Direct mail: The postage revolution

The Royal Mail's pricing in proportion system has brought mixed reactions from charities. But as Alexandra Coxon discovers, next year's changes could be an opportunity to update marketing strategies and make DM more creative.

Charity pens: are they a valuable way of improving the response to mailing or a tired gimmick that annoys supporters? Whatever your view, the debate may soon be laid to rest because the practice of putting pens into charity mail packs could die out from next summer.

Next September, when Royal Mail starts to charge postage according to the size of a letter or parcel as well as its weight, most charities will be affected, but those that send pens in their direct mail packs will be the hardest hit. It is likely that, rather than foot the extra costs, many charities will abandon the pen in favour of other options.

It's not only pen packs that will be affected - all bulky items will attract extra charges. For organisations that mail to fewer than 50,000 people using the Royal Mail's Mailsort 3 pricing package, the new 'pricing in proportion' system will mean an extra 3.75p per letter. Those mailing between 50,000 and 100,000 will be worse off by 2.8p per letter.

The message from experts is that charities must find out as soon as possible how the changes will affect them, what compensation might be due to them and how to redesign mail packs, where necessary, to make the most of the new system.

To help people deal with the price hike, Royal Mail has committed itself to providing compensation for organisations whose postal bill exceeds £100,000 and whose costs increase by more than 50 per cent after September 2006. However, the mitigation proposals might disappoint smaller charities that aren't eligible for financial support, despite the extra costs they incur sending the same mail packs or paying for cheaper to send redesigns.

Karen Ruskin, former director of fundraising at the British Union for the Abolition of Vivisection, is certainly worried. "The introduction of pricing in proportion is not good news," she says. "It will force charities to rethink some of the creative ideas they have invested time and money in developing. Introducing an A5 newsletter for supporters has been one solution for BUAV, and we also have plans to downsize our annual report and information packs in preparation."

But not all charities are as concerned as BUAV. The Woodland Trust, for instance, doesn't feel the change will have a negative impact on its direct mail activity. Indeed, direct marketing manager Phil Shipway believes the organisation might benefit. "Our cold mail won't be affected at all because we only send personalised stickers out with the packs," he says.

"The prompt for opening the pack is that they can see stickers through the reverse window, not because there's a pen or another bulky item in there.

"And where our magazines and annual review mailings are concerned, the changes are probably going to help us in the long term. We mail two magazines a year to our 145,000 members and also have an annual review mailing.

Size-based pricing will help both of these packs because they're regular in size, putting them within the new 'large letter' category. They will cost less to send next year, so we'll make some savings."

But even those organisations that know they will incur extra charges needn't worry excessively about the new cost structure. According to Neil Henderson, creative planning director at direct marketing agency DMS, pricing in proportion needs to be examined in context.

"Take the example of a C5 package that has something thicker than 5mm inside it," he says. "It currently costs 16p when mailing 250,000 at Mailsort 3 rate. Under the new system, it will cost 20p - an increase of 25 per cent.

"But get this in proportion. Along with postage, there are costs for creative, photography, studio, list-buying, print and computer work. An all-singing powerful fundraising package can easily cost £1. So a 4p increase in postage costs is actually only a 4 per cent increase to the overall cost.

"Donor packs can bring in shed-loads of cash - sometimes £4 or £5 for every pound invested. So the increased response needed to cover a 4 per cent cost increase is actually quite small."

Henderson doesn't think it is likely that DMS will strip out the thick items that make its charity clients' mailpacks "heavy and interesting".

Rather, he suggests, the company will pay the extra postage and continue to enjoy great response rates.

David Burrows, planner at direct marketing agency TDA, agrees that creativity shouldn't be compromised in the light of Royal Mail's changes. Moreover, he sees the move as an opportunity to make charities think about how they are marketing themselves to potential donors.

"The fact that the pens are going to have to go will push people to be more creative," he says. "We did a very successful pack for a children's charity, for example, that had a balloon in it. That would be fine under the new pricing system. There is a whole world of ideas out there and, in a sense, the pen has become a lazy option."

A fan of alternative media, Burrows also believes that charities might now see the benefit in targeting the 55 per cent of British households that have web access. "A lot of the time, there is no particular need to put print in front of people when charities can communicate as effectively via email," he argues. "Royal Mail's announcement could prompt organisations to gather their supporters' e-mail addresses and make more creative use of the web.

"For example, I'm an advocate of video sponsorship whereby, when you give money to a charity, you are sent web links to video footage so you can actually see the difference your money is making."

Good, old-fashioned emotive phrasing and images can also make a world of difference. The direct marketing agency WWAV Rapp Collins has been focusing on the importance of 'emotional connection' more and more in recent years. As creative director Barney Cockerell is keen to point out, affecting and motivating both existing donors and cold prospects works best when there is an emotional engagement.

"We have some great examples of highly successful standard-sized direct mail packs that we've produced in the past few years," he says. "The WWF-UK tiger bone pack, for example, is essentially a standard C5 outer that is made to look like an Asian medicine packet using two-colour printing and a tiger pictured on the front with the words 'powdered tiger bone'.

"Sumatran tigers are hunted for their bones and other body parts, which means they are threatened in the wild. So the idea here was to produce something that would outrage donors in the first instance. Once they get inside, they read words to the effect that 'we don't expect you, as a WWF supporter, would buy anything like this. But unfortunately other people do.' The novel solution here was to make the pack appear to be something it wasn't: to engage people and motivate them to give money that way."

WWF's tiger bone pack is a prime example of a direct mail initiative that will actually cost less to post once Royal Mail's new pricing structure is introduced. Between now and then, Cockerell's advice is that UK voluntary organisations start considering their own equally effective versions.

For the BUAV, enclosing a large glossy photograph instead of a small toy monkey in its 'adopt a monkey' renewal pack is one solution that has been mooted.

As Karen Ruskin, director of fundraising, puts it: "It's important that we're prepared. It doesn't make sense to design lightweight mailings in larger formats now if it's going to have an impact on us in the future, which is why we're working on new ideas already. Other charities would do well to do the same."

WHAT THE CHANGES MEAN

Pricing in proportion, or PiP, replaces the 16 prices that Royal Mail currently operates with 10 that take into account both the size and weight of a letter or parcel.

For some charities this will reduce costs. For example, a charity that currently uses Royal Mail's Mailsort 3 rate to send regular 12-page A4 updates to its 30,000 members will enjoy a saving of 36 per cent under the new system, simply by folding the sheets and popping them in a C5 envelope.

A mailing like this printed on standard printer paper currently costs 24.6p apiece to post. But under the new scheme, it will cost 15.8p. For each mailing to 30,000 people, this is a saving of £2,640.

However, this particular discount only applies if the letter is no more than 5mm thick and weighs 100g. Putting a 7.5mm thick pen inside each letter, for instance, could move the mailing into Royal Mail's more expensive 'large letter' category.

A light but bulky mailing, such as a 70g poster in cylindrical packaging, currently costs 21p each to post to 30,000 people using Mailsort 3. Under the new system, such 'packet' mailings that are more than 25mm thick, 353mm long or 250mm wide will cost 51.5p apiece. This increase of 145 per cent equates to an extra £9,030 for the run of 30,000.

Clearly, small really is beautiful come September 2006, and could cost you considerably less.

Royal Mail offers details of the new pricing structure in large print, on audio CD, on audio cassette and in a Braille booklet. Telephone 08456 113 113 or visit www.royalmail.com/pip. Textphone is available on 08456 000 606.

COUNTDOWN TO PRICING IN PROPORTION

Today

Call Royal Mail on 08456 113 113 to find out how PiP will affect your direct mailings. You can also visit www. royalmail.com/pip, where you can download a free 'impact calculator' to guide you through the price changes.

Until December

Whether you use an agency or produce direct mail in-house, think about altering your strategy to ensure you don't spend more money on postage come September 2006. You might find you need do nothing more than order C5 envelopes and start folding A4 paper in half. However, where you are mass-mailing bulky items such as toys or posters, evaluate the cost of postage versus rate of return. If it is no longer viable, discuss options and decide on a timeframe to bring the changes in.

If you produce a regular magazine, discuss the pricing implications with your contract publisher or in-house team. It might be more cost-effective to run three thicker A4 issues a year instead of six larger-sized newsletters.

But do consider consequences such as whether your readers see a reduction in newsletters as negative, and whether you are contractually obliged to publish a set number of newsletters with your contract publisher.

Early 2006

Stop ordering stationery that you no longer intend to use after September.

Once your current stock has expired, move to your new format - making any adjustments to printing equipment as you do so. This will ensure you are completely ready for the new pricing structure.

July 2006

If you mail directly from your organisation's offices, order extra trays and bags, free of charge, from Royal Mail. From 4 September 2006, you will need to separate mail into letters, large letters and packets. This applies to single items as well as bulk mailings, so you may need to allocate extra resources to the job of mail sorting.

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