece         with         address         preparation                of
the quality              of the Mint's               mailings            and a forwarding                     endorsement
should      achieve             greater      deliverability                     than     the     test         results.                The
Mint's      mail      pieces         are         lightweight,             sent         in regular-sized
envelopes,          and can be handled                       by USPS more efficiently                                than        a
flat.       The Executive                  Director          of the Third                Class         Mail
Association              said      that     problems            with      third-class                 mailings             are
primarily          associated              with      improperly            prepared             addresses.                  As
mentioned          earlier,          we believe              the Mint            uses excellent                     mail
preparation.                Also,         the Senior            Vice      President             for     Government
Relations          for      the Direct             Marketing             Association             said         that         the
higher      the     level         of carrier              route        presort,          the lower              the chance
of a hand1 ing error                      by USPS.           The USPS study                    tested         a ma iling

                                                                13
which         had a 32-percent                  carrier       route       presort            level,          while          the
Mint's         mass       mailings           have a 70-percent               carrier            route          rate.




Mint      officials            also      expressed           a concern            that       third-class                  mail,
when forwarded,                    would      incur       a forwarding                charge.           Mint           officials
have said             that     usually           300,000      to 350,000               of their             mailing           list
addresses             change during               a year.        While       third-class                    mail        without          a
forwarding              endorsement             does not        have to be forwarded,                              mailers           can
get      the       same      forwarding           service       for      third         class        as first              class         by
requesting              forwarding.               This      service       is available                  without             charge
if     the addressee                 recipient           has left        a change            of address                 notice
with        USPS.         A change           of address         notice           is    used by USPS to forward
mail        for     12 months           after      the      recipient        relocates.


If     USPS cannot                 forward       a mail      piece,       undeliverable                      first-class
mail        is returned              to the       sender       at no charge,                 while           USPS does
charge            a fee      for     returning           undeliverable                third-class               mail.             The
fee      is       the appropriate                single-piece            third-class                rate        multiplied
by a factor                of 2.733.             However,       a Mint           official           said        that        the
major         portion         of address           changes        come from customers                           whose mail
has been forwarded                      by USPS.             While       there         would        be an additional
cost        of returning               undeliverable            third-class                 mail,       it      need be
incurred            only      once for           each recipient             since,           according                 to a Mint
official,             returned          undeliverable             mail      forms           the basis              for
eliminating                a recipient            from      the Mint's            mailing           list.



                                                               14
Concerns          About      Recipient             Reaction
To Receiving               Third-Class             Mail


As they          did     in response              to our        1975 report              on mailing           practices
at the Mint              and other          agencies,2               Mint        officials         again       expressed
concern          about      the       "image"        of third           class.           There      is evidence           that
this      would        not be a significant                      factor          in the circumstances                   of
the Mint's             mailings.             USPS' Household                 Diary        Study,3        a major        study
of classes             of mail,          says that            the determining                  factor        of recipient
responsiveness               to a mail             piece        was whether              the     recipient        had been
a prior          customer.              The Mint's            mailing        list,        by definition,
consists          of prior            customers           or those          with      a demonstrated
interest         --the      list        consists          of people          who have been Mint
numismatic             customers           or who have asked                     to be added to the mailing
list.



As shown by the                    illustration            of a typical               Mint      envelope         in
appendix          I,     and the         third-class             alternative              to it,         the postage
class      is hardly           noticeable.                We believe             there       is little         chance        a
customer          would      even notice               that      the Mint            had used third             class
rather          than     a presorted              first-class             imprint,           and even less            that
it      would     affect       his       or her decision                  to place           an order.

2Federal Agencies Could Do More To Economize                                                 on Mailing         Costs
(GGD-75-99, Aug. 25, 1975).
3Household Diary Study--Fiscal    Year 1987, Demand Research
Division,  Office  of Rates, Rates and Classification  Department,
USPS. (Washington,    D.C.: July 1988).

                                                                15
Concerns         About         Timeliness          Of
Third-Class             Delivery


During        this      review         Mint     officials            echoed      concerns          expressed          in
1975 about            timeliness              of third-class             mail,       particularly            for
mailings         that        had a required               response         date.        We found        that        most
of the Mint's                mailings          do not       have a required               response        date        and,
where      there        is a response              date,        there      is a lead         time      of at        least

a   month,       which         could      be met by third                class.


USPS delivery                standards           for     first-class            and third-class              mail         are

admittedly            different.                USPS has set            a l-      to 3-day         standard         for
first-class             mail.          According          to a USPS official,                  third-class             mail
is to be delivered                     within          a period        of days equivalent                to the
number of zones                 the mail          must cross            plus      2 days.           (There      are
eight       zones       spanning          the country.)                 Thus,      USPS delivery             standards
for      third-class            mail      range         from       3 to 10 days.


A series         of 11 USPS tests                      done between            November      1986 and May
1989 found            that      delivery          times        for     third-class          mail      usually         came

within        a fraction           of a day of the USPS standards                              and that
presorted            carrier       route         third-class            mailings        usually        came under
the standards                by a fraction               of a day.             As I mentioned            earlier,               70
percent        of the Mint's                  mailing       list       is presorted          to carrier             route.



                                                               16
Mint     officials             also          said        that      its        numismatic             customers              all      want
to receive           their           promotional                 mailings             about         new issuances                  at the
same time         and that              the Mint                will       be subject               to increased
criticism         about         varying              arrival             dates        if     third      class          is     used for
mailings.            However,                the Mint's                mailings             are now typically                     mailed
over     a 2-week             period,              so that         we would                expect      little          difference
in customer             satisfaction                     between           the current                system      and third
class.


To the extent                 that      simultaneous                     delivery            is a real           concern,              the
Mint     could       plan        to enter                its      promotional                mailings           into         the mail
stream       at an earlier                        date    and sequence                     them to meet           the         zone

delivery         times,          to     allow            for      the        longer         anticipated            time           third
class       spends        in the mail                    stream.



Our discussions                  with             associations                of large          volume          mailers,              and
our analyses              of major                 studies             pertinent            to the       issues             raised        by
the Mint,            have convinced                      us that             the Mint's              continued          adherence
to first         class         for          its     mass        mailings           is an outdated                  and wasteful
practice         that         has long              been abandoned                    by the commercial                       sector.
The mail         manager              for         the Franklin                Mint--which              also      produces
collectors'             items          and sells                them through                 mail      order--said                 that
practically             all      promotional                    mailings           by his            company are              sent
third       class.            Industry               association               representatives                   for         third-




                                                                        17
class    and first-class           mailers       said      that     third     class    is
appropriate       for     the Mint's         promotional          mailings,       as long      as USPS
is   instructed         to forward        the mailpiece.


RECOMMENDATION


We recommend       that        the Mint      budget     for       and use third        class    for   its
promotional       mailings.


Mr. Chairman,           that    concludes      my prepared           remarks.         My colleagues
and I would       be pleased         to respond         to questions.




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           UNITEDS’CQTES
                       MINT
           Philadelphia. PA 19101-3636
    OFFICIALBUSINESS
                  PENALnFORPRlvATEUSE.1800




                theMan...
          Remember
          Remember
                theTimes
            Rememberit all wth theofficial
                                                       CAR-RT PRESORT         rrCR34
           1990Ewnhower Centemal Corn                  Brmdon   S. Pottir
           SPECIAL PPELSSUE DLSCOL’M                   8257 Londonderry   Cobrt
               IWR EUtLY ORDERS.                       Lmurol, MD 20707-5629




           UNITEDSWTESMm


    OFFICIALBUSINESS
                  PENALTYFORPRlVATEUSE,1300




            Remember it all wth theofliual               CAR-RT PRESORT           MCR34
           1990EisenhowerCentennialCorn                  Scott   Patti8
           SPECIAL PBEJSSUE DISC0Uh-I                    8247 Londonderry     Court
               POE EARLY OitDELT.
                                                         Laurel,    MD 20707-5629




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