Out With the Carrier Route Letter Rate

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For years, direct mailers have searched for ways to shave postal costs without losing response effectiveness. Since the 1960s, large-volume mailers have relied on the carrier route letter rate to get mailings out at the lowest possible cost.


At the end of the century, this mailing method doesn't make much sense anymore. As the carrier route letter rate becomes nearly obsolete, commingling technology is on the rise.


What is Commingling?


Commingling merges separate mail streams into a single one and achieves significant postal discounts for many high-volume jobs. The U.S. Postal Service requires 150 pieces per zip code as the minimum quantity to achieve desirable 5-digit postal discount rates. Commingling several mail runs together improves the chances that more zip codes will reach this cost-saving 150-piece threshold, which benefits all the jobs.


Although commingling technology isn't yet a household name in the direct mail industry, the USPS is rewarding early adopters with fat postal savings. Chucking the carrier route letter class of mail in favor of commingling is easy if you have a mailing services partner that will guide you through the process. Companies that segment large mailings into different cells especially should consider commingling technology - they can reduce their overall production costs and shorten delivery times while increasing market testing accuracy.


Assume you have a financial services client that offers credit card applications to individuals in four different demographic groups. If the components of the mailing are all different, you will have four separate streams of mail. If you were to mail these noncommingled jobs, a lot of it would be sent at the more costly 3-digit rate. However, if you commingled these mail streams together, more zip codes would qualify for the lower 5-digit rate, which lowers your total cost below carrier route letter rates.


5-Digit Vs. Enhanced Carrier Route Rates


Large volume mailers can reap huge financial and marketing benefits by commingling their mail for 5-digit automation. The enhanced basic carrier letter rate for mail is now $0.162, whereas the 5-digit automation rate is $0.160, which translates to $2/M ($2 per thousand pieces) savings. On this basis alone, using the basic carrier route rate doesn't make any sense.


It gets worse. Leftover mail that fails to meet carrier route minimums also stands an increased chance of not reaching the 5-digit rate minimum (150 pieces per zip code). This means that the remaining mail will have to be sent at the higher 3-digit automation rate, which carries a whopping penalty of $16/M pieces. The end result? In addition to paying extra carrier route postage, leftover mail also costs more to send.


What about cheaper basic automated and high-density enhanced carrier route rates? As you'll see, neither of these makes much sense anymore. First, the basic automated rate only saves $4/M over the 5-digit automated rate - and you still have to contend with the $16/M potential price penalty for leftover mail. Second, the high density rate needs 125 pieces of mail per carrier route to qualify. Even if a portion of your mailing reaches this high minimum-piece threshold, once again you'll pay the 3-digit rate premium for much of your leftover mail, likely negating your postal savings.


Let's assume a large mailing has 190 pieces going to one zip code. If 50 pieces qualify for the basic automated carrier route rate, you'll save $0.004 per piece over the 5-digit rate, for a grand total of 20 cents. However, 140 pieces of mail no longer qualifies for the 5-digit rate and will be sent at the 3-digit rate. The price premium of $0.016 for each piece increases your cost by $2.24. The combined net effect of using the carrier route rate increases your postage cost for this zip code by $2.04. Multiply these cost premiums by hundreds or even thousands of zip codes and it's obvious that the carrier route designation will cost your organization a lot of money.


To see the net effect of carrier route postal rates, consider the following example: If half of your 1 million-piece mailing qualifies for the enhanced basic carrier route rate, and 80 percent of the rest fails the 5-digit rate minimum, you will pay $167,400 in total postage. However, if the 5-digit automation rate is used, and 80 percent of the mailing now qualifies for the 5-digit rate, your total postal costs will be only $163,200. The bottom line? For the dubious privilege of placing a carrier route endorsement on half of your mailing, you will spend an additional $4,200. Clearly, this doesn't make any sense.


Marketing Considerations


Beyond the negative financial implications, carrier route mail also suffers from a poor marketing image. Not only do most large-volume mailers pay a premium for using carrier route rates, they also have to put up with an unattractive endorsement line placed above the address (i.e., Carrier Route Sort-XXX). Many marketers have discovered that visible endorsement lines reduce the chance of consumers opening mail because of obvious bulk mailing status. Among all the current USPS postal designations, the only class requiring a mandatory endorsement line is the carrier route.


Although the USPS still offers carrier route rates, today's economics and marketing considerations clearly spell doom for this one-time staple of large volume direct mailers. Unfortunately, many people still think of carrier route rates as being the cheapest way to send large amounts of mail. This is outdated thinking. Let's leap forward into the next millennium, forget about carrier route rates and embrace commingling technology.
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