Pricing in Proportion
Postcomm has approved Royal Mail’s Pricing in Proportion proposals, and has allowed the company to charge postage according to the size of a letter or packet, as well as its weight.
Postcomm announced its decision in August 2005, following two years of extensive consultation. Royal Mail introduced the changes on Monday 21 August 2006.
Before then, letters and packets were priced purely according to their weight, but Royal Mail says it costs more to sort, handle and deliver big envelopes and packets. This means that light but bulky items were priced below cost, whereas heavy items were generally overpriced. Royal Mail wanted to change its prices to more accurately reflect its costs. Because some prices will fall and some will rise, the new pricing structure is revenue neutral i.e. overall, Royal Mail will not be charging more for postage under Pricing in Proportion.
Most of the detail that was required to allow Royal Mail to proceed with Pricing in Proportion, following the decision by the Postal Services Commission, was put in place by the licence modifications that followed the completion of Royal Mail's Price and Service Quality review 2006-2010.
Packetpost Returns
Royal Mail recently made an application to extend Pricing in Proportion (PiP) to Packetpost Returns.
Packetpost Returns is a service that allows packets to be returned from customers with the postage cost being borne by the original sender.
Royal Mail’s application proposed moving away from the system under which the price per item paid by the original sender is based on the average weight of the mail returned. Instead, Royal Mail proposed that an item returned through this service should be treated and charged as a packet under its Pricing in Proportion (PiP) framework.
Royal Mail has also requested that Packetpost Returns, consistent with the greater alignment of these prices to those of normal Packetpost, should be included in the same controlled services group as Packetpost.
Postcomm conducted a consultation exercise focused on users of Packetpost Returns and other interested parties and carefully considered the points made in the responses. Following the consultation, the Commission decided to:
- allow Royal Mail to introduce a PiP price structure for Packetpost returns;
- require Royal Mail to give at least 3 months notice of the price changes following this decision; and
- reject the application to include the product in the same controlled services group as Packetpost.
Royal Mail has not yet made it clear when it will implement the new price structure for Packetpost Returns.
Related Documents:
- 24 October 2007 - closure report
- PiP closure report following the first anniversary of the implementation date (pdf, 88KB).
- 13 June 2007 - non-confidential consultation responses
- Packetpost Returns and Pricing in Proportion consultation responses (pdf, 85KB).
- 27 June 2007 - news release
- Pricing in Proportion and Packetpost Returns
- 20 February 2007 - consultation letter
- Royal Mail's application to extend Pricing in Proportion to Packetpost Returns (pdf, 69KB).
- 20 February 2007 - application by Royal Mail
- Application for approval to apply "Pricing in Proportion" prices to Packetpost Returns up to 1KG (pdf, 101KB).
- 20 February 2007 - news release
- Postcomm reviews Royal Mail application to extend Pricing in Proportion to ‘Packetpost Returns’.
- 18 October 2006 - direction
- Postal Services Act 2000. Sections 11 and 38. Licence granted to Royal Mail Group plc. Schedule 2 Part 2 Condition 21. Direction for the purpose of the determination of the maximum prices for access services (pdf, 38KB).
- 18 October 2006 - spreadsheets
- Spreadsheets for the determination of prices for Royal Mail's access services following the introduction of Pricing in Proportion (Excel, 989KB). These spreadsheets comprise the Excel Workbook referred to in Postcomm's direction dated 18 October 2006.
- 19 June 2006 - legal direction
- Most of the detail that was required to allow Royal Mail to proceed with Pricing in Proportion, following the decision by the Postal Services Commission, was put in place by the licence modifications that followed the completion of Royal Mail's Price and Service Quality review 2006-2010. This document is the legal direction (pdf, 35KB) which deals with the communications issue that was not dealt with in this way.
- 9 September 2005 - indicative Pricing in Proportion prices
- Pricing in Proportion - indicative prices for response service items (as at September 2005) (pdf, 72KB)
- 18 August 2005 - decision document
- Royal Mail's proposals for Pricing in Proportion. A decision document (pdf, 973KB)
- 18 August 2005 - decision document summary
- Royal Mail's proposals for Pricing in Proportion. A summary (pdf, 136KB)
- 18 August 2005 - news release
- Postcomm allows Royal Mail to price post by size as well as weight
- 29 July 2005 - consultation responses
- Copies of the non-confidential responses to the consultation document "Royal Mail's revised proposals for size-based pricing ('Pricing in Proportion')" - April 2005 (pdf, 1MB)
- 29 April 2005 - Frontier Economics report on Royal Mail size-based pricing application figures
- Evaluating the format switching and price elasticity estimates used by Royal Mail in their size-based pricing application. Final report prepared for Postcomm by Frontier Economics (pdf, 975KB)
- 5 April 2005 - consultation document
- Royal Mail's proposals for size based pricing ('Pricing in Proportion'). A consultation document (pdf, 965KB)
- 5 April 2005 - annexes to consultation document
- Royal Mail's revised proposals for size based pricing ('Pricing in Proportion'). Annexes to Postcomm's consultation document (pdf, 2.8MB)
- 5 April 2005 - news release
- Postcomm 'minded to' accept Royal Mail's revised proposals to restructure its prices
- 29 October 2004 - next steps following April 2004 consultation
- Royal Mail's proposal to implement size based pricing - next steps following Postcomm's first consultation (pdf, 10KB)
- 13 August 2004 - consultation responses
- Responses to the consultation document 'Royal Mail's proposal to implement size based pricing' (pdf, 1.2MB)
- 27 April 2004 - consultation document
- Royal Mail's proposal to introduce size based pricing. A consultation document. (pdf, 993KB)
- 27 April 2004 - summary
- Royal Mail's proposal to introduce size based pricing. A summary document (pdf, 136KB)
- 27 April 2004 - leaflet
- Does size matter to you? Your mail and size based pricing (pdf, 35KB)
- 27 April 2004 - news release
- Royal Mail wants size to matter.
