Advertisement

How Price Sensitive Is Letter Advertising Mail in the UK?

  • Frédérique Fève
  • Thierry Magnac
  • Leticia Veruete-McKay
  • Soterios SoteriEmail author
Chapter
Part of the Topics in Regulatory Economics and Policy book series (TREP)

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.

References

  1. Althen, J., Ten-Kate, J., Stafford, A., & Thresher, K. (2017). Mail as a branding tool: Recent research and the path forward. Presented at the 25th Conference on Postal and Delivery Economics. Barcelona.Google Scholar
  2. Borjas, G. J. (1980). The relationship between wages and weekly hours of work: The role of division bias. The Journal of Human Resources, 15(3), 409–423.CrossRefGoogle Scholar
  3. Bzhilyanskaya, L. Y., Cigno, M., & Pearsall, E. S. (2015). A branching AIDS model for estimating U.S. Postal Price elasticities. In M. A. Crew & T. J. Brennan (Eds.), Postal and delivery innovation in the digital economy (pp. 91–113). Cham: Springer.Google Scholar
  4. Davidson, R., & MacKinnon, J. (2004). Econometric theory and methods. Oxford: Oxford University Press.Google Scholar
  5. Fève, F., Magnac, T., Soteri, S., & Veruete-McKay, L. (2018). Price elasticities and factors driving international contract export mail sent from the UK to Western European Countries. In P. L. Parcu, T. Brennan, & V. Glass (Eds.), (pp. 299–310). Berlin: Springer.Google Scholar
  6. Veruete-McKay, L., Soteri, S., Nankervis, J., & Rodriguez, F. (2011). Letter traffic demand in the UK: An analysis by product and envelope content type. Review of Network Economics, 10(3), ISSN (Online) 1446-9022, https://doi.org/10.2202/1446-9022.1233.Google Scholar

Copyright information

© Springer Nature Switzerland AG 2018

Authors and Affiliations

  • Frédérique Fève
    • 1
  • Thierry Magnac
    • 1
  • Leticia Veruete-McKay
    • 2
  • Soterios Soteri
    • 2
    Email author
  1. 1.Toulouse School of Economics, University of ToulouseToulouseFrance
  2. 2.Royal Mail GroupLondonUK

Personalised recommendations