Institute of Fundraising: What Royal Mail's planned new pricing system entails

I've heard that Royal Mail wants to introduce size-based pricing. Can you tell me what this means?

Royal Mail wants to introduce a new price structure for postal items, which takes into account size, thickness and weight, rather than merely weight, as it is at present. They say that this will reflect the costs of handling mail more accurately.

So how would the new system work? There would be new criteria of postal sizes as below:

- Letters: a size slightly larger than A5, with a maximum thickness of 5mm and a maximum weight of 100g.

- Large letters: a size slightly larger than A4, with a maximum thickness of 10mm and a maximum weight of 500g

- Packets: does not meet either of the other criteria, maximum weight 1kg.

And what about prices? Letters would cost the same as 1st or 2nd class post now. Large letters would cost 46p/38p (1st/2nd) for up to 250g in weight, and 83p/70p (1st/2nd) up to 500g. Packets would cost 93p/81p for items up to 250g, and 179p/155p for items up to 1kg.

In simple terms, prices for large or bulky postal items would probably go up in price, while those for small but heavy items would go down.

So when will the changes happen? Before this can be introduced, Postcomm, the postal regulator, must approve the changes. Postcomm are running a consultation on the proposals until 27 July 2004. The Institute will be responding, and urges organisations to let us know how the proposed changes will affect them. The earliest that size-based pricing might be introduced is autumn 2005.

So what is Postcomm consulting on? Postcomm must assess how the proposal will affect different customer groups, and consider how any change might be implemented and how long a notice period should be given. It must also be convinced that the price changes will more accurately reflect the cost to Royal Mail of processing post.

Are there any other issues I should know about? In the consultation paper, Postcomm states that the thickness of the letters will be the most difficult variable to measure and determine. It also says that some customers will fold A4 letters to save money and that customer reaction to the price changes will lead to changes in the mix of mail.

The Institute invites readers to email questions for inclusion to enquiries@institute-of-fundraising.org.uk.

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