Finding Money in the Mail

Catalogers are extremely detail-oriented when it comes to analyzing customer demographics, sourcing product, developing eye-catching layouts, writing persuasive copy, and selecting the most appropriate paper on which to print the catalog. But many mailers fail to pay as close attention to planning how to get their catalog into buyers’ hands.

Surprisingly enough, each year many of America’s major mailers let millions of dollars slip through their fingers without even knowing that the money was within their grasp. Their only oversight? Failing to understand the full array of savings made available to mailers by the U.S. Postal Service and treating their mail distribution as a “byproduct” of print production.

Any good direct marketer can drop things in the mail, but great direct marketers understand that carefully managed timing and postal discounts drive more efficient and effective mailings that maximize response for the lowest total cost.

The key to transforming a printed piece into a message lies in a solid postal logistics strategy. But what is postal logistics, exactly? Simply put, it involves three main components: transportation, time, and postage. This is more complicated than it sounds, however, since improving any one of these three will affect the other two components. Managing the logistics algorithm means optimizing each variable.

A four-part partnership

Most mailers rely on their printing and fulfillment suppliers to manage the distribution of their printed product into the postal stream. But if the printer’s distribution plan is simply to sort the mailing by zip code and drop it off at the nearest postal facility, it’s time to add a postal logistics partner to the mix.

The relationship between the cataloger, the printer or the lettershop, the postal logistics provider, and the USPS is truly a four-pronged partnership, with each partner focusing on its core competency and working with the others to achieve a common goal.

First the cataloger sets specific criteria to measure how well goals and objectives within each facet of the mail campaign have been met. The mailer also establishes the priorities necessary for achieving those campaign objectives. For instance, if the offer is time-sensitive, delivery speed is critical. Or perhaps keeping costs down is a more significant concern. And if the materials used to produce the mailing are highly susceptible to handling damage, it may be necessary to reduce the number of times the pieces are handled.

Next, the printer or the lettershop gets involved. It works with the mailer to understand the priorities of the campaign. In addition to printing, binding, and assembling the mail pieces, the printer or the lettershop must communicate with the mailer and the logistics provider, ensuring that the production and distribution schedules enable the mailing to get out the door on time. To take care of any presorting and palletization, the printer or the lettershop must also work with the list provider.

Traditionally printers and lettershops sorted and palletized the mail, which was then picked up by the nearest local post office — a procedure known as origin entry. Some printers went so far as to deliver a portion of the mail to some of the 29 bulk mail centers (BMCs) throughout the country.

In this scenario, the mail was typically handled at five or six postal facilities before reaching its final destination at the recipient’s mailbox. Each move within the postal stream cost the mailer time and money. It also left the mail more vulnerable to damage and to getting lost.

Now, though, a postal logistics provider is often part of the process, getting involved at about the same time as the printer or the lettershop. It’s important to realize that the postal logistics provider is much more than a trucking firm; picking up and transporting mail is a small portion of the value that a good postal logistics provider contributes. The logistics provider serves as liaison between the printer/lettershop and the USPS to ensure seamless hand-offs at every touch point.

When the catalogs are ready for shipping, the postal logistics provider picks them up and brings them into its own network, where they are consolidated with other mail and separated by optimized routes, then dropped into the appropriate postal facility. The postal logistics provider can handle and automate the necessary postal documentation. Finally, the logistics provider tracks, analyzes, and reports performance data and recommends adjustments along the way.

Once the mail is delivered into the mail stream, the USPS completes the chain by delivering the mail to the recipient’s mailbox.

It’s all in the timing

Timing is everything when it comes to catalog mailings. Mailing lists become out of date with every passing day. The effectiveness of campaigns timed to coincide with specific events, such as holidays or sale dates, depend on precise in-home delivery. And the delicate balance of optimizing inventory levels and staffing call centers can be thrown out of whack by a mailing that went out earlier or later than planned. Controlling the on-time delivery of the mail is mission critical, and suppliers that can reliably reduce distribution cycle time enhance that control and improve program efficacy.

A postal logistics provider adds value by combining the mail of multiple mailers in its consolidation facilities and creating optimized loads to be entered as deeply as possible into the postal system — in other words, by drop-shipping.

There are three main points in the mail stream where mail can be entered: at one of the 29 BMCs, the more than 450 sectional center facilities (SCFs), or the more than 30,000 destination delivery units (DDUs, also known as the local post offices) across the country. Typically, the further downstream you can drop the mail, the more time and postage you save.

If the USPS picks up the mail at the printer, you can estimate that it will take about 10 days for the catalog to reach the recipient’s mailbox. Drop-shipping to a BMC shaves a few days off the schedule; drop-shipping into an SCF or a DDU can save as much as five days.

But that doesn’t mean it’s always most economical to drop mail right to the DDU. In most cases, your transportation efficiencies and mail makeup have to be factored in as part of your overall savings potential, so a mix of BMC, SCF, and DDU is usually your best option.

Just how much money can you expect to save? Based on a survey of subscribers to Direct magazine (a sister publication of Catalog Age), it’s safe to estimate that a marketer who sends out more than 100 million mail pieces a year could save about $1.7 million in annual net postage and transportation costs by switching from origin entry to drop-shipping. If that mailer already has a BMC program, it can save $300,000 a year by maximizing SCF penetration.

A smaller mailer — say, one that mails 25 million-100 million pieces a year — could save $400,000-$1.7 million in annual net postage and transportation, depending in part on where its mail currently enters the system and how deeply it plans to drop-ship. Even those that mail 10 million-25 million pieces each year can save $150,000-$420,000.

Shopping around

The more sophisticated the logistics partner working on your mailing, the better the service you will receive. To ensure that a postal logistics provider is sophisticated enough for your needs, you want to be sure that it offers economies of scope and scale. In other words, you want a provider that serves the country through a national distribution network and that manages significant volume. How much mail a provider handles is important because a supplier’s combined mail volume affects the postal discount it is eligible to receive. If the vendor relies on a regional distribution platform, you will probably want to be sure you can find a comparable solution in the regions it doesn’t serve.

Next, the logistics partner you select should be able to create a customized distribution plan that clearly identifies what percentage of your mail will be delivered to which reaches of the postal network — how much will go to BMCs vs. SCFs vs. DDUs. The plan should also outline the expected savings. If your logistics provider uses sophisticated mail optimization software to create optimized load plans, that’s a good indicator that it has the technological resources to tailor a plan for your needs and criteria.

Finally, you need to determine your potential provider’s level of postal expertise. Ask if it is Dropship Management System (DSMS) certified by the USPS. If so, it has demonstrated to the Postal Service that it has a total quality control system in place to ensure that the mail is properly prepared and the paperwork flawless. The benefits of having this certification include allowing the mailing to move off of the production floor and into the distribution network prior to postage payment, creating significant opportunities to save time.

By increasing your awareness of the dynamics that govern postal logistics, you can take greater control of mailing costs while improving response rates by improving the timing of your mailings — which in turn should improve your bottom line.

Linda Carlisle is director of brand development for RR Donnelley Logistics, a postal logistics provider based in Willowbrook, IL.

Postal Logistics Litmus Test

Although the four-pronged partnership is ideal, many mailers and their printers work with companies that are not able to provide optimal postal performance. Here’s a quick test to find out if your partner demonstrates true postal logistics expertise:

  • Are your distribution costs being broken out for your review?
  • Are your freight costs to the Postal Service competitive?
  • Do you know precisely what you are paying for postage? What is your supplier’s level of expertise to provide you with the lowest possible postal rates?
  • Are you aware that your supplier’s combined mail volume affects the postal discount it is eligible to achieve? How much volume does your supplier have to work with?
  • Have your vendors offered you drop-shipping to the BMC, SCF and DDU levels of the USPS? What percentage of your mail is entered at each of these?
  • How many entry points do your suppliers serve, and how often do they serve them?
  • Have you worked with your vendor to analyze the trade-offs between first class and standard mail for your promotions?
  • Are you aware that delivering mail too late (or too early) can decrease your response rate? What is your supplier doing to provide precision entry dates for your mail and to track and communicate performance to you?

If you answered “No” or “I don’t know” to more than three of these questions, there may be a few significant opportunities to improve the efficiency and effectiveness of your mailing programs.

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