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The Dollars and Sense of NCOA
By Robert B. Swick,
Vice President Data Services, Anchor Computer, Inc.
Here’s a "News Flash": Use of the United States Postal Service’s National Change of Address (NCOA) program reduces costs of labor, postage and materials. Unfortunately this is news to some clients and senior managers who have yet to realize the ROI benefits of this worthy program.
Presented herein are two reference tools you can share with clients and prospects: a Return on Investment Guide and a Case History.
ROI Guide
The USPS has stated that the average NCOA match rate last year was 4.1%. That translates to 41,000 move changes for a 1,000,000 record file. The match rate not only includes recognized address changes but also closed PO Boxes, foreign moves and moves with no forwarding address. When associated postage and material costs related to these factors are recognized as well as ZIP Codes lacking the +4 extensions, one begins to conceptualize the value of this service.
Rule of Thumb
The following are average percentages of key NCOA elements:
| Item | Percent | 1 mm Record File |
| Move changes | 4.1% | 41,000 records |
| ZIP+4 improvement | 1.0% | 10,000 records |
| Total affected records | 5.1% | 51,000 records |
The next process applies dollar values to these change dynamics. Two points regarding the figures used below. First, a typical discount for first class and standard class A letters is about the same, $0.06, which is used in the example. (Reference Domestic Mail Manual R100 and R600.) Also, the $0.05 material amount may be conservative for both mail classes.
Cost Savings Benefit #1 – First Class Mail
| 8,200 | Address changes over a year old* |
| x $0.31 $0.26 | discounted postage rate + $0.05 materials |
| $2,542.00 | Savings realized from this aspect of service |
Cost Savings Benefit #1 – Standard Class A Letter Mail
| 41,000 | Address changes |
| x $0.21 $0.16 | discounted postage rate + $0.05 materials |
| $8,610.00 | Savings realized from this aspect of service |
Cost Savings Benefit #2 – First & Standard Class A Mail
| 10,000 | ZIP+4 improved records |
| x $0.06 | Postage discount |
| $600.00 | Savings realized from this aspect of service |
Summary of Examples:
| First Class | Item | Standard Class |
| $3,142.00 | Gross savings | $9,210.00 |
| $1,250.00 | Less NCOA processing service fee of $1.25/M | $1,250.00 |
| $1,892.00 | Net savings | $7,960.00 |
Cost Saving Benefits:
- *Changes of 12+ month old moves that would have otherwise resulted in returned mail for first class mail. This example uses study data that identifies an average of 20% of total moves occur in the 13-36 month period
- Avoidance of mailing to closed PO boxes, foreign moves and moves with no forwarding addresses
- Address improvements resulting in ZIP+4 Codes
- Address standardization of all records
- Identification of probable moves and addresses with errors as noted in the NIXIE portion of the process
Most databases are relatively complete with ZIP+4 Codes, 90% - 95% on average. However, as the example illustrates, a database owner of 1mm records enjoys a further saving of $600 for every one-percent improvement the NCOA process provides.
Case Study
This study is presented as an example of the savings potential to small file owners that use standard class A letter mail, in this case an owner with 82,153 records.
| Item | % | Records | Unit Savings |
| Move address changes | 4.49% | 3,688 | $0.21 |
| ZIP+4 improvement | 1.00% | 821 | $0.06 |
Client Savings
| Move address changes and closed boxes, etc. @ $0.21 ea. | $774.48 |
| Postal savings on ZIP+4 records @ $0.06 ea. | $49.26 |
| Less cost of service | $300.00 |
| Net savings | $524.74 |
A Final Thought
It’s an interesting dichotomy: Over 100 billion records were processed through all FASTforward and NCOA licensee systems last year….and yet scores of mailers fail to appreciate the services’ value. Informing direct mail users of NCOA’s ROI potential is of benefit to all parties. Our success is tied to theirs.
Article authored by Bob Swick, VP Data Services and Buddy Spiegel, Director of Address Products, Anchor Computer, Inc. Anchor is a member of MASA and the DMA.
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