Rate Case Prompts ADVO Changes

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To continue to qualify for the lowest postal rates for its mail class, direct mailer ADVO Inc. said yesterday that it will modify its operations to move to in-line, on-piece addressing of its ShopWise shared-mail ad package.

The changes will be set by summer 2007 to meet the expected new postal rates. The ShopWise package's new look will be unveiled next spring.

ADVO, Windsor, CT, serves 17,000 national, regional and local clients and reaches 114 million households, more than 90 percent of the nation's homes, with its ShopWise shared-mail advertising.

The U.S. Postal Service filed May 3 for an average 8.5 percent rate increase. For business mailers, it generally means postage increases of 7 percent to 18 percent, based on averages for various mail classes. If approved, the rates should take effect by June or July 2007.

ShopWise is a saturation mailing of unaddressed Standard Mail flats. Currently, saturation mailings of unaddressed Periodicals or Standard Mail flats require mailers to address each piece separately by using in-line, on-piece addressing or using a Detached Address Label.

A DAL is a label made of paper or cardboard stock about the size of an index card. It features a delivery address and is delivered along with the flat.

ADVO usually uses a DAL, which is printed and packaged in enhanced carrier route order, and the cards and ShopWise packages are delivered to local post offices. The postal carrier matches the DAL with the ShopWise package "and marries the two and delivers them with the card into the mailbox. The cards are matched up by hand with the actual package that they go with," said Pam Kueber, an ADVO spokeswoman. "It's been our historical process, and it works quite well."

Along with the delivery address, ADVO cards also feature photos of missing children from the company's "America's Looking for Its Missing Children" public service program. On the flip side is space for an ad.

The USPS proposes in its filing that saturation mailers who want to continue to use the DAL pay a 1.5-cent surcharge for each piece. The DAL is a cost driver, not a cost saver, because mail carriers have to handle two separate pieces of mail, the USPS has said.

ADVO's planned on-package addressing will replace the DAL.

Ms. Kueber would not give specific numbers, but she said that the printing technology changes required would be part of the company capital expenditure program, and that ADVO has 20 facilities where this technology will have to be added in order to maintain the lowest postal rates.

The photos of missing children will move to a prominent position on the ShopWise package, continuing the company's support of the program. Ms. Kueber said the pictures could be featured in full four-color every week under the new system, where now they are black and white.

ADVO is speaking to advertisers who advertise on the back of the DAL card and working with them on other solutions, she said.

Though ADVO can handle the changes, this rate surcharge represents a large postage increase for mailers that must keep using the DAL, said Donna Hanbery, Saturation Mailers Coalition executive director. For DAL mailers that can convert to on-piece addressing, the capital and operating costs will be large and ongoing.

"Either way, the USPS proposal will hurt many of the most price-sensitive mailers," she said.

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