The Best Defense is a Good Offense
There is much at stake today in address quality. Postage discounts, timely delivery, and customer response are all directly tied to the upfront investment in address quality. Unfortunately, so much emphasis has been placed on the penalties of poor address quality that the overall benefits of keeping an address complete, correct, and current is getting lost.
The USPS® raised the bar November 23, 2008 when they expanded the Move Update requirement to First-Class™ and Standard Mail®, and increased the frequency by which an approved method is applied to at least 95 days prior to the mailing. This was done as a direct move to reduce undeliverable-as-addressed (UAA) mail both in cost and volume. According to the USPS, non-current addresses generate over 75 percent of the UAA volume and nearly 80 percent of the UAA costs involved in forwarding, returning, and disposing of UAA mail.
Real Life Example
For example, let us assume a mailing of 1,000,000 pieces is presented at a PBV enabled site. The acceptance clerk takes a sample size of 1,000 pieces and processes it through MERLIN®. The names and addresses are “lifted” from the pieces using the optical character recognition technology within MERLIN and are transmitted to the USPS National Customer Support Center (NCSC) in Memphis, TN where they are matched against the 48-month NCOALink® database. The NCSC finds that there are 100 records, which have a change-of-address on file. Furthermore, the NCSC determines that the mailer corrected 69 of them within the past 95 days. This results in a Move Update accuracy calculation of 69 percent, which would result in failure of Move Update compliance as it is below the 70 tolerance level currently proposed by the USPS.
Failure to comply with Move Update can result in significant penalties, loss of postage discounts, and impact timely delivery of the mail. The proposed approach by the USPS is to use MERLIN in conjunction with the Performance Based Verification (PBV) technology at the time of mail acceptance. This approach extrapolates address quality of the entire mailing based on the sample used during verification. This is being delayed until January 4, 2010 in order for the USPS to determine appropriate tolerance levels, penalties, and adjudication for Move Update compliance.
At the April MTAC (Mailers Technical Advisory Committee) meeting, the USPS presented two approaches for assessing Move Update penalties should the sample set fall below a specific tolerance. One approach extrapolated the change-of-address (COA) rate within the sample to the entire mailing and used that as the basis for a penalty calculation. The other approach gave partial credit to the mailer by factoring in the number of address corrections done prior to the mailing.
The first proposed scenario for calculating a penalty would be to assess the COA rate against the entire mailing. This would equate to 100,000 pieces (10% COA X 1M pieces) having some penalty assessed.
The second proposed approach, which provides partial credit to the mailer, factors in the address corrections applied prior to the mailing. This would equate to the failure rate of 31 percent multiplied by the COA rate of 10 percent and then extrapolating the result across the entire mailing of 1 million pieces (.69 X .10 X 1M pieces). This would result in 31,000 pieces having some penalty assessed.
Regardless of the adjudication method, penalty amount, or how it’s assessed, keeping addresses complete, correct, and current is still a smart investment. Unfortunately, that is the message that is often lost in the whole Move Update compliance approach. The simple fact is that a current address is going to likely have a better chance of timely, predictable, and ultimate delivery, which in turn improves customer response rates, direct marketing, and value of the mail.
Going back to our scenario, had the mailer been 90 percent Move Update compliant, then an estimated 21,000 more pieces (.21 X .10 (COA rate) X 1M pieces) would ultimately arrive at their intended audience. If our average response rate for this direct mail piece is 2 percent, then that equates to 420 new customers. Depending on the typical purchase amount from these new customers, the incremental value of correcting these addresses could pay for the entire investment of Move Update compliance for the mailing.
Move Update compliance. It isn’t just about preserving the postage discounts, or avoiding penalties at acceptance, it’s about improving the value of the mail. A mailpiece that has a complete, correct, and current address can translate into a greater return on investment and effectively increase the overall response rate due to a timely, predictable, and ultimate delivery.
This article was originally published in the August 2009 edition of Mailing Systems Technology.