“Phantom” Breakeven Slips Lower in 2010
This post is not intended to save you thousands of dollars in postage nor does it speak about some new innovative design technique. Rather, it is intended to help those that mail heavier promotional packages, in smaller volumes, to keep a bit more money in their pockets.
You may be aware that the minimum volume for an Addressed Admail mailing is 1,000 pieces. However, Canada Post introduced phantom mailings many years ago, allowing people to mail fewer than 1,000 pieces, provided they pay for a full 1,000 pieces. Given the significant difference in postage rates between Addressed Admail and Lettermail, this makes sense if the volume is high enough to justify it. We usually refer to this as the breakeven point, where it costs as much to mail a certain number of pieces at Lettermail rates as it would to pay for 1,000 pieces at Addressed Admail rates.
On January 11, 2010, Canada Post is planning to introduce the new Lettermail weight classifications of 301 to 400 grams and 401 to 500 grams. This will result in a drop in the breakeven points at 301 grams and 401 grams, as shown below:
| Weight | Current | Approximate Breakeven Points As of January 11, 2010 |
|---|---|---|
| 301 grams | 446 pieces | 420 pieces |
| 401 grams | 537 pieces | 468 pieces |
We found this very interesting when we looked at the numbers. As we said, it’s not going to save thousands but it might save a little on some mailings. Certainly, greater savings can be realized as volumes increase.
The calculations that we went through to determine these breakeven points can be little tedious. However, for the more adventurous, they are presented below.
A Basic Phantom Mailing Calculation
So, how do you do a breakeven calculation? Actually, it’s fairly easy. For items weighting 50 grams or less, the simplest way is to multiply the base NDG rate (available from the Canada Post web site) times 1,000 to determine what the postage for 1,000 pieces would be. The base NDG rate for Oversize Presorted Addressed Admail is $0.60, so 1,000 pieces would cost $600. The Lettermail postage rate for an Oversize piece, weighting 100 grams or less is $1.18. To determine the breakeven point you would want to know how many pieces you could mail as Lettermail for $600, which in this case is 508 ($600 divided by $1.18) pieces. So, if you were mailing more than 508 Oversize pieces, weighing 50 grams or less, a phantom mailing might make sense. Otherwise, even though the mailing might be promotional, it would cost less in postage to mail it as Lettermail.
As weights exceed 50 grams, Addressed Admail rates become a bit more complex to calculate. However, based on 2009 NDG rates, postage for an Oversize Addressed Admail piece weighing 301 grams would be $1.2275 and at 401 grams the postage would be $1.4775. Currently, the heaviest weight category for Lettermail is 201 to 500 grams and the postage in this category is $2.75. Simplifying the calculations somewhat, the breakeven point would be 446 pieces at 301 grams and 537 pieces at 401 grams. We have based this on 1,000 pieces at the same postage rate, However, in reality postage for the phantom component (i.e. 1,000 less the number mailed) does not have a weight component built into the price, so the breakeven can vary somewhat, depending on the volume mailed.
As we mentioned above, and in our Comparative Analysis of Canada Post Changes for 2010, there are two new proposed weight classes for Oversize Lettermail in 2010, being 301 to 400 grams and 401 to 500 grams. Lettermail postage for a piece weighing 301 grams will be $3.00 and for a piece weighing 401 grams the postage will be $3.25. At the same time, prices for Addressed Admail at 301 grams and 401 grams will increase to $1.2626 and $1.5226, respectively. This will shift the breakeven at 301 grams to 420 pieces and the breakeven at 401 grams to 468 pieces. And, again, this would vary based on phantom component, which does not have a weight factor built into the postage.
As always, if there are any questions, we are always happy to chat with our blog readers.
