Autumn 2006

Despite a relative lack of fuss when Royal Mail introduced its Pricing in Proportion (PiP) scheme in the UK in August, there is plenty of anecdotal evidence that it could have wide-ranging effects on everything from marketing literature to greetings cards (which could be smaller in future).

The new scheme bases the price of letter post on size as well as weight for the first time, distinguishing between "small letters" (up to 240mm by 165mm by 5mm thick) and "large letters" (broadly up to A4 in size). There is also a new classification for a "packet", which is anything measuring over 353mm long or 250mm wide or 25mm thick, or weighing over 750g.

The price differential is significant. The lowest weight band goes up from 60g to 100g, but the first class price up to this weight is 32p for small letters and 44p for large ones - over a third more.

The scheme applies to business mailings through schemes such as Mailsort and Packetsort as well as to the general post.

Many organisations which traditionally have mailed out large numbers of A4 envelopes as a matter of course are switching to A5, and there are indications that sales brochures and similar literature will increasingly appear in a smaller format. Although they can be folded to A5, some organisations seem to feel this is not the best solution.

One software business told us that switching its customer newsletters from A4 to A5 format had saved it nearly £1,000 overall on a mailing of 10,000. But this solution will not be available to organisations such as a firm mailing out small but delicate watch batteries in Jiffy bags. These are too thick for the lower rate under the new rules, and during the consultation process the company said it expected to see mailing costs rise by nearly half.

Postal equipment handling specialists such as Neopost and Pitney Bowes were well prepared, and say that much of the sorting and franking equipment in service can cope with the new system, either as is, or through remote software or firmware upgrades. Pitney Bowes, for instance, uses what it calls Intellilink technology to enable customers to download new postage rates via a secure internet connection.

Royal Mail has said it expects the overall effect of the change to be more or less neutral. Some estimates suggest that about a third of products by volume could see a change.