Are you trying to squeeze out more direct mail cost savings? Is there a faster way to get your mail to its destination? If someone said there is, would you be interested? If you think this is the brainchild of a snake oil salesman, it's time to learn about today's new commingling technology.
For the right types of jobs, commingling paired with drop shipping significantly reduces postal costs, gets mail into homes and businesses faster and provides better test marketing results. As of now, only a handful of U.S. mailing companies offer commingling services.
What is commingling? Commingling is the process of merging multiple ZIP strings into a single mail stream. When the right types of jobs are combined, significant postal discounts can be attained. The U.S. Postal Service requires 150-pieces per ZIP code as the minimum quantity to achieve desirable 5-digit postal discount rates. Commingling shorter runs together improves the chances that more ZIP codes reach this 150-piece threshold. Although “synergy” is an overused buzzword, it accurately describes the commingling process.
The beef. Effective January 1999, the difference between three-digit and five-digit rates is $16 million for-profit mail and a whopping $21 million for nonprofit. This is significant because even after factoring in the cost of commingling, it's as if you're getting envelopes for free.
The largest cost component of most direct mail campaigns is postage. Since postage represents up to 30 percent or even more of total production costs, chipping away at this large number makes a lot of sense.
Who can benefit? Companies that segment very large mailings into different cells should consider commingling technology. The financial services and nonprofit sectors frequently can reduce overall production costs and shorten delivery times while increasing market-testing accuracy. During the era of large “shotgun” mailings, postal discounts were easy to achieve. Today's highly targeted “rifle” mailings have increased response rates, but have also reduced the percentage of mail that qualifies for five-digit postal discounts.
Perhaps you have a credit card client offering sports-oriented cards. If only one “all-sports” credit card is promoted, there may be enough targeted prospects in most ZIP codes to qualify for the five-digit rate. However, if recipients are segmented into sports enthusiast categories such as tennis, softball, bowling, skiing and golf, postal costs will increase as more mail is pushed into the higher three-digit rate. Luckily, commingling allows you to keep segmentation benefits while maintaining lower postal rates.
Assume you have a for-profit mailing segmented into three cells. If ZIP code 99999 has 150 pieces — 50 in each lot — all mail in this ZIP code will be charged at the three-digit rate. However, if the three lots are commingled into the same tray, then all 150 pieces qualify for the lower five-digit rate, saving $2.40 in postage ($3.15 if nonprofit). If you have a million-piece for-profit mailing of which 75 percent benefits from commingling, then the net savings passed on to you after all commingling costs could be more than $7,500.
Evaluation and production. If properly done, commingling will remain transparent to the client. The first step of any project should be running a presort on the data file to predict commingling's savings because some jobs simply won't realize any benefit. For example, if you have a million-piece mailing and 95 percent of it already qualifies for the USPS five-digit rate, the cost of commingling outweighs the savings.
Once in production, presorting projects is important. If your million-piece mailing's presort determines that 20 percent of the job qualifies for the five-digit rate without commingling, this portion should be processed first so commingling costs aren't applied to 200,000 pieces. Next, the remaining 800,000 should be data processed and staged in the warehouse by lot and ZIP code order. Then, job A should be loaded onto the commingling machine in ZIP code sequence followed by jobs B, C, etc.
Before running a commingling job, statistics of each lot need to be downloaded into the commingling machine's computer. If there's a mismatch between expected and actual mail for any reason (i.e., spoilage in the letter shop), commingling systems will track this information.
Test marketing. Since multiple cells of a job arrive at destination SCFs in the same trays at the same time, test-marketing results are more accurate. For example, if four different color envelopes and three messages are being tested, mail from all 12 cells going to ZIP code 99999 will be simultaneously processed. A traditional multiple-cell mailing not only costs more; it's more susceptible to skewed testing results because of variable delivery dates.
Other considerations. Before deciding in favor of commingling your next job, consider a few factors. Commingling requires additional coordination time, especially if one company's job is piggybacked onto another's mail. Mailings that need to be commingled with other jobs usually are given a three- to five-day drop range.
Once the commingling process has begun, it's virtually impossible to stop. First, commingling jobs are data processed differently and second, mailing rates for all jobs are interdependent of each other. Since stopping a job from entering the mail stream can only be done by hand, it is highly impractical without even considering the lost postal savings anticipated for the other lots. If there's any realistic chance that a mailing will be halted, commingling isn't for you.
Also, if a commingling job needs to piggyback onto another, there has to be work in the pipeline. To use an analogy, it's hard to hitchhike when the road is empty.
Drop shipping: the other part of the equation. Commingling combined with drop shipping increases customer savings. If your project is deposited at a local post office, it will be processed through:
* The local post office.
* The local Section Center Facility.
* The destination Bulk Mail Center.
* Possibly a destination Auxiliary Service Facility.
* A destination SCF.
Choosing a large volume mailer that runs trucks of commingled mail to SCFs throughout the country means your mail will avoid the serendipity of USPS mail processing. Since mail is delayed anywhere from three- to 72-hours at each USPS facility, drop shipping to destination SCFs should realize a net time gain of three- to five-days on average. Even though your mailing may require an extra couple of days at your commingling service provider, it should still arrive faster than ever.
For the right type of direct mailer, combined commingling and drop shipping cost savings can be eye-popping. Saving $500,000 over the course of a year on net postage costs is just a good start. An additional $500,000 to $750,000 net savings on drop shipping costs is possible and has been done. For some direct mailers, commingling is definitely a “have-your-cake-and-eat-it-too” proposition.