← MarTech Podcast ™ // Marketing + Technology = Business Growth
MarTech Podcast ™ // Marketing + Technology = Business Growth
AI Personalization in Direct Mail Campaigns
00:33:08
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The Martech Podcast is a proud member of the I Hear Everything Podcast Network. Looking to launch or scale your podcast, I Hear Everything delivers podcast production, growth and monetization solutions that transform your words into profit. Ready to give your brand a voice? Then visit iheareverything.com.
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From advertising to software as a service.
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To data across all of our programs and clients, we've seen a 55 to 65% open rate.
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Getting brands authentically integrated into content performs better than TV advertising. Typical lifespan of an article is about 24 to 36 hours.
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We're reaching out to the right person with the right message and a clear call to action. Then it's just a matter of timing. Welcome to the Martech Podcast, a member of the I Hear Everything Podcast Network. In this podcast, you'll hear the stories of world class marketers that you use technology to drive business results and achieve career success. Here's the host of the Martech podcast. Benjamin Shapiro.
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82% 82% of marketers plan to increase direct mail investment in 2025 according to Lob's State of Direct Mail Report, marketers are dialing up physical mail even as postal costs increase. So how can direct mail win as digital marketing becomes more prevalent and sophisticated? While we're not talking about your grandfather's batch and blast postcards, even if it looks analog, direct mail acts a lot like email with AI powered data driven triggers sent the moment your cart is abandoned, somebody shows up at your website. Any sort of digital triggers you can send off collateral that shows your products and then gives links back to what's happening online. Most marketers still think of mail as slow, expensive, impossible to measure, and they're missing how to link the physical touchpoint to digital conversions. I'm Benjamin Shapiro and joining me today is Ryan Ferrier, the CEO of Lob, the platform helping brands like Lacetane, RO and SimpliSafe build next generation mail at scale via APIs and a nationwide printing network. And today Ryan is going to show us how AI is transforming direct mail from legacy laggard to precision marketing weapon that cut through digital fatigue. Ryan, welcome to the Martech Podcast.
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A
Thanks for having me.
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B
Excited to have you on the show. You know I've long admired your company. Back in my last job, it's actually 10 years ago yesterday I was the head of marketing at an early stage startup and we were really reliant on LoB as it was just getting started. So I feel like we've both been in this game for a long time. It's great to finally get to sit down with you and learn a little bit more about it.
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It's great. To me, you've been familiar with LOB longer than I have. I've been at LOB seven years and known about LOB for eight years. You actually known about LOB before me.
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There you go. Well, let me teach you a couple of things about how the platform used to work. I'm sure it's totally different than what's happening now. And let's talk about the actual now of direct mail. Explain why Lob State of direct mail research report shows that companies are doubling mail volumes despite the rising costs of postage.
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Yeah, I think the. The large reason is that people have a ton of digital fatigue. I feel like for a lot of people, their email inbox has kind of become a graveyard. People understand that digital ads, with every incremental eyeball, it actually gets more expensive and the more accessible that the direct mail channel is becoming, folks are realizing that, that the actual mailbox is not as crowded as those digital channels. And particularly among Gen Z and Millennials, which is surprising. There's not the same fatigue. There's actually a kind of a, A, a wow, surprise and delight factor that comes with receiving something, you know, tactile and physical that you can touch. So those, Those are the major reasons. I think the other thing is we're seeing a renaissance in the channel because the folks that we work with can now speak the language of the cmo, and that's language about cost to acquire a customer. Roi, Omnichannel communication. And part of our mission, we have a Persona at these companies that we call Mailhouse Melvin. It's this person that. He's been in the mailhouse for the last 30 years at an insurance or financial services company. And we're really trying to transform that Mailhouse Melvin Persona into an ROI rock star Persona.
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Yeah, we're. We're moving Melvin to Just Mel.
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Yeah, just. Just Mel. Just Mel. And it's not just that. There. There's these folks who are undergoing their own professional and, you know, personal transformation. There's a new crop of marketers who, you know, they're. They're always hungry for another channel. And for them, direct mail is becoming the third leg of their stool next to email and digital ads.
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B
One of my dreams as a marketer was to come into a legacy brand that's gone upon hard times. And you sort of strip down the old warehouse and you show the exposed beams and get it back to what's cool and rustic and unique about it. And Then go forward into the market with this innovative new brand that's actually an old brand that has no like and trust already built into it. And, and you're kind of doing that, but not with a brand. You're kind of doing it with a channel, which is fascinating to me. I think it's interesting that you're talking about the reason why derail direct mail is having a renaissance is the digital fatigue and positioning, you know, digital advertising against direct mail. Why is it that the, the sort of channel and the physical nature of direct mail has a better impact than a traditional digital ad?
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Yeah, interesting. Well, and I will say, you know, for clarification, we encourage our customers to use direct mail as a part of an omnichannel communication strategy. Really at the heart of everything we do is the end customer, right? And so we want to deliver the right piece of content at the right time to the right person. And so digital's certainly a part of that for those brands. That said, you know, I think for so long a lot of these businesses have been built on these digital channels. And when I, you know, I'm gonna super date myself. But in, in 2008 or 9, I stepped into my first marketing role as a VP of marketing at a startup company. And Marketo was the platform that had just come out for, for email, email orchestration. And I remember just like devouring every, every piece of content marketo put out all around how to create conversions and build life cycle journeys in email. Because it was like, it was like the whole new world had opened up to me, you know, but you fast forward, we're, you know, what is it like 18, 18 years later and now people are getting way more email than they can handle. And, and it is like, it wears on folks and it's tiring. And then also just the open rates and response rates go down. And so I think now that folks have mechanisms to kind of measure some of this stuff for direct mail and speak about it. They're like, oh well this, you know, like we're just literally looking at the, at the numbers, you know, like I think good conversion metrics for email is like, if you're, if you gotta click through is like 1 to 3% conversions, whereas direct mail if you have just a list is 4% and then if you have a curated like house list, it's 9%. Right. And so I think in a world where people are, everything is moving digital. I mean we're doing this interview on, on Zoom to be able to get something that's personalized and physical that you can touch is, is meaningful. And I think part of our larger mission is just to create real world connections, right? To use what is really the most durable channel. I mean, direct mail has been around before, before email, before sms, before ads, all, all of these things and marry it with the digital so that you can have the roi, but then you can also have the tactile real experience.
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So you've got higher conversion rates with the channel and you're basically fighting against the saturation of digital. And it's funny because it used to be, oh well, I get all this junk mail at home, so I stopped paying attention to it, so people stop sending it. So everybody started piling in with the digital ads and now it's like, wait, the mailboxes are empty. Everybody run to the mailbox and hey, here we are again. There's another component here where the old way of delivering digital mail, right, we're not exactly folding up a letter, putting a wax stamp on it, delivering it by hand anymore. It's not just relying at the mailman to send the right piece of mail to everybody. You could be very tactical and specific. LOB has an AB API approach to direct mail. Walk me through what that is.
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Yeah, so we offer a suite of APIs that allow brands to integrate their CRM, CDP, you know, marketing automation platform, really wherever they house data about, about their prospects or customers, and integrate that with lob. In addition to that, we offer an address verification API which verifies that you're actually mailing to the right address. It's where a resident lives. We have a real time API that checks based on all of the mail that we're sending across the US if this is a valid address. And as well, the USPS has a database. Ours just is real time and USPS updates theirs on a less regular cadence. So all of that allows us to generate, you know, a mail piece. But for us, we think about it more like a web page. Everything we generate is via HTML and so you can infinitely personalize what you're doing. The only constraints are the address block, obviously, and then whether you're using a postcard, a letter, the size, right. And, and we use merge variables in order to allow people to customize and personalize these mail pieces. And then because you're subscribed via API, the actual sending of the mail piece can be triggered based on an event like somebody abandons a cart on your website or something like that. On the back end, what happens is, you know, you shared earlier we have a national network of printers and logistics providers across the US which allows us to print on demand. We give these people enough volume where they're ready to accept on demand orders for us, as opposed to most mail campaigns, you need to plan, you know, weeks in advance so they accept the orders on demand. And we're able to intelligently route them based on the geography of the recipient in order to cut down the lead time. And then additionally, you know, we'll go into great detail here. We're also able now to optimize the price of the mail piece for our customers by essentially taking some of that logistics away from the usps. And that way, when we're delivering it, you get lower postage rates.
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So I mentioned it's actually been almost exactly a decade. I was working@rinse.com, it's a local dry cleaning and delivery startup.
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Mm.
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And so we were launching new zip codes one at a time. Zip codes or area codes, I think it was area. I don't remember zip codes. It was zip codes. And in San Francisco, we would pick off sort of one region at a time, and we would just batch and blast. Hey, we're going to send direct mail to everybody in this zip code saying, our service is now available. And it was, you know, that was. We didn't have to target all that well, we just had to hit everybody.
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Yeah.
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But then we started to realize the power of lob was when somebody stopped using our service that had already used it before, we could send them a $20 off their next laundry order to try to get them to restart. So if you've been lapsed for 60 days, there's a trigger in our CRM. Now we print a piece of mail with your name on it with a unique coupon code. But the problem was it took a week or two to get that piece of collateral out there. You're saying now essentially that is happening relatively real time.
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Yeah, I mean, we, we can have, you know, the API call happens and then instantaneously you get a proof rendered, so you're not sending any proof back and forth. And then we can have it in queue, you know, at a printer within. Within minutes. We have different speed SLAs, depending on how fast you need something printed and you want it in the mailbox, you know, but we, we average. And again, these things always change based on the USPS's delivery speed, but about, you know, five days from API call to mailbox, and, you know, we can be as, as quick as three days.
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So within a week, you're able to Deliver a piece of physical collateral that's customized towards the end user. Talk to me a little bit about the cost. You mentioned that you're at the behest of USPS's delivery timing, but also they set some costs, which is one of the big hurdles for direct mail.
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Yeah. So the usps, you know, they're in charge of, of the postage rates. Right. And so one of the big changes in LOB really over the last two years has been we've gone from an extreme focus on these digitally native type experiences. Like, hey, you can do your omnichannel communication through lob. You can have trigger events on lob. We have a QR code offering that allows you to personalize your, your QR code with a personalized URL and a personalized landing page. Seeing all sorts of results there. Right. And so all these are very cool offerings for marketers to get more targeted and boost their roi. But in the last two years, we've gotten really focused on our logistics and fulfillment network. We have a product that we call Postal iq, which is simply how we think about batching and routing the mail for efficiency. And so one of the things that we're encouraging CMOs and marketers to think about is, hey, think about just the operations of your channel. Not over, only the more performance marketing aspects of it. Because if you, if you are using LOB and you tell us, hey, what matters at all costs is speed, then, you know, next day we'll have it out. Right. If you say like, hey, it's important for this campaign to get out by the end of month and we have a few weeks, well, that allows us actually to collate a bunch of volume and use our own logistics network. And the, the largest part of a mail piece is actually not the print. Right. It's the postage. So we'll use our own logistics network in order to get economies of scale, drive down the postage, and then pass that cost back on to you. And so really instead of, you know, like a programmatic direct mail solution, you know, we have elements of that. We're really an orchestration engine for direct mail.
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What I'm hearing from you is if you need the speed, you can get something there. You know, you said three to five days. But if you're optimizing for ROI and, and you can be a little bit more patient, you can essentially wait for demand to build up, and when you send more volume, your costs go down. It sounds like there's also a routing thing where you've got the national network where I'm in the suburbs of San Francisco. If I want to mail something to someone in New York, it might be a little bit more expensive. But if I'm using a service like LOB and the print is actually coming out of New Jersey, that's going to be less expensive because that's where your vendors are. When you talk about routing, is it where the mail is created and sent from or is it something different?
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It's actually a little bit of multiple things. But the USPS does give postage discounts for getting things to these national distribution centers. And additionally there's proposed legislation for the USPS for them to actually charge based on zones, meaning how close are you to the end recipient? And then, and then give other discounts or, or favorability based on that. That's something that know, may come in in 2026, may come in 2027, but it's something they're actively, they've put it up for vote in that world. This, the calculus of this really changes favorably for, for folks who want to use an approach like lob. But even in the absence of the USPS moving to a zone based model, what we've done is we've actually insourced. We don't own any printers, we don't own any print facilities, we have a partnership with dozens around the US but we're digitally routing and commingling mail. Commingling is a process by which you put a bunch of different mail pieces together, you get them all to the same zip code, you saturate that zip code, you get a lower per unit cost on the postage. We're actually doing that digitally because we have this national network of printers. We, we're doing that digitally before we print it. We're creating saturation and then, and then we operate actually our own commingling network. So this is like the moving of mail, not just the printing of mail. So we've insourced a number of these things. We also do paper procurement and other things insource. So the more of the supply chain we can control, the more we can optimize for the customers. And, and my mission is every time we get, you know, another percent of optimization, we pass that back on to the customer.
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All right, so you're not just hoarding forever stamps, you're actually a little bit more logical and, and combining multiple pieces of mail, getting to the right places, optimizing for cost. Let's talk about the other side, which is attribution. How are you solving the attribution puzzle for marketers?
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A
Yeah, and this is this is a huge thing. You know, I was on a call with a, a business that helps people get better prices on their utility bills by essentially operating as a marketplace. And this was a huge part of our discussion because in the, in the, in a previous life they had direct mail. They were confident it impacted these customer acquisitions, but they had a tough time doing attribution. Right. And so there's a number of things we're doing. One thing that we do is and we encourage every piece of mail that we have to go out with some sort of QR code. You can also do, you know, like a unique offer code or that sort of thing. But what a QR code allows you to do is it gives you a personalized URL that enables you to customize the end web page based on the experience that you want folks, that you want folks to have. You know, so to give you an idea, I'm trying to think of the customer name on this one. But Next Insurance. So Next Insurance, they are like a digital first insurance carrier. They're focused on small businesses. They, you know, they were triggering, they were triggering mail pieces based on events, but then they were also pre populating things for the documents that needed to be completed in these personalized webpage which led to folks renewing. Right. And converting because these things were already pre populated. Right. And so one, it was a personalized experience. It had that person's name. Obviously you can do direct attribution when you, you know, are sending someone to check out right there, but it allows for that type of personalization. So we encourage folks who are standing on lob to, to use a QR code with a personalized URL. Now that said, every time you have a QR code with a personalized URL does not mean that, that, that that person who converts as a result of the mail piece is going through that flow. And so what we encourage folks to do is to send a holdout campaign with direct mail, without direct mail and then look at the delta on top of the direct attribution that they're doing.
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B
So generally, what do you see when you're doing the, the holdout campaign? What's the type of roi?
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Yeah, so let me, I have another kind of, another customer example. This is, and I know these are, I mean I will disclaim these are, you know, higher than usual. What's possible, not what is expected, but like branch. So what branch does, is their, their home and, and auto insurers and they make bundling your coverage easy. They, you, they actually use Iterable as their marketing automation platform. So they've integrated LOB with iterable. And similar to the example that I just gave when they're, when they're sending folks through a campaign for renewals or cancellations, things like that, they found that when they personalize and they use a QR code, they've got 25 to 30% conversion rate with the compliance ready audit. So because they've done all the compliance rate, all the, all the stuff ready for people to go through this compliance audit, they land on a personalized URL where all this is populated. 25% of folks actually convert. Right. So that's like the, that's, that's the art of the possible. Now, you know, as, as a benchmark, we see personalized your URLs have about a 5% conversion rate, which, you know, compared to other channels, is high.
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B
Yeah. You know, it's funny because I think of how much direct mail we get and I filter through the mail and I get this 3 to 5 inch stack of paper that I put in the garbage and don't pay much attention to. And then I get things like bills, letters from grandma and grandpa for the kids, and occasionally there's a print magazine that I'm taking a look at. I don't necessarily respond to a bunch of the advertisements. And maybe that's just personal selection. And you mentioned before that younger demographics are tending to lean towards and respond more to direct mail. Why are, maybe I'm just in the middle. I'm not Grandma and grandpa who are only looking at advertising from the mailbox. I'm not the younger person who thinks that it's novel. Why are the younger generations embracing digital mail even if they're digitally native?
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A
Well, let's actually, you had me on another thought. And so I will answer that question, I promise you that. But I had this experience and this actually speaks to, to, you know, the younger demographic and, and how they operate. But I had a, I had an experience with LabCorp. You know, I had some lab work done at LabCorp. I'm not sure if you're familiar, it's like Quest Diagnostic or something like that. And they're really good at collections. But anyway, so they sent me a physical mailer. I, I, I saw it was a bill. I have my stack, my, I have the same thing. I sort and stack and we get a bunch of, we moved into a new home two years ago and so we still get catalogs, you know, from Restoration Hardware and all. And as soon as I see them, like, all right.
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Let's throw them away before anyone gets the restoration hardware. What drives me nuts. It's so big. And I'm like, how much are you spending? I've already decorated my house. You need a QR code for don't send me this.
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Yeah, I mean, and there. But, you know, it's obviously the ROI is there, so they, they invest. But, you know, I quickly get those out so that we're not buying some crazy piece of furniture. But I have a stack of things that interest me, whether it be an offer like for HelloFresh or something like that, or, or another meal service. And then my bills. Well, I got that. I understood I needed to respond to it. There is a QR code on the, the thing. I just didn't do it. And then Quest Diagnostics gave me a text message or, no, sorry, LabCorp. I use LabCorp. LabCorp gave me a text message. I go back to the mail piece. I look at, I'm like, okay, that's how much it costs. I click on the link in the text message. I complete it right there with my mail piece, you know, in front of me. And so for me, that's, it's an operational use case, not a, not a, a marketing use case. But that's a good example of, of how you use an omnichannel communication to, to, to take action. So let's talk about Gen Z Millennials.
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Sure.
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So we surveyed, I think it was 2,000 customers. Right. So we also, we, we surveyed over 250 businesses. We do a state of direct mail report with a group called Mintel. They do a lot of research and reporting. 85% of Gen Z said that they read or respond to mail, and 67% say that they take action as a result of mail. 58% of these same, the same demographic said that they feel overwhelmed by these digital brand messages, and 53% say that direct mail feels more special or valuable. And so with.
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Let me, let me jump in here. I don't want to bury the lead. And I think that's the most important thing. 53% of Gen Z and Millennials, let's call that the younger generations are feeling like getting direct mail is special. Like, that's, that's the headline.
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A
Yeah. And, and as a result, you know, we're seeing a resurgence even to that, to that demographic. Right. And so, you know, we have companies on LoB who do a lot of customer acquisition for Medicare and Medicaid. And mail is a proven channel that works really well there. But we also see a lot of Folks that are doing direct to consumer e commerce brands. These meal services that I referenced, all targeting, you know that Gen Z and Millennial Group because of that, because they feel as though, hey, this is, this is a more special communication tailored towards me.
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All right, last question for you about direct mail. Specifically, I would be remiss if I didn't talk about how AI is impacting every marketing channel. Give me a little bit of a blurb on what's happening with AI and what's its impact on the channel.
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A
Yeah, so we, again, for us we're an end to end orchestration layer. So we, you know, we, we take mail from like just inception and creation all the way through fulfillment and, and AI is now touching every piece of that journey. So we partner with a company customer IO, they allow people to use AI to generate different marketing copy. You know, you can use prompts in order and people want to know how do I AB test or what do I AB test? How do I multivariate test? Right. So we'll partner with them to, to test creative. We don't have this live, but we've been exploring, hey, let's use AI to, for those businesses that maybe don't have access to a creative agency, let's use AI to generate these images. Now I think different marketers have different opinions. Some people think that, hey, these images still look too polished. You can tell they're AI images, but it's getting really, really close. And so even in the, in the, in the image creation portion, we're using AI. But for us, really it's on the back end where the most powerful AI is happening. I'll, I'll give you a couple, one concrete example and then, and then one application we're using across our network. But we have a large online real retailer, household name for them. Speed to Mailbox is really important. We fortunately have optimized the network where we can achieve really fast speeds. Even, even when you're using standard class mail, the way that it works is first class mail, you're guaranteed a speed, right? And so you, you pay a premium for that first class mail for this, for this online retailer, what we've done is we've, we've got an algorithm running that analyzes all of their past mail and the delivery patterns for the usps in the different regions that it's hitting and gives them a recommendation that says, hey, you could send this standard class and still, still get it there at the same time as if you had sent it first class. And so whenever that response comes back as you know, it's the same speed. We actually just automatically, via API, trigger a standard class mail piece as a, as opposed to a first class mail piece. You know, so we're saving several cents on every mailer that they send out where they do this. The other thing that we're doing is we're, we're using AI to look at delivery patterns, scrape for undeliverables. They, you know, in the USPS database, it may say that, hey, this is a valid address, but it's been undeliverable at lob, you know, X number of times. And then we're having like, like a recommendation to folks saying like, hey, we would not send this. We don't believe this is actually going to be a deliverable address. And that can save folks, like literally millions of dollars a year on unnecessary mail sends. And then finally, we're using AI in our routing algorithm. And so like I said, we have all of this data and we have atomic level data because we keep it down to the mail piece. We don't just say, hey, it went on this pallet. We, we have a unique barcode for every single mail piece that goes through lob. And so then we're able to look at send patterns to optimize and forecast one, what we think our saturation will be, and two, or our speed will be. And that allows folks to determine the cost structure they want to enter into. So is like, hey, given these send patterns, would you rather wait or would you rather speed up this mail piece? Right. Um, and so really, from start to finish, we're using AI in the platform.
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B
My takeaway is that there's two levers and they move in opposite directions. It's speed and it's cost. And AI helps you dial in where the levers should be based on what you're optimizing for.
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A
You said it perfectly the way that we. We have a couple core pillars for our business when we operate with our team. One of them is agility. And we aim to match speed and costs better than any other provider in the world. So, yeah, that's what we do.
- [32:32]
B
All right, that wraps up this episode of the Martech podcast. Thanks to Ryan Ferrier, the CEO of lob, for joining us. If you'd like to contact Ryan, you could find a link to his LinkedIn profile in our show notes or on martechpod.com or you can visit his company's website, which is loblob.com if you haven't subscribed yet and you want a daily stream of marketing and technology knowledge in your podcast feed, hit the subscribe button in your podcast app or subscribe on YouTube and what we've back in your feed next week. All right, that's it for today. But until next time, my advice is to just focus on keeping your customers happy.