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Direct Mail Outlook : Mail Matters for Marketers

December 2011 By Erik Cagle
Senior Editor
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The U.S. Postal Service (USPS), beloved though it may be, is not earning any brownie points with the mailing community following the announcement that it was moving forward with its exigent rate increase request of 5.6 percent. But, you have to feel for Mr. ZIP, as this move wasn’t his idea.

As recently as this past August, Postmaster General Patrick Donahoe told a quarterly meeting with major customers and industry associations that the U.S. mailing industry was “too fragile” for a major rate increase. However, last month the Postal Regulatory Commission (PRC) told the USPS it needed to commit, one way or another, to its request for an increase above the rate of inflation to avoid prolonging uncertainty for the mailing community (a rate increase would take effect Jan. 22, 2012).

Counting on Congress

The Postal Service was hoping to delay the PRC petition in order to give Congress more time to develop a postal reform package that could ease at least some of the ills that are behind the agency’s estimated $10 billion loss for its fiscal year ending Sept. 30.

Less than a week before the exigent increase filing, the Senate had announced a bipartisan plan that would, among other things, preserve six-day delivery for at least two years, return nearly $7 billion in overpayments USPS made to the Federal Employee Retirement System, and spread out the payment schedule for the funding of future retiree health benefits, a $5.5 billion annual albatross.

What the PRC is saying, clearly, is that the mailing community needs a little cost certainty as soon as possible. Which is somewhat ironic, since the Postal Service has been left to flap in the breeze for the past few years, fighting to rid itself of the onerous prefunding, battling to get its manpower in line with volumes (without sympathy or support from its unions) and unable to run itself like a regular business—one that it insists could be turning a profit without the government meddling in its affairs.

It’s not like the mailing community doesn’t have a dog in this fight. But it’s important to note that, when push comes to shove, Mr. ZIP needs to look out for his own interests. And, as the postal drama continues to unfold, printers and mailers are mindful of their obligation to continue providing customers with maximized printing and postage savings. That won’t change, regardless of what the USPS looks like five or 10 years from now.

“We continue to find ways to partner with clients, to plan marketing campaigns with them that cost less to produce and investigate ways to realize postage savings,” notes Matt Coltharp, president of The Cyril-Scott Co. of Lancaster, OH, and a member of the Consolidated Graphics (CGX) family.

CGX prides itself on all 70 member companies and 600 sales representatives being able to offer distribute/print/mail strategies to clients. Its geographical footprint provides a quicker time to market, supplemented by efficient postage and freight rates, Coltharp says.

According to Coltharp, many of the issues that dominated 2010 (production and distribution costs, reduced print runs, increased competition) played a role in shaping 2011. Direct marketers continue to refine their mailing lists, taking personalization to another level. Coltharp believes one of the keys for his company is working closely with clients to maximize direct marketing campaign results by refining the channels and tactics that work best, as well as testing cost-effective options that align with customers’ sales objectives.

From an investment standpoint, the CGX chain added a number of key pieces to bolster direct mail production. Among the highlights: A six-color Goss M-500 heatset web press with in-line finishing system at Cyril-Scott, and the introduction of the HP T200 color inkjet web press platform. Also proving popular was the 2010 introduction of the CGX Flex Mailer, which allows a variety of material to be mailed as an automated flat. In addition, CGX released an upgrade to its Connect cross-media solution to improve client visibility of multichannel campaign performance in real-time.

And, the printer has teamed with Sony Kyp on the eBridge Arc, which enables marketers to engage their target audience and drive them from print, to Web, to rich media. CGX has also received positive feedback regarding its Streamline Web-to-print application, which enables customers to stay on marketing message while controlling waste and reducing total cost of ownership.

Data Drives Cross-Media

With flat economic growth a current challenge, CGX concerns itself with areas it can control, such as streamlining operations and capital investment. Earlier this year, the company unveiled its new $8.5 million data center in Houston to support the new generation of marketing solutions. The center is built to high security standards with multiple redundancies for critical functions.

“Our advanced marketing solutions, supported by the power of our data center, are a significant competitive differentiator for us,” Coltharp stresses.

Volatility in the marketplace, where the financial services sector revised marketing campaigns to comply with new regulatory requirements, was one of the primary challenges that confronted direct mail specialist IWCO Direct. Jim Andersen, CEO of the Chanhassen, MN-based firm, notes that all of IWCO’s clients needed to be nimble in the face of changes in marketing plans resulting from the impacts of the slow economy. According to Andersen, many of them focused on developing new products to address evolving market demand, which led to changes in offers, test strategies and mail plans.

“We saw an opportunity in 2011 to augment direct mail programs with e-mail and text messaging for clients who wanted to take advantage of the information available in the Intelligent Mail Barcode regarding when mail arrived in the mailboxes of their customers and prospects,” he says. “In addition, we expanded our creative services offering to help clients take advantage of our technology investments and expertise across diverse market segments. We have also been pilot testing a new approach to commingling that we believe will greatly impact postage costs and in-home delivery for our customers.”

Despite the uncertainty with the USPS, Andersen doesn’t need to play the role of cheerleader to convince marketers regarding the viability and effectiveness of direct mail—they’re very much on board. What Andersen does is emphasize education and advocacy, providing guidance and perspective to customers, employees and business partners alike.

IWCO Direct became the first U.S. printer to install the Océ ColorStream 3500 production printer at its Chanhassen headquarters. Andersen said that model was chosen for its personalization capabilities and its ability to allow for more personal, relevant direct marketing messages as it moves easily from monochrome to full-color output.

“Financial strength and stability will be a key factor in 2012 as marketers want to be assured that their production partners can invest in new equipment, technology, and automation to support the dynamic nature of the marketplace and the marketing need to produce more targeted, relevant campaigns,” he remarks. “IWCO Direct is well-positioned with our private equity partners to expand our business, acquire new capabilities and exceed the expectations of our customers.”

Despite the uncertainty surrounding postal rates and future delivery frequency, Sussex, WI-based Quad/Graphics reports that the direct marketing channel has been robust, with many clients increasing their mailing spend and programs. The key from the printer’s point of view, notes Steve Jaeger, president of QuadDirect, is optimizing the value of that spend by devising timely, relevant and engaging ways to boost ROI.

Leveraging its Offerings

According to Jaeger, QuadDirect is offering more ways for clients to leverage its integrated data services, workflow solutions, expansive manufacturing platform, and efficient mailing programs to increase productivity and campaign deployment. The firm has invested more than $40 million in the platform over the past three years; in 2011, QuadDirect installed a new in-line press and personalization technology that enables more targeted, cost-effective direct mail options.

As for what the future may hold in regards to the Postal Service, QuadDirect closely monitors and works with the USPS to anticipate how changes may impact its customers’ bottom lines. And, as of now, concerns over the drama being played out in Washington have not been expressed through reduced or eliminated campaigns.

“Part of direct mail’s staying power is because it’s not standing still,” Jaeger says. “It’s evolving and changing. We exhibited at the DMA this year, and our theme was ’unleashing the power of print’ through interactive print solutions that combine print and multichannel campaigns. Using QR codes, augmented reality and even embedded computer chips in direct mail makes it more effective, interactive, engaging and ultimately successful. We expect that kind of innovation can help offset the negatives of future postal challenges.”

While cost pressures point to digital alternatives, there is still difficulty in establishing online media as viable, new customer acquisition tools, notes Dan Thornton, president of RR Donnelley’s Response Marketing Services. Thus, customers are challenged to devise the right mix of direct mail and electronic avenues, including personalized URLs (PURLs) and social media. RR Donnelley expanded its service offering through the acquisition of Nimblefish, with its responder “nurture and advisor” programs.

“These direct mail-driven campaigns and trigger technologies put the responder in the driver’s seat at PURL sites where they create custom, dynamic video experiences surrounding the direct mail offer,” Thornton notes. “Advisor enhances the responder’s understanding of the offer, and Nurture delivers a targeted, cadenced series of multichannel messages to the consumer.”

The emphasis (and pressure) toward one-to-one communication is constantly increasing, bringing with it the need for digital color whenever possible. This is another area in which RR Donnelley’s rollout of its ProteusJet digital inkjet color press line has augmented the variable data message.

With postage representing more than half of the campaign’s in-the-mail cost, direct marketers seek technology solutions to dial back on their postage bills. RR Donnelley’s variable imaging technology commingles mail streams and increases mail densities.

“Without full-page variable imaging on envelopes and inserts, marketers are forced to break up mail streams, and that can increase postal costs (up to) three cents apiece,” Thornton points out. “On a million-piece campaign, that can be as much as $30,000.”

A member of the Coalition for a 21st Century Postal Service, RR Donnelley provides its customers with periodic, comprehensive reports regarding USPS reform initiatives, congressional bills and White House proposals. Yet, as the USPS situation grew more dire, the year turned out to be resurgent as clients opened up their new customer portfolios, bucking the trends of 2009 and 2010.

With the presidential election and the 2012 Olympics on tap next year, RR Donnelley is bullish about the future of the channel. “We remind ourselves that direct mail is efficient and effective, its performance is highly measurable and it recovers more quickly than general advertising expenditures,” Thornton says. “We look to see continued growth momentum.” PI
 

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