AAA Goes Flat Out

The door opener!

Want to know what stops just about anyone when they open their mailbox?

No, not a boxing glove. Instead, it’s a flat. No, not a flat tire. A flat-sized mailing piece.

The 10 x 12 Flat. Size counts in direct mail.

So it is that I opened our mailbox to be confronted by a certificate-sized 10″ x 12″ envelope. Front and center, in portrait orientation, is an open window. As I peak through I see my name, in bold, printed below a 40-point, gothic type proclamation: Proof of Eligibility. The State of Illinois is symbolically positioned above.

This manifest is shielded behind a thin sheet of parchment. My reaction? Better open this now.

I am not that naiive, I know this is a solicitation. But still, eligible for what? Nomination? Higher taxes? Bronzing?

A beautiful label… applied on a slant, with raised shading, is actually printed, not real.

As it turns out, it is the AAA Life Insurance Company, who has decided to give me a second chance to insure my remaining days. Or until the age of 80, when all bets are off.

These are the same folks who sent along a policy kit a few months back. That one was a flat too: a “fulfillment package”. Presuming I am ready to sign up, it is essentially a welcome kit. Regrettably, and unknown to AAA, I am disqualified from obtaining coverage due to a shady past. So I deferred.

The official seal of eligibility.

The reason I highlight the new kit is to point out the allure and attraction of the envelope. “Proof of Eligibility” is vague. But when it is presented so elegantly, it works. How many of your incoming direct mail summons use parchment? 40-point Gothic? Not much I am guessing, since the Sheriff of Nottingham died.

The design strategy of this AAA kit is to get opened. My bet is that better than 90% of the recipients do open it. It is irresistible.

From there, the internals have to carry the freight.

The big question you should be asking is why spend the extra postage– probably 15 cents– to send an over-sized envelope?

The letter under the parchment, complete with filigree.

Do the math. In a standard #10 envelope, the kit, list and assembly would cost about $250/m. Postage, another $200/m. Total, $450/m.

Now lay the papers flat, and place them in a big envelope instead. Let’s say the production is cost neutral, but adding $150/m flat postage has just increased overall cost by 33%.

The bottom line in direct mail: raise your production cost 33%, you must increase response 33% too.

So if the small envelope garnered a 1% response, the flat needs 1.33% to stay in the game.

From personal experience, I know this is achievable, and judging from AAA’s use of flats before, it’s probably not unusual for them either.

By the way, what was I eligible for? Discounted premiums as an AAA member.

Thanks for reading! Never pass up the opportunity to go “big” in a mailing piece. The cost may frighten you, but usually higher response will cover it.

direct mail, Economics, Media, Politics

Found: The Hidden Miracle in the USPS

Spoiler Alert: This Is A Good Story About Numbers
Every year the media touts the headline that the United States Postal Service lost another few billion dollars. Politicians get huffy. The digerati are quick to call the funeral home.

But in fact, the USPS has accomplished an amazing business coup in its mail delivery management.

First, look at the current “bad news” available in the latest Revenue, Pieces and Weights report* for USPS full year 2014. Figure 1 gives some highlights.

Fig.1. 2014 revenues were up 0.66% while volume fell 2.06%

Fig.1. 2014 mail revenues were up 0.66% to $49.53B while mail volume fell 2.06% to 151.9B.

Mail volumes decreased from 2013 to 2014. A 2.06% decrease to 151.9 Billion pieces. “Pieces” include letters, parcels, magazines and flats. The shrinkage may be attributed, if you wish, to a blended increase in price (postage) from 32 cents to 33 cents per piece. A 2.77% increase. But it probably has more to do with society’s use of email. We would just as soon email Gran a singing birthday gift card as send her a parcel.

Dig deeper and we find that First Class volume shrank 3.25% while actual revenues increased 0.49%.

Postage per piece went up 2 cents, or 3.87%

What we know about mailing economics is that there is no elasticity. When postage goes up, volume goes down.

This is the fundamental truth of direct mailers. They maximize performance through testing list, offer, format and copy. The best performance becomes the economics benchmark. So when Standard Postage goes up 3.65%, we expect some mail to drop out, which it did: 0.62% less.

Amidst The Bad News, A Twinkling of Brilliance

November 14, the USPS presented its preliminary financial results to the Board of Governors. It declared a $5.5 billion loss in income. That made headlines. What was not picked up however, was its mail operations performance. You see, its operations income was $1.4Billion profit.

What that means is that the USPS moved nearly 152 billion pieces across the country to over 140 million addresses, six days a week, and did better than break even. What was the all-in price per piece to the mailer? 33 cents.

2004 Eye Opener

Now lets look at the real miracle of the USPS by comparing 2014 with 2004.

Ten years ago, it delivered 206 billion pieces for $65.87 billion.

Cost back then? 32 cents each.

Not bad! A one-cent increase in 10 years. Despite a 26% decrease in economies of scale, its performance eroded only by a penny.

Surviving The Ravages of Inflation and Restructuring

This does not begin to recognize the efficiencies the USPS has managed to achieve in the last ten years however. It disregards the massive cutbacks in volume, and the inexorable devaluation of the dollar. Look at the 2004 figures when they are expressed in 2014 dollars. See Figure 2.

Fig.2 Using 2014 dollars it cost 40 cents to a mail a piece in 2004, versus 33 cents today.

According to the US Bureau of Labor, we have experienced a 26% increase in prices. In other words, it takes $1.26 today to purchase what $1.00 would buy in 2004.

Applying the CPI to USPS figures then, we find that in 2004, it cost 40 cents to mail a piece, versus 33 cents today.

Standard Mailers would pay 24 cents in 2004 versus 22 cents today. First Class mailers would pay 47 cents, versus 46 cents today.

Magazines: 30 cents then, 27 cents now.

USPS: Economic Movement of Value

This government agency may have its critics. The oracles may claim that mail is antiquated. But they can hardly explain how well the post office has learned to distribute real property coast to coast at ridiculously low cost to the consumer. Email and Internet may be instantaneous, but they both lack the credibility of hard copy delivered under government seal.

It can be said that mail is slow, but it maintains its cache because it is trusted. We need to acknowledge the effort that the USPS has expended to bring us that service.

*The Revenue Pieces and Weights Report: http://1.usa.gov/1A8wEj1

direct mail, Marketing, Media

Triple-A’s Got You Covered!

An 11×13 kraft envelope. Pricey, but outstanding in the mailbox.

The AAA insurance offer I just received is a classic example of a winning direct mail design, with an important twist: it’s a fulfillment package. By that, I mean that it fulfills my request for a policy.

Only thing is, I didn’t request it.

If you’ve ever been concerned about getting insurance, procrastination is the obstacle. AAA’s direct mail effort overcomes that challenge. Why it works so well is that it presumes I want coverage. Like Radar knowing Col. Blake needs a pen before he asks for it.

I don’t need coverage. But there are a reliable percentage of people out there who really do want insurance, and this optimistic kit sets the table very nicely. Here’s how:

1. Trust: being a AAA member, I trust and use the company for roadside assistance, and a pretty much guaranteed 10% off any hotel bill.

2. The Envelope: unusual, but not weird. It’s big. AAA is paying USPS a significant postage premium for this over-sized envelope, but as in life, size counts. It’s kraft brown paper, portrait orientation, and has a “business forms” look about it with side zipper for opening.

This label sets the agenda: there’s stuff inside, and it’s “yours”.

3. The oversized label announces “HERE IS YOUR NEW POLICY KIT”. Yikes. What’s this?

4. The manifest: the label details five items inside, including a “Summary of Coverage” which one would infer is already in effect. Amongst other things, there is a “Thank You Gift”, again reinforcing the fait accompli.

5. DO NOT BEND: marketers can only say this if there is a legitimately unfoldable item within… like a sterling silver name plate… no, sorry, not really, but it does raise our hopes.

“OFFICIAL ELIGIBILITY” is good enough. The zip strip advises to fold and tear off…as if we needed help.

6. An OFFICIAL ELIGIBILITY LETTER: sounds a little pretentious. I would have dropped “LETTER”. But the title is followed by some computer-generated data dropped into pre-printed boxes.

Evolutionary Throwback: Upper Case Dot Matrix… for the 80’s crowd.

Note the font. Institutional in appearance, it would warm the cockles of any actuary’s heart just to hear the buzz of an 80’s-era dot matrix printer ripping across the page as a cogged wheel advances the continuous form.

7. The terse opener: “This is to notify you”

8. The heads up: “What This Means To You:”

Commanding, but not demanding copy… and risk is eliminated in three bullets.

9. Three “No Risk” bullets: there are two kinds of risk in direct mail. The obvious one is, “getting ripped off”.

The not-so-obvious risk is the personal hassle that follows saying “yes”. This letter advises there will be no medical exam, no sending samples, and best of all, no sales person. So we can put the latex gloves away.

10. Your Next Steps: from here on, the letter simply instructs the reader how to apply. There are 5 steps, the last being a deadline date which will be reinforced throughout the kit.

Penmanship fitting for a President!.

11. Very important: the letter is signed by a titled officer of AAA Life Insurance. Unfortunately, I think the writer, Harold W Huffstetter, Jr. suspects that I am a nefarious check forger. If that is his actual signature, I cringe at the zeal and rabid discipline of his 4th grade teacher who taught him penmanship.

12. A personalized COVERAGE SELECTION CHART. (Not shown) There are oodles of legal hurdles that surround direct mail insurance marketing– the prospective insured can’t complain for lack of information. A close look offers a financial pat on the back for non-smokers, though.

Incidentally, dirt cheap prices start at 18 years of age. Do Millennials buy insurance? I doubt it, but it entices the Baby Boomer to look on.

Application is highlighted and well-spaced.

13. A color-highlighted application form. Again, this form probably underwent a martyr’s gauntlet of legal reviews. I like it because it adds color to an other-wise bland package. And there’s appropriate spacing for names and addresses.

This QR code (smudged for confidentiality) pulls up my information.

14. But note the QR code in the upper right corner. Could it be that I scan that and immediately apply online? Nope, and a good thing too. A distracting jump to a website at this point could kill the sale.

In fact, the QR code is for the data-entry folks at AAA. When scanned, it identifies me, and all the tracking detail attached to my record.

Questions are answered. Note the display of contents.

15. The SUMMARY OF COVERAGE is explicit. What is attractive on this piece is the table of contents on the front cover. This is a benefit piece, and again, is described in plain, low energy language.

Labels. We will never have enough labels, really!

16. My Thank You Gift. This is what everyone looks for in the kit. The unfoldable item. Here, the gift is a set of address labels.

You know, there is a future for address labels that extends beyond mailing your next bill payment.

Address labels find themselves on everything portable: cell phones, laptops, tablets, phone batteries, cameras, dog collars, staplers, strollers and DVDs. If it moves and it’s yours, it could use a label. Warren Buffet may label every freight car of BNSF Rail some day.

The reply envelope has two perfs. One for tearing, one for folding. Don’t mix them up!

17. Lastly, a blue reply envelope with motherly reminders to sign and date your application and…AND… to affix your PERSONAL PROCESSING LABEL!

While you may think this is hokey, I bet you a dollar that AAA’s mail box is stuffed with reply envelopes that carry the label, regardless of its seeming irrelevance. Why? First, we don’t want to jinx our life karma. And second, we like to play with sticky things. Honest.

One thing with the reply envelope– I wonder how many get destroyed by confused customers who tear off the wrong perforation. A little scissors icon would help.

When reduced to ink on paper, insurance marketing is pretty staid, but consumer friendly. What it lacks in emotional appeal it makes up in trustworthiness, as this kit demonstrates. Most important, it didn’t try to sell; it assumed already that I was prepared to apply.

And that’s why it works.

Thanks for taking the time to get to here. Please pass this along to your direct mail friends. Thanks!

direct mail, Marketing

DAV Makes The Numbers

I just received a mailing from the Disabled American Veterans, whose organization I frequently support.

DAV’s Mailing to Past Donors

The mailing piece is illustrative of the investment DAV makes to raise money for their many services provided to America’s injured war vets. If you have never received a DAV piece, you have not seen the abundance of gift stuff frequently mailed to potential as well as loyal donors: greeting card sets, bookmarks, calendars, and beautifully crafted address labels. There’s nothing “junky” about a DAV appeal letter.

46 cents postage, courtesy of DAV

What struck me about this recent letter was the inclusion of a reply envelope which was already paid with 46-cents of stamps.

Claiming austerity, most fundraisers ask you to provide your own postage. Instead, DAV pays the bill. Does it seem contradictory to you? Or does it make perfect sense? My guess is that providing the postage is a tactic to increase response, not necessarily the gift amount. In other words, if a donor normally gives $10, the prepaid return postage tactic doesn’t get more dollars per donor, but it gets more donors: those folks who won’t allow 46 cents to go to waste. And it’s unlikely many stamps get steamed off.

But here is where it gets interesting: what direct mail manager is willing to put their job on the line by suggesting they add 46 cents to the cost of every fundraising letter they send out the door. “Are you nuts, or just plain stupid??” suggests their boss, popping TUMS once a minute.

“Riskophilic” may be the proper term. Daring. Or canny. A little bit of math may reveal the truth.

You can look at DAV’s 2012 annual report which shows some numbers worth bragging about. They earned $97 million in direct mail donations at a cost of $32 million. Basically, for every dollar spent in direct mail they received 3 dollars in return. The 3:1 ratio is pretty consistent every year, and by the way, their fundraising cost is only 19% of all their expenses, which is quite acceptable.

Anyway. The letter I received had 5 Christmas cards and envelopes, a disclosure sheet, a letter, outer envelope and reply envelope. With outgoing postage, I figure the kit was worth 75 cents in the mail. $750/m. Add an additional 46 cents, and you are at $1.21 for one piece of mail. Multiply that by 100,000 and you have college tuition at Northwestern.

However: increase your cost by 60% and you need to increase revenues by 60%, to keep that 3:1 ratio. Sounds challenging? Just about miraculous is how I would define it. You don’t get swings like that. But the beauty of direct mail is that you can test it both ways, with and without the extra stamps. Clearly, the test proved positive, in a good way, so the DAV is keeping the USPS afloat while making money for its vets.

There’s more at work though. That crazy manager also has another equation in his or her head. It answers the question: how much revenue with every piece mailed? If each piece costs $1.21, then each piece must earn $3.63 in donations. 3:1, right? But only if DAV gets 100% of the people to respond. What if only 15% of the people respond? Then a $3.63 donation won’t cover the ratio. Now the gift changes, and here’s the revealing equation: $3.63 divided by 15% response. $3.63/15% = $24.20. The average donation must be $24.20.

The “ask” starts at $7.00.

Hmmm. Look at the donation form on the letter. DAV is asking for “$7… $10… $15… or more”. Whoa! What if everyone just gives $7 dollars? Well, again, this is what gets tested, and DAV is pretty confident that a $7 gift is acceptable. My hunch is that if each gift is at least $7.00, DAV just about breaks even. How’s that figured? Well, divide the piece cost by 15% response. $1.21/15% = $8.07 average gift required to break even. $7.00 is close.

Fortunately, my bet is that people give a lot more. Without having any direct knowledge of DAV’s results, I can only guess that the scenario is something like what I have described. And if it is anywhere close, DAV has some very good writers, and some very generous donors. And some very deserving vets.

A salute to all of them!

Phil Brown

"Like triple cream– rich, pungent, a little barnyardy, and spreads easily. A good cheese."

Tag Archives: USPS

AAA Goes Flat Out

Found: The Hidden Miracle in the USPS

Triple-A’s Got You Covered!

DAV Makes The Numbers

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