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Sub-ZIP Code Geographic Targeting: How Much Can You Save Your Clients on Mail Costs?

Sep 13, 2008
For most service providers in the direct marketing industry, geographic targeting has come to mean picking a few SCFs or ZIP Codes to mail to. This is fine for large areas or markets where geography isn't very important. But when geographic location is critical for response, you might be able to save them considerable money by geotargeting within or across ZIP Codes.

Good list brokers or lettershops know that it's short-sighted to try to bump up the rented name count or pieces of mail by adding in names that won't respond. Nonetheless, it's astounding how few firms allow their clients to target sub-ZIP Code areas. For example, selecting the carrier routes within your client's market, regardless of which ZIP code they are in, could save them a bundle on mailing costs while keeping their total response count constant. Plus, they still qualify for postal discounts. Simple "radius selects" don't account for things like rivers where the nearest bridge is miles away and hence consumers on one side rarely cross over to shop.
Sure, you may have to charge some up-front targeting expense but compared to the money it saves, those geotargeting services are easily offset.

To estimate the savings on a campaign, you need the following estimates:

1) Per Piece Mailing Costs (list, printing, postage)

2) Cost of Targeting Service per ZIP Code

3) Original Recipient Count (if mailing to entire ZIP Code)

4) Reduction % (estimate how much fat can be trimmed from entire ZIP Code by geotargeting)

5) Total Number of ZIP Codes in market area

To calculate the savings, use the following formula:
[Total Number of ZIP Codes] X [(Original Recipient Count) X (Per Piece Mailing Costs) X (Reduction %) - (Cost of Targeting Service per ZIP)]

For example, let's say a saturation mailing was planned for 10 ZIP Codes, with an average household count of 3,000 per ZIP. Typically, a geotargeting service might cost you around $50 per ZIP but you might mark this up 30% for a cost to your client of $65 per ZIP. Let's assume a per piece cost of $0.30. Although geotargeting can usually reduce the mailing by 50% or more, let's be conservative and assume it only eliminates 20% of the waste.

Using this example, your client would save $1150.00 on this campaign without any significant lost response. And this is AFTER they've paid you an additional $650 for the targeting service.
About the Author
The author, Zephyr Sherwin, works with Maponics, which focuses on ZIP Code maps, carrier route maps, and other map products for businesses. You can find out more at www.maponics.com.
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