Mailing & Fulfillment — Maximizing Postal Discounts

THERE WILL come a day, sometime soon, when print buyers will come to respect the value that direct mail printers bring to the table in a consulting capacity. As for now, many printers have to be scratching their heads and wondering, “Where’s the love?”

Or, better yet, why the lowball? This ain’t a commodity, pal.

“I had a client who told me that my printing price was a little higher than the competition’s,” notes Paul Nichols, president of Tulsa, OK-based CP Solutions, a Consolidated Graphics company. So Nichols made the customer a tongue-in-cheek offer: He would print and mail the job for the price quoted by his competitor, plus $100,000. The buyer was dumbfounded, waiting for the other shoe to drop. Why would Nichols ask for a hundred grand over the match?

“In return,” Nichols told the client, “I’ll give you $319,000 back in postage (savings).”

The client had a tough time getting over Nichols asking $5,000 or $10,000 above the competition for the printing portion and could not fathom saving $419,000 in postage. The $419,000 is correct; Nichols wouldn’t dare ask for the $100,000 juice, even though he would be saving the client hundreds of thousands in postage costs. But you can bet that had Nichols shared a few ideas on saving postage without getting the contract, the print job would’ve been bidded out again.

Printing Not a Commodity

Some buyers (we won’t say all) view print as a commodity and hunt for bottom-dollar pricing. And there are those printers who do little to refute the stereotype that printing is just printing. But, for those printers that make a living in the mailing realm, they well know that postage is not just postage—unless postal costs are not an issue, which is not likely the case, since buyers are trying to milk that last 10 percent from you on the printing side of the job.

The best-kept, and maybe least-marketed, secret in printing and mailing circles is the role printers play, or could play, as consultants in the entire cradle-to-grave process. When print buyers pause to consider the numbers that are being crunched on the postage end—numbers that dwarf printing costs—they realize that perhaps the least value that direct mail printers offer in the overall job is the actual printing.

“One of our employees is a certified USPS design expert,” Nichols adds. “We run things past him all the time, asking, ‘Is there a better way,’ or ‘Is there something we should look out for?’ There’s a lot of leg work that happens on the front end of a job; if done on the tail end, it’s too late. We literally sit down with clients at the very beginning, consulting with them on how well the offer is designed, and how we can best maximize their postage savings.”

The Pressure’s On

The direct mail channel is already under intense pressure, hampered to a degree by a sluggish U.S. economy, increasing postal costs, dwindling response rates and alternative Web-based marketing channels. A paper recently commissioned by the Direct Group, a fully integrated direct marketing solutions provider based in Swedesboro, NJ, and authored by the strategic consulting firm Winterberry Group of New York, sheds light on opportunities emerging around the development of comprehensive postal optimization strategies.

Titled “A Strategy for Savings: Postal Optimization and the Future of Direct Mail,” it explores the leading drivers of postal optimization adoption. Some of its findings, from a cost savings standpoint:

• Though widespread understanding of postal optimization and its high-level benefits finally reached an industry-wide “tipping point” about 18 months ago, many marketers—including several of the nation’s largest direct mailers—have yet to fully integrate a comprehensive postal optimization execution plan into their long-term direct mail strategy.

• Effective postal optimization execution requires the integration of multiple tactical tools, potentially including data hygiene, commingling and various logistics solutions depending on the marketer and the specific needs of its direct mail program.

• The critical importance of scale in driving optimization efficiency (especially in relation to volume-oriented commingling production) has served to bifurcate the direct mail production industry into a small corps of “mega-players” that have the tools and the capacity to drive such value, and a large general community of smaller providers that have little choice but to outsource such work or offer less comprehensive optimization solutions.

• Reduced postage rates may provide the initial motivation for investment in postal optimization, but a wide range of ancillary benefits—including improved targeting capability, enhanced flexibility with regard to mail timing, and significant potential reduction in “waste mail” expense—may ultimately emerge as more significant long-term benefits.

Considering all of these issues, it would seem obvious, at the basic level, that printers should be seated at the table with designers and marketers from the word go. Jim Andersen, president and CEO of Chanhassen, MN-based IWCO Direct, feels it is imperative to have printers in on the concept/design phase of a project to ensure the mailpiece is automation compatible and, when possible, letter-sized. Likewise, it’s critical to test whether designs that don’t maximize postal discounts provide an offsetting lift in response rates to drive a positive return on investment.

“The printer must build a strong relationship with agency and design teams, keep a close eye on the size and weight of the piece, and provide format and paper alternatives to support maximizing postal discounts while achieving marketing and production goals,” Andersen states.

He says one of the most costly mistakes at the concept and design stage is not taking advantage of subject matter experts. The USPS has a staff of local and regional mailpiece design analysts and maintains a Pricing Classification Service Center at the national level. And, of course, clients will be happy to know that these resources are free.

The IWCO Direct exec cautions against focusing too heavily on the printing aspect at the expense of mailing. The main thrust is to produce pieces that can take advantage of discounts for destination entry, automation compatibility and commingling to ensure optimal presort penetration.

Lisa Wurman, manager of postal affairs and strategies for Vertis Communications in Baltimore, agrees that automation compatibility is a key variable often overlooked by printers. For many printers and customers, however, gaffes can be as elementary as miscalculating the weight and thickness of the piece. This happens when variables such as components and materials (number of panels, folds, diecuts and glue) are not taken into account.

“At times, printers may not think about how changes to the original design (like materials and format) may affect the weight and thickness of a piece, which ultimately impacts the cost of postage,” she says. “Although it seems basic, printers need to properly understand the dimensions of a mail piece. They must be able to determine what is considered the length and what’s considered the height of a mail piece, since these impact postage costs.”

Management and proper hygiene of a mailing list is pivotal, according to Nichols of CP Solutions. “In my opinion, and this is arguable: The list is 50 percent or greater to the success of the campaign,” he contends. “Offer and design make up the other 25 percent each.

“Data analysis tells you how to put creative and selling strategies together. Analyze your database on the front and the back sides. Reducing the number of pieces going out is the Number 1 way to reduce postage.”

Down the road, Andersen sees the importance of printers and their clients becoming prepared for the Intelligent Mail program. This entails understanding how to create and print the Intelligent Mail Barcode (IMB) for the mailpiece and the Intelligent Mail Tray and Container Barcodes; creating electronic documentation for each mailing; and using “e-documentation” to pay postage and create mailing statements electronically. Beginning May 2009, being able to comply with the USPS’ “Full Service” IMB proposal will result in the deepest available automation discounts, he notes.

Vertis’ Wurman also sees the value for printers in differentiating themselves in what is a highly competitive business segment.

“What can we do differently to distinguish ourselves and provide the best service, best price and best postage discounts to our clients?” she says. “This may involve looking at postage in a different way and innovating the way we process mail.” PI