Switching from Manual to Mailmark Polywrap and Paper

1. Switching from Manual to MailmarkPolywrap and Paper February 2019

2. Introduction • This paper is for account managers and the mailing house team in Royal Mail Retail, Royal Mail Wholesale, Access customer organisations, and Mailing Houses to use with their end customers • The presentation outlines the opportunity of switching polywrap and paper items from manual services to Mailmark services and switching polywrap to paper based outers. • For those producers and customers who wish to continue to use polywrap, we outline improvement suggestions that have been identified from the current testing programme.

3. Contents • The Challenging Environment • Challenges for mail producers • Challenges for title owners and direct marketers • No easy solutions • Overcoming the Challenges • Print and Paper: a great environmental story • Change is starting • Polywrap still works for many • Myth Busting • Switch from Polywrap to Paper Wrapped Mailmark • Saving Postage Costs • Next Steps

4. With the war on plastic becoming one of the hottest topics in the sustainability sphere, corporates are rushing to make plastic-reduction pledges in a bid to prove their environmental credentials Organisation are switching the wrapping on their magazines and communications sent out to customers and members from plastic to sustainable alternatives, starch based materials for example. Paper Wrap is an excellent example of how Mail Producers have responded to increasing public concern over single use plastic and a desire to address this environmental issue. The most readily available alternative is of course paper in the form of envelopes or wraps. Paper wrappings using Mailmark not only fit the sustainability agenda but also attract the lowest postage rates

5. Challenges for Mail Producers Mail Producers are experiencing difficult trading conditions: some customers are leaving the channel and those that remain are tightening budgets, increasingly wanting to address environmental concerns around sustainability. There are constraints on investment capital, so it’s not easy to change • Some Mail Producers using polywrap have: • Invested in Laser Jet print technology which gives a better Mailmark read • Developed paper wrap alternatives to Polywrap • Are working with Royal Mail in the testing of starch based alternatives • Mail Producers using polywrap need to: • deliver products that give price certainty • address the environmental concerns raised by customers • provide the great quality that title owners or direct marketers insist on. Mailmark can deliver on these requirements

6. Challenges for Title Owners and Direct Marketers Many Title Owners and Direct Marketers are managing spend and increasingly giving greater consideration to sustainability and the ‘Blue Planet’ effect. Customers are pushing them to stop using polywrap or plastics. On top of this they face difficult trading conditions, e-substitution - consumers switching to online channels and consumers wanting a price that will keep them in the mail channel. They understand that in a world of fleeting clicks print still works for maintaining brand loyalty. They want to retain these relationships. www.marketreach.co.uk/reports Some Customers want to retain polywrap of course, we are aware of that. They feel that the aesthetics, door mat appeal and robustness add value to the publications or catalogues. There are many customers that have been working with Royal Mail through their testing programme to understand the best way to apply a Mailmark and gain the preferential prices and Royal Mail are sharing the learnings from those tests with everyone Mailmark can address these concerns, Royal Mail’s lowest price product and providing reporting that allows a clear line of sight to the quality of performance.

7. There is no easy solution • Customers sending items in polywrap tend to use Royal Mail manual services rather than Mailmark even though the latter is cheaper and provides reporting – why?; • In general, Mailmark barcodes are easy to print but with inkjet on polywrap the challenge becomes greater. They are therefore concerned that they will incur adjustment charges for non-compliance. This price uncertainty hinders them from switching to Mailmark. • Specifically relating to letter polywrapped items, the Royal Mail letter machines cannot process these. Customers wanting to send them using Mailmark have to send them as a large letter format and Royal Mail will charge the large letter price. Changing these wraps to paper provided there is no rigid spine will generate a significant saving • Customers are concerned that Royal Mail will apply white barcode stickers to their items – we won’t, we invested significantly to avoid that process 2 years ago. • Mailmark over time will become increasingly cheaper than manual and as the environmental agenda comes to the fore, there is a compelling case to think differently about how to send items traditionally sent in poly (magazines and catalogues). However these too are not simple solutions; • Royal Mail have an unwrapped option, but for many mailers the inability to place inserts into these is an obstacle that cannot be overcome. It suits some mailings though. • Starch based alternatives that address the sustainability issues are difficult to Mailmark because of the opaque quality of the finished product. They also present issues of robustness passing through the Royal Mail pipeline • Printing Mailmark’s directly onto polywrap is difficult but using laser print or a cover sheet delivers excellent results. • Paper costs more and does not have some of the poly benefits above

8. Overcoming the challenges • Some Mail Producers have invested in adapting their kit to ‘paper wrap’ the content. • Royal Mail has worked over the last 18 months with Mail Producers and customers to test Mailmark polywrapped items and has had considerable success in getting good read rates by identifying issues and recommending changes to the printed output. The trials continue until June 2019. • Royal Mail have adapted their large letter sorting machines to accommodate unwrapped (naked) mailings which can use Mailmark to achieve lowest prices. We have also removed the necessity for placing white barcode stickers on items. • Royal Mail working with Mail Producers continues to conduct tests on starch based and paper wrap products using Mailmark, recommending changes to achieve a good Mailmark read rate. • Undoubtedly though, paper is the best substrate for great Mailmark reads. Paper also fits the sustainability agenda that is an increasing ask from consumers. " For sheer flexibility, style and effectiveness, Print and Paper can be the natural choice for sustainable and powerful communications."

9. Print and Paper have a great environmental story to tell Paper-based packaging has an excellent environmental record • On average, UK manufactured corrugated boxes contain 76% recycled fibre. • Once used, paper-based packaging is easy to recycle. • In the UK and Europe, the collection of paper is hugely successful with over 80% collected for recycling • This superb recycling rate prevents an area the size of Greater London from going to landfill every four months. • Paper is made from wood, a truly renewable and sustainable resource • Forest certification ensures wood comes from well managed forests • Responsible wood, pulp and paper production ensures healthy growing forests Source – Two Sides Myths and Facts V9-April 2017

10. Some customers are starting to change • Organisation are switching the wrapping on their magazines, brochures and communications sent out to customers and members from plastic to sustainable alternatives • Digital image printing on paper can have pleasing aesthetics but we estimate it costs £8/k more

11. Some customers want to continue with polywrap • Some Mail Producers and their customers want to continue to use polywrap as the choice of covering their mailings. We have identified what benefits are perceived from using these materials. • We want to assist those producers and customers in gaining the best possible prices for their mailings and have worked over a long period of time in testing sample mailings, identifying issues and suggesting improvements. • These tests have delivered fantastic results and the tests continue until June 2019, we would welcome new participants • We have found some common issues and these are shown on the next slide, being mindful of these will accelerate your mailings being Mailmark ready

12. Test results – Common Issues Clear results are emerging from the testing as follows:  • Laser printing performs better than inkjet printing • Performance using ink jet is continuously improving • An eManifest uploaded outside the 5 day active period will result in the system recording as 100% Barcode Not Seen • Barcode quality is key to us being able to read the barcode. Common issues include modules not printed consistently square shaped. White or grey lines running across the centre of the barcode. Bar heights not correct

13. Best practice for mail producers DRAFT - IN COMMERCIAL CONFIDENCE - NOT FOR EXTERNAL CIRCULATION

14. We need to bust three myths • Mailmark adjustments could outweigh the benefits of moving from 1400 to Mailmark • Moving from 1400 polywrap to Mailmark paper is more expensive • Price certainty is not achievable

15. Save postage costs by switching to Mailmark and Paper If design breeches user guide, clients nearly always opt for 1400 rather than face unknown adjustments Clients are fearful of adjustments – average NMP for P1-6 18/19 is 6.1% £0 adjustment Less: production; consumables; porterage; and linehaul; and better container fills Postage cost comparison between: Polywrapped Access Advertising 1400 letters and enveloped Mailmark letters - excludes any increased production costs Mailmark is £29/k cheaper than 1400 The mailing is cheaper even with adjustment charges Opportunity of a further £3/k discount for trays Opportunity to move to 48 selections for greater efficiencies Estimated £10/k extra costs from switching to paper Opportunity for DM letters to get Responsible discounts £5-£10/k Typical advertiser sending specialogues

16. Save postage costs by switching to Mailmark and Paper Clients are fearful of adjustments – average NMP for P1-6 18/19 is 6.1% £0 adjustment Less: production; consumables; porterage; and linehaul; and better container fills Postage cost comparison of Access Business 1400 large letters 101-250g that were polywrapped to Mailmark Magazine Subscription large letters that are enveloped - excludes any increased production costs Mailmark is £39/k cheaper than 1400 If design breeches user guide, clients nearly always opt for 1400 rather than face unknown adjustments Estimated £17/k extra costs from switching to paper Opportunity of a further £9/k discount for trays The mailing is cheaper even with adjustment charges Typical publisher sending magazines

17. Save postage costs by switching to Mailmark and Paper Clients are fearful of adjustments – average NMP for P1-6 18/19 is 6.1% £0 adjustment If design breeches user guide, clients nearly always opt for 1400 rather than face unknown adjustments Less: production; consumables; porterage; and linehaul; and better container fills Postage cost comparison of Access Advertising 1400 large letters 101-250g that were polywrapped to Mailmark large letters that are enveloped – excludes any increased production costs Mailmark is £11/k cheaper than 1400 Opportunity of a further £9/k discount for trays Estimated £17/k extra costs from switching to paper Opportunity for DM letters to get Responsible discounts £5-£10/k The mailing is cheaper even with adjustment charges Typical advertiser sending direct mail

18. Save postage costs by switching to Mailmark and Paper Clients are fearful of adjustments – average NMP for P1-6 18/19 is 6.1% £0 adjustment Less: production; consumables; porterage and better container fills Postage cost comparison of 2C Retail Advertising High Sort Letters that were polywrapped to Mailmark letters that are enveloped – excludes any increased production costs Mailmark is £51/k cheaper than High Sort The mailing is cheaper even with adjustment charges Opportunity of a further £3/k discount for trays Opportunity for DM letters to get Sustainable discounts £3.50-£8/k Opportunity to move to 48 selections for greater efficiencies Estimated £10/k extra costs from switching to paper Typical advertiser sending specialogues

19. Save postage costs by switching to Mailmark and Paper Clients are fearful of adjustments – average NMP for P1-6 18/19 is 6.1% £0 adjustment If design breeches user guide, clients nearly always opt for High Sort rather than face unknown adjustments Less: production; consumables; porterage and better container fills Postage cost comparison of 2C Retail Advertising High Sort Large Letters 101 – 250g that were polywrapped to Mailmark Large Letters that are enveloped – excludes any increased production costs Mailmark is £29/k cheaper than High Sort The mailing ischeaper even with adjustment charges Opportunity of a further £9/k discount for trays Estimated £17/k extra costs from switching to paper Opportunity for DM large letters to get Sustainable discounts £7-£15/k Typical retailer sending direct mail

20. Next steps • Remind end customers about the poly large letter trial • Mail producers to contact end customers to discuss Mailmark and paper opportunities and how they can save money • Customers to contact their mail producers to discuss Mailmark and paper opportunities and how they can save money • Send samples to the RM Mailmark QA team in Dearne for testing • Start posting Mailmark and saving money to reinvest in mail

21. Thank you

22. Questions?