Pricing in Proportion

By The Drum | Administrator

May 18, 2006 | 5 min read

As is the way, nothing stands still forever, unless that is, you’re waiting in line for Splash Mountain at Disney World... Despite having used the same scheme for decades, Royal Mail will this year switch its postal charges - traditionally based on weight - to size.

From 21 August, Royal Mail will change its pricing policy for posting and delivering mail throughout the UK. This new scheme, ‘Pricing in Proportion’ (PiP), will see letters and packages priced in relation to their size, rather than their weight.

Industry regulator Postcomm has approved the new proposals, which will introduce mailing prices that Royal Mail believe will reflect their costs.

How much will this affect the Scottish marketing industry, with the use of electronic mail and courier services taking away from the use of the traditional mailing service?

The price of posting a regular letter with a maximum weight of 100g currently costs between 32p-49p to send first class. The new system will have a fixed price of 32p at first class and 23p second class.

The real difference in pricing begins with packages of A3 or A4 sized mail.

A3 size mail, which includes many magazine sizes with a maximum weight of 750g, currently costs between 32p and 49p.

Explaining why Royal Mail has found it necessary to introduce PiP, a spokesperson said: ”Under the current system, the price paid for posting a certain piece of mail does not actually reflect what it costs Royal Mail to collect, sort and deliver the item. For example, if you want to send a poster, rolled up in a cardboard tube, it will not weigh very much and will currently be very cheap to post. However because of the awkward shape of this parcel it cannot be sorted by machine and is therefore expensive to the process.

“The cost of mailing a monthly magazine such as Elle under the current system would be £2.69 for first class delivery, but under PiP the cost of sending first class will drop to £1.31.”

He continued to say that about 80% of businesses would be unaffected by PIP and that almost two thirds of businesses would find their postage costs to be lower.

“Probably the most straight forward way for businesses to save money is simply to fold A4 documents in half to post them as C5 letters, which if the letter weighs 100 grams will only cost 32p to post instead of 49p under the current system” he concluded.

A spokesperson for one distribution agency – who understandably didn’t want to be named - expressed some concerns about what the introduction of PiP would have on his agency. “We believe that initially it is going to be a costly exercise for anyone doing any mailings as Royal Mail are trying to organise consistency by breaking all mail into three basic categories,” he said. “I believe that anyone sending large mailers should be making sure that the promotional material being posted stays in size to one of the three categories that Royal Mail are offering, the smaller the better.”

In the build up to the implementation of PiP, Royal Mail will launch a £10m awareness campaign incorporating TV, radio and press advertising. Advertising will also be placed in all 14,500 Post Office branches, and every UK address both businesses and residential, will be sent information on the changes.

Alex Walsh, head of postal affairs at the DMA, also expressed concern. “I am concerned about Royal Mail Communications not reaching appropriate people in larger business, and not reaching small businesses at all,” he said. “Royal Mail will be carrying out a major public communications programme in June or July and, hopefully, will pick up all those who are currently unaware. Companies need as much notice as possible so that they can plan changes and not be adversely affected by PiP.”

Walsh went on to explain that, while he believed it was still too early to determine what impact the new scheme will have on direct marketing, he could see some benefits for publishers. “The publishing industry could benefit from PiP because of extra weight for no extra cost, allowing more pages, advertising, inserts and being able to use polylopes for their magazines,” he said. “PiP allows for a polylope ‘tail’ not to count in the overall dimensions so that they can be classified as a large letter.”

Kathy Crawford, business manager of the Periodical Publishers Association (PPA) said that they had worked closely with Royal Mail and negotiated what they saw as a fairer system for all concerned.

Crawford said: “There were a number of issues that the PPA were concerned about, but we’re much happier now. I think that one of the key issues was that Royal Mail was not going to be so flexible on the threshold. They were going to implement a 20mm threshold, which would really have penalised the magazine format. But they have re-planned and will now be using a 25mm threshold.”

“However, companies need to be aware of the changes, especially if they are already working on a design for something due in September, as they will need to know the parameters.”

PiP may turn out to be a positive move for Scottish marketing and media, if Royal Mail’s belief that it will save companies money rings true. Either way, companies will need to learn to live with the new pricing system, or find alternative methods to Royal Mail for transporting work from agency to client.


Industry insights

View all
Add your own content +