Royal Mail challenged over plans for zonal pricing for bulk mail

Royal Mail’s bid to introduce zonal pricing for bulk mailers has come under fire during industry body Postcomm’s fourth annual industry forum this week (12 June).

The company’s proposal would affect the cost of sending bulk mail depending on which of five zones it is sent to. In some areas, such as within the M25, the charge increase could be as great as 12%.

Around 140 representatives attended the debate on Royal Mail’s proposals, which, if approved, could come into effect as early as April next year.

The zones are priced according to population density. Low density zones would see prices hiked 11%, whereas the business district of central London would see a drop of 28%.

Royal Mail justifies this anomalous increase because of the congestion charge, increased recruitment and salary costs and other factors.

It insisted that “where strong competition and customer choice is already well established, Postcomm should let the market decide on prices. That means allowing Royal Mail to introduce zonal pricing for bulk business mail – if business customers want it”.
Royal Mail told “It is up to individual businesses to determine the benefit of sending direct mail, catalogues or magazines to people who live in areas which have slightly higher delivery charges under zonal pricing. But those customers are often more responsive to that material because they have less access to goods and services than people who live towns and cities. Zonal pricing brings a more cost reflective pricing structure that also reflects more closely the value of the service.”

Postcomm chief executive Sarah Chambers said: “If customers decide they don’t want zonal pricing, they should challenge Royal Mail on why it is proposing this change. Given its statement today that it will introduce zonal pricing only if customers want it, Royal Mail will have to demonstrate that this is the case.”

Postcomm will publish a consultation document in July, after which there will be two months for interested parties to raise issues. A final decision will be taken 2 January 2008.

The Postcomm spokesperson questioned whether an April 2008 rollout would then be a feasible date and whether there would be enough time to communicate these changes to bulk mailers.