Return on Investment

Growing up, when you asked you parents for money, they probably asked you how it was going to be used, but they had little to no expectation of getting it back, let alone, getting the money back with an additional return on their spend. Your boss on the other hand, wants to know how the money will be used and how quickly a return will be recognized on the investment.

You could make a guess on the return. However, this approach will most likely result in disappointing results.

The goal of this article is to help you understand a variety of factors that impact the cost of address quality as well as help you quantify what is at risk. If your organization is the primary driver of a communication either for driving revenue or a fundraising effort, this article will help you pull together the key cost factors to consider when building your case for improvement. Maybe you are a service provider. This is an opportunity to help drive your clients’ success and increase your value with them. Using numbers, you will be able to help put together the case to invest in solutions and services that get results.

As a mailer you may be thinking, “Our list or database is pretty good, we think.” Or as a service provider, you may be thinking, “We offer the basics or meet mailing requirements, so that’s good enough.” But, is it good enough? If that was the case, would the cost of Undeliverable as Addressed (UAA) mail still be a headache to the United Stated Postal Service?

The United Postal Service defines UAA mail as mail that cannot be delivered to the name and address specified on the mail piece, and must be forwarded, returned to sender, or properly treated as waste, as authorized for the class of mail and the ancillary service endorsement on the mail piece.

There are several factors that can cause undeliverable mail. It could be that an individual, family or business moved. In some cases a change of address was filed and steps were missed in the mailing effort failed to integrate the change into a system for future use. In other cases, the change may have been filed incorrectly or even not at all. An incomplete, incorrect or illegible may also cause a mail failure. Perhaps the mail is addressed to a recipient that is unknown or deceased or they may even refuse or fail to claim the mail. Finally, the piece itself may not have enough postage.

No mailing list is immune from these factors. But, if we understand the full cost of poor addressing and the tools available to mitigate undeliverable mail, we can align that information with goals and recognize a real return.

Cost Factors

According to a United Stated Postal Service Office of the Inspector General (OIG), the cost of UAA to the Postal Service is estimated to be over $1.5 billion per year and $20 billion for the mailing industry.

$20 billion per year! Where does the cost come from?

Postage often becomes the key cost considered when calculating the impact of poor address quality. But, we really need to start at the beginning. Way back to the creative stage of the process. Creative does cost money and it is something that can be factored in when putting together a business case for improvement. Other mailing costs to consider range from list purchase, production, postage to ancillary services.

Finally, the cost that may be the biggest loss, OPPORTUNITY. Not reaching the intended recipient means lost opportunity in revenue, donation and even retention. We all know that retention sustains business. The cost of keeping a client or donor is far less than acquiring new. So are we target new prospects, reaching existing clients or donors is vital.

Hard ROIs

To start to understand the cost, let’s look at postage for a Standard Mail Letter.

For example, if the mailing is an automation letter, the difference in postage for addresses that cannot corrected increases by roughly six percent. Remember, depending on class of mail, some mail will be “properly treated as waste, as authorized for the class of mail and the ancillary service endorsement on the mail piece.” This means that that six percent increase may really mean a total loss of postage for those pieces.

Example

Mailing of 50,000 pieces with a 97% record fully delivery point encoded = 1,500 records that will not qualify for automation rates. For these pieces, postage if roughly $25 higher. That may not sound like a lot, but now let’s consider a nearly total postage lost for those pieces, a much higher cost of about $450. Now repeat that mailing 4 times, a loss of up to $1,800.

Now, add in the cost of the creation of the mail piece and the mail preparation process. This is a cost that can vary greatly, but it is something that can be calculated and agreed upon when making a case for improved address quality.

For our example, let’s use $1.00 per piece to cover creative, mail preparation. The lost investment per mailing could be almost $2,000.

Lost Opportunity

Lost creative, postage and production costs are one things, but the real loss, lost OPPORTUNITY.

This one is harder to quantify, but it can be done. Key factors to think about, average response rate and average spend.

For this example, let’s use a two percent response rate with an average purchase of $50. That could be up to $1,500 in lost revenue for one mailing. We all know, campaigns are repeated. If that happened multiple times through the year, the loss to a business or a charity is much higher.

Common Causes

Data Capture Customers, prospects and donors come from multiple sources. Sources range from websites, events and referrals, call centers and purchased lists. Putting in place systems that help you ensure you accurate information when the address is captured is the first place to head off costly undeliverable mail.

Imagine hosting a fundraising or a prospecting event. New prospects join, invited by those on your existing guess list or they’ve joined because of an open invitation on social media. Their interest is exciting and they even took the time to scratch down their information on a guest card. When your team goes back and tries to enter them into the system, they decipher the information the best they can and get it in the system. Hopefully the system or other tools help them scrub it and get it right. If systems or tools can’t help with a particular lead, then determine other ways to get it right. Maybe a phone call, send a First Class Postcard or use any popular search engine on the internet.

Extend this concept of quality at data capture to all places names and addresses of valuable prospects enter a system.

Now don’t think it is a small business owner problem. It happens in organizations of all sizes. Disparate systems, departmental initiates and even those freeform spreadsheets of contacts that float around the office present challenges for organizations of all sizes.

On the Move So you’ve got those valuable contacts in your system and you are ready to grow your business, drive donations and execute on the goals you’ve set.

Guess what though, people move.

According to 2013 Census Bureau press release, 11.7% of US residents moved between 2012 and 2013. That is 35.9 million.

Many file change of addresses with the Postal Service and some do not. Have a plan to get and keep the most current address.

Not Updating Systems Probably the most distressing reason for undeliverable waste is when updated information is not utilized to update the core data system. Mailing standards require criteria is met for scrubbing addresses and identifying moves. Often this happen right before mailing. What often happens though is the owner of the mailing fails to utilize the feedback from the process and they do not update systems. In some cases the systems have not been architected to make it easy for them to keep old and new addresses or merge in changes. Over time, a move may no longer be identified or an address may fail to standardize.

I’ve moved several times. At month 18 and then again at month 48, I’m always disheartened by the amount of mail I receive for the previous owner as their change of address begins to expire out of the processing cycle. It is obvious that feedback from an NCOA^Link process was not incorporated into the marketing database, even those of some large marketers. Yes, I may be interested in the offer, but in many cases, the previous owner’s interests may be vastly different than mine. Wouldn’t the money spent been better used to keep up with the previous owner or transition the budget to a more viable prospect?

Turning on Success

So how do we turn around this around?

First, know your goals. What do you want to accomplish? Are you looking for growth, retention or both? If you are service provider, are your clients goals aligned with their approach? Providers, this is your opportunity to demonstrate your expertise and even offer additional services.

Second, know your target. Do you clearly understand your audience? You may be asking how this relates to address quality. It does. Different demographics move at different rates. For example, renters and the younger generation moves more. Think about the just out of college generation that move home, moves out and then moves back home. Or, maybe your target is nearing retirement age and has two homes, one near the family in the snow-lands and one in the sun.

Third, know the source of the mailing list. Quality can vary. Perhaps the house file is in great shape, but a list you will be adding in is from a valuable source, but it may have some problems. Knowing the source and the quality of the source should drive decisions in what tools to use upfront to get the best possible outcomes. It may even help you decide if post mailing options like AEC and AEC II are a good fit.

Forth, know the tools available. There is a wide range of solutions from pre to post-mailing tools. There are even advanced tools, both from the USPS and proprietary sources that that attempt to rescue even the hardest to revive addresses. Some of the advanced tools go beyond address information and utilize name information, third party data and in the case of USPS solutions, carrier knowledge.

Know the value of the address and the cost of the tools. Factor this into the equation and then make your decision. In some cases, those addresses may be worth every penny to rescue. In other cases, you time and money could better be spent purchasing new lists and seeking other sources of prospects.

If you are a mail owner, it can be confusing and your core business if not mailing. Mailing is a method to drive marketing success. Find a service provider you trust. There are so many credible and able providers and consultants to help you be successful.

For you the service provider, know the tools available. Even if you don’t directly offer them, help run the numbers and facilitate the process. This will make you invaluable and trusted.

Finally, keep up with changes. There is always something new out there. For example, in the last years the Postal Service rolled out Secure Destruction. While not an address quality tool, it can lower your costs and still provide valuable feedback for First Class mail that cannot be delivered. New address change options have also been introduced. The Postal Service has started to introduce the Mailer Scorecard to help mailers understand their mail quality, including Move Update statistics.

This can be daunting for a mail owner whose real business if not mail. But again, this is an opportunity for a provider to help them cut to the chase and get the most out of their mailing efforts.

Bringing the ROI Home

You could make a guess on an address quality investment’s return, but this approach will most likely result in disappointing results.

So instead of thinking, “Our list or database is pretty good, we think.” Or as a service provider, “We offer the basics or meet mailing requirements, so that’s good enough.” Bring together the cost and opportunity data points. The process will align expectations and ensure that goals are delivered.

You, your boss or your client will know how quickly a return will be recognized on the investment.

As Director of Marketing and Industry Relations at Fairrington, Paula Stoskopf’s role is to plan, develop and implement marketing strategies and public relations activities. In her role she also ensures organizational readiness for new and changed rules, regulations and procedures that impact the industry and Fairrington’s clients. Founded in 1981, Fairrington is the largest, full-service, printer-independent mailing logistics provider in the US. The company was built on visionary entrepreneurial leadership, values of integrity and excellence, and a commitment to develop and equip its people to provide extraordinary service. Paula can be reached at PStoskopf@Fairrington.com.