Industry backs rethink of zonal pricing
Celebrations over the rejection of Royal Mail’s zonal pricing plan were shortlived, with most people agreeing the scheme will be implemented eventually. But at least now it will not be rushed in
When Royal Mail first mooted the introduction of zonal pricing (PM July 14 2006) it was intended as a pre-emptive strike to prevent competitors from cherry-picking major business clients, by bringing in a pricing structure that offered major discounts for city deliveries.
Designed to charge more for delivering to outlying areas, it was part of the postal operator’s strategy to introduce cost-reflective pricing, affecting all mail sent through Mailsort 3 – the most popular service for direct mail – and magazine-delivery scheme Presstream.
But the benefits evaporated almost overnight when Royal Mail revealed that deliveries inside the M25 were also to incur a surcharge.
One of the main voices of discontent was the Periodical Publishers Association (PPA), which condemned Royal Mail’s zonal pricing plans, as “benefiting no one but Royal Mail and being hugely damaging to the magazine industry”.
Only last week the PPA was claiming that pressure from its members had led to Royal Mail revising its application.
Seven days on and the scheme is doomed, following Postcomm’s decision to force Royal Mail back to the drawing board once more (precisionmarketing.co.uk).
A PPA spokeswoman comments: “It is in everyone’s interest that we have a healthy Royal Mail but the impact of these proposals would have led to a reduction in all mailing volumes, including those of magazines. We don’t dispute price-reflectivity but it is not easy to implement without competition in the market.”
Meanwhile WWAV Rapp Collins Group chief executive Marco Scognamiglio says: “While we believe that Royal Mail should have greater flexibility when dealing with business customers – to compete effectively with rival operat- ors and with other media channels – this zonal pricing proposal was clearly not the way forward.
“It met with virtual total opposition from customers and the decision is therefore logical and rational. There is no doubt, however, that we have not seen the last of zonal pricing.
“As competition develops, it is more than likely that the regulator will agree to some form of geographical-based pricing as it has made it quite clear in this ruling that it continues to be supportive of the overall principle.”
Zonal pricing, it seems, is still firmly on the map.
