Trim Costs After the Postal Rate Increase

From improved data hygiene practices to a better print contract, a little savings here and there really can add up.

Last month’s postal rate increase of 5.4 percent should have caught no one by surprise. If you’re looking for ways to save on other parts of your operation in order to pay for your higher postal bill, you’ll find many options.

In the first part of this article, you’ll learn about list hygiene tools that aren’t just important to offsetting the postal rate increase, but are good strategies to keep your housefile healthy and responsive. In the second part, we’ll offer tips and caveats regarding common print cost cuts.

Data Hygiene Tools, Practices to Try

Delivery Sequence File Second Generation: You’ve got a customer’s name and address, so you’re pretty sure you can get catalogs to her door, right? Not necessarily. What the customer can’t or won’t tell you is how she gets her mail. That’s where the U.S. Postal Service’s (USPS) Delivery Sequence File: Second Generation (DSF2) can come into play.

Available through service bureaus, DSF2 can help you determine: whether you’re mailing a residence or a business; if the address is seasonal or vacant; or if the address is a commercial mail receiver, says Dan Minnick, director of postal services at Broomfield, Colo.-based data services provider Abacus. Further, DSF2 can tell you if addresses in your housefile are invalid or simply missing information.

Each of these attributes provides the opportunity for a decision or a test, Minnick notes. For example, you may not want to mail to a vacant address or one that’s lived in seasonally. If you can’t correct a fractional address, it may be more economical to stop mailing it.

National Change of Address Link: While the USPS requires all First Class mailers to check their lists against the National Change of Address Link (NCOALink) file quarterly, that may not be enough.

Since 19 percent of the American population moves every year, if you don’t run NCOALink (the latest iteration of the National Change of Address process) once a month, at least 1 percent of the people on your housefile will have moved without you knowing it, says Minnick.

He breaks down the math as follows: If you mail a customer’s old address, it will perform at about one half of average. The customer’s new address will perform at about twice the average, since your customers who are new movers traditionally respond better. By mailing the new address instead of the old one, you multiply the likely response rate by four.

“Additionally, NCOALink on a per-hit basis is inexpensive, and you get the windfall lift of that new-mover nature for several months. So there’s a longer-term [benefit] that comes into play,” says Minnick.

Available through data services providers, NCOALink also offers return codes for addresses that have changed, but for which new information isn’t available. “Using those return codes, you can identify another half a percent of your file that will not perform at the expected rate,” Minnick notes.

Proprietary Change of Address: While NCOALink will cover most of your customers’ moves, it won’t catch all of them. Minnick speculates 20 percent to 30 percent of new movers don’t alert the USPS when they move. To catch these movers, use a proprietary change of address (PCOA) service.

Because PCOA is rooted in a financial relationship with the customer (e.g., a magazine subscription, utility bill), it’s likely the customer’s information will be correct, says Minnick.

That said, PCOA can be more expensive than NCOALink. PCOA generally costs about 6 cents per identified hit, whereas NCOALink’s flat fee usually works out to 3 cents to 5 cents per hit.

Whether you have your service bureau run NCOALink, PCOA or both, Minnick suggests running both your housefile and rental lists against them. He notes that doing so significantly decreases your deduplication in the merge/purge.

He gives the following example: If you mail 500,000 catalogs, then suppressing 0.5 percent (not an unreasonable number) due to found dupes, missing apartment numbers, etc., would save nearly $1,000. If you mail 12 times per year, then that 0.5 percent represents savings of more than $10,000.

Address Element Correction and Address Element Correction II: When an address can’t be located, it can be run through the Address Element Correction (AEC) process. This computer process, available directly from the USPS, generally can repair at least 25 percent of those addresses, notes Minnick. The service costs $15/M addresses scanned.

For all addresses not fixed by AEC, the USPS implements AEC II, a process where the USPS asks local mail carriers if they know how the address should be coded. For each corrected address, the USPS charges you, the mailer, 21 cents if the information is delivered to you electronically, and 75 cents if delivered by hard copy.

Each address fixed using AEC II is put into the AEC database, so as time passes, companies using AEC II will experience fewer expensive changes, as these will have been picked up in the initial computer match.

Individually, each of these address quality strategies may yield only a few percent savings. Collectively, however, you may find that they more than offset the recent postal rate increase.

Cost Cuts for Print, Paper

Renegotiate your print contract. While it requires good timing — you wouldn’t want to negotiate a contract that hasn’t yet lapsed — renegotiating your print contract could be a great way to recoup the money lost to the postal rate increase.

Depending on how long ago and how well you negotiated your last print contract, you could see savings as much as 10 percent, says Janie Downey, president of Publish Experts, a Cumberland, Maine-based catalog production consultancy. The important thing, she notes, is not to let a contract renew without examining it. You never know where money could be saved.

Questions to answer include:

1. How long is the contract’s term? Downey recommends committing at least to a three-year contract when it’s time to renew. “They need to see that you’ll be around for a while,” she says.

2. When is your busy season? “Printers have a lot of Christmas/ holiday business, so if you have a heavy push during spring, when they’re lighter, that’s helpful to them,” says Downey.

3. How much paper waste does your contract allow for? You don’t pay just for the paper your catalog is printed on, but for the paper roll from which it was cut. Make sure your printer is cutting the paper as efficiently as possible, notes Downey.

4. How does your printer get your books in the mail? “A lot of people don’t know this, but you can negotiate your freight rate,” says Downey. Every printer charges a different amount to get your books into the postal system. Make sure it’s doing this as efficiently as it can.

Cut pages. Something to consider before dropping pages from your catalog, notes Downey, is that if your book weighs less than 3.3 ounces, fewer pages won’t change your postage costs; the USPS charges a flat rate depending on your circulation for pieces under that weight.

However, if your catalog weighs 3.3 ounces or more, you’ll pay extra for additional weight. Most importantly, consider the impact of a smaller book on your sales.

Cut your trim size. Trimming just one-eighth of an inch from your catalog can make a big difference in weight, notes Downey. Be wary, though. “I’ve seen this go kind of haywire, where every time there’s a rate increase [some catalogers] take another eighth off their books,” she says.

Abacus’ Minnick agrees that trimming can be a tough decision to make. If your catalog is 8.5 inches by 11 inches, a 5 percent cut means half an inch off its height, and your customers will notice that, says Minnick.

Reduce paper weight. As noted, if your catalog weighs 3.3 ounces or more, you’ll save money on postage by reducing paper weight. But there can be problems associated with that decision. Although you can look at two papers of a different basis weight and not see a difference yourself, your customers might. Some of Downey’s clients have seen response rates drop during tests of lighter paper. The problem is that response rates don’t go back up when the cataloger has switched back to heavier paper, she says.

Minnick notes that below a certain basis weight, paper manufacturing costs tend to go up. So although you may save money on postage, you’ll be paying it out again in paper costs. Additionally, lighter papers sometimes cause trouble for printers. “In some machines [lighter paper] is harder to run, and printers will charge you more to use it,” says Minnick.

Use selective binding. If you have several versions of your catalog differentiated by dot whacks or variant covers or signatures, selective binding by your printer could drop your postage costs significantly. Minnick gives an example: Carrier route discounts kick in for mailings greater than 500,000. If you have three lists of 500,000 customers (or less), none of the mailings based on these lists would qualify for the discount. Using a binding machine to create a single mailing of non-identical books would create one mailing of 1.5 million. Roughly 55 percent of the mailing now qualifies for a discount of 6.7 cents per piece. Spread across your whole mailing, that’s a savings of $36.85/M. Minnick notes that selective binding typically costs $3/M to $5/M, so the added cost more than pays for itself.

Consider co-mailing. If your printer also prints for a noncompeting cataloger with your same trim size, ink jet area and in-home dates, co-mailing may be an option. Similar to selective binding, the printer combines multiple catalog titles into the same mailstream. More catalogs in the mailing then qualify for the carrier route rate, resulting in a lower overall postage cost.

“Printers have found [co-mailing] a great way to save money, because the savings isn’t coming from them; it’s coming strictly out of postal costs,” says Downey.

Just One Question

Catalog Success: What cost-cutting tactics did you employ, if any, due to the postal rate increase last month?

Mike Yager, founder and president, Mid America Motorworks, Effingham, Ill.: While the rate case was being considered, we switched our Volkswagen catalog to rotogravure. That required a change in both the style of printing and the type of paper. That gave us a lighter catalog to mail, about 28 lb basis weight.

On the Corvette side, we’ve just made sure we’ve kept that catalog efficient. We’ve been able to offer the same amount of products in about 40 fewer pages. We’ve become more efficient in how we get the products to market.

Michael Schuster, vice president of marketing, Nancy’s Notions, Beaver Dam, Wis.: We altered the paper weight strategy of our catalog to make it a little lighter, just a slight difference. We did it for two reasons. The postal increase was one, but the paper we switched to was one of the standard stocks used by our printer. It was just more available to us.

The switch didn’t cover the rate increase completely, so we’re also trying to be careful about who we mail to. We’re not making any drastic changes to our circulation strategy; we’ve just tried to keep our lists a little cleaner. I’m also watching our marginal segments a little more closely.

For service providers offering access to DSF2 and NCOALink, visit www.usps.com/ncsc/ziplookup/vendorslicensees.htm.