The encyclopedia · Marketing & Brand · Financial decision · 1973–1976
USPS paid mailers to sort their own mail and created the presort industry
A one-cent discount for pre-sorted First-Class mail turned customers into workers and built presort bureaus nationwide.
United States Postal Service
The solution
In the early 1970s the US Postal Service faced steep rate increases and rising costs. Sorting mail into carrier routes is one of its most expensive operations, so it proposed a radical idea: offer a discount to mailers who did that sorting themselves. A half-cent discount for First-Class presort proposed in 1973 became a full one-cent discount in 1976.
The economics worked because the discount was set below the cost USPS would otherwise bear. Mailers with computerized lists sorted in exchange for lower rates, and an unexpected industry appeared: presort service bureaus, which today produce about one-third of all presorted First-Class mail by doing the work for mailers too small to do it themselves.
The Postal Service embraced worksharing because it lowered real costs and helped palliate rate increases. The same logic later extended to barcode discounts and automation discounts, making mail preparation, presorting and transportation largely customer-performed.
Why it worked
- Sorting is the expensive step, and mailers could do it without extra travel
- The discount was priced below USPS's own cost, so every discounted piece still saved money
- It smoothed rate politics by giving big mailers a reason to accept increases
- Presort bureaus scaled the benefit to small mailers who could not presort alone
- The mechanism was self-funding: no subsidy, just avoided cost shared with the customer
What can be applied
Price the expensive step as a discount and the customer will do it. Keep the discount under your real avoided cost so both sides win.
Aftermath
Worksharing became a permanent pillar of US postal economics, extending to barcodes and automation. Since 1976 the discounts have saved the Postal Service tens of billions of dollars and are estimated to have reduced its workforce by 187,000 positions versus a world without worksharing.
Sources
- The Impact of Using Worksharing to Liberalize the Postal Market
- Rebuttal Testimony of the National Association of Presort Mailers
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