Challenges facing the European postal industry are greater then ever before. The approaching full market opening in 2011 and 2013 will be the central factor driving commercial developments, where new market entrants - without the burden of the universal service obligation and additional social responsibilities as one of the largest employers in their domestic markets - will have the possibility to attract large volume B2B/B2C mailers away from incumbent national postal operators, and especially on the high-margin, high-density urban areas. Traditional bulk mailers such as financial service providers, telecom companies and utility service providers, which are themselves under pressure to maintain there revenue streams and/or decrease operational costs, will search for cost efficient mailing alternatives and thereby foster postal competition. Substitution through electronic/hybrid communication is also a continuing major force cutting into transactional mail volumes. Understanding customer demand and the development of customer oriented solutions will become central issues for postal operators. Part of this customer orientation will be a shift in pricing policies, which today are often considered as purely a regulatory determined component in the revenue equation, with the primary focus of commercial activity being on volume development rather than on innovative pricing and billing practices. As postal operators are dominant market players in domestic mail markets, full market opening will not mean the absence of regulation. To the contrary, strong supervision will limit their margins in price definition for universal service products, which have complex interactions with bulk mail products. Thus, a major challenge facing European postal operators besides competition is how to retain market share and price level simultaneously. Price will be an important influencing factor for customers when new entrants with similar service levels appear. Therefore in this study we undertake to analyze current practices of postal operators and, together with the study participants, formulate key lessons on what should be part of preparation for full market opening in terms of market-oriented pricing. The study was realized in three stages. We first overviewed major trends on the European postal market with an eye on the role of pricing in a liberalized environment. As a second step, through structured interviews with selected operators on current and planned pricing practices, we attempted to understand current approaches to pricing strategies. Finally, by a comparison of results on a regional level, we formulated key lessons learned. Marketing, strategy and pricing experts of incumbent postal operators were visited personally or interviewed by phone. In all cases we applied the same interview structure, which was focused on the underlying pricing framework and on pricing processes. Under “pricing framework” we evaluated the pricing strategy, the organizational structure in place for dealing with pricing issues, the methods facilitating pricing decisions and the supporting technology. “Pricing processes” summarized the practices on pricing activities, including market analysis, pricing structures, implementation and monitoring of pricing outcomes. The research scope included European postal operators facing various stages of market opening. Altogether we interviewed 17 incumbents; for confidentiality reasons the study results were synthesized into Eastern and Western European practices in order to disguise the individual responses
