Royal Mail looks to placate marketers after price hike

Royal Mail is to hike the price it charges for handling direct mail by up to 7% from April.

Royal Mail

The price of large letter DM is set to rise between 4 and 7% but the postal operator insists that most increases will be below 5% and some under 1%.

Royal Mail has changed the conditions of its Advertising Mail service, which offers companies financial incentives to use DM, in a bid to placate direct marketers bristling over rising costs.

Changes include introducing a packet format that would allow 3D mail to qualify for Advertising Mail discounts and a machine readable large letter format, with the option to use polywrap, which could lead to cheaper prices for sending catalogues.

A spokesman for Royal Mail blamed falling mail volumes for the price increases.

“We know how hard it is for businesses when the economy is as tough as it is now. No-one likes to raise prices in the current economic climate. Mail volumes have fallen by around 25 per cent since 2006 and the regulatory regime has meant that prices have been artificially low.

“Royal Mail has made a loss on its core mails, including packet, activities of almost £1 billion over the last four financial years. That is not sustainable for any business so we need to better align prices with the cost of providing our services.”

The additional products were welcomed by the Direct Marketing Association.

Chief of operations for the DMA, Mike Lordan, says: “We are pleased that Royal Mail acknowledges the importance of direct mail and is keeping increases for advertising mail to a minimum. We also welcome the introduction of new products that will allow more direct mail to qualify for the advertising mail discounts.”

Companies have expressed concern over rising costs. Nationwide is accelerating efforts to move away from using mail because of rising prices.

Plans could change once Ofcom has delivered its conclusions on the regulation of Royal Mail, also expected in April. The watchdog, which assumed oversight of postal services last year, proposes restrictions on what Royal Mail can charge for services should be removed, leaving it free to set its own prices.