By Darin Marks
Sr. Resource Manager
(This article appears in the upcoming edition of the Official Mail Guide)
Each year, marketers face the tough predicament of how to allocate their marketing budgets and justify staying in the mail as print, lettershop and postage costs continue to increase while other intangible marketing options (such as email) stay relatively flat.
It is clearly evident that budget allocation is slowly moving away from mail, according to the United States Postal Service (1) standard mail volumes declined from 100.9 billion in 2005, to 80.3 billion in 2014; a more than 20% loss in volume. There are multiple factors that caused such a huge decline in mail, some of which relate back to the cumulative cost of mail marketing versus other marketing tactics, like email, online ads, radio, TV, phone, and e-bills.
Despite the rise of less expensive marketing options, direct mail continues to be one of the most effective ways to reach a consumer or donor. The reason for this is simple; it is personal, targeted, tangible and impactful (2).
Given this fact, the big question facing marketers is how to reduce procurement and postage costs to justify staying in the mail? Here are 10 easy ways to reduce your mailing costs and keep your budget allocation where it will be most impactful – in direct mail.
1. Postal Logistics
Postage is typically one of the most expensive portions of the budget. Unfortunately, there is only one supplier and unless you are a very high volume mailer, the USPS doesn’t negotiate postage rates. The best option is to mail smart by obtaining the leanest possible postage rate available. This is where postal logistics come into play.
There are many national and regional 3rd Party logistics companies, and even some large lettershops who specialize in logistic services. The key is to work with your lettershop or partner with a reputable 3rd Party who will manage your postal logistics.
The typical postal logistics options are:
* Commingle – when your mailing and the logistics provider’s other client mail is pooled and sorted together creating one large-volume mailing. This allows you to take advantage of very low postage rates, typically in the DSCF range.
* Drop Shipping – When your mail is sorted down to the DNDC and DSCF level, placed on trucks and shipped to the different NDC and SCF facilities. In this case, you are paying for the full cost of each truck going to the NDC and SCF; which can be expensive if you aren’t filling each truck to capacity.
* Co-Pal – When your mailing is sorted and placed on pallets by the lettershop. The logistics provider then takes your pallets and combines them with their other client’s pallets onto one truck. This allows you to take advantage of DNDC or DSCF rates and share freight and fuel costs with one or more other mailers.
For each of these options, the 3rd party will add processing, freight and fuel to your bottom line postage costs; however in many cases this is still more cost advantageous than paying high local entry postal rates.
Another potential benefit to using a logistics provider is that they specialize in mail transportation enabling them to reduce amount of time it takes the mail to go from the lettershop to the recipient, and you should see a reduction in your average “time in mail” experience.
2. Leverage Annual Volumes
It is the goal of many printers and lettershops to acquire annual program work. In return, the suppliers will offer discounted costs on annual programs versus the price of
one-off projects. The most difficult part of this process is compiling all of the mailing information (quantities, production dates, print and mailing specifications, etc.) into one master annual document for a full annual program bid, but all the pre-planning is well worth it. Annual program pricing allows for easier budget planning, price comparisons, and efficient production management throughout the year.
3. Over or Gang Printing
If you have a particular control package that is mailed several times a year, why not over print and store the components in inventory? This will drastically reduce costs throughout the year. Many times, Return Envelopes, Inserts, Letterhead and Outer Envelopes can be gang run as they stay fairly consistent from mailing to mailing. However, it is not advisable to overprint for more than 12 months as the integrity of the paper and/or glue could become questionable depending on the environment in which it is stored.
4. Entertain Potential Prospect Suppliers
Many times suppliers will have their own niche price points based on the type of product you are buying. Just because your supplier pool may have three envelope suppliers, doesn’t mean you should rule out entertaining a fourth, as they might have a niche price point or unique capability to offer that your others do not. Vetting that prospect supplier’s pricing is easy if you have already created an annual program bid sheet (See #2 above).
5. Always Price Audit
You should be obtaining at least three bids for every item you are printing or package you are mailing. You just never know what the true market value of an item is without multiple bids. Again, this is simple if you have an annual program document (See #2 above) as you can audit all of your prices one time per year.
6. Allow Incumbents Right of First Refusal
Your suppliers don’t want to lose work, so providing them with right of first refusal will help maintain the supplier relationship even when cost is a factor. By giving your incumbents right of first refusal you provide the opportunity to negotiate down to meet another supplier’s lower bid.
There may be times when your incumbent can’t price match, however they are typically willing to drop the price a bit to keep the work.
7. Prices are in the Details
Suppliers need very detailed information to give you the best price possible. If possible, you should be giving them full and accurate specs including:
* Bid Quantity (if RFP, include annual quantity, number of runs/mailings per year and quantity per run).
* Print: Number of Versions, Version Quantity Splits, Number of Plate Changes per Version, Print Size, Paper Stock, Inks, Bleeds, Ink Coverage, Perforations, Scores, Folds, Ship Point and Delivery Point if Logistics will be included.
* Lettershop: Number of Packages, Package Quantity, Postage Mailing Category, Data Processing Needs, Personalization Specs, Inserting Specs, Number of Matches, Postal Logistics Handling.
If you have old PDFs or draft PDFs of the print or package samples, those are extremely helpful, as the suppliers can get vet your specs and give you the most accurate price possible.
8. Print Supplier Consolidation
Many times you will find that printing package components with different suppliers will yield the best price, because again, everyone has their own niche prices based on capabilities. However, consolidating suppliers can sometimes reduce costs further. If a
supplier knows they will be awarded 3 components instead of just one, then they may be able to reduce their overall price. Consolidating can also help with quality control, freight costs and keeping products on schedule.
9. Digital Printing & Personalization
For many years, Digital printing was thought to be very expensive and not a viable cost savings option on high quantities. However, in the last several years, there have been advancements in technology making digital printing at high volumes more feasible and leveraging this technology can sometimes reduce production costs. This is due to the ability to digitally print and personalize on a digital roll-to-roll press. On the input side the paper is blank and the printer can add CMYK images, static and variable text and then rewind on rolls. The quality is not as crisp as offset printing, and most printers do not support PMS colors but allow for CMYK builds, however if cost is an important factor, then this might be a good option to explore.
10. Fuel Costs
According to the US Energy and Information Administration3, diesel fuel costs have decreased by 30% from 2014 to 2015. Furthermore, as of February 23rd, 2016 rates are the lowest they have been since January 2005. Therefore, be sure your suppliers are passing these savings along to you. This goes for your printers as well as your postal logistics providers.
These are just a few options to help you reduce procurement and postage costs in your marketing budget. Understanding your options can be equally as important as understanding your constituents and cost savings will ultimately help your programs be as efficient and effective as possible.
Darin Marks is a Senior Resource Manager with 13 years of experience in the mailing industry. Darin started his career at a high-touch lettershop managing accounts and processing data. His current responsibilities include RFP and Bid Management, Postal Logistics, Process Improvements and Employee & Client Training.