OddThinking

Well, sending normal letters usually serves a purpose other than a greeting card, purposes which are important enough for people to send letters and which are also important enough for people to spend their money.
Sending Christmas cards, however, is something which you don’t *need* to do. You wouldn’t spend a lot of money to send those cards – if it costs too much you would only send the really important stuff (like what you send throughout the year). So basically, making it cheaper to send Christmas cards cause more people to actually send them, so it is a purely economical decision.

We don’t celebrate Christmas or send cards here though, so I wouldn’t know. By how much exactly is it cheaper? 50%?

Configurator,

By how much exactly is it cheaper? 50%?

50c rather than 55c for small letters, so 9%

Imagine, if you can, that postal workers, by-and-large, are underworked most days of the year . Preposterous I know: who ever heard of public servants not being fully employed? 🙂 While these staff are underworked, the average cost per piece of mail sent through the system is at a premium – someones got to pay to have that postal worker available, even if they’re not sending mail every second.

At christmas in years past, the shear volume of mail means that the postal service even delivers mail on weekends to try and get through the enormous backlog of mail it builds up. This means the service is processing the maximum amount of mail it can per worker, and this in turn means that it should cost less per item.

However, with SMS and email almost completely replacing the standard letter, I can’t imagine that sending christmas cards through the mail will survive as a tradition in even 10 years time. I’m vaguely surprised its still happening today!

Stats you can use to blow this theory apart: overtime payrates, or staffing levels showing extra staff put on just for the christmas rush. And I’m sure there’s more…

Configurator’s argument that greeting cards have less utility than normal letters, and therefore have a lower price is a good one.

I came up with two counter-arguments.

The first is that from the consumer’s perspective, greeting cards have a higher cost than normal letters because the stationery itself is rather expensive compared to normal letters. (The demand could, in theory, still be very elastic, but a 5c difference, when the stamp plus card is probably over $5, is pretty minor.)

The second is that, if greeting cards are intrinsically of less value than regular letters, then the discount should apply all year, independent of which holidays you celebrate. (Unless you can argue that birthday cards, Valentine’s Day cards and Ramadan cards are of higher utility than Christmas cards.)

While researching my previous comment, I discovered another plausible explanation.

According to this “econometric analysis of Australian domestic small letter volumes”, pre-sorted bar-coded small letter deliveries drop over December, to around 87% of the average. Presumably these are business-related letters, and the seasonal holidays impact business productivity to reduce the number of mailings.

Given the reduction in demand over December, it may make sense to reduce the prices to drive up demand to fill up the unused capacity. Thus, the increase in other small letters (132% of the average) may be very sensible.

Having made this argument, let me shoot it down.

Firstly, four days of holiday would account for the reduction in business letters. Those holidays normally start on Christmas day, which is when the demand for Christmas card deliveries stop. So, it probably doesn’t fill unused capacity, but merely creates more demand.

Indeed, November has higher than normal demand for both types of small letters, so offering a discount in November is counter-productive.

Secondly, Australia Post staff themselves would, if they could, take holidays in December as well, like the rest of the population. The reduction in demand probably coincides with a reduction in supply of staff (which needs to be counter-acted by compensation).

Thirdly, this section of the study doesn’t mention the comparative volumes of the two letter types. If pre-sorted bar-coded small letters only account for 5% of all small letters sent, demand would still be much higher around Christmas. Anecdotes would suggest that Australia Post has to hire more staff to handle the pre-Christmas rush each year.

Richard,

Thanks for the scenario. I don’t need to introduce facts to discard your idea. I can just use theory.

There are three economic solutions to the problem of over-capacity during the off-season.

• Modify your workforce arrangements to reduce capacity during the year, and increase capacity only when you need it, and keep the price the same throughout.
• Reduce your capacity, and charge more during the peak periods to ensure demand doesn’t exceed the new reduced capacity.
• Maintain high levels of capacity, and reduce the price during the year to promote demand to use the available capacity

In real-life, there is some mix of the three that should be applied.

However, notice none of these solutions would reduce the price at exactly the time of the peak demand.

Effectively, Australia Post is subsidizing the sending of Christmas cards, which is something I am finding hard to justify, whether it is economically, environmentally or culturally.

My theory is that Christmas cards are Australia post encouraging the sending of chain-letters. Sending one tends to trigger many – like chain mail with an epidemiology that has a higher fan-out rate and a deadline.

Lowering the price by a trivial amount ahead of Christmas and is a noteworthy memory jogger – a psychological trigger – to commence Christmas card writing.

Another theory is that Christmas cards are low priority packets in a packet routing system designed to maximise utilisation of seasonal staff. Australia Post hires a bunch of seasonal workers at this time of year and wants them to be as occupied as possible getting high-priority packages and letters through the system so people continue to rely on the mail system. Christmas cards don’t get in the way of normal mail and help to subsidise the over-staffing period.

In the spirit of PWM, I’ve also asked them why.

Julian, I think you have the wrong idea about card prices. There are $5 cards with funny captions and which are sold individually. But these are usually bought with a single person in mind on an individually important occasion (birthday, sickness, etc.).

For something like a seasonal card, you are sending cards to many people. You buy in bulk with a generic design and write individual inscriptions for much less cost per unit.

This is also a potentially very elastic demand curve. Each individual has a wide discretion about which people are considered ‘close enough’ for a card. And there is also mutual obligation as Chris mentioned. There is a social awkwardness in not reciprocating a greeting card.

It could be that the seasonal greeting cards are simply a form of market segmentation. The greeting card senders are more cost sensitive, and are less likely to pay the full price of postage. Reducing the price is a way of getting some revenue from this segment which would presumably be lost otherwise.

Julian, to counter your second counter-argument:

Valentine’s cards and birthday cards are sent to one person. I’ve never heard of a Ramadan card myself, so I won’t comment on these. However, when you send a valentine’s card to your loved one, would you care about an extra 5c? I wouldn’t. But when I send say 100 cards, I would care about 5c in each as they amount to a little more.
Also, when the human mind sees discount the first reaction is “Ooh, I’ll send more, there’s a discount!” Again, this would apply to Christmas cards but not to birthdays or Valentine’s.

Australia Post have a reputation for laziness, except over the Christmas period, when their workers take on multiple shifts, doing everything required to ensure the mail gets through. With cheap couriers one part of their business, and email taking another, the busy Christmas period is better than advertising for Australia Post. The 5 cent discount is a cheap way to ensure that the busy period happens.

And a good thing too, I say. Post offices still have a vital role to play in being a convenient interface to government – tax forms, passport applications, a place to find a JP – and they’ll be shut down if their core business dies off.

In support of my thesis, I offer this piece of spin:

http://goulburn.yourguide.com.au/news/local/news/general/busy-postal-staff-leave-their-stamp/1394788.aspx

Still no joy from the response to my web form enquiry. Let me know if you would have me follow up.

Your Enquiry

Hi, A friend recently asked what the reason was for the discount for sending Christmas cards. We wanted to know if it was tradition, a charitable work, or if there was some underlying economic, or operations research-related reason for doing so. Cheers, Chris

Our Response

The discounting of stamps for sending Christmas cards is an Australia Post commercial business decision. In part based on ‘getting into the Christmas spirit’ and goodwill. If you have any further queries in relation to this or any other postal matter, please respond by return email.

I feel a little guilty for not following up these comments sooner.

Two factors are amping up that guilt.

The first factor is the quality of the suggestions. I am impressed and thankful for them. They are much better than my pre-Christmas grumbling humbuggery deserved.

I tried this question at a pre-Christmas party, and was lightly admonished by a fellow I had just met: It was a Christmas present to us from the Post Office, he argued, and we shouldn’t question it. It was very nice of them, and we shouldn’t look a gift horse in the mouth.

I let the topic drop, but that attitude is one I find frustrating, and I am glad I got much more thoughtful responses here.

The second factor in my guilt is discovering that the Post Office Help Desk beat me in response time!

Let me remedy that now…

Alan,

I found your argument a little hard to follow, so let me see if I have understood.

Australia post is losing market share to couriers and email. A partial cause of this is an (unfair?) perception that Australia Post is lazy. By reducing the price of stamps, they encourage people to give Australia Post another go. That will cause people to realise that Australia Post workers aren’t lazy, and they will use them for the rest of the year. Lowering the price is cheaper than advertising that says “We’re not lazy!”

Is that right? It seems a long bow to draw.

As for your comment about them being a vital role to the government, I agree completely. It has surprised me that, over the past two decades, the Post Office haven’t turned into a general administration centre for all government and semi-government organisations. They seem to have bitten off small pieces here and there, but they haven’t gone the whole hog.

I had a very interesting chat one evening several years ago with an Australia Post guy who designed some of their processes. He explained that one of the bottleneck constraints is how much you can expect an Australia Post worker to remember. They cannot be expected to be proficient in the intricate details of too many disparate processes at once.

Finally, I notice from your link that (according to a nameless study, quoted in a local rag, by a manager – so it must be true) 11% of people DO NOT look forward to receiving Christmas cards. It may not surprise you to know that I am one of those people. For the most part, they have little emotional meaning for me. I have considered in the past how I can profit from such a discrepancy; if it means nothing to me to send or receive a meaningless card, and yet it is emotionally rewarding to others to receive them, there should be a way for me to make many people happy, at little emotional cost to me. I haven’t cracked that one yet – send your suggestions on the back of a card…

Chris,

I like your disease metaphor, although I am not convinced by the high fan-out rate. It isn’t the case that for every card you send, it triggers three more letters. Every card you send results in perhaps one more card sent back to you (where the propagation stops).

I also like your suggestion that Christmas Cards are low priority packets to fill the gaps. I believe that function is currently served by magazine and advertising materials, and if they drop off during December, it may make sense to backfill with cards. Do cards have a lower service-level agreement though? I don’t think they do.

I am also humbled by the second suggestion in as many posts, to stop merely whinging and actually contact the service provider. It’s a shame the response you got was so shallow. I read it as saying: It is a Christmas present to you from the Post Office and you shouldn’t question it.

[EDIT: added the word “lower” to make the comment make sense.]

Jonathon makes a very good point about Christmas cards being cheaper, less personalised, purchased in bulk and of lower utility/value than other greeting cards. That undermines my arguments against Configurator’s first comment.

(Configurator, in his/her second comment also mentioned the point about bulk nature of Christmas cards compared to other cards.)

That means that, as Jonathan, Alastair and Configurator point out, there may well be a reasonably high elasticity of demand even over the relatively small price difference – one which isn’t present for regular letters or birthday cards. In such an environment, it would well make sense to charge less for cards.

I accept that is a possibility, and that without any actual facts about the marketplace to contradict it, this is a valid solution to the puzzle I posed.

Hmm.
Why exactly do you think there will be a rational reason for the discount?

Let me save you some anxiety (unless of course you simply enjoy spirited discourse for its own sake). There is no real reason, except that the Christians got in on the deal early and now have an exclusive.

However, this does not mean that one cannot take advantage of such a ridiculous arrangement. Label everything “card only” and save yourself the 9% on your snailmail for 17% of the year.

Cheers!

I am kicking myself. The title to this article should have “Separation of Church and Stationery”. That would have been much funnier.

I am kicking myself. The title to this article should have “Separation of Church and Stationery”. That would have been much funnier.

Indeed, but if you’d waited until you had the best title, who knows when you’d have posted it? If at all.

You could also change the title now, though I suspect you would be uncomfortable with that.

How delighted I was to stumble across this entry again. Mostly because I don’t remember reading it the first time, or leaving a comment. In reference your question: I agree that my argument makes little sense, and I don’t know what I was thinking. I’ll try again, by rephrasing the Post Office’s own response:

It’s a promotional gimmick, trading on the public perception that the post office is providing good-hearted support for societal norms.

That might annoy you if you disagreed with the societal norm (heh, heh) but it’s arguably a good business decision. Whether it’s a good public policy or not is also arguable.

I asked my own question on their webform:

Hi, Australia Post delivers a large number of items at Christmas. I was wondering whether there were any data to support the case for discounting of cards during this period. Would you be able to send me some information or refer me to other sources? Thanks!