Pricing in Proportion

 

What is Pricing in Proportion?

Pricing in Proportion is a way of pricing mail on the basis of its size as well as its weight, as this reflects the costs of handling letters and packets in modern postal systems.

When was the new method of pricing introduced?

Pricing in Proportion was launched on 21st August 2006.

How Pricing in Proportion works

There will be three sizes for ordinary mail:

1. Letters - most small and medium envelopes up to half the size of A4.
2. Large letters - most larger envelopes up to A4 size.
3. Packets - anything else.

Mostly, you will be able to tell which category your mail is in by the size of the envelope, but you will also need to consider its thickness and weight.

Who will be affected?

Pricing in Proportion will affect all Royal Mail customers:

Pricing in Proportion applies to 75% of mail volume

• Public Tariffs, 1st and 2nd class (42%)
• Packetpost, 1st and 2nd class (2%)
• Flatsort 8, 1st and 2nd class (<1%)
• Packetsort 8, 1st and 2nd class (<1%)
• Mailsort 1400, 1st, 2nd and 3rd class (24%)
• Walksort, 1st and 2nd class (3%)
• Presstream, 1st and 2nd class (3%)
• Response Services, 1st and 2nd class (1%)

Price of 66% of mail unaffected

• The pricing of about two thirds of the volume from products affected by Pricing in Proportion does not change.
• This results from Royal Mail's proposal to keep the standard letter price for all products unchanged.
• Therefore, the 'one price goes anywhere' retail stamp price of 30p for 1st class and 21p for 2nd class (from 7th April 2005) and will not change fro letters weighing up to 60g
• Royal Mail has also proposed extending the present 0-60g step up to 100g, which results in a price decrease for these heavier items.

Price of 33% of mail affected

• The general effect is to raise prices for relatively light but large or unusually shaped postal items, and lower prices for relatively heavy postal items.

Why are Royal Mail making this change?

Royal Mail believe that:

• Pricing in Proportion would introduce a fairer and simpler pricing system which more accurately reflects the cost of handling mail. This is because it believes the size and shape of most mail is a more important factor in the cost of mail sorting and delivery than weight.
• the changes are needed so that it can continue to provide a one-price-goes-anywhere universal postal service and can compete fairly with competitors in the future.
• that its proposal will make it simpler and easier for customers and small businesses to post mail.

The European Directive requires that the prices of universal services 'be geared' to costs. Although there is some discretion in this area, it seems clear the UK universal service prices will over time need to become most cost-reflective than they are now. Postcomm Business Plan 2004

Isn't Pricing In Proportion just another way of increasing prices?

No, postal prices overall will not increase, and in fact a lot of mail will cost the same or even less to send. More than 70% of mail will fall into the existing letter category, and will therefore be unaffected. Of the remaining 30%, some items will go up and some items will go down. The changes are not about price increases, they are simply about rebalancing the postage prices as some items cost us more to handle than we are charging for them to be sent.

Does this mean I will have to measure my mail to work out what stamp to use?

You shouldn't need to measure your mail. The price categories should be straightforward to work out. An ordinary envelope up to half the size of a standard A4 sheet will be a basic 'letter', up to A4 size will be a 'large letter', charged at the next price up; and anything bigger will be a 'packet'.

What's the difference between 'letters', 'large letters' and 'packets'?

'Letters' will include most letters, postcards, greetings cards, bills and statements and some brochures and catalogues. 'Letters' will be A5 size, half a sheet of standard A4 paper, 5mm in thickness and 0 -100g in weight. 'Letters' currently comprise over 70% of total mail and over 80% of stamped mail.

'Large letters' will include most brochures, catalogues, company reports,magazines, CDs and DVDs. 'Large letters' will not exceed 353mm x 250mm in size (which is slightly larger than standard A4 paper) and 25mm in thickness. 'Large letters' may contain unfolded sheets of standard A4 paper. 'Large letters' currently comprise 22% of total mail and 11% of stamped mail. This is expected to change to 19% of total mail with Pricing in Proportion.

'Packets' will include VHS cassettes, books, some magazines and catalogues, parts and samples, foodstuffs, prints and posters in cylindrical packaging. 'Packets' will be any item longer than 353mm or wider than 250mm or thicker than 25mm or heavier than 750g. The maximum weight allowed for Second Class items will increase from the current 750g limit to 1kg. The maximum weight allowed for First Class items will remain 20kg. 'Packets' currently comprise 4% of total mail and 5% of stamped mail. This is expected to change to 3% of total mail with Pricing in Proportion.

Will Royal Mail provide everyone with a measuring template or device?

Shortly before the introduction of Pricing in Proportion, Royal Mail will launch a major communications programme designed to educate everyone about the changes. As part of this exercise, paper template guides will be delivered to every household in the UK and will also be available to download from the web. Business customers may also request a cardboard version of the template guide.

Which Royal Mail services will be affected by these changes?

Ordinary letters; some pre-sorted services mainly used by large mailers such as Mailsort®, Walksort® and Presstream®; packet services used by businesses such as Packetpost™, Packetsort™ and Flatsort™; and Response Services such as business reply envelopes and Freepost™ will be affected. Some business services such as Cleanmail®, Mailsort® 120 and Mailsort® 700 are already priced on size, so their pricing system will be largely unaffected.

Which Royal Mail services will not be affected by the changes?

Special Delivery, Door to Door, standard parcels, and all items weighing more than 1kg will not be affected.

Do the changes affect international services?

Royal Mail is proposing that international services will adopt the same categorisation ('letters', 'large letters' and 'packets') as inland services, but tariffs will be simplified to one zone. However, this change will be made under a separate application to Postcomm.

Why does it cost more to handle a larger item?

Research has shown that size is a significant contributor to the cost of handling and delivery. Larger items take up more space, for example in vans and postbags, and large and irregular shaped items require more manual handling. The current size boundaries between the formats have been set with the agreement of the postal regulator after a consultation exercise with customers.