December 2008

A comparative cost analysis of Canada Post
postage increases for January 2009
An overview of pending changes that may affect your firm’s communications and costs. By Dave Ward

There are some dramatic changes scheduled for Canada Post Products in 2009. Of course, the extent to which you may be affected will depend on the nature of your business or organization and the types of things that you mail.

Although you cannot always avoid paying more in postage than you might like, you can do many things to tip the scales in your favour. As you read the following, consider how a slight change in weight, thickness, length or width might prevent you from marginally crossing a key threshold. For example, did you know that some coated stocks weigh about 16% more than plain paper?
This analysis discusses pending product changes and provides comparisons between the 2008 and 2009 rates for the following Canada Post products:

• Domestic Lettermail and the Status of Irregular O/S Lettermail
• Addressed Admail and the Integration of Catalogue Mail
• Publication Mail and “Distance” Rates for Letter Carrier Presorted Mailings
• New Structure for Unaddressed Admail
• Change in to Legal Notification Period for Addressed Admail and Publications Mail

Domestic Lettermail and the status of irregular O/S Lettermail
The initial notification of changes from Canada Post indicated that they would be introducing Irregular O/S Lettermail as a new classification of Domestic Lettermail in January 2009. We have recently learned that this new product has not been approved and will not be implemented at this time. For those that are not aware, the new product would have included Oversize Domestic Lettermail items between 10 mm and 20 mm where:

• the item has box-like edges, or
• the short end will not bend around a curve with a radius of 140 mm without being damaged.

Other Domestic Lettermail increases are modest, ranging from 1.18% to 3.85%.
Note that some increases for Incentive Lettermail have been a little steeper and that pricing for items in the 31-gram to 50-gram category remains under review. For more information on Incentive Lettermail rates you can visit the Canada Post web site or speak with your Canada Post representative.

Mailing 1,000 Catalogues at 501 grams in 2008	Mailing 1,000 Catalogues at 501 grams in 2009
Phantom component: 1,500 X $2.35 = $3,525.00 Pricing for Catalogues Mailed: 1,000 X $2.3517 = $2,351.70 Total Cost $5,876.70	Phantom component: None at this volume Pricing for Catalogues Mailed: 1,000 X $2.3325= $2,332.5 Total Cost $2,332.50
Unit Cost $5.8767	Unit Cost $2.3325

Addressed Admail and the integration of catalogue mail
With the integration of Catalogue Mail into the Addressed Admail product line, the minimum number of pieces for catalogues weighing over 500 grams will plummet from 2,500 to 1,000. This is great news for some that mail catalogues in lower volumes and will also make phantom mailings for these items much more viable (with a phantom mailing, you pay for the minimum quantity, regardless of the quantity mailed).

However, the maximum weight for catalogues will also be reduced to 1.36 kg. This means that catalogues exceeding this weight will have to be mailed at parcel rates, which are considerably more expensive.

In view of the foregoing, we will examine price increases for the current categories of Addressed Admail and we will also provide examples that will demonstrate the:

• favourable impact of the reduced volume requirements for catalogues weighing more than 500 grams
• significantly higher postage rates for catalogues weighing more than 1.36 kg.

Price increases for Oversize Addressed Admail items weighing 50 grams or less are modest, ranging from 2.22% to 2.92%. Interestingly, apart from Delivery Mode Direct (DMD), price increases for Short/Long are considerably higher, with the DCF level seeing an increase of 7.69%. This will have an impact on smaller mailings with broad geographic distribution. It is also worth noting that the cost per gram for items exceeding the base weight allowance of 50 grams will see increases of 11.11% and 8.7% for the Short/Long and Oversize categories, respectively.

Dimensional Addressed Admail remains cost-effective for the right types of projects, with increases ranging from 1.16% to 3.45%. It is also interesting to note that there have been no increases for the cost per additional gram surcharges for items weighing more than 50 grams.

Catalogue comparison at a volume of 1,000 pieces
Currently, anyone mailing catalogues in quantities of less than the minimum must pay for the full 2,500, regardless of the quantity mailed. Although this can save money, it can also seem disproportionately expensive. The following illustrates the dramatic savings to be realized once the minimum becomes 1,000 pieces on January 12, 2009.

Catalogue comparison where weight exceeds 1.36 kg (minimum 2,500)
Catalogues come in a broad range of weights and sizes, with some larger scientific catalogues weighing 4 or 5 lbs. (1.8 kg – 2.3 kg). Currently, the maximum weight for catalogue mail is an astounding 22.7 kg. When the maximum weight of 1.36 kg is introduced on January 12, 2009, most businesses sending out catalogues weighing more than 1.36 kg will be required to mail them at parcel rates. Currently, it would cost $3.0517 to mail a catalogue weighing 1.37 kg. As of January 12, 2009, this same item would have to be mailed at parcel rates, likely in the $10 - $11 range, represent a percentage increase of over 300%.

Catalogue comparisons at volumes of 2,500 pieces
To be fair, we must also compare “apples to apples” and take a look at mailing at or above the current minimum of 2,500 pieces for Catalogue Mail in 2009. It is interesting to note that at a volume of 2,500 pieces, there will be a slight reduction from $2.3524 to $2.3325, at a weight of 501 grams. However, at the upper limit of 1.36 kg, there will be an increase of about 3.5%, as the price increases marginally from $4.512 to $4.668.

Publication Mail and “distance” rates for Letter Carrier Presorted mailings
With the advent of the new Local, Regional and National classifications for pre-sorted Publications Mail last year, we knew that respective price levels would follow this year. These rates are distance based, with higher rates for out of province addresses, intermediate rates for in province addresses and slightly better rates for items that are delivered through the actual station of deposit.
For items weighing up to 500 grams, National (out of province) rates have increased the most at around 6% to 7% at the lower sortation levels. In contrast, the increases for items weighing from 500 grams to 1.36 kg have remained under 5% across the board. Given this, it will now cost more to mail LCP pre-sorted Publications to further destinations. This has been the case with Publications Mail prepared via NDG sortation for several years now.

New structure for Unaddressed Admail
The Unaddressed Admail product currently has separate pricing for Standard and Oversize mail. At this time, the rates in each category apply for delivery to both residential and business addresses and samples can be included in either category.

As of January 12, 2009, Unaddressed Admail will be restructured into the new categories of Basic and Premium Unaddressed Admail. The Basic category will consist of Standard size items that do not contain samples and are to be delivered to residential addresses using the “Upon Receipt” delivery option. Items that are Oversize, are to be delivered to business addresses, contain samples or use the “Specified Delivery Start Date” option will be classified as Premium Unaddressed Admail.
The structures for 2009 remain very similar to those for 2008, with the major differences being the reclassification of some items as Premium Unaddressed Admail, as noted above. This being the case, in order to provide realistic cost comparisons, we must look at the increases in costs related to reclassification at certain levels, rather than simply comparing increases in costs in the two categories from 2008 to 2009. Cost comparisons are as follows:

As shown in the tables, apart from transportation fees, postage for items that have been reclassified experienced the largest increases ranging from 11.52% to 14.29%. Transportation costs did experience the largest increases. This, of course, stems from the inordinate increases in fuel costs over the last year.

Change to legal notification period for Addressed Admail and Publications Mail
For many years, we have enjoyed a 180-day notification period for changes to the Addressed Admail product line and 60 days for Publications Mail. Effective January 12, 2009, this notification period will be reduced to 30 calendar days.

The implications of this are far reaching, as items that are in planning to be mailed at a later date (e.g. four months down the road), may be affected by changes to a product line and/or unanticipated rate increases. It will be absolutely crucial to stay on top of current rules and regulations and to keep an ear very close to the ground regarding any changes that may be in the offing.

Summary
These are the changes for 2009 that we feel may have the largest impact on direct marketers. There are some benefits and there are also things that mailers will have to keep in mind. As always, it’s the little things that often cost us more in postage than we might like.

Dave Ward is president of Highland Marketing, a Waterloo Ontario based firm which provides a complete range of data and lettershop/fulfillment services to both smaller businesses and large multi-national corporations. The company also specializes in the areas of pharmaceutical fulfillment,
proxy mailings and database restructuring. He can be reached at dward@hiland.com.