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How Price Sensitive Is Letter Advertising Mail in the UK?

In: New Business and Regulatory Strategies in the Postal Sector

Author

Listed:
  • Frédérique Fève

    (Toulouse School of Economics, University of Toulouse)

  • Thierry Magnac

    (Toulouse School of Economics, University of Toulouse)

  • Leticia Veruete-McKay

    (Royal Mail Group)

  • Soterios Soteri

    (Royal Mail Group)

Abstract

The share of advertising expenditure going to letter mail has been declining for many years. While this has mainly been due to an increasing focus on digital advertising spend other factors, such as the price of letter mail, are also important. In order to help inform advertising letter mail pricing strategies this chapter provides price elasticity estimates conditional on customers using Royal Mail retail advertising products. The overall price elasticity estimated for this customer group was around −0.7 but tended to increase in absolute value by customer size and vary substantially by industry sector. For example, customers operating in the Finance and Insurance and Utilities sectors were estimated to be highly sensitive to price movements with estimated price elasticities of −1.5 to −2.6 respectively. Additional analysis was undertaken for customer sub-samples. However due to potential issues related to selection bias these results should be viewed as directional in nature and subject to further research.

Suggested Citation

  • Frédérique Fève & Thierry Magnac & Leticia Veruete-McKay & Soterios Soteri, 2018. "How Price Sensitive Is Letter Advertising Mail in the UK?," Topics in Regulatory Economics and Policy, in: Pier Luigi Parcu & Timothy J. Brennan & Victor Glass (ed.), New Business and Regulatory Strategies in the Postal Sector, pages 207-217, Springer.
    • Handle: RePEc:spr:topchp:978-3-030-02937-1_16
    DOI: 10.1007/978-3-030-02937-1_16
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    Cited by:

    1. Frédérique Fève & Thierry Magnac & Soterios Soteri, 2020. "Demand Elasticities at the Intensive and Extensive Margins for Advertising Mail Traffic in the UK," Topics in Regulatory Economics and Policy, in: Pier Luigi Parcu & Timothy J. Brennan & Victor Glass (ed.), The Changing Postal Environment, pages 213-224, Springer.

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