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Maximizing your Mail House’s Profits
Maximizing yourMail House’s Profits
Maximizing Your Mail House’s Profits2
Maximizing yourMail House’s Profits
Recent years have been difficult for mail shops and printers as the demand for printed materials declined from $106.9 billion in 2002 to $75.9 billion in 2012. It’s a good bet you know several of the 10,400 printing-related companies who went out of business between 1998 and 2011. While the market for direct mail is stabilizing, Morris Anderson expects the number of companies providing printing and mailing services to decrease by 1.5% annually during each of the next three years.
So how do you make sure your business stays strong and profitable? This eBook lays out a game plan to maximize the profits of the mailing portion of your business with these primary components:
• Build your business by focusing on the types of mailings you have a competitive advantage in
• Minimize your postage costs through commingling and postal logistics • Run a lean & mean operation• Wow your customers by providing extraordinary customer service• Increase your profits through value-added services and strategic
partnerships
We created this eBook with the hopes of providing some thought-provoking ideas you can use to thrive in today’s price-sensitive marketplace. We’re here to help you succeed; please call us if we can help you in any way.
Debbie SylvesterVP of Sales, MailSmart Logistics
(443) 539-2640
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Table of
Contents
Increase the Profitability of Your Mail Shop Services:
Choose Your Competitive Niche
Use Postal Logistics to Minimize Your Postage Costs
Decrease Your Direct Labor Costs
Deliver Extraordinary Service to Your Customers
Expand Into New Value-Added Services
Maximize Your Profits Through Strategic Partnerships:
What You Can Expect From A Partnership With MailSmart Logistics
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7160 Columbia Gateway Drive, Suite 300Columbia, MD 21046
www.MailSmartLogistics.com
(443) 539-2640 (302) 545-1629
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Increase The Profitability Of Your Mail Shop Services
Choose Your Competitive Niche
According to the marketing industry consultants at the Winterberry Group, advertising and marketing spending has increased at a strong pace over the last 5 years. Unfortunately, the growth has predominantly been in digital marketing, which has been growing at a rate of 23.4% a year since 2010. Spending on direct mail has remained essentially flat during this period, with a compound annual growth rate (CAGR) of only 0.39%.
Nonetheless, the $45.7 billion that the Winterberry Group predicts will be spent on direct mail in 2015 represents quite a sizeable market. The key to success is to figure out the niches where your business should focus.
Gone are the days where small to mid-sized mail houses could expect to be able to provide competitive bids for any jobs that come in the door. The printers and mail shops that are thriving in today’s market are those that have selected a few market niches to focus upon where they can be particularly competitive. Study your current products, particularly in terms of which types of mailings you make the highest profit on, to determine where you should focus. Some of the areas to think about as you define your competitive advantage include:
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Type of InDuSTry:
• The insurance and financial services industries are major users of direct mail, shipping primarily medium-sized envelopes and relying heavily on personalization.
• The nonprofit industry is similar to insurance and financial services in terms of the
types of mailings they do and their reliance on personalization, but tends to utilize less-splashy mailings so donors don’t feel their money is being wasted on expensive marketing materials.
• The travel, professional services and retail markets rely more heavily on postcards,
self-mailers and brochures, with envelopes representing less than 25% of their mailing mix. Most of their mail is not personalized beyond the mailing address.
Type of MaIlIng:
• Envelope mailings:» Personalized bills, statements or acknowledgements» Solicitations» Various sizes
• Postcards• Self-mailers• Dimensional Mailers• Catalogs
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proDucTIon run:
• Large vs. small production runs• Quick turn mailings
Choosing your competitive niche(s) is crucial because you need to match the level of technology you offer with the market you’re serving. For example, if you are focusing on large production runs for the financial services market, being competitive may require investing in a state-of-the-art digital printer and a continuous flow operation. If your specialty is quick-turn solicitations for the nonprofit industry, a high-speed laser printer combined with decades-old inserting equipment may work perfectly.
Once you’ve established what types of mailings to specialize in, stick to your core business and do it well.
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Use Postal Logistics ToMinimize Your Mailing Costs
In order to be competitive in the mailing services business, you must take full advantage of postal logistics to minimize your mail delivery costs. The following primer explains the basics of qualifying for reduced postal rates.
POSTAL LOGISTICS PRIMER
First class mail is typically delivered in the U.S. within 1 to 4 days. If you are shipping at least 200 pieces and the mailing is not extremely time-sensitive, you can ship standard class (what used to be referred to as “bulk mail”) instead. Standard class postage will be 40% to 55% less than first class if your company is a for-profit entity, and 55% to 80% less if your company is non-profit. These savings are obviously worth pursuing if your mail can take a bit longer to arrive.
In order to get the maximum postage discounts, you need to do the following:
• Deliver the mail to the mail facility closest to where the mail needs to be delivered. The USPS reduces what it charges to deliver a piece of mail commensurate with the work you save them. There are substantial savings if you sort your mailing into trays of at least 150 mail pieces going to the same 3-digit or 5-digit zip code and deliver the trays to one of the 29 Network Distribution Centers (NDCs) & Auxiliary Service Facilities (ASFs) or 196 Sectional Center Facilities (SCFs) closest to the mail’s ultimate destination. You have two primary options to get the mail to these centers:
» Drop Shipping: If your mailing is over 100,000 pieces, you will
likely end up identifying dozens of NDC and SCF locations where you can save money by drop shipping the trays of mail to the mail facility closest to the mail’s destination. Be aware that all
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mail being drop shipped needs to be sorted, sleeved, tagged, and strapped according to stringent postal service regulations, and appropriate paperwork submitted to ensure its acceptance at the final destination point. » Commingling: Another alternative is to work with a commingling
company who will pick up your unsorted mail, mix it with mail from other sources, and ship it to the mail facility closest to its destination. Using a major commingling company like MailSmart Logistics provides a multitude of advantages for a mail house because the company handles all of the sorting, sleeving, tagging, strapping, paperwork and shipping to the NDCs and SCFs. And because MailSmart Logistics commingles so much mail, our customers benefit from our substantial volume discounts.
• Comply with the Postal Service’s requirements for automated mail.
USPS requires that each piece of mail meet the following requirements to qualify for the reduced rates associated with automated mail:
» Be CASS Certified: CASS stands for “Coding Accuracy Support
System”. CASS certification standardizes address data by fixing street and city misspellings, confirming the carrier route, checking five- and nine-digit zip codes, and creating an accurate delivery point barcode. This can be done for you by your postal logistics company or you can do this yourself by purchasing CASS-certification software for your mail shop. You must run your data file through the certification software within 180 days of the date of the mailing.
» Check against the National Change of Address (NCOA) database: With one in every six American families moving each year, making sure the addresses on your mailing list are correct is an ongoing challenge. The USPS requires that your mailing list be compared with the Postal Service’s database of known address changes within 95 days of the date of the mailing.
» Barcoding, Sorting & Tagging: Mailings must be 100% delivery point or Intelligent Mail barcoded, and sorted and marked according to USPS standards. All pieces must be automation compatible.
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In order to take full advantage of the savings postal logistics can provide to your clients, you should:
Focus On Total Delivered Costs: Your clients are undoubtedly focused on the postage rate you offer them. However, postage rate is only one of the elements that impacts the total cost for delivering mail to the end consumer. The true cost your customer should be looking at is the total delivered cost, which includes freight charges and direct labor costs for drop shipping. For example, while the drop shipping example below has the lowest per piece postage rate, drop shipping ends up costing more than commingling once freight and direct labor costs are factored in:
Drop Shipping ComminglingPostal rate per piece (standard rate mail)
$0.255 $0.264
Postage costs per 100,000 piece mailing
$25,500 $26,400
Freight $1,250 (included)Direct labor for sorting, sleeving, strapping & tagging the mail, plus preparing the USPS paperwork
$750 (included)
Total delivered cost $27,500 $26,400
Total delivered cost per piece $0.275 $0.264
Lock in Your Commingling Rate: Since today’s hyper-competitive market dictates low profit margins, it is particularly important that the quote you receive from your postal logistics company is set in stone. Changes in mail jobs come with the territory, and if your postal logistics company charges you extra for an additional pick-up or you drop into a different pricing tier because of a reduction in the number of pieces being mailed, these changes can eat up a lot of your expected profit.
Take Advantage of USPS Standard Mail Promotions: USPS offers a number of promotions each year that can provide your client with discounts on their postage costs. For example, mailers could receive 2% postage discounts if they incorporated color in their QR codes or if their mailing included a personalized URL during separate two-month promotion periods in 2014.
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Decrease YourDirect Labor Costs
Your company’s profits rely on your ability to run an efficient mailing operation. Here are some ways to run lean and mean:
Invest in continuous processing equipment: Every time you move a job from one piece of equipment to another, you increase down time, require another set-up process, and risk introducing new errors.
Develop a flexible workforce: Workflows rise and fall in the mail service business. When you have jobs that need to go out on deadline, you need a workforce willing to work overtime. When times are slow or you’re on hold waiting for approval to run a job, you need to be able to send extraneous workers home. Cross-training your workforce on different machinery also creates a workforce better able to meet the changing demands of your business.
Outsource labor-intensive operations: Many mail houses discover that the savings in labor costs by eliminating the need for them to sort, sleeve, tag and strap their mail or to oversee the delivery of the mail to multiple destinations more than compensates for the loss of the small amount of profit they would receive by marking up the trucking costs.
Get approvals from your customers as early as possible: Proactively request client approvals before they are needed to minimize the time a job is lined up on your press waiting for approval to start. Remember, it is down time that hurts you – you only make money when your equipment is running.
Maintain your investment in the latest postal logistics and design software: As postal regulations become more complex, you do not want to scrimp on either your postal software or on the training of your data processing team. To ensure error-free printing, you’ll also need to keep up with the latest InDesign software upgrades (and Quark, if your clients use it).
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Deliver Extraordinary Service To Your Customers
It may be a competitive price that convinces a customer to try your mail shop for the first time, but the way to keep them long-term is to provide exceptional service. Clients today expect more for less, and you should consider providing these value-added mail services to them:
Manage the entire mailing process: Become a strategic resource for your customers, most of whom don’t live and breathe postal logistics. Manage the CASS certification and NCOA reviews for their data files, recommend USPS promotions they may qualify for, and work with them to optimize their mailing so they qualify for the maximum postal savings.
Offer free mail tracking to your customers: MailSmart Logistics provides free mail tracking, allowing you and your customers to know whether any particular piece of mail has been delivered. Mail tracking can be particularly useful in investigating why your customer is not getting the response they expect from a mailing.
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In addition, you should do everything in your power to make it a pleasure to work with you, including:
Make each mailing as effortless for your customer as possible: Get quotes to them quickly. Be proactive. Don’t make your customer ask you for counts, dumps or set-ups. Once you have the data file for a new job, schedule when each item will be provided to the customers and then diligently follow through. Your client does not want to have to babysit their mail shop.
Under-promise and over-deliver: Never commit to a schedule you’re not sure you can meet as it is extremely difficult to recover a customer’s trust after a missed mail date. Reduce your job set-up time so you can turn jobs around quickly and provide full tracking across the work flow.
Resolve problems fairly and quickly: Many a promising relationship was cut short by a disagreement over a minor issue or a small amount of money. Focus on the importance of building a strong long-term relationship, and reach a fair resolution quickly.
Finally, beware of the customer who cares only about price. It is hard to build a thriving business if your clientele are predominantly price-shoppers who beat you up on price on every job and bolt whenever someone offers them a miniscule savings. Aim to provide such superior service that your customers preferentially want to do business with you.
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Expand Into New Value-Added Services
Unfortunately, the price erosion surrounding commodity mailing services is likely to continue. While you should work to build your business by becoming increasingly competitive handling certain types of mailings, you should also seriously consider what additional services you could offer that provide higher profit margins.
The lines between different types of businesses in the printing and mail shop industry are blurring. A 2014 Critical Trends Survey of Epicomm’s printing, mailing, fulfillment and marketing services members found that 82% of printers and 89% of marketing service providers also offer mailing services, while 89% of marketing services providers and 52% of mailing services providers offer digital color printing. Overall, mailing services (defined as “Finishing” below) represent about 14% of the revenue stream of companies in this combined industry:
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Many of these faster-growing companies have repositioned themselves as marketing services providers offering innovative ways to build, manage, execute and/or measure their customer’s multi-channel marketing efforts. While moving up the marketing supply chain is a major undertaking, it is often easier to expand across product lines than it is to acquire new customers. And if you are not moving to accommodate your customer’s emerging needs, you risk losing them as customers to more nimble competitors.
Determining which service areas will be most profitable for you to expand into can be a very difficult decision. A good place to start is by considering the needs of your existing customers and the skillsets and interests of your company leadership and employees.
Start by talking with some of your biggest customers about the marketing challenges they’re facing in their business. If several of them are experiencing the same problem, there may be an opportunity for your company to develop a new service addressing this need.
The number of possible marketing expansion opportunities is almost unlimited. Some of the more obvious include:
Digital Marketing: Digital marketing is a large and rapidly growing field that is likely to keep growing for years to come. According to the Winterberry Group, marketers spent $28.3 billion on digital display marketing in 2014, up 21.1% from 2013. Digital also tends to be a sticky business whose customers stay loyal to their service providers for long periods. If you and/or your employees have excellent marketing talent, perhaps you can expand into web design, digital advertising or copywriting.
Data Analytics: Do you have a cracker-jack data person on staff? Perhaps you can leverage your existing data expertise to help customers draw actionable insights from their exponentially-growing sources of data.
Fulfillment Operations: You already know how to mail efficiently. If your customers need help with fulfillment services, this may be a good expansion route for your business.
John Foley, Jr. has written an excellent book titled Business Transformation – A Path to Profitability For the Mailing and Fulfillment Industries that includes numerous case studies of companies successfully transitioning from a mail house or print shop into a marketing services company. While this is a difficult process that will take years, those who succeed usually find that the hard work involved in developing new higher-margin service offerings is amply rewarded.
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Maximize Your Profits Through Strategic Partnerships
As mail houses and print shops focus on the types of jobs in which they have a competitive advantage, the importance of strategic partnerships increases.
If your business is optimized for large digital printing jobs and one of your customers asks you to run dimensional mailers, everyone concerned will benefit by your asking a printer whom you know and trust who specializes in these types of products to manage the job for you.
Along the same lines, if your expertise is in the print business, it may not make sense for you to handle mailings yourself. If a trusted mail shop can manage the job for you and do it well, you may be better off letting them deal with the ever-changing postal requirements and possible mailing equipment challenges while you focus on attracting more business in your area of competitive advantage.
This becomes even more important as you expand the value-added services you offer. Nobody can be an expert in all things. If you are developing websites but have little experience in the critical area of search engine optimization, for example, you should partner with an expert in this field.
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What You Can Expect from aPartnership with MailSmart Logistics
MailSmart Logistics has been offering commingling services since 2002. In addition to our large buying power and years of experience, what really sets us apart is the way we do business:
• Extraordinary customer service: We bend over backwards to make it easy for you to work with us. We handle everything for you from managing the data file to scheduling the pick-ups, filling in the pick-up slips, sorting the mail, and managing any count discrepancies. Once MSL’s truck leaves your shop with the mailing, you can be confident that the mailing will go out as planned with no further effort on your part.
• Free mail tracking: Know where your mail is at every point in time at no cost to you.
If a client isn’t getting the expected response from a mailing, you can help them understand what impact (if any) mail delivery might be having on their response rate. And if a mail truck is in an accident or if mail is not being delivered quickly from a particular location, MailSmart Logistics can follow up and attempt appropriate action.
• Low, locked-in commingling rate: Because of our large buying power, we can offer
commingling rates to our customers that are lower than all but the biggest mailers could qualify for by themselves. Making our pricing even better, we will lock in your commingling rate from now until the next postal rate increase based upon the volume of mail you expect to commingle this year. With no worries about pickup charges, pricing tiers or any other extra fees for letter-size mail under 1.5 ounces, this should make it easy for you to develop competitive mailing bids.
• Fast and predictable mail delivery: Because we work with the largest commingler,
your commingled mail will move quickly and predictably through the mailstream. In fact, our 2014 data shows that your mail will arrive 2.4 days faster if you commingle with MailSmart Logistics than if you drop it off at the nearest USPS mail entry location.
• Reducing your workload: Not only will we do all of the data handling for you, but
using our service should save you substantially in labor costs since there is no need for you to sort, sleeve or tag the mailing.
• Postal logistics consulting: Not sure if a mail piece qualifies for USPS’s automation
pricing? Have a problem with sequence number count discrepancies? Your MailSmart Logistics account manager will utilize their many years of commingling experience to serve as your personal postal logistics consultant.
Sound Interesting?
Let’s Talk!
Request a Free Phone Consultation or call
(443) 539-2640
Scott and his team at MSL are the best – dependable, efficient and always pleasant. Their goal is flawless execution, start to finish, and they deliver every time!
Karen GotayThe Mail Bag
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