Postal Codes: An Ultimate Guide

A postal code is a series of letters and/or numbers added to a mailing address to help identify the precise location of an address. The format and length of postal codes vary by country, as shown in the examples below: 

While the earlier purpose of postal codes was to simplify mail delivery, they now make an important identifier in a database, allowing for easy tracking, consolidating of data, and for geo-targeted marketing. This means postal codes need to be accurate, valid, and complete. You can only ensure your postal codes meet these quality guidelines if you are aware of its structure and anatomy. Without having an in-depth understanding of postal codes of your specific region, you will not be able to identify critical postal code errors. 

Let’s take a look at a postal code structure in the example below.

Since postal codes with a combination of letters and numbers are the most prone to errors, we’ll use the UK postal code structure to understand what the characters represent. 

The UK postal code has two parts: the outward and the inward code. 

Outward Code: 

The outward code consists of the first part of the postal code, which is composed of the first 1-4 characters. In this example, “WC1A” is the outward code.

The first character of the outward code represents the postal area. The postal areas in the UK are divided into different regions and are assigned letters, ranging from A to Z, except for the letters C, I, K, M, O and V. In this case, the letter “W” represents the postal area of London.

The second part of the outward code is a number or letter that represents the district within the postal area. In this example, “C1” represents the Bloomsbury district of the London postal area.

Inward Code: 1RL

The inward code consists of the second part of the postal code, which is composed of the last three characters. In this example, “1RL” is the inward code.

The first character of the inward code represents the sector. The sector is a subdivision of the district and is used to further define the delivery location. In this example, “1” represents the first sector of the Bloomsbury district.

The last two characters of the inward code represent the unit or building, such as a specific street or building within the sector. In this example, “RL” represents a specific address or building within the first sector of the Bloomsbury district.

While postal codes across the world have the same functions and purpose, their structure is varied. When you’re handling customer data and need to standardize or clean postal codes, it’s imperative to understand and know the structure of a country’s postal code. For example, the postal code for Canada has a similar combination of letters and numbers as the UK postal code, however, it is separated by a space in the middle, which means when you’re standardizing a Canadian postal code, you have to be mindful of the space between the first and second set. 

Accuracy matters! But you cannot achieve accuracy without being aware of the different standards and guidelines of postal codes. 

Because each unit in a postal code represents a certain location, it needs to be accurate to point to the right address. For example, if the WC1A code is accidentally written as WC21A, it would represent a different district than what was intended. 

Accuracy matters because incorrect or invalid postal codes can disrupt operations both for the sender and receiver. For example, mail delivery failures, lost packages, delayed shipments, etc put both parties at a loss. 

More importantly, now that businesses and government agencies are using address data for crucial operations, it is necessary for postal codes to be validated and verified. 

Some business areas where valid postal codes are important include: 

Better customer experience: When a customer’s mail or package is delivered to the wrong address or is delayed due to an incorrect postal code, it can lead to a negative customer experience. Validating postal codes ensures that customers receive their mail and packages on time, leading to a better customer experience. Companies can also risk legal consequences by mailing sensitive documents to the wrong address! 

Reduced costs: Invalid postal codes can result in returned mail, additional delivery attempts, and other extra costs that businesses have to bear. Imagine packing, labeling, posting parcels to the wrong address, then having to receive them as returns, then packing, labeling, reposting – again. Not only are you bearing the material and logistic costs, you’re also bearing extra labor costs which could have been prevented with valid address data! 

Compliance: In some industries, such as healthcare and finance, there are strict regulations and compliance requirements that mandate the use of accurate postal codes for data management. For example, the Health Insurance Portability and Accountability Act (HIPAA) in the United States requires healthcare providers to maintain the privacy and security of patients’ protected health information (PHI). this includes a patient’s name, address, and medical history. To comply with HIPAA regulations, healthcare providers must ensure that the postal codes they collect and use for patients are accurate and up-to-date. 

Spatial analysis: Valid postal codes are required for spatial analysis, which involves analyzing geographic data to gain insights into customer behavior, demographics, and trends. For example, a retailer can use postal codes to analyze sales data by region, identify areas with high demand, and make data-driven decisions about inventory and product offerings.

Cross-border shipping: Validating postal codes is especially important for cross-border shipping, especially when it comes to clearing customs. If the postal code is incorrect, the package is held up, resulting in additional fees and charges. In some cases, the package may be confiscated or destroyed if it is not cleared through customs. 

To put it bluntly and honestly, poorly collected or poorly maintained postal code data can affect your business operations in more ways than one. 

But what are common postal code errors and how do you prevent them from happening? 

Read on. 

Postal data is often prone to errors that occur at the point of data collection. For example, a sales or customer rep may misunderstand N for M. Even when the right phonetics are used, there is always a chance of human-caused errors. Further, errors can also be caused by poor form validation practices where users are required to enter their postal codes or address manually. 

Some of the most common postal code data errors we’ve seen in client databases are:  

Missing or Incomplete Postal Codes: It’s not uncommon for customers to miss out a number or a letter when entering postal code data. If you don’t have effective form validation practices (such as making 6 figure entry mandatory), you will have incomplete data. Some customers may also just provide address data but not accurate postal code data. You can avoid this issue by implementing automated validation that checks for a valid postal code in real-time as data is entered or uploaded. 

Incorrect Formatting: Most people fail to follow the proper lowercase requirements when entering a postal code. Some may just write lowercase letters in a hurry which leaves your database untidy and poorly structured. For example, customers would often skip adding a space between the two sets of a Canadian postal code. This causes your database to contain varied versions of the same type of data, leading to validation issues later down the line. 

Invalid or Outdated Postal Codes: Postal codes are regularly updated to represent new settlements and areas. If your database has obsolete codes, you could be sending out mails to an invalid mailing address.  To avoid this problem, you must regularly match your address data with a government address database and ensure you’ve got accurate locations. 

Typographical Errors: Typographical errors in postal codes can also be a problem, such as swapping two digits or accidentally adding an extra digit. To avoid this issue, we can implement automated validation that checks for common typos and provides suggestions or alerts when errors are detected.

Here is an example table that shows common postal code errors and how to avoid them:

To avoid these errors, it’s important to use address validation software that can standardize and verify the accuracy of postal codes. Additionally, your data entry personnel should be trained on proper formatting and double-checking for accuracy. If your business relies heavily on web forms and data input from customers, then it’s even more important to ensure you’ve got strong form validation put in place. For example, instead of letting the customer type out their data, you could provide drop down options or use predictive text analysis that enables them to select the data instead of having to manually type it all down. 

Remember, the goal is to minimize the chances of error at the data entry point so you have a reduced workload when analyzing or using the data for business purposes. 

We spoke to several data quality managers to get the best tips for managing postal codes. Given below are some tips from experts around the world. 

Set a postal code standard: While it’s easy to set a standard based on your country of operation, it becomes a challenge if you’re a global business catering to customers worldwide. In this case, you would want to ensure your database is flexible enough to handle the different variations and formats of a postal code and that you’re able to categorize this data efficiently. You can create automated validation rules that can cater to a postal code format based on the country selected. So for example if a user clicks United States, your data form should allow only for numeric zip codes to be entered. 

Validate postal codes at the point of entry: Businesses should validate postal codes at the point of entry, whether it’s through an online form, a customer service call, or another channel. This can help catch errors or inconsistencies in real-time, reducing the likelihood of failed deliveries, returns, and additional costs. For example, if a customer enters an incorrect postal code when placing an order, the validation process can flag the error and prompt the customer to correct it.

Store postal codes in a separate field: Businesses should store postal codes in a separate field in their database or CRM, rather than within the address field. This can make it easier to validate and update postal codes as needed. For example, if a business needs to validate all of the postal codes in their database, they can do so more efficiently if the postal codes are stored in a separate field.

Use standardized abbreviations and formatting: Businesses should use standardized abbreviations and formatting for street names, unit numbers, and other address components. This can help ensure consistency and accuracy in the address data, including the postal code. For example, if a business uses “St.” instead of “Street” or “Apt.” instead of “Apartment,” it could result in inconsistent data that is more difficult to validate.

Regularly Update Postal Code Data: Postal code data can change frequently, especially in rapidly developing areas. To ensure the accuracy of our postal data, regularly update our postal code database by matching your postal data with a government database such as the USPS. You can use a CASS certified tool like WinPure to verify your postal code data. 

Conduct Regular Data Audits: Regularly auditing our address and postal code data can help identify any inconsistencies or errors that may have been missed during the initial validation process. This can be done using a combination of manual and automated techniques, such as comparing address data against official postal databases, checking for formatting errors, and reviewing any flagged records for further investigation.

Implement a Data Governance Framework: To ensure consistent and effective management of address and postal code data, implement a data governance framework. This would include defining policies and procedures for data collection, validation, storage, and maintenance, as well as assigning roles and responsibilities for data management. By implementing a data governance framework, we can ensure that our postal data is managed consistently and effectively across the organization, reducing the likelihood of errors and improving overall data quality.

By implementing these best practices, you’re saving your team and your business from legal confrontations, penalties, unnecessary shipping costs, unhappy customers and a lot many other troubles. While in the past, postal address data may have been important just for mail deliveries, these days it’s used in multiple purposes – from identifying and tracking people, to geo-targeted marketing/advertising, to launching strategic business initiatives. It’s no longer just for mailmen!