By Adam Collinson, GrayHair Software
Undeliverable mail, often considered an unavoidable aspect of marketing and transactional mail, represents a significant financial burden for both the United States Postal Service (USPS) and the broader mailing industry. While address quality requirements can vary based on mailing purpose—such as meeting strict USPS regulations versus specific business needs—proactive management of addresses is crucial.
The Financial and Operational Impact of Undeliverable Mail
The costs associated with mail that fails to reach its intended recipient are substantial. In 2024, the USPS spent $1.4 billion on handling undeliverable mail, which includes forwarding, returning, or treating it as waste. This operational cost is eventually passed back to the mailing industry through increasing postage rates.
When factoring in all expenses for the mailing industry—including postage, production, customer service, and lost revenue opportunities—the scale of the problem is even more significant (well over $20 billion in impacts).
Recent data from the USPS highlights a troubling trend for First-Class Mail, which comprises critical communications like statements and bills. The percentage of undeliverable First-Class Mail has worsened over the last four years, reaching 3.38% in 2024. This increase is particularly concerning because the overall volume of First-Class Mail is declining, yet the absolute volume of undeliverable pieces is rising. This suggests that factors beyond the conversion of good addresses to electronic communication are contributing to the issue.
In contrast, marketing mail has seen an improvement in deliverability, with undeliverable rates decreasing to 3.91%. This positive shift is partly due to:
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- Improvements in the USPS change of address (COA) process in 2023, which enhanced the quality of captured address changes and allowed for better pre-mailing corrections.
- Lower rates of people moving, influenced by factors like high mortgage rates.
- Cycle O enhancements, introduced in 2023, provided new features and data to mailers. For example, these enhancements introduced new codes that distinguish between genuinely deficient apartment information from extra, non-essential data, enabling mailers to make more informed decisions about which addresses to mail¹. The adoption of Cycle O is believed to be a key reason for the improved marketing mail delivery rates.
Why Mail Misses Its Mark
Several factors contribute to mail being returned or simply disposed of as undeliverable – especially knowledge and time:
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- Address Deficiencies: Many undeliverable items have address shortcomings that demand additional effort from postal carriers and clerks. For example, a piece addressed to a high-rise without an apartment number might be undeliverable if the carrier doesn’t know the recipient’s specific unit.
- USPS Operational Challenges: Staffing shortages and the USPS’s efforts to reduce carrier route times can lead to more undeliverable mail, especially during peak volumes. Carriers have limited time to resolve address issues on their routes, meaning some problem pieces will simply be returned.
Specifics of Marketing Mail:
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- Unlike First-Class Mail, undeliverable marketing mail is often not counted by the post office; it might simply be discarded by the current resident if the intended recipient does not reside there.
- Marketing mail is typically not forwarded when a change of address occurs.
- Many marketing campaigns rely on purchased lists, which can have uncertain data quality.
Marketing to small and medium businesses (SMBs) often results in higher undeliverable rates (industry average 10-25%). This is because businesses may have valid addresses where they don’t receive mail, or issues arise from sending mail to generic titles, such as “current business owner,” in multi-tenant buildings where the mail center cannot identify the specific recipient. In such scenarios, the undeliverable rate can be over 40%.
Embracing Best Practices for Address Quality
Best Practices in Address Quality for postage discounts is a subset of Best Practices in Address Quality for your business needs and goals.
Mailers who adopt and implement best practices for address quality can drastically reduce their undeliverable rates, realize significant savings, reduce fraud, and enjoy multiple benefits including increased response rates as well as customer satisfaction and retention.
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- For operational mail, mailers can achieve undeliverable rates as low as 0.5% to 1% by correcting known bad addresses before mailing, significantly below the industry average of 2-4%.
- For marketing to consumers, best practices can reduce undeliverable rates to below 2%, compared to an industry average of 5-10%.
- For SMB marketing, rates can be reduced to 5-8% from the industry average of 10-25%.
Achieving these low rates requires more than just using the address that results from CASS™ (with DPV, LACSLink®®, and SUITELink®®) and NCOALink® processes that qualify for postage discounts. Best practices encompass a comprehensive approach to addressing quality. This involves leveraging the combination of quality and characteristic indicators as they relate to your specific operations. While all operations can benefit from this data, what data to use and how to benefit from it varies from business to business, operation to operation, and even mailing to mailing – one size does not fit all.
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- What all does this address represent – their physical address, their mailing address and/or their package delivery address?
- Are there restrictions on the filing of Changes of Address from the address and/or on the USPS’s forwarding of pieces
- Is there an issue with the address or with the person / business associated with the address?
- Based on the nature / purpose of the mailing, what action should be taken: fix, suppress, replace, alter the address, modify the piece, flag for additional fraud protection, or even just take proactive action to avoid future problems?
Additionally, actively managing undeliverable mail through services like ACS™ and implementing processes like Green & Secure for efficient disposal and cost reduction are crucial. Utilizing the data from ACS™ in combination with results from CASS™ and NCOALink® allows mailers to make even smarter decisions and positive impacts on future operations.
Continuous monitoring and adaptation to evolving postal processes, as well as addressing exceptions, are also key to maintaining optimal deliverability. Remember, USPS processes and personnel are constantly changing.
Leveraging Key Address Quality Processes and Data
The USPS offers various tools, services, and data to support address quality management, complemented by third-party solutions. Key processes include:
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- CASS™ (Coding Accuracy Support System): This system standardizes addresses according to USPS specifications and validates them against USPS data to assign current address information. Notably, Cycle O enhancements within CASS™ in 2023 introduced new codes that distinguish between apartment information deficiencies that are critical for delivery and extra, non-essential data, allowing for more informed mailing decisions.
- DPV® (Delivery Point Validation): Confirms whether an address is a recognized USPS delivery point. This additionally includes a variety of flags indicating the type and nature of the address.
- LACSLink®® (Locatable Address Conversion System): Converts addresses when streets are renamed or addresses renumbered. The biggest scenarios are Rural Route (RR) and Highway Contract (HC) style addresses converted to street-style addresses, representing the actual location of residence versus the box location. A result code indicates when this process was not able to provide the new format for the address.
- SUITELink®®: Addresses situations where CASS™ did not find or recognize the secondary address information (like unit or suite numbers) for businesses, by attempting to match the business name to determine the secondary information for where the mail is delivered.
- NCOALink® (National Change of Address): Processes name and address to identify permanent Changes of Address (COA). The USPS refined its COA submission processes in 2023, improving the quality of captured COA records, which aids in pre-mailing correction.
- PARS (Postal Automation Redirection System): A USPS system used to detect COAs and manage undeliverable mail.
- ACS™ (Address Change Service): Post mailing, provides electronic notifications for Undeliverable as Addressed (UAA) mail, citing reasons such as COA-related changes or NIXIE (non-COA) reasons. ACS™ can make matches and provide new address information in cases where NCOALink® cannot.
- Secure Destruction: a process where the USPS securely disposes of undeliverable First-Class Mail, requires the use of ACS™.
- Green & Secure: Mailers using ACS™ enable the USPS to dispose of First-Class or Marketing Mail that cannot be forwarded or delivered. This helps mailers reduce USPS costs, which can impact future postage rates. Utilization also improves the mailer’s Census score for Move Update compliance.
The Returns of Better Deliverability
Improving address quality and mail delivery rates yields numerous benefits for mailers:
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- Increased response rates
- Higher customer satisfaction
- Improved customer retention
- Reduced risks of fraud
For marketing campaigns, instead of merely suppressing bad addresses, mailers can replace them with good records, thereby maximizing their Return on Investment.
Final Thoughts on The Nuance of Addressing: “It Depends”
Addresses are not an exact science and nothing is 100%. The effectiveness of any addressing practice invariably “depends” on various factors, including the mail class, shape, and specific address characteristics.
Address quality management often involves dealing with numerous exceptions, and even “exceptions to the exceptions.” This dynamic nature underscores the importance of continuously monitoring mail operations and re-evaluating procedures, as postal processes evolve.
