Return Mail Challenges And Solutions - Pitney Bowes
Return mailchallenges and solutions
Return mail has become a pervasive problemfor corporations who need to communicatewith their customers. The issue is particularlyconcentrated among high volume First-Classmailers in five business sectors: Finance;Insurance; Healthcare; Utilities (Energy, Telcoand wireless providers); and Government.High volume communications sent via UnitedStates Postal Services (USPS ) First-ClassMail include: billing and other transactionalstatements; explanation of benefits (EOBs);and legal and regulatory notifications. Eachtype of organization has its own issues.According to Pitney Bowes estimates, Financerepresents approximately 35% of all First-Classreturn mail, or more than 490 million pieces peryear. One particular reason for the large volumeof return mail within this industry is that returnmail is managed at decentralized locations.Different departments have different standards formanaging return mail, and the central organizationdoes not get visibility to the enterprise problem.For example, one division of a high-end investment group cannot not make an address changewithout the client’s approval, while anotherdivision can update an address just based onUSPS NCOALink or Address Correction Service(ACS ) data. This makes it difficult for thecentral procurement part of the organization toensure that lines of business are meeting therequirements for USPS work-sharing discounts.Without centralized reporting and analysis ofreturn mail, how can an organization meetcompliance requirements in a Postal InspectionService audit? The lack of consistent measurement capabilities also make it difficult to findthe root causes of the pre-mailing addressissues that need to be corrected.Pitney Bowes estimates that Insurance andHealthcare together account for 20% of returnmail, or more than 280 million mail pieces peryear. In the Health Insurance and Healthcarearena, companies often have the unique problemof not being in control of address data when it isprovided by employers or government agencies.This can make return mail management veryexpensive because sales representatives need topersonally follow-up with their clients to updateemployee address files. All these issues canhamper insurance and health care companies’ability to meet USPS Move Update regulationsand make them potential candidates for auditsand penalties.Pitney Bowes also estimates that Energy, Telcoand wireless providers comprise 21% of thereturn mail problem, or around 294 pieces a year.These industries face many of the same issuesas financial, insurance and healthcare companies.In addition, a big challenge today for thesecompanies is keeping up with customer movesas they migrate to wireless services.Pitney Bowesestimates:Finance representsapproximately35% of allFirst-Class returnmail, or more than490 million piecesper year.Insurance andHealthcaretogether accountfor 20% of returnmail, or more than280 million mailpieces per year.Energy, Telco andwireless providerscomprise 21% ofthe return mailproblem, or around294 million piecesa year.Return mail challengesand solutions2
Government entities at the local, state, andfederal level have similar issues stemming frommobile populations and decentralized approachesto managing databases and return mail. Onemight think that the government should havethe most recent household data on the Americanpublic, yet counter to this view, 21% of the U.S.Census mailing was returned as undeliverable.The scope of the problemThe challenge for the mailing industry is thatapproximately 1.9% of all First-Class Mail does notget delivered. While that number doesn’t seem significant, it actually amounts to approximately 1.3billion pieces of mail annually that is returned tothe company where it originated as“Return to Sender/ Return Mail.”According to Pitney Bowes’estimates, each piece of return mailcosts a company an average of 3per piece in operational costs alone,including postage and printing,handling, research, re-mailing,and related processes. With 1.3billion pieces of return mailoverall, that’s a whopping 4.2billion in operational costs theindustry absorbs each year!The true total cost of all thisreturn mail is actually muchhigher. Below the surface, the totalfinancial impact of return mail canexceed 50 per mail piece. Manycompanies continue to strugglewith profitability, layoffs and reduced access toworking capital. That means that an estimated 65 billion is absorbed or unrealized by businesses each year due to return mail. Included inthis total is the lost value of the returned communications: delayed and missed payments, excesscall center activity, and overall customer servicecosts. These costs can have a major impact oncash flow, labor costs, and customer retention.According to Pitney Bowes research, acentralized and automated approach to returnmail management can reduce a company’soperational costs by up to 70%. The othercomponents of the total cost of return mail(missed payments, etc.) are 100% returnedto the company’s bottom line.Postal regulations add further impactIn January 2010, the USPS increasedenforcement of its Move Update requirement.By USPS mandate, organizations must nowupdate First-Class Mail claiming discounts andStandard Mail with customer move informationwithin 95 days prior to the mailing. If a company’smailings do not reflect current customeraddresses, the USPS can fine the company intwo ways:1. Prior to mailing,USPS Mail acceptanceunits take a random sample of a company’smailing and process it on a machine calledMERLIN (Mail Evaluation Readability LookupInstrument), which determines if the mailing iseligible for postal discounts. If MERLIN detectsa sufficient number of moves that a mailer didnot update, the USPS rejects the mailing and amailer can either rework the mailing or pay a 0.07 per piece fee multiplied by the percent of themail that fell below the threshold. In the industry, Thousands4Print andPostage4OperationalProcessingCosts Millions4 Audits4 Cash Flow4 Churn4 Compliance4 Cost of Money4 Data EntryErrors4 DepartmentalResearch4 Direct Mail toWaste4 Facilities andUtilities4 MaintenanceManagementand Training4 Procurement4 Software/Hardware4 UncapitalizedAssetsthis is referred to as the PBV (PerformanceBased Verification) test.2. After mailing, the Postal Inspection Servicecan also perform audits triggered by return mailto determine if mailers are generating undeliverable mail with stale move information. Return maillabeled “Forwarding Time Expired” signifies movesthat are over 12 months old. The USPS can thenfine the company:4 The postage deficiency between what wasclaimed and what was actually earned. Fora First-Class mailing, this would be thedifference between full postage ( 0.44 perpiece) and presort automation postage(typically 0.357 per piece) on all pieces inthe mailing.4 If the mailer knowingly claimed discountsfor mail that was non-compliant with MoveUpdate, the USPS may:– Multiply the postage deficiency (notedabove) by a factor of x2 or x3.– Fine 11,000 per mailing (per falselysigned postage statement).Approximately 1.9%of all First-ClassMail does not getdelivered. Whilethat numberdoesn’t seemsignificant, itactually amountsto approximately1.3 billion piecesof mail annuallythat is returned tothe company whereit originated asReturn to Sender/Return Mail. Eachpiece of return mailcosts a company anaverage of 3 perpiece in operationalcosts alone,including postageand printing,handling, research,re-mailing, andrelated processes.Return mail challengesand solutions3
– Multiply a company’s fine by a numberof years (because the Move Updateregulation has been in place since1997), if the mailer knowingly claimeddiscounts for mailings that werenon-compliant with Move Update.These fines can significantly impact acompany’s bottom line. Unfortunately, manymailers believe that they are fully compliantwith the Move Update regulation only to findout later that only certain mailings met therequirements for postage discounts. Mailersshould therefore consider the followingquestions before signing a postage statement:1. Do we have visibility into all mailings in theorganization claiming postage discount2. How recently was a USPS-certifiedmethod of Move Update performed? Is thatprocess documented? Where would we go toproduce reports if the USPS were to audit ourprocess?3. How does our company handle moves thatdo not have a forwarding address? Are we requiredto send those pieces and if so, are we sendingthem at full postage?The following examples demonstrate thepotential financial impact of non-compliancewith the Move Update regulation:Technology: addressing toolsTo begin to solve this First-Class returnmail problem, there are address tools availablefrom the USPS as well as databases availablefrom many third-party sources. Companiesand service providers also offer solutions thatwork with postal certified databases. Therange of tools include:4 NCOALink – The NCOALink product makeschange of address information available tomailers to help reduce undeliverable mail piecesbefore mail enters the mailstream. TheNCOALink process consists of computer softwarepurchased, leased or developed by the licenseeto access the NCOALink data.4 CASSTM/DPV – The USPS Coding AccuracySupport System along with the Delivery PointValidation process validates address deliverability and updates hygiene attributes.4 LACSLink – The Locatable Address ConversionSystem updates rural route conversions to cityaddresses and other address renaming and/orrenumbering.4 SUITELink – This adds or updates suitenumbers in business addresses.4 MLOCR based solution (FASTforward , orUMove system) – These systems perform OCRscans of the mail pieces and use data from theNCOA database to look for updates on movers toapply directly to the mail piece at the time of mailing.4 Intelligent Mail Barcode (IMb) – The IMbprovides a means to uniquely identify every mailpiece in a mailing. When used with additionalservices like Address Change Service, adds theability to more easily connect the mail pieceback to a specific mailing and/or record withinthe customer database.4 Address Change Service (ACS ) – A USPSservice that provides a post- mailing method ofattaining electronic Change of Address (COA) andNIXIE information. There are several versions ofACS. To review all the options, visitwww.USPS.gov. While ACS allows the mailers toreceive information on return mail back in anelectronic format, there may be additionalcharges for ACS records. In addition, not everycompany can use all the ACS options; those mailingconfidential materials cannot allow the USPS todestroy the mail piece via a process that is notconsidered secure. A company will request thatall critical documents such as physical creditcard or service cancellation notices be returned,even if undeliverable.4Address Element Correction (AEC) – AUSPS service that corrects and standardizesaddress elements by focusing on addresselement deficiencies such as misspellings,In January 2010,the USPS increasedenforcement ofits Move Updaterequirement. ByUSPS mandate,organizations mustnow update FirstClass Mail claimingdiscounts andStandard Mail with customer moveinformation within95 days prior to themailing. If acompany’s mailingsdo not reflect currentcustomer addresses,the USPS can finethe company.Return mail challengesand solutions44
non-standard abbreviations, incorrectly joined,improperly ordered or missing elements, andaddress lines containing data other than theactual address.4AECII – The next generation of AEC. AECIIuses Delivery Force Knowledge to correcterrors in addresses that are not correctible byexisting programs. Delivery Force Knowledgeleverages the efforts of local delivery unitemployees who review bad addresses andenter corrections into an AECII electronic processfor return to the submitting customer.4Third-Party Data Sources – Many businessesoffer proprietary databases that use consumerand credit information to update addresses,though some have reported varying degrees ofeffectiveness with this method. Use of third-partydata must be carefully determined based on thetested quality levels of the results. In many cases,use of third-party data should be limited onlyto when a piece of mail is undeliverable andwhen that information is verified, supported viaUSPS certified addressing tools and/or verifieddirectly with the intended recipient.Industry technology trendsAs mailers continue to struggle with theirbottom line, many are taking a closer look at whatused to be considered a cost of doing business.The reality is, return mail and its related impactsare a significant cost of doing business. To attackthese costs, mailers are exploring the latesttechnology advancements for solutions. Actually,there are many solutions at different levels ofdeployment, and each have their own set of tradeoffs, so mailers need to evaluate how the use ofmultiple solutions can be justified and deployed toaugment and enhance their processes.Full Service implementation of the IntelligentMail barcode with ACS is a trend generating themost interest. Implementing Full Service version of the IMb can require significantinitial investment, but can yield financial benefits including additional postagediscounts and discounted ACS services.Mailers may be able to leverage these discountsto justify implementation costs.While this process may reduce the number ofphysical return mail pieces that a mailer needsto process, it can increase the total number ofnotices that still need to be verified, researched,analyzed and acted upon by the mailer. It is important not to get ACS confused with traditionalNCOALink. Both are valid, certified methods ofmeeting the USPS’s Move Update requirement.NCOALink includes permanent Change of Addressinformation only. ACS also includes information onTemporary Changes of Address, NIXIE’s, andpermanent moves where matches were able tobe made thanks to carrier knowledge. Independenttests run by software vendors have found a10% - 20% difference between ACS andNCOALink data regarding permanent Changesof Address. If your company has strict policiesregarding updating customer data, it is highlyrecommended that you review ACS data usingother postal certified data sets, such asCASS/DPV and NCOALink.The Intelligent Mail barcode and OneCode ACShave been around for several years however, FullService IMb and Full Service ACS are still relativelynew and is experiencing operational issues thatthe USPS is working to correct, such as:4 The inability to return some ACS notices.This will cause a mailer to continue to sendmail pieces to bad addresses that theyotherwise could have suppressed orapplied an update to.4 Failure by the USPS to detect and treat amail piece as Full Service ACS, resulting inthe manual handling of the mail piece (withcorrespondingly higher fees). In 2010,some mailers indicated that over 50% ofthese mail pieces were not being returnedas Full Service ACS mail pieces. The rootcause can be traced to factors such aspiece production issues, physical damagefrom delivery processing and handling,USPS scanner issues, and even actions bythe recipient.Since some of these factors are outside thecontrol of the mailer and the USPS, many mailersare implementing not only the FullService IMbwith ACS but maintaining a back-up of TraditionalACS for the return mail piece at no additionalcharge.Additionally, mailers are taking a much closerlook at data that is provided by these tools andservices to obtain more value from them, or ensureproper handling. Studies by Pitney Bowes andthe mailing community consistently show that10% to 17% of the USPS reason codes as to whya mail piece was not delivered are incorrect. Incorrectly suppressing mail to a valued client hasthe same financial impact as losing all contactwith them (e.g. when they moved and did not notifya product or service provider of the move).Maximizing the impact on a customer’s bottomline means utilizing the right tools and servicesto obtain, confirm, and enhance the necessaryinformation and take the appropriate action.It is important that you work with a technologysolution provider to develop a roadmap fromphysical to virtual return mail. This also requiresAs mailerscontinue to strugglewith their bottomline, many aretaking a closerlook at what usedto be considereda cost of doingbusiness. Thereality is, returnmail and its relatedimpacts are asignificant cost ofdoing business.To attack thesecosts, mailersare exploring thelatest technologyadvancementsor solutionsReturn mail challengesand solutions554
constantly reviewing the latest tools and servicesthat are being developed and released.The ideal approachA truly effective solution to reducing operatingcosts and risking fines associated with First-Classreturn mail is to create a centralized,automated managed service. This approachintegrates multiple technologies to convertphysical mail into usable data, update addresses,and perform a variety of processing and postprocessing functions to ultimatelyupdate addresses.The ideal approach goes beyond products toprocesses that analyze the root causes of thereturn mail problem and work to eliminate it. Thegoal is to establish a timely, efficient, consistentprocess that can be managed with the centralizedreporting needed for a USPS compliance audit.To be effective, a managed return mail serviceshould: automate integrated technologies;incorporate postal hygiene addressing toolsand third party data; provide real-time reportingand auditing; and significantly reduce the volumeand cost of return mail.There are four steps in the process of operating acentralized, automated return mail service:1. Document capture and conversion. Mostcompanies lack the security, processes, andworkflow required to efficiently process andtrack physical mail internally. The first step inthe return mail process is to capture physical mailpieces and convert them to electronic format. Thiscan be done with scanning or bar code capture,onsite or offsite, using company personnel oran outside service.Once document capture is completed, theoriginal mail pieces can either be shredded orstaged for repurposing or secondary processing,such as re-mail, reprocessing, and addressvalidation with customer follow-up if required.Data should be promptly reported to a hostplatform for updating and storage.2. Address management, standardization, andsearch. After an organization has establishedcentralized document capture and convertedphysical return mail to digital files, their addressdatabase needs to be updated and validatedusing the tools (USPS certified and third-party)mentioned above. The ideal approach utilizes thesetools with an integrated data platform thatcombines intelligent program logic with multipledata compilers and hundreds or thousands of activepostal certified and third party databases.Integrating these with mail and undeliverablemail data and secondary repurposing ofcustomer communications can provide valuableoutput data and solutions.The goal is to conduct a truly comprehensivesearch of consumer and business records,including everything from landline and cellphone data to voter registrations and magazineand newspaper subscriptions. These advancedsearch activities can significantly improve thelikelihood of finding the last known or updatedaddress, far beyond using only the commodityaddress quality and move update solutions.3. Secondary processing and documentrepurposing. The next part of the return mailmanagement services operation involves settingup back-end business processes and data-drivenevents. These make it easier to re-mail orreissue mail to updated addresses and allowsubsequent automated reprocessing of anyaddresses with on-going issues. It also isnecessary to set up the secure destruction ofphysical return mail either onsite or offsite.It is critical for mailers to historically trackhow many pieces of undeliverable mail originatedfrom a single record. Companies s
mail, or more than 280 million mail pieces per year. In the Health Insurance and Healthcare arena, companies often have the unique problem of not being in control of address data when it is provided by employers or government agencies. This can make return mail management very expensive because sales representatives need to
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