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How To Optimize Direct Mail Postage

November 26, 2012

There are many different factors that affect postage. These range from size and class of the mailpiece to the different sort levels and entry-points. When I was working as a mail service provider, many clients would want a ‘per-piece cost’ for postage.

It was easy enough to calculate the “average per piece cost”, but the actual rates at which mailpieces mail out at is contingent upon the different “sort groups” they fall into.

This post is a real basic 101 on how MSP’s save you money on postage.

Automation

By placing a barcode containing the delivery-point information for the address, mailers realize what is called the “automation discount”. There are many misconceptions about the value of the automated discount.

When comparing the difference between automation and non-automation for the AADC and Mixed-AADC rates, the difference is only one cent. Because of this, I’ve seen many MSP’s state that the automation discount is only one cent per record. Not quite true.
Non-automation letters are only eligible for the AADC and Mixed rates. Automation letters can qualify for 3-digit and 5-digit sorts, as well as the more advanced ECR rates.

So, if you’re dealing with a “mixed-mailing”, the automation discount might be minimal. But for more saturated mailings, automation will open up all new rate options.

Entrypoints

Mailpieces will receive what is called an entrypoint discount when qualified trays are accepted at qualified facilities. The entrypoint discounts are as follows:

None-Entry – Mail contained in packages and trays do not qualify for any entry-level discount.

NDC-Discount – The .03/record NDC discount is applied to mail accepted at a “Network Distribution Center” (NDC) that contains delivery-points that fall within the NDC’s “AADC”. AADC stands for ‘Automated Area Distribution Center’. The AADC of a facility is determined by the USPS labeling lists.

SCF-Discount – The “Sectional Center Facility” .04/record SCF-discount is applied to mail that is accepted at an SCF-facility and falls within that SCF’s AADC. The AADC of an SCF is usually that of an entire 3-digit prefix.

DDU-Discount – “Destination Delivery Unit” DDU-discounts are available for ECR flat-sized mailings only. The Postal Service loses money on flat processing, therefore it’s worthwhile for them to still offer this discount.

Read More: Entrypoint Optimization

Methods of optimizing entrypoints

It is possible to expedite mail through either PVDS (Plant Verified Drop Shipments) or PMOD (Priority Mail Open & Distribute).

PVDS – Mailers are required to pay the postage on the “dropshipped” mail at the postal facility where the permit is based out of. The mail is verified at that facility before the MSP can transport it to the destination. PVDS requires extra paperwork.

PMOD – PMOD entails paying priority mail postage on the mailing (up to 70 lb. per shipment) to transport it to the facility. The great thing about PMOD is it requires less effort than PVDS. Depending on the zoning matrix, it may be more cost-effective too.
Sort Levels – Sort levels are one of the greatest factors impacting direct mail postage. Sort levels are created by matching up records destined to matching regions. What level the record falls into depends on how many qualifying records are present.

list of the different sort levels:

Mixed-AADC – Mixed-matched AADC. “Not sorted”. Least fine sort available.

AADC – 150 records destined to the same AADC. (As determined by USPS Labeling List)

3-Digit – 150 mailpieces destined to the same 3-digit zipcode prefix.

5-Digit – 150 mailpieces destined to the same 5-digit zipcode.

ECR-LOT – “Enhanced Carrier Route – Line Of travel”. At least 10 records belonging to the same carrier route, sorted by ‘line of travel’. ECR-LOT flats mail at a lower rate. ECR-LOT letters mail out at a higher rate than 5-Digit letters, but can be dropshipped to a DDU for an SCF rate which may justify it.

ECR-WSH – “Enhanced Carrier Route – Walk-Sequence High-Density”. 125 records belonging to the same carrier route, sorted in “walk-sequence”. The walk-sequence sort requires a 3rd-party database append.

ECR-WSS – “Enhanced Carrier Route – Walk-Sequence Saturation”. mailing contains 90% or more of all possible addresses within a carrier route. Mail must be addressed using simplified addressing or be sorted in walk-sequence. The walk-sequence sort requires a 3rd-party database append.

Learn more about the sort-levels: Using the USPS Postage Calculator

And there you have it!
Direct mail postage is nothing simple. The above post is about how basic you make the topic. Just know that the mail service providers are aware of these different techniques. All direct mail outsources are usually completely justified by the additional postal savings.

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