SIZE-BASED PRICING (SBP) - BRIEFING

It is now almost two and a half years since Royal Mail first revealed its plans to introduce a pricing system based on the size and format of an item rather than its weight. With Postcomm’s 3-month consultation period on Royal Mail’s size-based pricing (SBP) proposals now at an end, here is an update on the situation.

Some progress achieved

Over the last two years magazine publishers have worked closely with Royal Mail to help shape the carrier’s proposals for SBP to best meet Royal Mail’s desire to be more cost reflective and the magazine industry’s requirements for a service which provides a cost-effective service for single copy, countrywide magazine delivery.

Undoubtedly some progress has been made. In particular, the addition of an A3 format category making a total of three format categories for magazines (large letter, A3, and packet); a change from weight step pricing to straight-line pricing (therefore removing the more dramatic and extreme price jumps), and also the removal of a worryingly subjective ‘flexibility measure’.

One major concern remaining

The one remaining major concern for publishers is around Royal Mail’s plans to include a measure involving the uniformity (flatness/ evenness) of the piece being mailed. PPA has put to Royal Mail an alternative proposal which we believe is more cost-reflective than the existing one and will enable publishers to accommodate product variations without risk of incurring a heavy cost penalty and to budget more effectively when planning their advertising and promotional activity. In its submission to Postcomm, PPA has asked for the Regulator’s support for the amended proposal.

Under Royal Mail's existing proposals, if the surface of a mailing piece of 10mm thickness or above falls outside a tolerance of 4mm, then the item would be classed as a packet rather than a large letter, resulting in a substantial increase in costs. There are two key elements to PPA's new proposal to Royal Mail: firstly, that for items over 10mm thickness the 4mm tolerance threshold should be increased to 5mm, and secondly, that an intermediary price line should be introduced for any item that is over 10mm thick but whose surface varies in depth by between 5mm and 10mm.

Additional information on Royal Mail costs

In its submission, PPA has also argued for intervention by Postcomm (as the surrogate market force) in pressing for more disclosure of Royal Mail’s cost structures, if the carrier is arguing that its proposals are cost reflective. We have also highlighted that the objective of the pricing policy should be to grow or at least retain the total business and to see how to make changes in the product offering to achieve solutions which represent a win for both Royal Mail and its customers.

PPA has also urged Postcomm to ensure adequate time for adjustment if SBP goes ahead, with 18 months being the preferred timeframe from announcement to implementation.

What happens now?

It is now down to Postcomm to review the responses from customers to its consultation document which it will use to help assess in more detail Royal Mail’s proposals. In parallel it will continue to work on a thorough review of the cost justification to support the SBP proposals. Once all this has been completed, Postcomm will issue a second consultation document, likely to be in early 2006.

For more information about Postcomm, click here

Frequently asked questions about sized based pricing

Frequently asked questions

• Can I post a periodical that weighs less than 60g?
  Yes but you will be required to pay the same as a 60g item.
• Can I post less than 1,000 packets using Presstream
  Yes but you will be charged for 1,000 packets.
• Can a mailing house hold a Presstream contract?
  No. Only the publisher / Owner of the periodical or an organisation who has contracted with the publisher / owner to publish the periodical on their behalf, can hold a presstream contract.
• What are the weight restrictions on supplements being posted with the main periodical?
  Until recently it used to be that the supplement could not weigh heavier than the main periodical, however, this has now been changed and there is no maximum weight limit for supplements.
• How many loose inserts can I place within the main periodical?
  There are no restrictions on the number of loose inserts, however, the total weight of all inserts must not exceed the weight of the main periodical itself.
• Can product cards be sent via Presstream?
  Yes, product cards can but only via Presstream 2. They also have to be seen by the Product Team for clarification that they meet the criteria as stated in the Presstream Schedule.
• Are presstream prices due to increase?
  There is no planned increase on Presstream prices for this calendar year.
• Is the profile price discount in addition to standard Presstream directs & residues discount?
  Yes. If the customer is entitled to say 20 per cent discount they still obtain the sortation discount they are entitled to.
• Is the profile price flat rate price per item in addition to standard Presstream discounts?
  No. The flat rate price has already taken into account standard Presstream discounts. Therefore no further discounts can be obtained.
• What would the profile price discount be (approximately) on a mailing of say, 25k items?
  Profile price discounts are calculated on an individual basis looking at the number of copies being delivered into city centre areas and therefore it is not possible to estimate discounts.
• What format do the line listings need to be submitted in?
  Line lists are only accepted in electronic 'comma delimited' or 'comma separated variable length (CSV)' formats.
• Exactly what information do you require on the line listings?
  The minimum information required is the standard selection code and the number of items going into that selection.