Finding the sweet spot in direct mail: Cost-effective targeting with AI optimized EDDM

It's 2025, and direct mail isn’t just alive—it’s thriving.

Despite the rise of digital channels, businesses continue to invest heavily in direct mail because it works. Consumers engage with physical mail in ways that digital ads simply can’t replicate. Seniors rank it as their second-favorite method of business communication, and even Gen Z—raised in the digital age—often find it a welcome reminder of the tangible world. In fact, over one in ten Gen Zers say direct mail is their favorite way to hear about banking rewards, proving that a well-executed campaign can capture attention across demographics. So it’s no surprise, then, that companies are doubling down, with a staggering 82% of businesses having increased their direct mail budgets in 2024, a sharp jump from 58% in 2023.

And the reason? Direct mail delivers. As our partner, Lob—one of the best direct mail providers in the business—reports it, nearly 4/5 of executives they surveyed last year said that direct mail was their best outreach channel. That’s how much value they see it driving for their brands. And as AI and automation tools continue to improve execution—now used by 56% of marketers, up from 40% in 2023—direct mail is becoming even more effective, making it an essential part of modern marketing strategies.

But here’s the catch: it’s not always easy to implement.

Firstly, it can come with a serious price tag. Marketers are finding themselves paying more and more each month to reach high-intent prospects via mail. The United States Postal Service (USPS) plans to raise stamp prices five times by 2027, with a significant increase expected in July 2025. This follows a 5-cent hike in July 2024 and a series of price increases in recent years, raising stamp costs by 36% since 2019. Additionally, USPS has outlined plans for twice-yearly increases in 2026 and 2027, subject to approval. With rising costs adding up quickly, maximizing the efficiency of direct mail campaigns has never been more important. Secondly, even the best campaigns need to be smart to get good response rates. Even if your messaging is on point, your product is best-in-class, and your brand is well known, it’s very possible that many of those sends won’t get a glance if your campaign isn’t properly targeted

So you’re likely starting to get the picture. That despite the cost going up, direct mail isn’t going anywhere.

But where does that leave the rest of us marketers? Those without unlimited budgets. Most of us need to carefully manage each and every dollar of marketing spend to ensure the greatest value for our brand, and that means direct mail is a fantastic but risky tool that needs to be used correctly.

So what should we do about it?

One of the best solutions for managing the low response rate problem is comprehensive direct mail targeting. Highly targeted campaigns allow brands to send mailers to only the most promising prospects, improving conversion rates. However, this approach also has its challenges. First, fully customized direct mail campaigns can still be expensive, as they require detailed audience segmentation and personalized messaging. Second, they can be too complex for many brands, requiring significant time and resources to manage effectively. Third, they depend on high-quality data to ensure accuracy. Although Faraday customers don’t have to worry about many of these issues thanks to the Faraday Identity Graph (FIG), which provides rich consumer insights on nearly every US adult and their households, for better targeting, as well as our powerful AI agents, which handle personalization and optimization, automatically, this tool is still effortful and overkill for some campaigns. Finally, postage for first class mail is three to four times the expense of bulk mailing options.

On the other end of the spectrum, the USPS offers a more budget-friendly option: Every Door Direct Mail (EDDM). EDDM allows marketers to send mailers to every address along a specific mail carrier’s route, without the need for custom prospect lists or addressing individual recipients. This can significantly reduce costs, sometimes as low as 20 cents per mailer, making it an attractive option for marketers looking to cut down on expenses.

However, the trade-off is clear: while the cost savings are substantial, EDDM lacks the targeting precision that custom direct mail offers. Since it sends to all households in a given area, marketers can’t ensure that their mailers are reaching high-intent or relevant prospects. This lack of segmentation means that some of the mailers will inevitably go to recipients who may have little to no interest in the product or service being advertised. As a result, brands risk wasting valuable marketing budgets on less targeted customers, potentially diluting the effectiveness of the campaign. Additionally, without the ability to target specific demographics or behaviors, the impact of the message might not be as strong or relevant, leading to lower conversion rates.

So, marketers often find themselves stuck between two good but limited options. Both can be powerful, but in some cases, neither can meet their exact needs. Do they want:

• High-cost, highly targeted direct mail campaigns, or
• Low-cost, more loosely targeted EDDM campaigns?

As is often the case, a middle ground option would often best serve the needs.

Enter: AI optimized EDDM

That’s exactly what Faraday has provided with our new high propensity AI optimized EDDM service. With approximately 15 carrier routes in an average zip code, knowing which ones perform best could strike the perfect balance between cost and effectiveness. Instead of choosing between expensive, hyper-targeted direct mail and inefficient, low-cost EDDM, brands can optimize their spend by targeting the best routes available through EDDM striking a balance between the other options.

Carrier route aggregation provides a new tool by which brands can identify the carrier routes most likely to contain high-converting prospects but this functionality isn’t entirely new. Instead it expands on other existing aggregations we offer, including those at the state and household level (among a range of other options). But this feature is uniquely designed to take advantage of the EDDM option provided by the USPS. For marketers looking to take advantage of this specific service is a more targeted and efficient way, carrier route aggregation can be the perfect answer. With it, Faraday empowers clients to:

• Identify high-propensity carrier routes
• Deploy cost-effective EDDM campaigns with improved targeting
• Reduce waste while maintaining strong performance

And it is important to note that we’re not suggesting that aggregating by carrier route level is some magic bullet that will solve all your direct mail problems. The reality is that knowing which targeting method is best suited to the situation in question is the most important question to answer for effective targeting.

Luckily for our clients, we have a team of expert, forward deployed data scientists (as well as some pretty spiffy AI agents) who can help you answer those questions or just solve the problem for you. At Faraday, you don’t just get predictions, you get targeted implementation strategies that mean those predictions can actually move your business forward, quickly.

Client example

Let’s unpack how this is already helping one of our home service clients.

Before this new feature, this client was dropping ~10 million EDDM mailers a year relying on broad demographic filters like household income and age to choose carrier routes. After developing and deploying a likely customer AI agent across their service territory, they discovered that the top 10% of routes identified by the model delivered more than 3x the profit per route compared to their previous average.

In practice, the client was able to maintain the benefit of EDDM’s lower cost while still ensuring that mailers reach the most likely converters, resulting in significantly improved marketing and sales KPIs. The bottom line? Smarter targeting makes direct mail more efficient, cost-effective, and impactful—helping brands win more customers while optimizing their marketing spend.

In conclusion

Direct mail isn’t going anywhere, but the way marketers use it needs to evolve. Rising USPS costs make efficiency more critical than ever, and blindly choosing between ultra-targeted campaigns or broad EDDM mailings isn’t always the smartest move. Instead, the key is flexibility—having the ability to adjust your strategy to get the best return on your marketing spend. Services like Faraday provide this flexibility and the expertise to utilize it effectively.

We’re not here to tell you that carrier route aggregation is the only answer—but we are saying that using the right tool for the job will make your direct mail campaigns more cost-effective and impactful. Sometimes, broad, untargeted EDDM campaigns make sense (like when you need to reach every homeowner on a street). Other times, hyper-targeted mailers are worth the investment. And now, with carrier route aggregation, you have a powerful middle-ground option to strike the perfect balance between reach and efficiency.

At Faraday, our goal is to equip you with the best possible tools for any situation. Whether you need pinpoint accuracy, cost-effective broad reach, or something in between, we’ve got you covered. So what’s stopping you? Hate making money? If not, let’s talk and see how Faraday can help you optimize your direct mail strategy today. Sign up here for a free trial (with a complementary predictive model validation).