A chain reaction is simply defined as “a sequence of reactions where a reactive product or by-product causes additional reactions to take place.”
Over the past couple of years, we’ve all experienced chain reactions caused by things like major weather events, catastrophic wildfires, or the worldwide pandemic. Many of these chain reactions on consumable items made the headlines because of shortages of consumer goods such as toilet paper, hand sanitizer, computer chips and pork (just to name a few). Supply chain issues have also impacted entire industries, like construction and food service. The disruption to our personal and professional lives and timelines has been costly, inconvenient, and in many instances, painful.
But the supply chain disruption is not only impacting headline-grabbing things like grocery stores, restaurants and building suppliers. Our direct response marketing world is getting hit too, in the form of supply limitations, production delays and wild price fluctuations. If not managed properly, this will have a negative impact on how you achieve membership acquisition and retention goals for your organization.
WHAT ARE THE SUPPLY CHAIN CHALLENGES MARKETERS ARE FACING?
So how do you continue with your membership marketing plan when your supply chain is unpredictable and potentially off the rails? To help navigate these waters we sat down with MCA’s Production Director, Connie Boeshans, to better understand the cause of the supply chain issues impacting our industry and how this is directly impacting the procurement and production of materials.
Q: Connie, what types of direct response products are being impacted by the supply chain issues?
A: We’re seeing decreased availability of items like paper, PVC plastic, and other materials used for the production of print materials like certain envelope glues.
Q: Breaking these down, what are some of the causes of the decreased availability?
A: In the case of paper, some of it is driven by paper mills putting our print vendors on allocations. For example, the mills and merchants have allocated their customers (our vendors) an amount of paper equal to what has been purchased in the previous 6 months, making it difficult to secure paper for additional work. This is caused by mill closures and also mills transitioning from paper to board stock which is used for packaging materials (to support the massive increase in online ordering that occurred over the past 18 months).
The supply chain for petroleum based products such as PVC (used to manufacture membership cards and keyfobs) and the remoist glue and window film used for envelope production was disrupted due to the cold weather event in Texas during February of 2021.
Q: It seems logical to assume that paper and other material shortages are causing a chain reaction of price increases, correct?
A: Absolutely. We are seeing more frequent paper cost increases than normal. For example, after several price hikes in 2020, there have been at least 5 additional cost increases so far this year (and another one was just announced at the time of this writing!). Coated stocks have been more affected by these increases than uncoated stocks. Since the beginning of 2021, the average increase passed on to our print vendors is approximately 8%.
Q: What about the turn times on projects with the print and lettershop facilities? Has that been impacted as well?
A: Yes, projects are taking longer to complete…going from a typical 3-4 week turn time to as much as 5-6 weeks. This is being caused by the previously mentioned material challenges, and also by workforce limitations. Like other industries, some of our print and lettershop facilities currently have fewer employees on staff to perform the work. One of our suppliers has areas of their production facility running at 60% of capacity at times, due to not having someone to run the equipment.
Q: Connie, do any of your sources have insight on how long these supply chain challenges might last for the direct marketing industry?
A: Obviously no one has a crystal ball, but my sources are estimating this could last through 2022. Thankfully, MCA has solid relationships with multiple vendors and materials sources; we’ve cultivated those relationships for years, which works to our advantage and helps us to procure what is needed for our clients.
SO WHAT CAN MARKETERS DO TO SAFEGUARD THEIR MEMBERSHIP MARKETING STRATEGY?
In light of these challenges, you are likely wondering what you can do to mitigate the risk for your own marketing efforts.
1. Examine your marketing budget and priorities to understand if you have any flexibility to change those priorities. For example, if you have very rigid acquisition and retention goals for the next 18 months — and absolutely must get those members regardless of cost — you will need to budget accordingly, recognizing that your cost-per-member acquired or retained will be higher. Include increased expenses on print material and lettershop services, AND increased postage costs (effective August 29 2021, the USPS is raising postage rates 6% to 8% for standard marketing mail and 4% to nearly 9% for non-profit mail).
2. Think strategically and consider buying your materials more efficiently. Combining print buys for multiple mailings is one example, and this works in your favor in a couple of ways. It secures the paper (or PVC plastic or other materials) up front, AND gets you a better cost per thousand because of buying in larger volume.
3. Look for alternate production methods that can help alleviate higher costs. In the plastic card production world, “drop on demand” versus embossed personalization on member cards is one cost savings option. Be flexible about the type of paper you specify for printed materials and use what is available. This might mean running uncoated instead of coated stock, dull finish instead of gloss finish, or changing the weight of the paper.
4. Consider ways to change your creative package that are low (or no) risk but can bring costs down through a change in materials or less time needed in production. Words of caution: Do not turn to postcards as an alternative to a traditional direct mail package. They simply will not perform strongly enough. And remember to test any substantial changes!
5. Consider these timeline management tactics:
- Build extra time into your production schedule because you will most certainly face longer lead times.
- Consider flexibility with your mail date and become comfortable with a date in terms of “the week of…” or possibly even “the month of…” rather than a hard and fast date on the calendar.
- Commit to making decisions earlier than you normally might. For example, you can’t wait until the last minute, hoping to capitalize on test results. Accept that you need to get something in the mail sooner, and wait for the next campaign to act on any successful tests.
6. Expand your channels. Apply some of that direct mail budget to digital ad campaigns while you ride out this wave of supply chain shortages.
MARKETERS, TAKE STOCK OF YOUR HEALTHY VENDOR RELATIONSHIPS
As the saying goes “this too shall pass.” But we’ve learned throughout the past 18 months that now more than ever, relationships matter.
Having reliable partners from relationships cultivated over many years of doing business together is helping MCA to weather this supply chain storm. And so has having experienced in-house production experts like Connie, who know what levers to pull and what tricks to pull out of her sleeve.
It’s interesting to note that despite unforeseen events causing a variety of supply chain issues, AND rising postage costs, mail is still the most trusted channel (source: Morning Consult 2020 Survey).
So like many marketers out there, we will continue to procure materials and produce millions of pieces of mail on behalf of our clients. The trick is being flexible, nimble and open to new ways of looking at things— and calling on the help of your trusted friends in the industry to keep the direct marketing boat afloat during these temporary but turbulent times!