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Automated Mail Stream Under Assault [MAIL:]

October 1, 2006

Todd Butler

Hand Made Mailer
Published in Mail: The Journal of Communication Distribution
(Oct-Nov 2006)
The Postal Service is finally opening its eyes to the fact that there is a new and growing market; utilizing direct mail for the distribution of optical disks. As this market develops it is breaking into three primary business models; disk rentals, peer-to-peer disk exchange and Multimedia Mail advertising.
The disk rental business is currently dominated by NetFlix and Block Buster but also includes game rentals. The peer-to-peer market has a business model utilizing the Internet to facilitate the exchange of optical disks between members. Currently La La Media is concentrating on music and a company called Peerflix dominates DVDs. The third segment of this new market is Multimedia Mail.
Multimedia Mail is postal delivery of Internet advertising. Wynn Casinos used this product in a recent mailing campaign and achieved an 80% response rate. Optical disks in the mail stream have the potential of generating substantial volumes of new mail for the Postal Service. It is imperative that this “new mail” meets the same compatibility requirements as the rest of the direct mail industry.
Optical disks in the mail were initially perceived by postal management as a short term volume boost, an oddity. When problems arose in the automated processing of DVDs, operation managers were told by USPS marketing to deal with the mail they were presented. If that meant manual processing was required for some segments of this mail stream, then operations needed to provide the necessary services. The resulting costs from processing this non-automated mail (accepted at automated letter rates) have been built into the base costs used to establish the proposed First Class rates. Essentially, credit card and remittance mailers will start subsidizing the disk mailing industry with the implementation of R2006-1.
With their success at assisting the disk rental industry, postal marketing has turned their attention to the potential mail volumes generated by the emerging peer-to-peer disk industry. La La Media provides rigid packaging to its members and pays First Class (two ounce single piece) postage. With implementation of R2006-1 ST Class rigid packaging will be reclassified as parcels and La La Media’s postage will nearly double.
Another peer-to-peer company gaining postal and media attention is Peerflix. This company exchanges DVDs between members as La La Media exchanges music. But instead of providing adequate packaging, Peerflix provides an on line template for its members to print on their home inkjets utilizing available paper stock. The member is then instructed to place the CD (or multiple CDs) in the middle of the template, fold then tape the paper creating a self mailer. The go-to address, postnet barcode and planet code is printed as part of the template. Peerflix’s determination of the appropriate postage is also printed on the piece.
Anyone in the direct mail industry that has worked with a non-profit’s volunteer group to hand fold a letter, insert it into a standard envelope and then seal it, knows that the final product can not be processed on any equipment of any kind. When I first heard about the Peerflix mailer (called the Peer Mailer) I chuckled, imagining the wad of paper and disks held together with box tape that the Postal Service was going to receive and manually process.
Postal marketing has turned my chuckles into total disbelief. They have approved this hand made abomination for automated letter processing! No, Peerflix (currently) isn’t claiming automated letter rates; but the Peer Mailer has been approved for Confirm. This allows Peerflix members to track their disks across the country as the disks are processed by postal automation. Great implementation of Confirm, if only the Peer Mailer was automation compatible.
Confirm is not available for non-automated mail. The postal operations group requires automation compatible mail in order to be able to provide automated services. Postal marketing, needing to meet their quotas, approved the Peer Mailer for automated services. Once again the operations group has been told to deal with the product they receive and send the bill to mailers that provide automation compatible mail.
The traditional direct mail industry, wanting lower postage costs or requesting automated services, is required to provide automation compatible mail meeting numerous DMM requirements. Compliance with these regulations is verified every time a job is presented to an acceptance unit. Barcodes are checked to ensure readability. The aspect ratio, length, height, paper thickness and construction are checked making sure they are within the appropriate tolerances. The weight of the mail piece is verified for proper postage payment. Disk mailers should have to meet the same stringent regulations the rest of the direct mail industry has been wrestling with for the past ten years!
Consumer’s manufacturing mail pieces by hand will produce a unique piece every time they ship a disk. Height and length will vary by more than the 1/25 inch that Merlin allows for the maximum deviations from the DMM specifications. Folds will not be straight; therefore the pieces will not be rectangular. Since the barcodes are printed before folding, an incorrect fold line will create barcode skew. Tape is to be used in manufacturing of the Peer Mailer and yet tape is not allowed for the construction of automation compatible mail. Weight of the mail pieces will vary as different paper stocks are used and simple instructions are not followed. Reflectance will be a major problem if the Peerflix customer happens to have red paper in their printer instead of white. Barcode quality will be an issue, depending on the preferences a member has for ink color or the condition of their printing system. And yet these hand made pieces have been approved for automation.
Major cost savings have been achieved by Peerflix in its approach to mail piece design and manufacturing. If the Peer Mailer becomes the standard, other companies will reduce their packaging and postage costs by having their customers and members enter hand made mail pieces into the automated mail stream. Who is going to pay the increased costs as this non compatible mail clogs the barcode readers trying to get Confirm data? La La Media is looking at their postage costs increasing with R2006-1 to $1.20 per piece, plus packaging cost. Peerflix is looking at a postage cost next year of $0.42 with no packaging costs.
What if NetFlix and Block Buster, both having automation compatibility problems, decided to provide a compatible one-way mailer for their out bound mail and instructed their customers to print the return address, postage, barcode and Confirm information on a hand made return piece? Who is going to pay the increased costs and suffer the degradation in mail services with millions of non-automation compatible pieces in the automated mail stream… daily?
It is time to take mail piece approval out of the hands of the headquarters marketing group and turn it over to operations. If we are going to have an efficient, cost effective automated mail stream, the Postal Service must require and the industry must produce automation compatible mail. Who better to know what that looks like than the operations group? If people want to continue to produce non-automated disk mailers, their mail should be kept in the non-automated mail stream with non-automated services and assessed an appropriate non-automated cost.

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