If you believe the cost of mail pieces that fail to reach intended recipients is the total of paper, ink, and postage you are underestimating. Depending on the documents that miss the mark and the profile of the addressees, the true cost could dwarf the production expense of the actual mail pieces.
To estimate the cost of undelivered direct marketing mail, one must consider the lost opportunities. For new customer acquisition efforts, the cost includes not only the advertised product or service, but the lifetime value of customers not acquired. The calculation is straightforward. Let’s use a mailing of 20,000 air conditioner tune-up coupons as an example. Assume one-half of one percent of those coupons do not get delivered to the targeted households because of poor address hygiene or old data.
The average conversion rate for well-designed direct mail is about 3.5%. If the average customer responding to the coupon spends $250.00 in parts, service, and upgrades, then the initial lost revenue from those undelivered mail pieces is about $875.
However, if repeat business from an average customer of the air conditioner service company spends $6,000 on service or replacements over their lifetime, the cost of those missing coupons is really $21,000!
When the Postal Service cannot deliver transactional documents such as bills, renewal notices, payment reminders, or cancellation alerts, organizations suffer damaging consequences. Effects on a business can include disrupted cash flow, increased administrative costs, and declines in customer satisfaction.
Consider cases when late payment reminders do not reach an insured, and the company cancels the policy. Once the customer discovers the cancellation, they initiate a series of actions to which the company must respond. Reactions might include fielding expensive customer service calls, generating extra correspondence, adjusting accounts for fines and fees, and re-issuing policies. The customer’s experience is negative, which can spur derogatory comments on social media or unfavorable remarks made to the customer’s friends and family.
Address Quality and Paperless Delivery
Delivering documents electronically has its own perils. Analysts estimate 30% of consumers change their email addresses every year. That is twice the number of people who change postal addresses. Unlike postal mail, emailers cannot look up new email addresses using an address change repository. The emailing company cannot reach their customers by email until consumers update their contact information.
Many companies relying on e-delivery will print and mail documents if customers do not open initial emails within a prescribed timeframe. If the company has not used postal addresses for some time, mailers can experience multi-channel delivery failure and lose contact with their customers entirely. They cannot reconnect until they engage in expensive manual research and outreach efforts.
Time Lag Adds to Expense
The USPS may take over 30 days to return undeliverable First Class mail to the sender. They simply destroy Standard Mail if they can’t deliver it to the addressees. By the time mailers realize some recipients are not getting their mail, they’ve generated more pieces printed with the same bad addresses. The mailer must sort, route, and research a growing volume of returned mail pieces because of the long wait.
Mail professionals perform move update processing for every job and continue to do so even after customers switch to paperless delivery. Companies should have an established process for dealing with returned mail or address correction data supplied by the Postal Service to keep their house lists current. This applies even if their mail service provider is correcting addresses on the fly. Most important is an enterprise-wide appreciation for the actual cost of undelivered mail.
If you are wondering why we recommend keeping address information current in your source data, even if you are not mailing to them regularly, ask us. We can also help compute the total impact of undelivered mail on your organization and offer advice about how to minimize the expense. Undelivered mail probably costs more than you think. An initiative to improve deliverability is a sound financial strategy.