Feb 28, 2006
Take a Bite Out of the Postal Rate Hike
Four words -- Cleanse, Consolidate, Digitize and Profit -- can help you escape rising postal costs
By George Linkletter
Like death and taxes, constantly increasing postage costs now seem inevitable. But there are at least four strategies that can help HVTO managers minimize, offset and possibly avoid the postal increases altogether.
Use Clean Addresses
The first step is the make sure your mail gets delivered the first time.
That may not be as simple as it sounds. America is a nation on the move.
Every year an estimated 40 million Americans move either their residence or their business, according to the USPS.
Unfortunately, many HVTO managers are slow to update their address data.
The result? Millions of messages nationwide are delayed, misdelivered or not delivered at all. Some observers estimate that as much eight percent of all U.S. mail is Undeliverable As Addressed. That's a huge number and is now largely avoidable, thanks to advancing technology.
The best way to tackle the problem of misaddressed mail, according to Glen Wordekemper, Vice President for First Data, one of the nation's premier customer messaging firms, is to access the up-to-date information contained in the USPS National Change of Address database.
"The NCOA contains more than 160 million permanent address changes, is updated weekly, and covers (on a constantly rolling basis) the past 48 months of move information," he explains.
At First Data, access to the NCOA data is fully integrated into the firm's highly automated and high-speed message processing system. Which means it is instantly available to every one of its 1,400 client companies. As a result, the addresses on First Data-produced mailpieces -- and there are nearly two billion mailpieces each year -- are as clean and up-to-date as possible.
In fact, the USPS officially recognizes First Data's ability to send customer messages accurately and on time. The firm is one of the few high-volume, multi-location mailers to receive the highest designation possible from the USPS -- a perfect 100 percent score -- under its Mail Preparation Total Quality Management program.
Consolidate Mailings
Mailpiece consolidation is another option that can lower postage costs. It may seem odd to advocate fewer mailings. After all, our industry is in the business of Connecting with Customers. Can fewer customer contacts really be a good thing? Absolutely -- if the consolidation is done strategically.
And that is exactly what Wordekemper is recommending.
"In the credit card industry, each new customer typically receives one mailing containing a plastic card, and a second, separate mailing with a welcome kit," he continues. That model for initial customer contact was created several years ago when postage costs were lower and the need to connect with and retain new customers was a higher priority.
But the economics have changed. Today, it may be more effective from a cost and customer relations perspective to combine those two separate mailings into one.
"Many of our bank clients have eliminated the dual mailings and adopted our innovative 17x11 inch card carrier to deliver the plastic card and the welcome kit in a single, attractive package," he says. "They've reduced their initial contact costs by about a third. And they've discovered that many customers actually prefer receiving a single, custom-tailored package, rather than sequential mailings, which many consumers perceive as costly and inefficient."
Digitize Messages
Paper-based mail was once the only channel to reach customers. And it is still immensely popular and the only way to achieve universal reach. But new methods of customer contact are evolving and mail is no longer the only game in town.
"Electronic communications such as e-mail and text messaging are emerging as mainstream forms of customer contact," says Wordekemper, "especially for the younger, more technologically-savvy, and more lucrative segments of our clients' customer base." He says an "increasing number of consumers want more choice in how they receive messages and how they interact with their business partners."
According to Wordekemper, First Data is at the forefront of capitalizing on the shift in consumer preferences. "We have the capability to convert virtually all forms of paper-based customer messaging to an electronic format, and can generate and deliver secure, content-rich digital document to customers via a variety of electronic channels." These include e-mail, Web sites, mobile devices, the now age-old fax and even aggregator Web sites.
The new electronic channels are substantially less costly than paper-based mail, usually on the order of 80 percent when production of the paper-based message is suppressed. First Data also offers an automated outbound voice capability, which enables it to achieve prompt and cost-effective connections with even the most mobile or remote customers. And since these new channels respond to the newer consumer preferences, they help strengthen customer relationships as well as lower costs.
Focus on Profit
Few internal HVTO managers are accustomed to using a word like 'profit.'
Yet profit is the purpose of any business. And transforming customer account statements into profit generators may be the best way to combat rising postal costs.
"There's tremendous untapped marketing opportunity in account statements,"
says Wordekemper. "Virtually every recipient opens and carefully reads statement-based correspondence. Studies consistently show that account statements receive unparalleled attention from consumers when compared to other forms of possible contact."
Still, hundreds of companies today send account statements each month with nothing more than a single-page bill. Enclosing just one pre-printed marketing insert with those statements could more than offset the cost of both the current and the projected postal rate increase, according to Wordekemper. Including additional inserts would boost revenues still more.
The credit card industry is clearly on the leading edge of insert-based marketing. And First Data is advancing the cause by utilizing the concepts of 1:1 messaging via both in-statement and on-statement marketing.
"We've developed a highly-advanced decision engine that can automatically select from a range of pre-determined offers and match those offers with the customers who are most likely to respond." The result? "We can put the right marketing offers in front of the right customers with each monthly statement," he says.
How does it work? Consider the example of a bank seeking to market a home equity line of credit. On the one hand, the bank can broadcast the offer via a statement insert to all customers, regardless of their credit worthiness. Such an offer will likely trigger responses from an array of customers, including those who may be ineligible or poorly suited to the offer.
Or it could identify in advance those customers who are most suitable to receive the offer, and limit distribution to highly-targeted customers based on factors such as age, geography, credit risk score, credit limitation utilization, payment delinquency or other key factors.
Customers who did not meet the preferred profile could be offered other products or services that are more suited to their individual needs or capabilities.
Not only will the targeted offers be more likely to 'hit' and thus make the mailing more effective, but the bank will also eliminate a great deal of unproductive work dealing with those ineligible customers -- and potentially a great deal of negative customer relations as well.
Taking the concept a step further, Wordekemper says the bank could assemble a package of three or four distinct or even synergistic offers. It could also charge outside firms a premium to be included in the mix or to reach the bank's most lucrative customer segments.
The marketing messages could be delivered via a mix of both pre-printed inserts and as text and images printed inline on the statement during mailpiece assembly. Early reports from banks using the onstatement marketing option indicate that the messages printed on the statement itself are just as effective, if not more so, than the pre-printed inserts. In fact, the technique even has a name -- onsert marketing.
How much is it all worth? Potentially, a significant amount of money, according to Wordekemper. "Depending on the pertinence and synergy of the 1:1 messages, and the value of the target audience, the income earned by maximizing the use of marketing inserts and onserts in statement-based mail can approach the total cost of postage per mailpiece."
# # #
Comments? Contact georgeol@ntplx.net