The economic hardships caused by the global pandemic have only escalated demand pressures and uncertainty within the paper market and The United States Postal Service (USPS). We have seen some much-needed improvement, but the long-term impact of COVID-19 on 2021 marketing plans and the fundraising industry has yet to be fully determined.
Paper Mills
Paper mills have been shut down or converted to other work over the past year. In 2020, in the uncoated free sheet market, Domtar, North America’s leading uncoated free sheet manufacturer, reduced their overall capacity by 25 percent. In the coated free sheet market, Verso, a leading coated manufacturer, reduced their capacity by 40 percent.
As noted by Midland Paper National, paper mill shutdowns and conversions are significantly reducing paper supply year after year. Run rates at mills are up 90 percent due to capacity reductions, and input costs continue to increase from two to ten percent on raw materials, pulp, energy, and oil. The paper market continues to face demand pressures and uncertainty. The hope is that the mill shutdowns and conversions to significantly reduce supply will help to stabilize the market.
Transportation
Transportation also remains a challenge for paper suppliers and The United States Postal Service. Demand has and is severely outpacing capacity as average haul rates have increased.
According to the American Trucking Association’s Truck Driver Shortage Analysis (2019), over the next decade the trucking industry will need to hire roughly 898,000 new drivers (90,000 drivers per year) to replace retiring truck drivers and keep up with industry growth. Because roughly 70 percent of all U.S. freight tonnage is moved by truck, any disruptions often impact entire supply chains. Freight costs continue to increase dramatically, trucking rates are doubling, and container costs are tripling.
This all means that by the end of Q1 2021, nonprofits can expect to see paper price increases of three to five percent for coated and uncoated paper. And, based on current feedback from paper mill partners, merchants, and market research, we should prepare to see another increase mid to late Q3 2021.
Postage
The United States Postal Service is an important conduit for the nonprofit community. A well-written letter with a personal message sent via the mail has been—and continues to be—a vital means of communication from nonprofits to donors, members, beneficiaries, and the general public.
The USPS filed new rates with the Postal Regulatory Commission (PRC) for Market Dominant Rate Changes, and these rate changes went into effect in January 2021. This is a typical CPI (Consumer Price Index)-based rate change under the laws of the Postal Accountability and Enhancement Act (PAEA), which was signed into law in 2006, that means rate changes are calculated from a pool of potential changes based on the Consumer Price Index change over the prior year.
January 2021 highlights are:
- The cost of a single piece First Class stamp will remain at $0.55 (zero change)
- Single Piece Postcards – $0.35 to $0.36
- 1st Class Auto Presort is increasing 1.7 percent as a category. 5D 1 oz increase is .009
- 1st Class Auto Postcards are increasing 3.4 percent as a category. 5D increase is .009
- The increase to Nonprofit Letter mail is small – under 2 percent at the DSCF level and 1.4 percent at the Automation Category level
- Nonprofit Auto Flats under 4 oz are going up 3.4 percent as a category
- DSCF 5D under 4 oz is going DOWN .008
- DNDC 5D under 4 oz going DOWN .01
The immediate concern is that the USPS is expected to announce its next rate increase very soon, which is expected to be 6% to 8.5%, depending on the class of mail. The new rates will likely take effect around 90 days later, in late June or early July.
Manage Your Costs
Supplier Relations
One of the first things you should do is talk to your agency partner to see if you have the benefit of locked-in rates with their suppliers. Many of our nonprofit clients are likely to see delayed increases, whereas others have already begun to see price increases. Edge Direct benefits from long-term strategic partnerships with many of our suppliers, which, combined with our national buying power as part of Moore, enable us to limit our clients exposure to the full paper increases.
Strategic Creative Solutions
Utilizing new creative and package formats to offset the increasing costs of paper and postage is another way to manage your costs. Edge Direct designs and produces campaigns with high response rates and that qualify for the USPS nonprofit letter postage rate. We recommend adding letter appeals as follow-ups to premium campaigns like cards or calendars, or adding high-impact matching gift campaigns as seen in the example below.
A renewal campaign with a match challenge is extremely successful and cost-effective. Adding personalization, mission-based creative and strong storytelling resonates with donors and engages them to give. We regularly incorporate localization, to include the state in which the donor resides, to increase personalization. Adding call-outs like, “We need 25 more donors in <YOUR STATE> to meet our goal” increases urgency and encourages giving.
Most importantly, our select and data segmentation strategy is hyper-targeted. We are tailoring campaigns with enhancements to boost response and drive net revenue.
Offset Cost Increases with Winning Strategic Solutions
Study your package formats and how you can maximize real estate with impactful, engaging messaging.
Sample package strategies to offset fundraising challenges:
Target the Right Prospect with Next-Generation Co-op
Direct mail allows nonprofits to target specific types of donors who correspond to your typical donors. We are able to refine your mailing lists to reach only those potential donors likely to become actual donors. The ability to create a targeted direct mailing list translates directly into savings for your nonprofit.
If your organization wants to look beyond traditional segmentation and take a far more individualized approach to reaching donors, it might be time to upgrade your co-op. Thanks to the availability of machine-learning technology, it is now possible for co-ops to predict giving at the individual rather than segment level.
Next Generation Co-Op
A cloud-based co-op that utilizes machine learning can determine where to spend your last acquisition dollar, who should get a mail piece, and what creative strategy will work best. The cloud-based model allows it to combine the most up-to-date data with the greatest depth of data, delivering that data to state-of-the-art algorithms, making certain that you are talking to the right person every time.
Moore’s SimioAudience is our next-generation co-op. It incorporates other types of donor data to find new prospects traditional co-ops miss with over 100 billion data points and refreshes in real-time. This means that nonprofits can mail to the best donors in days, not months. Many of the country’s top nonprofits have already joined, and we have nearly 60 million unique donors within the database.
Most recently, a humanitarian organization was looking for ways to scale its acquisition. They needed to find prospects who were more likely to donate than those from traditional co-ops. From billions of transactional and non-transactional data points, SimioAudience provided 29 percent of the mail volume for the organization’s Fall 2020 acquisition campaign, more than any other model.
Showing no hint of diminishing marginal returns from providing the large chunk of prospect names, this 29 percent of the mail volume provided 32 percent of the total number of donors from the mailing and 36 percent of the total revenue. That is because the SimioAudience Revenue Model outperformed the average response rate by 10 percent and the average gift by 11 percent. This test showed that the humanitarian organization involved in this case study could count on SimioAudience as a workhorse co-op in its mail acquisition.
Integration Moves People Into Action
Your direct mail strategy should not be stranded on an island by itself. Integrate this strategy with your other marketing efforts, especially digital. Align your direct mail campaigns with your emails, online ads, and social media promotions using the same images and messaging to build synergy and keep donors going in the right direction. Use this as an opportunity to build your email lists as an alternative communication channel. Integration moves people into action.
Informed Delivery Increases Donation and Open Rates
Informed Delivery is a service USPS offers. Any of your direct mail recipients who are signed up with informed delivery will get a scan of your mail piece via email. By putting a little effort into this channel, you can create an image that represents the contents of your mailed package, and include a ride-along image that acts as a display ad in the email. This ride-along image will also have a link to provide users an easy way to donate online. We have seen this strategy also raise the donations provided by mail as the recipients are more likely to open it.
Co-Targeting
Another great option is co-targeting. This allows you to target your direct mail recipients with display ads as they browse the Internet. These campaigns typically run for two weeks before your in-home date and two weeks after. We have seen lifts in donations anywhere from 20-50%.
