News analysis: PIP dictates shape of mail to come

Postal regulator Postcomm has decreed that from September 2006 Royal

Mail will be allowed to price post by size as well as by weight. In
essence, the changes mean larger, lighter packs will be more expensive
to send, while heavier, smaller post will be cheaper.

For many in the industry, this result was a foregone conclusion, and now
the reality of working with PIP is starting to hit home.

There are concerns, for instance, that despite delaying the launch, many
who will be affected by PIP have a limited understanding of what the
actual issues are and how they will be affected. This is despite the
fact that the September 2006 launch date represents a delay of five
months, requested by interested parties in order to prepare for the
changes.

Awareness drive needed

"Large mailers understand what is proposed and how to take advantage,
where possible, of the new pricing structure," says Peter Carr, chairman
of postal watchdog Postwatch. "But many large businesses, small and
medium-sized enterprises and domestic customers generally do not. The
challenge for Royal Mail is to bring its whole customer base up to the
same level of understanding."

David Robottom, director of postal affairs and industry development at
the Direct Marketing Association, believes there is little awareness of
the impact PIP will have. "There are many who do not have PIP on their
radar," he says. "It's up to Royal Mail to devise a strong communication
programme and to meet the cost."

Others believe that giving postal users twelve months to prepare may not
be long enough, and there are further fears that direct mail budgets
will be slashed in favour of other, more cost-effective media.

Robert Mayes, communications director at WWAV Rapp Collins, says: "Other
media are bending over backwards to introduce new ways of working -
Royal Mail seems intent on doing the opposite."

Robottom agrees with Mayes, saying that Royal Mail and Postcomm have
failed to understand that clients will be not be competing with other
mail, but with other forms of media.

In the meantime agencies have been quantifying the effect of PIP on
campaign costs for clients. WWAV has tested the potential impact of PIP
on all of its clients. In a campaign for one charity, some 200,000 items
were mailed at a postage cost of £32,158. WWAV estimates that
under PIP, the postage would increase by over 17 per cent, or 2.8p per
item mailed.

Not everyone in the industry see the changes as a threat, however. It's
no secret that for catalogue and bulk mailers, the introduction of PIP
will mean a reduction in mailing costs.

Home shopping business Shop Direct Group says it will be a net
beneficiary of PIP, but adds that some of its mailing budgets will be
directed into other communications channels.

Testing, testing

"We're glad that PIP is coming in," says Tony Preedy, brand director of
Shop Direct. "However we will be rethinking campaigns that will not make
economic sense and getting rid of our large format prize draw mailings.
It is the light, large post that will be affected."

Shop Direct has been testing different creative formats for some time.
"Whether we channel some of our DM budgets elsewhere is an issue I've
been debating. It's all about achieving the best cost to response. The
introduction of PIP is a small price to pay though, and it will
encourage us to be cleverer with our campaigns - creativity will come
from the database side."

But for most, PIP appears to present more disadvantages than it does
benefits. For the DM industry, the battle has switched from when PIP
will be introduced to how best to manage it. Whether this includes a
switch away to other media, remains to be seen.

PRICING IN PROPORTION: THE FACTS

- Many DM packs are posted 2nd class or Mailsort 3 to avail of price
discounts. Most DM packs aim to be under 60g to gain the maximum price
reduction.

- Royal Mail says that 70% of mail will be unaffected, but DM packs of
C5 or above will have to conform to tighter rules to avoid PIP's extra
costs.

- Creative packs are often over-sized C5 in size, but under 60g. If they
stay at oversized C5, posted 2nd class, the price per pack under PIP
goes from 21p to 35p.

- The good news: the maximum mail weight will increase from 60g to 100g
for the 240mm x 165mm (oversized C5) size, which is the lowest price
band.

txt2email: You can send a copy of this article to a friend's email
account by texting this message, 'MxD 1056 recipient's email address',
to 86222. Text messages are charged at standard network rates. Powered
by Vertis.