Pricing in Proportion

Historically, Royal Mail has based its prices on the weight of letters and packages.  But the company has shown costs are also linked with the size of items. Weight is still relevant, but not the only factor it needs to take into account when setting postage prices. Therefore - after extensive consultation with all stakeholders and following detailed discussions with Royal Mail - Postcomm accepted the company's proposal to change the way it sets its prices.

Royal Mail's new pricing regime - "Pricing in Proportion" (PiP) - was launched on 21 August 2006, and applies to most products where format was not already part of the pricing specification, including:

  • First and second class mail
  • Mailsort 1400
  • Walksort
  • Presstream
  • Response services
  • Packetpost

PiP does not apply to Special Delivery or international mail. 

Under PiP, there are three main categories of items:

Letter 

  • maximum dimensions: length 240mm; width 165mm; thickness 5mm 
  • maximum weight 100g

Large letter 

  • maximum dimensions: length 353mm; width 250mm; thickness 25mm 
  • maximum weight 750g

Packet 

  • dimensions: length more than 353mm or width more than 250mm or thickness more than 25mm
  • maximum weight: 1kg for second class; none for first class

Similar pricing changes have already been implemented by postal administrators in Belgium, Denmark, Finland, Greece, Italy, Luxembourg, Australia, Canada, Japan and the USA. The following countries also have forms of size-based pricing: Austria, Germany, the Netherlands, Poland, Slovenia, Switzerland, Hong Kong, New Zealand and South Africa.

Postal users will find that the smaller envelope sizes labeled DL or C5 that they are able to buy in supermarkets will be classed as "letters", as long as the item is less than 5mm thick when ready for posting. Larger envelopes (C4) will be priced as "large letters", as long as they are less than 25mm thick.

Royal Mail has now - after a 'grace' period to allow mail users to get used to the new system - introduced surcharging for stamped items with underpaid postage. Recipients of underpaid mail are charged a fee of £1, plus the outstanding postage cost. This makes it important for mail users to make sure they use the correct stamp value, especially where items are large or unusually-shaped. 

Packetpost Returns

Royal Mail 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.  Link to the Royal Mail web page where this will be announced.