Catalogers must tackle inevitable rate increase
Two excellent articles on last week's postal rate decision are worth reading. One is a front-page story in this print edition. Its author, deputy editor Melissa Campanelli, analyzes the consequences of the Postal Regulatory Commission's recommendation to raise prices for Standard mail flats between 20 percent and 40 percent. Thankfully, the U.S. Postal Service Board of Governors has asked the PRC to reconsider its recommendation.
The other article, online today at http://www.dmnews.com/, is veteran direct marketer Donald R. Libey's stance on the topic ("How to offset some of the postage increase: Libey's take"). Mr. Libey is understandably upset. He is certain the postage increase will do more harm than good. Catalogers will respond in knee-jerk fashion and cut circulation quantities and move online. With that, they risk weakening a key driver of e-commerce transactions. Further, reduced circulation will undermine prospecting efforts. Catalogs still are the main tool used for new customer acquisition.
That said, catalogers must be prepared to face reality: Postage rates are going up and Standard mailers have to adapt. We agree with Mr. Libey's ideas on ways to gain savings to maintain financial bottom lines in the face of the postage hike.
First, look at non-productive mailings.
Mr. Libey often finds 10 percent to 20 percent non-productive mailings in almost any circulation plans. This leakage is due to many unknowns. Key code is poor, allocation of unknowns is ignored, and catalogs are mailed without segmentation by recency, frequency and monetary value.
Address hygiene is another issue. Anywhere from 6 percent to 12 percent of all addresses are undeliverable as addressed even a couple of decades after NCOA and improved database management services. If 8 percent of a company's catalogs are undeliverable, then solving that problem alone would cover the cost of the postage rate increase, Mr. Libey claims. Then there's the issue of old customers who haven't bought in three to five years. Get rid of these non-buying, old names from the list. Finally, purge inquirers sooner than later.
Second, mail smarter.
Decrease membership co-op mailings in favor of going back to list testing and identifying sources of names that the cataloger controls. This point, from Mr. Libey, is controversial, since there are those who would advocate the expansion of co-op mailings in their circulation plans. So there are pros and cons. But mailing smarter could also include better modeling and database marketing as well as improved circulation planning, co-mailing and actionable metrics.
Finally, there's catalog production.
Work with sophisticated printers who have knowledge of postage and programming. Consider trim-size reduction and self-covers versus separate, heavier weight covers. Mr. Libey suggests getting rid of the bind-in order form. And also cut page counts, but with caution, keeping in mind the effect on merchandising.
Most of these tips are obvious. But they need to be considered at a time when the fate of the catalog industry as we know it is up in the air. Catalogers must continue to lobby James C. Miller III, chairman of the USPS Board of Governors, as well as Postmaster General Jack Potter. They understand the industry's concerns even as they work to ensure the USPS' welfare.
A postage rate increase should not have been the reason for catalogers to galvanize themselves into action. Still, better to start now and turn a new page into making the catalog an even more efficient component of multichannel retail.