Outside our industry, return mail must sound so last century. But although mail volume is shrinking, return mail is down just 0.62% since 2004, with around 1.6 billion pieces each year.* This is an acute problem for high-volume mailers in four groups: finance; insurance and healthcare; energy, telco and wireless; and government. These organizations communicate with customers in critical areas like billing, explanation of benefits (EOBs) and regulatory notifications. Here's the scope of the problem in each group:

Finance. An independent PBMS study revealed financial companies account for about 35% of all first-class return mail, more than 490 million pieces per year. Typically, return mail is managed at decentralized locations, as different divisions operate differently. A high-end investment group, for example, won't make an address change without client approval, while another division will update such data from address correction software. It's difficult to confirm that everyone's meeting discount requirements because the customers address can vary from database to database.

Insurance and Healthcare. Our study showed these segments own 20% of return mail, almost 300 million pieces per year. Health insurance and healthcare companies often aren't in control of address data from employers or government agencies. This adds greatly to return mail expense, with sales reps pursuing clients for correct information. It's hard to meet USPS Move Update regulations, leaving companies vulnerable to audits and penalties. Also, an understanding of CMS (Center for Medicare/Medicaid) regulations on addressing vary from one line of business to another.

Energy, Telco, Wireless. These sectors account in the study for 21% of return mail, just under 300 million pieces per year. Since customer addresses are tied to the location where service is provided, this group's biggest challenge is delivering the final invoice to customers no longer in their service area. In addition, each customer can have up to three addresses - physical location, mailing address and E911. And as people migrate to wireless services, it's harder to keep up with their physical moves.

Government. Similar issues exist in local, state and federal government, thanks to decentralized databases and return mail management. The government should know where Americans live, yet 21% of the last U.S. Census mailing was returned undeliverable.

Scoping the Costs
By our estimates, each piece of return mail costs the sender an average of $3 - a massive $4.2 billion expense to the industry each year. And that's just operational costs - postage and printing, handling, research, re-mailing and related processes. The total is much higher, exceeding $50 per mailpiece when you count the value lost with returned communications -delayed and missed payments, additional call center activity, overall customer service costs. This adds up to an estimated $65 billion each year.

The United States Postal Service (USPS) Move Update requirement is also tighter than ever. For both discounted first-class mail and standard mail, organizations have to update customer move information within 95 days of a mailing, or discounts are lost and fines levied. Fines can be significant, as the USPS may multiply the postage deficiency by a number of years, since Move Update has been in place since 1997.

Unfortunately, mailers often think they're fully compliant, only to discover that certain mailings weren't. Then they need visibility into all the organization's mailings--documentation that a Move Update was performed, all reports and proof that full postage was applied where required.


Mailers usually begin solving their return mail problem with USPS address tools and third-party databases. There are also third-party solutions that work with postal certified databases. Tools range from NCOALink to access national change of address information to LACSLink that updates rural route conversions and other address renaming and renumbering.

The Intelligent Mail Barcode (IMb) uniquely identifies every piece in a mailing and can be used with services like the USPS Address Change Service (ACS) to connect the mail piece to your database. The Full Service implementation of the IMb with ACS is part of the trend toward integrated solutions. But every solution has its own trade-offs, so you need to evaluate how each is deployed.

Implementation costs can be significant, so you want to leverage the benefits. Mailers are therefore looking closely at the data from these tools to extract greater value and accuracy. We often find that mailers are suppressing customers from mailing because USPS reason codes on return mail and ACS files were misinterpreted. Suppressing mail to a customer has the same impact financially as completely losing contact.

To make sure your return mail solution has maximum bottom line impact, you need the right tools and services to obtain, check and develop the data and then take proper actions. It's critical to work with a technology solution provider to develop a roadmap and constantly review the latest tools and services.

The Ideal Answer
The one truly effective solution to reducing operating costs and fines is to develop a centralized, automated managed service. This integrates multiple technologies to convert physical mail into usable data and to perform a variety of pre- and post-processing tasks for address updating. Operating this service is a four step process:

1. Document capture and conversion. Once in electronic format, the original mail pieces can be shredded or staged for secondary processing, such as re-mail, reprocessing and address validation with customer follow-up. Data is reported to a host platform for updating and storage.

2. Address management, standardization and search. Advanced search activities include everything from landline and cell phone data to voter registrations and magazine and newspaper subscriptions. These go far beyond what commodity address quality and move update solutions provide.

3. Secondary processing and document repurposing. Setting up back-end business processes and data-driven events makes it easier to re-mail to updated addresses, while automating the reprocessing of addresses with on-going issues. This includes secure destruction of return mail and processes to prevent suppression of updated addresses. Rebound processing can also feed call centers or trigger other communications.

4. Reporting, auditing and metrics. These processes update the host platform and provide management statistics. All electronic images and files are indexed and archived. Tracking, analysis and documentation provide metrics to validate process quality.

Because of the complexity of the issues, it's advisable to work with a consultant with postal expertise to design and implement the correct solution for your company. But the benefits can be huge. Our research confirms that taking a centralized, automated approach to return mail can reduce operational costs up to 70%. The rest of the total cost, such as missed payments, are 100% returned to the bottom line!

* USPS 2011 National Postal Forum

Jeff Stangle, CMDSM, MQC, Six Sigma Black Belt is Director of Solutions Development, Mailstream Consulting Pitney Bowes Management Services. For more information, visit www.pb.com/Management-Services.