Co-Mailing: The Biggest Controllable Variable in Your Catalog’s Printing and Postage Costs, Part 2 of 2

This week in the final part of our two-part series on co-mailing economics, I’ll inform you of the various price estimates you need to research from printers to accurately compare savings between co-mail pools. I also pose a list of questions that catalogers need to ask printers when negotiating co-mail contracts.

(For part 1, click here.)

Cost Estimates
It can be difficult to compare savings between different printer’s co-mail pools. To do this effectively, you need to get the following estimates from printers:

* estimated gross postage without any savings;

* estimated net postage after the printer’s mail pool and co-mail savings; and

* the printer’s cost for their portion of the savings, their freight cost (including the dreaded fuel surcharge) and administration cost.

You end up with the printer’s estimate of your net postage and their total cost to capture that savings for you. The postage savings and the printer’s costs can be difficult to calculate. Even if you calculate the savings yourself, ask your printers to also provide an estimate of net postage and all costs they’ll be charging you for. Keep it simple: What will be my postal bill and what will be my cost from the printer to capture those savings? (Click on the chart at the bottom of the page for an example of how to calculate these numbers.)

Other than costs, are there other factors to consider? In addition to the differences between in-line and off-line pools, educate yourself on the size of the typical mail pool from the different printers. The bigger the pool, the bigger the potential savings! Then find out the frequency of the pools: Are they once a week, twice a week or spread further apart? Know the trim size constraints and whether your trim size is giving you the best flexibility. The generic trim sizes have become 8 inches x 10 ½ inches and 7 3/8 inches x 10 ½ inches, but some printers have machinery that handles a variety of trim sizes. And know whether the pool is through the printer or a consolidator.

Do printers offer different levels of service or all printers’ co-mail capabilities essentially the same? Actually, there’s a wide variety of capabilities and potential cost savings. The big three printers — RR Donnelley, Quebecor World and Quad/Graphics — have big, established co-mail programs that work with catalogs with circulations of all sizes. The second-tier printers, like Arandell, Catalogs America, Brown Printing and The Dingley Press, are getting into co-mail in a big way. They’re using in-house co-mail pools or consolidators, or a combination of the two. The smaller third-tier printers are the ones really suffering, because if they don’t have mail pools they tend to lose out based on price.

Bargaining Power
What are the deal points when negotiating a contract with your printer? Make sure to ask the following:

* Do they offer a guaranteed savings? Some printers offer guaranteed postage savings.

* Do they guarantee freight prices? Freight guarantees are common and are typically based on a cost per cwt.

* What are the administrative costs for each mail drop? Is there a fixed cost for each mail drop?

* How are the savings split between printer and cataloger? Savings split 50/50 is common, but greater savings are possible from some printers.

As catalog costs spiral upward and break-even costs threaten profitability, catalogers must understand the potential savings from co-mail programs. Co-mailing should save between $.02 and $.04 per catalog mailed, which translates into a savings of $200,000 to $400,000 over a circulation base of 10,000,000 catalogs. That savings can represent the difference between a profit and a loss in 2009. So take a deep dive into your co-mail costs and savings to maximize your bottom line.

Jim Coogan is president of Catalog Marketing Economics, a Santa Fe, N.M.-based consulting firm focused on catalog circulation planning. You can reach him at (505) 986-9902 or jcoogan@earthlink.net.