How much does a mail piece cost?

The document center might estimate the cost of a simple direct mail piece at 50 cents or less. They will include items such as paper, ink, envelopes, postage, labor, facilities, and machine maintenance. From this perspective, undelivered and returned mail seems insignificant. There isn't much motivation to spend time correcting the problem. This is a mistake. The value of those mail pieces is far greater than the cost to produce and distribute them.

Calculating the true value of a marketing mail piece must include the revenue lost because of non-delivery. The average lifetime value of a new customer typically attracted by such a marketing effort represents the missed opportunity. Multiply lifetime value by the expected conversion rate for a more accurate estimate of what each undelivered mail piece actually costs an organization.

The impact can be even greater for First Class transactional messages destined for existing customers. What happens when bills, renewal notices, payment reminders, and contracts do not reach customers? Sluggish cash flow, loss of existing revenue, increases in administrative costs, and declining customer satisfaction.

The crazy thing is no one seems to be too concerned. Processing returned mail and correcting addresses in source databases is a low priority task for everyone involved. Rarely is undeliverable mail considered a large enough problem to justify any enterprise-wide corrective effort. Perhaps it should be.

Paperless delivery doesn't solve the problem

Organizations believing they don't have to worry about postal addresses anymore because of digital delivery are mistaken. In fact, the e-delivery situation could be worse. Analysts have estimated 30% of consumers change their email addresses every year. That's double the number of people who change postal addresses, with no e-mail address change repository mailers can use to update their records.

Some organizations using email to notify customers about online document availability automatically print and mail those documents if customers do not access the electronic versions within a certain timeframe. Mailing to the postal address on file, perhaps for the first time in years, could result in multi-channel delivery failure.

By the time delivery issues are noticed it is too late

Compounding the problem of dealing with undeliverable mail is the time lag. Some mail is not identified as undeliverable until it is in the hands of local postal carriers. The USPS may take over 30 days to return undeliverable mail to the sender -- long enough for mailers to generate additional pieces printed with the same bad address. The volume of returned mail pieces to be sorted, routed, and researched grows because of the long wait.

Sometimes expensive actions can be triggered before the mailing organization is even aware the customers are not getting their mail. Overdue responses from customers may spur debt collection, assessment of fees and fines, or policy cancellations. Meanwhile, customer service call volumes increase and customer relationships suffer.

There will always be undeliverable mail, but the impact can be reduced. Using software to validate delivery addresses when they first enter the organization is a good strategy. Performing move update processing for every job and continuing to update even when customers switch to paperless is also useful. So is an established process for dealing with returned mail or address correction data supplied by the Postal Service. Most important is an enterprise-wide understanding about the actual cost of undelivered mail. Once organizations compute the real financial impact they have more incentive to develop appropriate measures to lower the cost.

Mike Porter is President of Print/Mail Consultants. He writes constantly about topics of interest to the communications industry. To keep up with Mike's tips, trends, and commentary visit and sign up for Practical Stuff -- a free newsletter for customer communication professionals or follow him @PMCmike on Twitter.