H.R. We gathered pertinent information from the Service’s Finance Department to develop profiles, including financial data, on the remaining new products the Service marketed and/or had under development during fiscal years 1995, 1996, and 1997 and that had been publicly announced as of November 1997. Statutory and Regulatory Authorities and Constraints Governing the Postal Service’s Ability to Market New Products and Recent Reform Proposals

The Postal Service has broad statutory authority to develop, test, approve, and market a variety of new products, including new capital, philatelic, domestic and international postal, and nonpostal products. First, since it is the underlying statutory mission of the Postal Service to provide postal services to bind the nation together, the Service needs to be able to explain how any new product it develops will further that mission. Second, under its statutory authority, before marketing (including test marketing) a new domestic postal product, which necessarily involves classification of mail, the Service must request a recommended decision from PRC regarding the propriety of the Service’s proposed classification, rates, or fees for the new product. Prior to issuing its recommended decision, PRC is required to hold hearings on the Service’s proposal. Finally, the Service’s ability to market new products can be constrained or influenced by congressional oversight, restrictions imposed during the appropriations process, or other legislative actions. 22 or legislative changes offered by the Postal Service would amend the Service’s current statutory authority to develop, test, approve, and market new products. 22 would place new restrictions on the introduction of new, nonpostal products and international postal products. However, H.R. 22 would provide the Service with broader latitude to test market experimental postal products. Nevertheless, our analysis shows that the Postal Service is subject to at least three constraints that affect postal operations, including the development and marketing of new products. The requirement to request a recommended decision from PRC before marketing a new product applies, however, only to new domestic postal products. The Postal Service’s Board of Governors may approve, allow under protest, reject, or modify PRC decisions as provided for in statute. H.R. H.R. The Marketing Department’s CustomerPerfect! To oversee this work, Marketing established a New Business Initiatives and Products Group. Additionally, to facilitate the process of developing and introducing new products and to ensure effective management control, the Service developed a formalized system of checks and balances that requires top management buy-in at critical stages of the development process. Under the new product development process, new products initiated by the Marketing Department’s New Business Initiatives and Products Group go through four distinct stages: the (1) concept stage, (2) business plan stage, (3) test stage, and (4) implementation stage. Total revenues and expenses reported for the 19 products, through fiscal year 1997, were $148.8 million and $233.5 million, respectively, resulting in a net loss of $84.7 million. new product development process was implemented. new product development process following adoption of that process in June 1996.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Postal Service's (USPS) development and marketing of new products and provided information on the expense and revenues associated with the products, focusing on: (1) the statutory and regulatory authorities and constraints covering all major groups of new products; (2) the potential impact that enactment of H.R. 22 and USPS' proposed reform legislation could have on new products; (3) providing information on USPS Marketing Department's new product development process and determining, for three selected products, how closely that process was followed; and (4) providing information, including financial data, on all new postal and nonpostal products USPS marketed or had under development during fiscal years (FY) 1995, 1996, and 1997.

What GAO Found

GAO noted that: (1) the statutory and regulatory authorities governing USPS provide USPS broad latitude to develop and market a wide variety of new products; (2) GAO's analysis shows that USPS is subject to at least three constraints in developing and marketing new products; (3) since it is the underlying statutory mission of USPS to provide postal services to bind the nation together, USPS needs to be able to explain how any new product it develops will further that mission; (4) under its statutory authority, before marketing a new domestic postal product, USPS must request a recommended decision from the Postal Rate Commission (PRC) regarding the propriety of USPS' proposed classification, rates, or fees for the new product; (5) prior to issuing its recommended decision, PRC is required to hold hearings on USPS' proposal; (6) the Postal Board of Governors may reject or modify PRC's recommended decision; (7) USPS is not required to request a recommended decision from PRC in the case of nonpostal products; (8) USPS' ability to market new products can be constrained by congressional oversight, restrictions imposed during the appropriations process, or other legislative actions; (9) adoption of either H.R. 22 or legislative changes offered by USPS would amend USPS' current statutory authority to develop, test, approve, and market new products; (10) H.R. 22 should place new restrictions on the introduction of new, nonpostal products and international postal products; (11) however, H.R. 22 would provide USPS with broader latitude to test market experimental postal products; (12) USPS' Marketing Department established the New Business Initiatives and Products Group, which implemented a new product development process, CustomerPerfect!; (13) it is intended to ensure effective management control through a formalized system of checks and balances that require top management buy-in at four critical stages: (a) concept; (b) business plan; (c) test; and (d) implementation; (14) three judgmentally selected products showed that in developing these products, the Marketing Department's New Business Initiatives and Products Group generally followed the CustomerPerfect! new product development process; (15) information and financial data show that during fiscal years 1995, 1996, and 1997, USPS marketed, or had under development, 19 new products that had been publicly announced; and (16) total revenues and expenses for the 19 products, from inception through FY 1997 were $148.8 million and $233.5 million.