Direct mail, Fundraising, Strategic planning
Postal Increases and Your Budget: Six Strategies to Prepare Your Direct Mail Program
Shannon Murphy
Principal & Senior Vice President, Direct Mail Production
Ahh, postal increases … just another reminder to add to your calendar. As reliable as Giving Tuesday and end-of-year, you can be assured that increases will come around again: The proposed increase announcement in October, the vote from the PRC (Postal Regulatory Commission), the increase going into effect in January – and then we do it all again in July!
This year’s January increase has been the smallest we’ve seen in a few years, coming in at 2% – but the just-announced July 2024 price change will represent an ~8% increase. (By July 2024, first class postage will have increased 33% in just two years!)
Under Postmaster DeJoy, twice-annual increases have become the norm – our most recent was the fifth consecutive increase since he took the position. So before we get into strategies for handling these rising costs, let’s start with the why.
Why do postage rates continue to increase?
Really, it’s due to a combination of factors:
→ Declining mail volume
→ Increasing number of delivery points
→ Funding retirement for USPS employees
→ Inflation
How do postal increases impact nonprofit organizations?
Each time postage rates increase, nonprofits see a significant increase in their cost-per-piece budget on all direct mail campaigns. In a typical campaign, postage accounts for 30-70% of total costs. That means for a program that spends $5,000,000 annually on direct mail – and keeps their postage down to that lowest 30% of total costs – this increase would add $340,000 additional expense over the course of a year. Imagine if you spend double or triple that.
Looking at numbers like this, it can be easy to get overwhelmed – how can your organization afford this? So let’s dig into the strategies that help nonprofits prepare for and work around the challenges of postal increases.
What can organizations do?
Budget. Since we continue to consistently see increases twice a year, plan for the inevitable! Work with your agency partners to ensure these increases are being accounted for in your budgets.
Optimize allocation. Take a more critical look at how spend is allocated across your program. Is your budget efficiently balanced? Should you consider adding a new channel to your program?
Calibrate your mail file for the best postal rates. Work with your agency or mailshop to analyze each mail file, and identify the best possible sort level – even when that means splitting the file up between SCF, NDC, and commingle. The more we can do on the front end to optimize sort levels, the lower the postage rates.
Test, test, test! With the proposed increases, flat rates will crush your budget! So – if you have a 9×12 calendar, test a 6×9. Maybe a previous test proved the larger calendar a winner. Well, that was 10 cents ago. Ask yourself: Do you really need to mail +$50 segments at first-class rates? Test third-class, and compare results. SREs are great, and have proven to increase response – but will they still give you the ROI you need when first-class postage is increasing twice a year?
Test it all:
→ Sizes
→ Paper stock
→ Postage types and classes
→ Can you gang print across programs to create economies of scale on price?
Clean your data files. Forty-five million people move every year! And, as much as we would like to believe that everyone diligently fills out their USPS change-of-address forms … they don’t! Our sister company QCT does incredible work ensuring that you have the cleanest data at your fingertips before you spend organizational dollars to mail a bad address.
Cleaning up your data can spare you from inefficiencies like sending multiple mailings to the same address – or from other errors, like sending mail to someone who has passed away. Not only do these outcomes reflect badly on your organization, you’re also spending money on a piece of mail that will never get a return.
Make sure you have all the available data you’ll need to clean your data files:
→ NCOA48
→ PCOA
→ Deceased Screening
→ Internal Dedupe
→ Suppression files for those who’ve asked not to receive mail from your organization
USPS incentives! Lastly, don’t miss out on opportunities to improve efficiency through the USPS’ Promotions & Incentives Programs. You can download their 2024 calendar to keep important dates close at hand.
Postal rate increases, while presenting a direct mail challenge, are an enduring aspect of the fundraising landscape. However, it would be unwise to disregard the value of direct mail altogether. It remains a cornerstone of nonprofit fundraising efforts, playing a pivotal role in generating a significant portion of the over $319 billion raised annually for charitable causes. Its effectiveness extends beyond direct revenue generation, as it synergizes with other channels to achieve overarching fundraising objectives. Indeed, for numerous nonprofit partners of MissionWired, direct mail fundraising constitutes a substantial portion of their annual fundraising budget.
It takes all channels for a successful fundraising campaign – so lean into opportunities to break down the silos between channels and look to the data and key performance indicators to make broad decisions for your program and set your long-term goals.
The direct mail production world is full of moving parts, and I’m excited to share more updates as they come up! In the meantime, if you have questions, I am always happy to talk through the production process – you can reach out to me at [email protected] to continue the conversation.
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