USPS filed on Friday a notice to the Postal Regulatory Commission to test market “Mail Works Guarantee”.

Her are excerpts from the notice:

The United States Postal Service hereby gives notice that it intends to conduct a test of an experimental market-dominant product. The experimental product is the “Mail Works Guarantee.” The top advertisers in America represent $90 Billion in total expenditures for media advertising. The USPS share is currently 3.1% or about $3 Billion annually which represents a huge revenue potential for the Postal Service. Thus, this new product will be offered to a group of companies who spend a minimum of $250 Million annually on advertising as identified by Advertising Age magazine and for whom mail is not currently a large part of their advertising mix (postage is less than 0.36 percent of the company’s total spending on advertising). These companies will be offered a postage-back guarantee to test advertisements for their products through First-Class Mail and Standard Mail. The market test will begin on or shortly after May 16, 2011.

Description of Nature and Scope of Experimental Product Proposal

During the Mail Works Guarantee market test, 16 initial companies will be offered a postage-back guarantee to test the effectiveness of advertisements for their products using First-Class Mail and Standard Mail.

For each selected mailer, a set of unique metrics will be developed jointly with the Postal Service against which to evaluate the performance of a test Direct Mail campaign. For example, a retail company’s Direct Mail offer could be designed to increase store traffic, an e-commerce company’s offer could be designed to drive Web traffic, or a product goods company’s offer could be designed to promote increasing sales of a specific product. The threshold for determining success will be an agreed-upon percentage of increase in the uniquely established metric. Each participating mailer will be expected to mail a minimum of 500,000 pieces up to a maximum of 1 million pieces of First-Class Mail or Standard Mail. The Postal Service will provide assistance in developing the Direct Mail campaigns during the market test, as well as in the benchmarking and measuring the test metric.

If the Direct Mail campaign fails to meet the established metrics, as verified by a Postal Service representative, the Postal Service would only refund the postage paid during the market test, up to a total of $250,000, issued as a credit to the company’s Centralized Account Payment System account. Production and printing costs for the Direct Mail campaign would not be refundable.

Unlikely Market Disruption The Mail Works Guarantee is intended to generate additional volume from potential customers who do not currently use the mail. The new product will not affect current marketing-mail customers, and non-mail options for advertising also will remain competitive. Because users of the Mail Works Guarantee whose campaigns are successful will pay list prices for current products, the new product is unlikely to cause disruption within the advertising-mail market as these new advertisers will be facing the same terms as existing advertisers. Refunds of postage paid will only be made if a campaign is unsuccessful, in which case, current users of the mail will not have been
harmed.

Depending on the results of the test, the Postal Service may file a request with the Commission for approval to offer the Mail Works Guarantee to additional companies under the market test.