In proportion: Royal Mail’s new pricing


This week, Royal Mail has launched a direct mail campaign aimed at helping businesses prepare for the introduction of its new pricing system. How will the new system affect the average small to medium-sized reseller?

Royal Mail’s pricing in proportion (PiP) initiative, which is to be introduced on 21 August 2006, marks the organisation’s first price restructure in its history. It is expected to have a significant impact on some small and medium-sized companies.


The new pricing method takes into account the size and shape of mail as well as its weight, currently the most important factor. Bulky but light packages will likely go up in price; heavy but compact parcels will likely go down. Items over 1kg will not be affected, revealed Royal Mail.


"It is a revenue-neutral move to better align prices with costs," James Eadie, senior external relations manager at Royal Mail, explained to OPI+. "The new price will better affect the cost of collecting, sorting and delivering mail. It’s all about the space the package takes up in the van, how it runs through our machinery. A large proportion of letters can be done by machines that sort 30,000 items an hour, for example."


Eadie added that 70 per cent of its business stamp mail will not be affected, and of the 30 per cent that will be, around half will go up in price, half will go down.


As an example, Eadie cited that the price to ship the Harry Potter hardback will go down from £2.71 to £2.06 under the new pricing system; a DVD will go down from $0.46 to £0.42. Meanwhile, two sheets of A4 paper in an A4 envelope will go up from £0.30 to £0.42 under PiP. But if these sheets of paper are folded into a smaller-sized envelope such as C5, the price will remain at £0.30.


"We are currently undertaking an extensive £10 million ($1.7 million) awareness campaign, incorporating TV, radio and press advertising, to make sure all our customers are aware of the changes so they can prepare for and understand the changes," said Eadie. "In addition, we have sent out packs providing information on the pricing system and advice on how to manage the impact of PiP to half a million small, medium and large businesses from this week."