How to Reduce Postage Cost
Postage expense accounts for approximately 50% of the total costs to print and mail a catalog. The basic carrier route rate is $.383 per catalog mailed compared to about half that amount 10 years ago. Here is a history of postage rates. Postage rates continue to increase and every time they do, catalogers mail less. It is a self-fulfilling prophecy which makes me wonder if the USPS truly gains from these increases.
While paper costs are likely to come down at some point, postage rates are here to stay. There are actions you can take to help reduce postage costs and the related impact on your business. I want to review ways to reduce actual postage costs to help you mail more cost effectively.
Catalog postage is calculated based on the “piece” rate and the “pound” rate. Under the piece rate, the weight of the catalog doesn’t influence cost up to 4.0 ounces. A catalog weighing more than 4.0 ounces will mail at the piece plus a pound rate surcharge. The more the catalog weighs (over 4.0 ounces), the higher the postage costs. If you can reduce page count to lower the weight of the catalog, postage costs will be less if your catalog mails at the pound rate. If you can reduce page count and/or trim size so that the catalog weighs 4.0 ounces or less, postage costs will be even lower. However, keep in mind page count drives response, i.e., the higher the page count, the higher the response rate (up to a point). If your catalog mails at the piece rate, maximize page count up to 4.0 ounces to fully leverage your postage expense.
Another way to reduce postage costs is to make sure you are in a co-mail pool. The process occurs during the binding/ink-jetting phase of catalog production or with already bound catalogs that are then ink-jetted on a co-mail machine. During the binding/ink-jetting stage the printer combines multiple catalog titles into one mail stream. While printers may approach their charges differently, the result in terms of the potential savings will be similar. Most printers do try to pass the savings onto the large mailer on a proportional basis.
A Slim-Jim format catalog is often elected to reduce postage cost. What is a Slim-Jim? It is a catalog that measures not more than 6” wide or 10.5” tall. It is saddle stitched (with staples) on one side and it must be “tabbed” with a seal on the other three sides. This is a USPS requirement. The tabs and the trim-size enable the catalog to flow freely through mail sorting machines thus reducing postage costs. Slim-Jim page counts vary. Typical page counts range from 24 to 48 pages or more. Because a Slim-Jim size catalog mails at the letter rate, postage is less compared with a full-size piece-rate or pound-rate catalog. Postage costs for a Slim-Jim are in the range of $.38 per catalog vs. $.44 for a full-size piece rate book (estimated costs include actual postage and freight).
Test to determine if it is cost effective to mail to 1x only web buyers. A large percentage of first time Internet buyers never made a second purchase. They are surfing the web for a specific item they want and repeated catalog mailings to them have little impact. Eliminate these one-time/first time buyers from your circulation plan to reduce costs.
Add-a-Name is the process where you add one or two records to a carrier route to qualify for a discount where you were previously short of the 10 per carrier route requirement. The records added bring your postal cost down and the net gain is positive. For most mailers, a national circulation of 700,000 or more is required for Add-a-Name to make economic sense. At this level, generally about 5,000 to 10,000 catalogs will be added.
Talk with your printer and marketing consultant about ways to maximize your postage savings. There are ways to reduce postage cost. Be careful not to take actions that will negatively affect your response rate. Postage is a huge expense and reducing postage cost a few cents can help your bottom line.