Royal Mail: Opportunity knocks

This month's changes to the way Royal Mail charges for mail means businesses need to act now to avoid higher bills. However, just as many need to act now to ensure they don't miss an opportunity, says Alex Blyth.

On 21 August Royal Mail will change the way it charges for mail.

From that date the amount paid for postage will be determined by the size and shape of your letter or parcel, as well as its weight and the speed of its delivery. This is a major change, which Royal Mail estimates will affect 30% of all business mail. Yet many businesses are unprepared for the change. When they receive their first higher bill for postal services they will probably sit up and take notice. By acting now, however, businesses can save themselves that shock.

What is PiP?

Royal Mail first mooted the idea of pricing in proportion (PiP) in 2002, and since then has been through several rounds of consultation. As a result, from 21 August, mail items will fall into three categories. There will be letters, which will measure no more than 240mm by 165mm by 5mm, and weigh no more than 100g. There will be large letters, which will measure no more than 353mm by 250mm by 25mm, and weigh no more than 750g. Then there will be everything else above these measurements.

Light bulky items, such as poster tubes, greetings cards with badges attached and large sized cards, will all be more expensive to post. However, compact but heavy items, such as books and DVDs, will cost less to post.

Royal Mail argues that this pricing structure more accurately reflects its costs and allows it to compete effectively in what is now a fully competitive postal market. Overall, Royal Mail will make no extra revenue from PiP.


Some see it as a problem. They believe that it will cost them more, and in many cases this is indeed the case. The Central Office of Information, which provides marketing support to government departments, has commissioned a study which revealed that, if it were to do nothing about PiP, its costs would rise by 6%. It posts many large, lightweight booklets and it estimates that these will be 40% more expensive to send.

Some in the direct marketing industry claim that PiP will stifle creativity.

Richard Hallam, chairman of McConnells, an advertising agency, which spends around £1m a year on direct mail, says: 'I don't think that the creatives in our industry should be forced to work solely within an A4 format, which is what will happen with PiP. The danger is that every industry will become like the insurance sector, where it's already impossible to distinguish between mailers from different companies.'

For its part, Royal Mail is trying to play down the implications. It expects that 70% of business mail will be unaffected by the changes. However, a growing number of business people are beginning to argue that PiP presents a major opportunity.

For one thing, at least half of the 30% of mail that is affected will be cheaper. Steve Crossland, production manager at direct marketing agency JDA, says: 'Some businesses could benefit greatly from price reductions.

We currently post an average of 500 parcels per day for one of our clients.

Each of those parcels weighs 950g. When PiP comes into effect that client will save around 10% on its postage costs, roughly £30,000 a year.'

There are also many opportunities around the fact that a letter weighing 100g will cost as much to post as one weighing 60g. Companies will be able to fit more information in their mailings, perhaps include marketing messages with transactional information, or send one mailing rather than two. Some companies might even begin to take inserts from non-competing companies with the same target audience, thus turning the excess capacity into a revenue stream.

Yolanda Noble, chief executive at mailing services provider Corporate Mailing Matters, believes that the direct marketing industry will have to change. He says: 'Marketers will need to start sending the larger, more eye-catching mailings to their most profitable customers and those most likely to respond. They will need to send lower cost, standard-size mailings to less profitable customers and to those less likely to respond.'

Many creatives are looking forward to the challenge of working within these new constraints. Chris Ward, managing director at Personal Communications, a direct marketing agency that works for companies such as Barclays, Bulldog and BMW, says: 'Too many marketers produce low quality direct mail in the knowledge that if they send it to enough people they'll get enough response. These changes to prices will do a lot to get marketers to focus on producing fewer, higher quality mailers.'


So, while some businesses need to act now to avoid higher bills, just as many need to act now to ensure they don't miss an opportunity. Royal Mail believes it has been working hard to tell its customers about the imminent changes. James Eadie, group communications manager, says: 'In January 2006, we sent PiP information packs to half a million businesses across the UK. We have invested £10m in an extensive awareness campaign, which will include TV, press and radio advertising, a direct mail campaign to every address in the UK and information in all 14,500 Post Office branches.'

Ignorance will be no excuse. There are several sources of help and advice, such as the PiP customer services line on 08456 113113, but the action required is, in most cases, fairly straightforward. Declan Bermingham, marketing manager at mail room supplier Neopost, says: 'You need to audit all your outgoing mail. Use Royal Mail's website to work out how prices will change. You should consider a franking system, as that will become 2p cheaper than stamping. You should look at whether you are using the best envelope size, and whether you can aggregate any of your transactional mail.'

All of this is fairly simple to do, but will be time-consuming, so it is important to start as soon as possible. Roger Williams, marketing director of the Abacus Alliance, a data sharing collective, comprised mainly of catalogue companies, reports that most of his 600 members are fully prepared.

He says: 'Last year I conducted a survey into their attitudes towards PiP and found that 60% of them regard it as an opportunity to grow their businesses. I think every business should look at it that way, and should start thinking now about how they can benefit from it.'

One accountancy firm's view Unity is an accountancy firm based in Bolton. It has around 100 staff and is one of the top 50 firms in the UK. Mike Gillibrand, finance partner, says: 'The crux of PiP is that the cost of mailing an A4 envelope is increasing by 40%. We use these a lot for mailing tax returns, engagement forms and so on, so I reckon that if we do nothing, PiP could cost us around £5,000 a year.'

Unsurprisingly, Gillibrand does not intend to do nothing. He has called the PiP helpline and reviewed his situation. He says: 'This will hasten our progress towards the paperless office. Revenue & Customs already wants us to submit returns online next year, and we can process most of our documents electronically. It's only legal documents like property deeds that still need to be posted.'

The firm is also looking to advise its clients on how PiP will affect them and what they should do. It will proactively contact those clients it thinks will be most affected by it. Gillibrand concludes: 'This is an opportunity to review postal procedures and to tighten up on them.

Although the post is a neglected area in most businesses, with the introduction of PiP no one can afford to ignore it.'

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