What Royal Mail is trying to do, of course, is get itself in shape before competition increases too much. As with pricing by size, the aim is to get a charging system that accurately reflects postal costs. It is more expensive for Royal Mail to deliver a letter in the countryside. Therefore, by this reasoning, it should charge more for the service. To me, this is accountant-speak. Yes, it's absolutely right to have a clear understanding of the business' underlying cost structure. That doesn't mean the results have to be slavishly followed in the pricing system.
The marketing approach is to charge what the market will bear. First, identify what the customer wants, then set out to provide it, at a profit. Do Royal Mail's customers want zonal pricing? I think not, judging by the reactions of the main sectors affected by the proposals, which are condemned by the well-respected mail order company Lakeland as a further example of creeping discrimination against the rural community.
Let's do the impossible, and generalise about a "typical" mailing campaign. The postal element could well be something like 19p or, broadly speaking, 40 per cent of the pack's total cost. Although initial increases would be small, Royal Mail would like to see the charge for delivering to the most expensive areas rise by 34 per cent within three or four years. That would add roughly 6p, or 12 per cent, to the packs going to rural destinations. Some fear the eventual increases could be even larger.
Agency WWAV Rapp Collins says that clients and their advisers will have to look at the cost equation of large-scale acquisition programmes. "If the figures don't add up, then the more expensive zones will not be targeted. Which potentially could lead to more mailers concentrating on less of the population."
In its haste to counter a competitive challenge that hasn't really emerged yet, Royal Mail is in danger of creating a vicious circle. Key growth areas like magazine subscriptions will be adversely affected. Home shopping will be driven more and more online. Mail volumes to rural areas will fall, pushing up costs, leading to more price hikes or poorer service.
These proposals should be thrown out!
Ken Gofton is a freelance journalist who has covered the marketing industry for over two decades.