In Part I, I explained what Every Door Direct Mail® (EDDM) is and how it came to be offered by the USPS. In Part II, I explained how EDDM works. In this article, I would like to call attention to the unintended consequence of EDDM referred to as Regulatory Required Direct Mail (RRDM) and its impact to the return on your investment.
What is RRDM?
Previously, I mentioned that it is important to identify carrier routes that have a high saturation of existing or prospective customers when using EDDM. This is because you must deliver a mailing piece to every household within your selected carrier route(s). It may seem a bit surprising but this is an unintended consequence of EDDM and is referred to as RRDM: “Regulatory Required Direct Mail.” Let me explain further:
In its annual 2016 10-K report to the United States Postal Regulatory Commission, the USPS described its EDDM service as follows: “Every Door Direct Mail enables customers to prepare direct mailings without names and addresses for distribution to all business and residential customers on individual carrier routes.”
The essence is this:
- Customers prepare (self-service)
- Names are not allowed
- Addresses are not allowed
- Delivery is to all addresses within a carrier route
Put another way, EDDM requires you to pay postage for distribution to all households within a carrier route whether you want to reach them or not. The only option you have is to exclude businesses. Moreover, you still need to pay the full amount for distribution to all households even if you accidentally provide fewer pieces than the total number of households. This is unlike targeted mailings where you pay for postage based on the exact number mailed. Regulatory Required Direct Mail (RRDM) makes it more difficult to maximize your return on investment if you choose EDDM when you really should be targeting according to common demographics such as age, income, education level, vocation or other attributes.
It’s easier to understand RRDM and its financial impact by using the USPS’s EDDM online targeting tool. So, let's look at an example: Assume you want to target people within carrier routes from zip code 85016. Once you enter the zip code, a map zooms to the zip code area and provides you with the opportunity to hover over each carrier route within it. Doing so reveals the number of households and businesses plus demographic information provided by the U.S. Census Bureau.
As you can see in Figure 1, the EDDM tool shows the number of households and businesses and provides a total for the combination. The tool allows you to exclude either one and it recalculates the total. Also available for information purposes is the percentage of households for a selected Age range which is adjustable. You can also show or hide the Size (which is the average number of occupants per household) and average Income per household. This is useful information but you are not allowed to exclude any households to adjust the size of your mailing. Rather, the information is provided to help you choose carrier routes that are more likely to have a higher percentage of households that are relevant to your business.
In Figure 2, you will notice that the EDDM tool lets you use a slider to adjust the Age demographic. Once again, this is for information purposes only. Refining the average age range per household does not exclude households that do not meet your criteria. The number of pieces you will be delivering does not change.
Figure 3 demonstrates the concept of RRDM in a side-by-side comparison of two scenarios. Scenario A on the left has different demographic filters than Scenario B on the right and I have presented them in the table below the images. Regardless of the adjustments made to demographic criteria, the number of pieces you must deliver to never changes nor does the cost.
In the preceding table, notice that the Age column has different values for our scenarios. Scenario A shows that 29% of the households are between the age of 35-54. Scenario B shows 66% of the households are between the age of 25-75. However, also notice that the Cost column is the same for both.
The Real Cost of RRDM
Let’s examine RRDM more closely. Let’s assume that Scenario A represents your desired target audience. As I showed, 29% are between the age of 35-54. However, since you have to distribute to all households, 71% are what we refer to as "RRDM" or Regulatory Required Direct Mail. You must pay for postage to these households, too. This significantly changes the real cost of direct mail to reach your desired target audience.
Let’s do the math and see the impact of RRDM. To accurately calculate the true postage cost required to reach your desired target audience, you must add your target audience postage cost plus RRDM postage cost and then divide that total by the number of target audience households.
(Target Audience Postage + RRDM Postage) / Number of Target Audience Households
($35.58 + $87.08) / 201 = $0.61 each
As you can see in this scenario, the real postage cost to reach your desired target audience is actually $0.61 per household – not $0.177. This is more than three times the cost than many marketers may realize when considering EDDM. Put another way, the postage for each mailing piece directed at the desired target audience is almost 25% higher than the retail price of a First-Class® postage stamp and nearly 80% higher than the retail rate for a First-Class postcard. When compared to the postage rates offered by mail service providers for First-Class and Marketing Mail® (formerly referred to as Standard Mail) the cost can actually exceed 100%.
The unintended consequence of EDDM is referred to as Regulatory Required Direct Mail or "RRDM" for short and it significantly impacts marketing return on investment (MROI). This requires us to examine EDDM vs. alternatives in fuller detail to determine which direct mail method is the right choice for your business and under what circumstances. Of course, postage costs are paramount but other things need to be considered as well. In part IV of this series, we will move beyond postage to examine other important elements of direct mail, compare EDDM to alternatives and provide a framework to quickly and objectively make the right decision every time.