How the Rising Cost of Paper Impacts Direct Marketing
In 2019, the paper used in direct mail was up to 25% more expensive than it was two years previously. There are both environmental and economical shifts that have created this situation starting with the economic turmoil experienced around 2008-2009. During the Great Recession, marketers and publishers decreased budgets for print and shifted their attention to digital efforts, which relied less on paper. As a result, the demand for printing paper dropped and paper mills may have closed or pivoted their focus and equipment to other outputs like packaging, which could not be replaced by digital alternatives.
Fast forward 10 years, and the U.S. economy is booming; demand for paper is on the rise. Unfortunately for direct marketers and other industries that rely on paper, the increase for paper products, combined with less paper producers has created a paper shortage.
The imbalance of supply and demand has been amplified by a number of factors, all contributing to higher costs.
Factors contributing to rising costs
- Fewer paper mills – Major U.S. manufacturers are consolidating or closing, and at least 18 pulp and paper mills in the southeast closed temporarily or permanently after being destroyed by Hurricanes Harvey and Irma.
- Global competition – The price of raw materials used to make paper is rising, with experts predicting a 5% year-over-year increase in 2019. Single stream recycling in the U.S. has led to a shortage of the recycled paper available to major buyers like China.
- Labor shortage – The pool of available truck drivers is shrinking. Moving over 10 billion tons of freight requires over 3.5 million drivers. As Amazon and Walmart continue to increase demand for drivers, paper mills and freight companies need to attract new drivers meet demand.
Factors contributing to increasing demand
- Paperless prediction falls short – For many years experts were predicting offices would become paperless and rely more on digital communications. While email, messaging services and PDF workflow may have altered paper consumption, there are studies that show paper still plays in important role. Legal documents, photographs, architectural designs and other archival type documents can last for decades on paper while digital versions are susceptible to hacking or outdated formats with uncertain technical futures.
- Shift on environmental impact – Paper is recognized as a renewable resource. When produced, used and recycled responsibly, paper is a sustainable way to communicate. Paper-based packaging is viewed much more favorably by environmentally conscious consumers over plastic. In 2017, the American Forest & Paper Association found that over 65% of the paper consumed in the United States was recovered for recycling and that paper is recycled more than any other material.
- Important role in modern direct marketing mix – Direct mail is proven to be an effective marketing tool for smart marketers. Printed marketing messages are easier to comprehend, more likely to be retained and improve response when compared to digital advertising. Consumers view printed material as more credible, and advancements in technology provide marketers the opportunity to personalize unique messages and images on paper in the same way they have utilized email in the past.
How to maintain budget as paper costs rise
- Forecast and stock inventory – Determine your direct mail schedule ahead of time and purchase the paper needed. Your power to negotiate price is better with the more product you can commit to.
- Maintain a flexible design – Printers have certain equipment best suited for different formats and sizes. If your design is flexible, find print efficiencies that best accommodate your format. You may be able to stretch your budget by making slight adjustments to the size of your design.
- Bulk printing and personalization – Consider designing a universal outer envelope that can be used in multiple direct mail campaigns over the course of the year. Also, you can make variations in content of a self-mailer or letter by pre-printing shells in large quantity and then use printing techniques to personalize your message.
As paper costs to continue to rise, it will be important to have a paper strategy to help maximize your direct mail marketing budget.