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Data Quality: How Bad Customer Contact Data Costs You Good Money

4 Apr, 2016 By: Kevin O'Connor

Data quality is an issue that affects all businesses. Every business leader knows that clean data is the ideal norm. Every business leader also knows there is no such thing as pure data and unmanaged data costs time and money. Yet there are very few companies that understand and, more importantly, quantify the cost of bad customer contact data to the organization.

Here’s a simple question: How much does your customer contact data quality issue cost your organization?  

Let’s explore the effect of customer contact data quality as it relates to communicating with customers by mail. Physical mail remains one of the most effective media to correspond with customers. Personalizing important business communications by mail can lead organizations to higher levels of customer satisfaction, higher customer retention and, ultimately, increased revenue. Poor customer contact data, on the other hand, can diminish the effectiveness of message content as well as increase your postage, operations and lost-opportunity costs.

The magnitude of the data quality issue may surprise you. Almost 6.5 billion mail pieces and parcels were designated as “undeliverable as addressed” (UAA) in 2015 according to the United States Postal Service® (USPS). This means that the mail piece or parcel couldn’t be delivered to the name and address appearing on the mail piece or parcel. Of this number, more than 2.4 billion first-class mail pieces and parcels were tagged as UAA. Altogether, the postage used to send UAA mail cost organizations more than $1.26B collectively1.  (1Source:  https://ribbs.usps.gov/uaamail/uaamail_print.htm)

There are several considerations for every organization to consider about the effect of UAA mail on postage costs, operational costs and lost opportunity costs.

Postage Costs

Most undeliverable first-class mail pieces are returned to the sender’s address; these are UAA mail pieces with the yellow “return to sender” sticker. Collect these mail pieces for a month to determine the immediate cost of bad address quality on your organization. It’s easy to calculate. Simply multiply the number of returned mail pieces by the amount of postage used.

Postage costs don’t stop there. In many cases, organizations pay additional fees to the USPS to handle first-class UAA mail because not all UAA pieces are immediately rejected. The USPS will forward mail as requested depending on services requested by the sender or recipient. Some mail pieces are simply classified as wasted mail, and ultimately purged. The majority of UAA mail is returned to the originator. The USPS charges the originator various fees depending on the UAA mail service. UAA service fees average 19.5¢ per piece but they can range from .063¢ for purged mail to 54.2¢ for mail that is returned to sender.

You should periodically review your USPS postage costs to determine if your company paid additional, unwanted fees because of a high volume of UAA mail.

Operational Costs

The operational costs associated with bad customer contact data are harder to calculate, but not so hard to comprehend. Bad customer contact data that results in undeliverable mail affects mail center operations, database management operations and customer service operations.

Mail centers are required to physically handle undeliverable mail that is returned to an organization. Mail center operators are often required to sort, count, redistribute and, sometimes, resend the undeliverable mail. Each of these activities adds non-value-added time and work to your mail center operation.

Data quality problems often require your database managers to research and update customer records manually in your organization’s CRM (Customer Relationship Management) systems. This is another non-value-added exercise that affects operational costs.

Customer services operations often suffer the effects of bad address quality in the forms of increased call volume and correspondence from dissatisfied customers who do not receive important business communications. Customer service costs associated with bad address quality can easily be measured by calculating the costs per call and the number of calls that result from customers not receiving important communications in a timely manner.

Lost Opportunity Costs

The lost opportunity costs caused by undeliverable mail are the hardest to quantify but they cost your organization the most money.

Typically, mailers use first-class mail to send important business communications: invoices, periodic statements, marketing offers and compliance information. Consider these questions:

  • What is the cost to your Account Receivables department when they are required to call 15 percent of your customer base when invoices aren’t received in a timely manner?
  • What is the cost to your Finance department when accounts receivables are delayed for 15 percent of your customer base when invoices aren’t received in a timely manner?
  • What is the cost to your Mailroom Operations when they are required to research and resend periodic statements to 15 percent of your customer base when statements aren’t delivered in a timely manner?
  • What is the lost revenue opportunity cost to your Marketing and Sales teams when they miss out on 15 percent of your offers that aren’t delivered to your customers?
  • What is the cost to your Legal Departments and Mailroom Operations when they are required to research addresses for 15 percent of your customer base when critical documents aren’t delivered?

Every organization has different answers to these questions. The simple fact, however, is that every organization should have some answer for these questions. It’s vital that you understand the financial, time and good will effects, and potential opportunities, for customer contact data quality issues.

What Causes Bad Customer Contact Data?

Fortunately, there are known reasons why organizations have issues with bad customer contact data. Inaccurate addresses enter databases in a variety of ways including data entry mistakes by employees, errors made by customers when completing physical or online forms and data imports of unverified records from external sources.

Furthermore, address quality can deteriorate simply by the natural migration of businesses to new offices and individuals to new homes. About 17 percent of Americans (40+ million people) change their residence and nearly 20 percent of all businesses change locations every year. As a result, address databases deteriorate at a rate of 15 percent annually.

How Can Your Organization Solve the Bad Customer Contact Data Issue?

Every organization suffers from the deterioration of address quality inside the CRM system. There are no sure-fire ways to avoid this issue. In reality, most organizations will never have 100 percent correct customer contact data; the cost would be too great for any organization.

The best course of action is to maximize customer contact data quality with the most cost-effective tools available to organizations. Every organization should minimally take these three steps:

  1. Utilize data quality assurance tools for all customer information data entry systems.
  2. Leverage customer touch-points to confirm and update customer contact information.
  3. Invest in data-cleansing software from a trusted organization experienced in delivering high-quality, easy-to-use customer contact data quality solutions.

Kevin O’Connor is Vice President, Marketing, Neopost USA. The company, based in Milford, CT, provides hardware & software to mailers and shippers of all sizes. Neopost-brand solutions enable businesses to send and receive physical mail, digital documents and traceable packages, and helps its customers connect with their customers by establishing individualized, one-to-one business relationships.

About the Author: Kevin O'Connor

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