Strategies for DMers in a Tight Paper Market

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Veteran direct marketers likely have noted troubling changes in the uncoated paper market during the past few years. High energy costs, rising transportation expenses, reduced truck fleets and declining capacity have shifted what was once a buyer-friendly market into one that poses considerable challenges for users of uncoated paper.


Demand for Uncoated Free Sheet (UCFS) paper (offset, forms bond, envelope, etc.) has been in decline since the beginning of the decade. Ordinarily, this would herald greater availability and stable or declining prices. But in the same period paper manufacturers have been aggressively adjusting mill capacity to compensate for declining demand. More than 2 million tons of capacity have shut down since 2002, with more shutdowns scheduled for 2006.


Caught with less capacity and shallow inventories, the paper supply chain has become overbooked. Manufacturers are going to a system called allocation to distribute the available UCFS supplies to their regular customers. Printers are allocated a certain amount of particular types of paper monthly based on their historical usage.


How will these changes affect direct marketers? At least for the short term, expect paper prices to continue to rise, which will be reflected in the cost of printed materials. Furthermore, the availability of specific types of uncoated paper may be limited, so the lead time to secure certain types of uncoated paper will increase.


The news isn't all bad. Though direct marketers may be unable to avoid the problems entirely, there are strategies to lessen the effect of an unstable paper market on your next mail campaign:


* Build partnerships with your service providers: The more your printers know about your paper needs, the more they can work proactively to ensure that the right paper is on hand when you need it. And ask your printers about their partnerships with paper manufacturers and merchants. Providers having good relationships with the paper industry are in a better position to control costs and ensure continuity of supply.


* Keep the lines of communication open: Printers need accurate information about your paper needs in order to be an advocate in sourcing the best stock for your projects.


If you are planning a new direct mail program, engage your printers as early in the process as possible. Discuss the marketing goals and budget constraints so they can suggest stocks that are available in your timeframe and suitable for your project.


If you have ongoing programs for which quantities have either increased or decreased since the original estimates, inform your printers as soon as possible. The sooner they are aware of a quantity increase, the sooner they can provide you with alternatives for additional stock. A decrease in quantity may give your printers more flexibility to meet the needs of their other customers, a favor that can be returned when you need additional stock.


* Be flexible with your paper options: If you've always printed on 60-pound offset stock, consider switching to 50- or 70-pound stock, which often works just as well. Also consider switching to a recycled stock, which has the added benefit of enhancing your company's image as a "green" marketer.


What about different paper grades? Could you upgrade to an opaque stock (It might even increase your response rate!)? Have you considered groundwood content stocks? They are an increasingly popular alternative to UCFS stocks and offer a bulk-to-weight advantage that improves yield and lowers postal costs.


* Weigh your alternatives: We all have our favorite brands of paper, but in this tight market it might be time to switch brands, particularly when a comparable product is more readily available.


If you find yourself exploring alternative paper options for your mail piece, ask yourself these questions:


* What printed materials do you have in stock? How does your alternative stock compare with the original stock you were using? Will there be aesthetic issues combining the two in the same mail piece?


* How does the cost of an alternative paper stock influence the final cost of your mail piece?


* Should you test the alternative stock to see whether it affects response rates?


* If you move to a paper stock of a different basis weight, how does that affect the final weight of your mail piece? If you are producing First-Class mailings, additional postage will be required if the piece weighs more than one ounce.


By working with your printers, being flexible in your paper options and using alternative brands, you can limit the effect of the current paper market on your next direct mail campaign.


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