Dec 27, 2006
A Carrot and a Stick
New postal rates from the USPS encourage fewer and
Lengthier mail pieces and more electronic messaging
By George Linkletter
The U.S. Postal Service has proposed a broad range of postal rate increases that are expected to go into effect in May and August of 2007.
On average, high volume mailers can expect their cost for postage to increase by about seven percent due to these changes. However, the actual increase for individual mailers could be much more -- as much as 30 percent more -- depending on the format of the mail piece and the ability of mailers to take advantage of work-share discounts.
Size Matters
The postage for a single mail piece, which previously was based primarily on weight, will now be determined from a combination of weight and the shape or size of the envelope. In effect, the USPS is rewarding mailers who use a traditional business-size envelope (such as a #10 or 6x9), and is penalizing those who use a large-format envelope to mail documents that are unfolded or flat.
To help sort through the changes, and identify some of the best ways to minimize the impact of the higher postal rates, I contacted an expert at First Data, which is among the largest private mailers in the U.S. First Data processes more than 1.7 billion mail pieces annually on behalf of hundreds of banks and financial organizations and spends more than $500 million in a year in postage alone.
“Like many organizations, the USPS is facing rising costs for healthcare insurance and fuel,” said Tim Rosenthal, Senior Vice President of Output Services at First Data. “They need additional revenue but are also structuring this latest round of increases to create more incentives for mailers to use both envelope and address formats that yield faster, more accurate and more efficient mail processing. Mailers who take advantage of the incentives can dampen the increases and benefit from better service delivery.”
The proposed rate increases amount to 7.7 percent hike for a single piece of mail, 7.5 percent for 3-digit sorted mail, and 6.5 percent for 5-digit sorted mail. The cost for a single piece of flats mail is increasing by 59 percent, a 3-digit sorted flat will cost 24.8 percent more, and a 5-digit sorted flat will increase in cost by 25.2 percent.
“A flat is a mail piece that exceeds either 11.5 inches long or 6.125 inches high, and usually encompasses documents that are unfolded or flat within the envelope,” explains Rosenthal. Investment and insurance firms in particular use flats for monthly account statements and insurance policies.
However, the USPS has also proposed a price decrease to entice mailers to configure their mail into shapes that help the USPS reduce its overall cost of mail processing. With this in mind, the USPS has proposed reducing by 16.7 percent the rates for additional ounces in the same envelope to encourage mailers to utilize the #10 or 6x9” size envelopes for lengthier mail pieces.
“The USPS can process the smaller, standard-size envelopes at much faster speeds than the over-sized flats, so it just makes sense to encourage their use to speed up and streamline the entire mail stream,” continues Rosenthal.
Step One: Reduce Use of Flats
The significant increase in the cost of mailing flats suggests that high volume mailers now need a very good business reason to continue using the higher-cost flats format for regular or routine communications. In fact, because of the new, lower cost for additional ounces in the #10 or 6x9” envelope, it may even be possible to migrate multi-page documents to the smaller size envelope and achieve a lower total cost for postage.
Step Two: Consolidate Mailings
Frequent customer contact is always good. But as postage costs continue to rise, is each and every letter necessary? For example, new credit card customers may receive a welcome letter and a separate welcome kit. Or a customer may receive a promotional mailing and a regular account statement in the same month. Substantial savings can be achieved by consolidating those separate mailings into one combined mailing.
To illustrate the point, Rosenthal shows how a credit card issuer can save significant amounts by utilizing the First Data 17x11” Plasticard Enterprise Presentation card carrier to deliver both plastics and welcome information in one package.
“Many of our clients have already adopted this advanced card carrier to avoid the need to create two separate packages, with separate costs for materials, production, and postage, and are saving more than 35 percent on average.”
The firm’s Strategic Communications Solutions also enables far greater use of the monthly account statement for multiple messaging purposes. And its Relational Processing capability enables banks and other firms to link multiple accounts held by a single customer into a single, consolidated statement, which results in still more savings due to lower printing and postage costs.
Step Three: Keep Up With Customers
An estimated 10 billion mail pieces are undeliverable each year. Accessing the USPS National Change of Address databank, which contains more than 160 million permanent address changes, and is updated weekly, can greatly reduce the incidence undeliverable mail. First Data has fully integrated access to the NCOA information within its system, so mailings and statements can always incorporate the most up-to-date address data.
Step Four: Assure Quality Addresses
Standardizing addresses, i.e., correcting spelling errors such as Bellview vs. Bellevue, and assuring the accuracy of address locations, can reduce errors in processing and delivery. And it can be done automatically via First Data.
Step Five: Use Electronic Messages
E-mail and text messages are now more mainstream for more forms of communications, particularly among the Internet savvy segment of customers. And the cost of electronic messaging is a fraction of the cost of paper-based messages. So digital delivery is a clear alternative for high-volume mailers who want to lower postage costs. And First Data has a unique capability here as well.
“Our eMessenger service enables banks and other firms to convert virtually all customer communications to an electronic format, and generate and deliver secure, content-rich electronic documents via a variety of channels, including e-mail, Web sites, mobile devices and fax as well as aggregator sites,” adds Rosenthal.
And, of course, all of those electronic options come with no cost for postage.
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Comments? Contact georgelinkletter@charter.net.