Catalog Mailers Consider Strategies To Offset Hefty USPS Rate Increase

Multichannel vendors can survive the rate hike and thrive by testing new options, such as mini catalogs that mail at letter rate without wafer seals

With the USPS enacting the largest rate hike for print mailings since 2007 – a 5.9% increase across all mailing types – catalog mailers are being forced to consider new strategies to offset the steep increase in costs. But rather than dramatically reducing circulation and frequency or jumping to less-established online marketing channels, industry experts are cautioning that such an approach could have dire long-term financial consequences.

In fact, the concern is that history will repeat itself, and the damage to catalog mailers that take too extreme an approach and abandon valuable, established print mail marketing tactics will rival what occurred in 2007 in the face of similar news.

“Mail remains the most productive of media channels for most marketers, and there are no adequate substitutes for it,” says Hamilton Davison, President and Executive Director of the American Catalog Mailers Association (ACMA).

According to a 2012 survey conducted by FGI Research and commissioned by ACMA, “Consumers who receive and use catalogs consider them far more useful than many other types of unsolicited mail.”  Catalogs are also critical in driving traffic to websites, and about 60% of orders today come through websites, adds Davison.

Yet, despite the known value of catalog mailings, the cold, hard truth is that the increase will be a tough pill to swallow and hard decisions will have to be made.

Responding to the recently announced USPS price hike, Davison said, “I don’t know of any CEO who you can tell ‘postage is up 5.9 percent this year, so I need 5.9 percent more in my budget’ so catalog mailers are going to have to find productive ways to offset the cost increases.”

According to Davison, the concern is that catalog mailers will slash circulation, at the expense of new customer prospecting.

“Catalogers can cut prospecting, but this can be self-defeating due to normal attrition,” says Davison.  “Customers move, change, and die.  You have to replenish that attrition with new customer names.”

Unfortunately, after the 2007 USPS rate increase many catalog mailers reduced new customer prospecting from the usual 40-70% of total mail volume to nearly zero, knowing full well it would affect long-term growth.  The result was a vicious cycle of having too few new names to mail, followed by fewer orders and less customer retention over the long term.

To offset the latest postal rate hike, one promising print category for catalog mailers today is the mini catalog, which has been refined since the USPS’ 2007 mail rate hike.  After that rate hike, various mailers, printers and associations cooperated with the USPS and industry vendors to test a variety of mini catalog formats.

“Although some marketers found the mini catalog format productive, the biggest drawback was that the wafer seals, also known as tabs, used to get the letter mail rate were difficult to open and inhibited the response rate,” says Davison.

Today the wafer seal challenge in the mini catalog format has been resolved by designing it so the pages are contained under a panel, so no wafer seals are required.  Instead, fugitive glue adhesive is used for automated mail that allows for easy opening without ripping or tearing the pages.

Options to Maintain Frequency/Circulation

One option that is generating renewed consideration is the so-called “Mini “Slim” Catalog.”  Despite having fewer pages than full catalogs, mini catalogs such as those by B&W Press, a Georgetown, Mass.-based printer specializing in direct marketing, allow companies to cut mailing and production costs without sacrificing circulation or frequency.

Though not considered a replacement for full-sized catalogs, mini catalogs can be used on a case by case or supplemental basis to fill the void of a catalog that otherwise might not be sent due to increased postage costs.

Mini catalogs mail at the cost of a standard automated letter and provide up to ten pages to promote products.  They can cut mailing and production costs by a third, helping to offset the increase in mailing costs.  They can also be as effective as larger catalogs in response rate as well as driving customers to company websites.

Where a marketer is doing four to five mailings a year of full-sized catalogs, supplementing their schedule by doing three full-sized catalog mailings and two mini catalog mailings, for example, can significantly lower cost without lowering response rates. While mailing a full-sized catalog can cost 57 cents a piece at a million mailed, mailing these new mini catalogs can cost as little as 29 cents a piece at similar volume. This can make mini catalogs a cost-effective alternative even to postcards.

National Ropers Supply (NRS), a Decatur, Tex.-based catalog and store retailer of western lifestyle décor and supplies (www.nrsworld.com), needed an inexpensive way to drive customers and prospects to make purchases at their website, according to Kerrie Thornton, a NRS business analyst.

According to Thornton, the retailer had traditionally mailed out five to six full catalogs of over 250 pages annually, costing about $1.50 each at their volumes. To cut costs they began substituting a few 84-page catalogs for the larger catalogs, but still found this a costly way to market to prospects.  Another challenge was forecasting accurate inventory and sale prices in these catalogs, since the printed data could be out-of-date by the time customers went online to buy.

As a solution, NRS chose to mail out two full catalogs a year, supplemented by mini catalogs by B&W Press in between.

“We found that sales with the mini catalogs were as good or better than with the 84-page catalogs,” says Thornton.  “For as little as 32 cents per mini catalog, we’ve been able to get our key product groups in front of prospects and customers to drive them to our website, where inventory and pricing is up-to-date.  For about the cost of producing and mailing a postcard, we’ve found this to be a much more effective direct marketing approach.”