01 January 1999

DESPITE A ONE PENNY REDUCTION in the basic second class postage rate, and the freeze in the basic first class rate, mail order and home shopping compa-nies face higher costs in the wake of adjustments to the weight-based postal tariff. Claims Royal Mail managing director Richard Dykes: ‘We are attempting to reflect handling costs more accurately to produce a fairer price structure for customers. It costs less to handle the basic letter but more to process the bigger items. We are seeing a change in the mix of mail towards heavier items through the increase in mail order and home shopping.’ The heaviest price hikes will affect both first and second class items over 100 grammes, while special delivery charges will rise by 6%. Most airmail charges will also rise by 1p. Two out every three letters handled by the Royal Mail are now second class and the new rate structure has been shrewdly engineered to maximise the PR benefit from the 1p reduction in the basic rate whilst recouping this [or more] from heavier items. First class mail up to 100g will be held at present rates for the time being, although Dykes warned that this was dependent on the economy. A slowdown resulting in reduced mail volumes would almost certainly lead to an in-crease. [An apt illustration of the chasm between the philosophy of a monopoly and that of competitive business: the former increases its prices when volume drops; the latter reduces them.]

Reaction to the RM’s proposed new rates by the publishing and direct mail industries was mixed. Publishers were not happy bunnies: ‘I feel badly misled. It appears to be a change of heart from the very top and is horrifying for publishers who have built their budgets for the year’, growled Peter Jago, chair of the PPA’s Postal Contract Group. He then revealed the trump in the PPA’s negotiating hand: ‘Happily, we have our inde-pendent distributor initiative ... I am sure the Royal Mail will have encouraged publishers to put even more effort into this -’ and at speed.’ The DMA’s response was more cautious: ‘The proposals, overall, are quite complex and we will respond to the Royal Mail in detail next month ... on the face of it, big volume mailers will not be worse off and medium users may be better off’, said development director, David Robottom.