Head to Head debate on size-based pricing

Firstly, let's give Royal Mail some credit. Over the years it has spent millions of pounds promoting the direct mail medium and creativity within that medium. In doing so it has helped introduce and nurture new direct marketing entrants.

Consequently, mailing volumes have continued to grow at a rate unrivalled by any other medium. But as receipt has grown so too has the need to design creative "stand out." Now, more than ever, the pressure is on to deliver creative solutions that get your mailings noticed, opened and responded to. And one of the obvious ways of achieving this is to produce mailings of an unusual size or shape.

Yet under the size-based pricing proposals Royal Mail will incentivise us all to produce standard format mailings that are machine-processable and thus cheaper to handle.

It will significantly penalise those who create non-standard format mailings.

Research by us shows that postage costs on some mailings by clients could increase by over 300 per cent.

Given such a scenario the new proposals will discourage many from innovating and, given that cost effectiveness is key in direct marketing, may even put some others off the medium entirely.

Undoubtedly some clients will benefit from the proposals and Royal Mail is apparently keen to stress how savings will be made on elements such as fulfilment packs. But to send out a fulfilment pack you have got to have engendered a response. And how do you do that? Chicken and egg is the phrase that springs to mind.

Size-based pricing is very clearly a tax on creativity. It takes at least one dimension away from a three dimensional medium, thus making it less attractive to some clients, probably affecting mailing volumes and therefore partially strangling what is ultimately Royal Mail's cash cow.

But there is time for us all to do something about it. The postal services regulator Postcomm, who must sanction the change, will be having a three month consultation period early this year, giving us all the chance to put forward our case. It's an opportunity we should take.

In a nutshell: size-based pricing would stifle creativity, make direct mail a less attractive medium and adversely affect mailing volumes.

NO – Barbara Casey, marketing manager, Scottish Widows

The proposal by Royal Mail to introduce size-based pricing is an emotive subject. However, to argue that this will stifle creativity and innovation is not looking at the issue with serious thought.

It is important to remember that, should the new proposals be introduced, over-sized mailing activity is still a creative option, albeit at a premium or rather the true cost of processing through the system.

In fact if this is the case, we should consider the possibility that standard mailing activity has been subsidising non-standard for some time – so is this not really more about the removal of an existing subsidy than the introduction of a new form of tax?

While the policy may be seen as restrictive in terms of choice, it could be that it only removes the easy option of differentiating by size. Unless the use of a non-standard pack fits closely with your brand strategy and the added cost can be balanced against potential returns.

We all know creativity and innovation can take many forms – a convincing timely message; an offer that adds value for the customer; advances in production technology that broaden the choice of formats and solutions; imaginative copy execution; an enhanced service proposition or the use of external data sets that enrich a propensity model and improve your response rates.

But creative agencies are working within continually changing parameters and restrictions in terms of client requirements and media formats. For example, in interactive advertising we must consider at the outset the cost impli-cations of the different technology platforms.

This proposed change for mail could well be just another example which they take in their stride. If this is a given it will mean market-ers turn even more of their attention to what they do best, developing highly creative campaigns built around clear USPs which strongly differentiate their brands in the minds of consumers.

Let's not forget that potential cost savings enjoyed under the new structure add breadth to campaign activity such as integrated follow up or use of new media.

As we wait for Postcomm's decision there will be much lobbying against this proposal but we may find that by the implementation date there will be other distributors to handle this type of communication at a more competitive price.