On 14 June 2013, Royal Mail launched a consultation on proposed changes to the Postcode Address File (PAF®) licensing scheme and invited contributions from anyone affected. Said to “simplify…the licensing and pricing regime”, helpIT has concerns that the proposed changes would negatively impact direct mailers. As a provider of data quality software to more than 100 organisations that would be affected by such changes, helpIT systems notified customers, collated their input and drafted a response on their behalf. The Consultation is now closed but you can read more about the PAF® licensing options here.
Below is a summary of the feedback submitted to Royal Mail and the kind of feedback received from our customers which mirrors our own concerns.
Q.1: Do you agree with the principles underpinning PAF® Licence simplification?
We are a major provider of PAF address verification software for batch usage – our users are a mixture of service providers and end users who use PAF software embedded within our broader data cleansing solutions. Our feedback includes feedback from many of our users who have replied directly to our notification of the consultation, rather than reply via your portal.
We agree with the principles except for no. 6, “to ensure that current levels of income derived from PAF® licensing are maintained for Royal Mail”. In addition, although we support no. 8, “to seek swift deployment of a PAF® Public Sector Licence”, we feel that free usage should be extended to the private sector, or at least made available to all private sector organisations at a small flat fee of no more than is necessary to cover administration of the licence and to discourage users without a real need.
Q.2 Are there other principles that you believe should underpin PAF® licence simplification?
Royal Mail should follow the example of postal providers in other countries who have made PAF free for users, which (unsurprisingly) is proven to result in improved address quality and lower sortation and delivery costs through higher levels of automation. We believe that in the UK too, these reduced costs will far outweigh the loss of income by eliminating or reducing the income received from PAF licensing.
Q.3 Do you agree that these are an accurate reflection of market needs?
The market needs an efficient and cost-effective mail system – this principle is not mentioned! Royal Mail’s approach should be to encourage use of direct mail and delivery of goods by mail. It should focus on reduction in handling costs to more effectively compete with other carriers, rather than increase prices in a vain effort to improve profitability.
Q.5 Is the emergence of ‘Licensee by Usage’ as a preferred model reasonable when assessed against the principles, market needs and evaluation criteria?
For reasons stated above, this model does not fit the market needs, or Royal Mail and the UK economy’s fundamental interests. If a usage-based charging model is adopted for batch use of PAF, at the least we would not expect to see a transaction charge applied to a record whose address and postcode are not changed as part of a batch process, as in our opinion this will deter usage of PAF for batch cleansing and directly lead to a lower return on investment for use of mail. Even if this refinement is accepted, this will increase work for solutions and service providers, end users and Royal Mail in recording changed addresses/postcodes and auditing. We have a large, established user base that has made use of PAF, particularly for batch address verification, essential to maintenance of data quality standards. Any increase in charges to our user base will result in decreased usage and the more significant any increase, the higher the dropout rate will be amongst our current users and the lower the take-up from new users.
Typical feedback from an end user is as follows:
We currently use a Marketing Data Warehouse which is fed from transactional databases for Web, Call Centre and Shop transactions. The addresses captured in these different systems are of variable quality, and includes historical data from other systems since replaced. Much of it is unmailable without PAF enhancement, but we are unable to load enhanced/corrected address data back to the transactional systems for operational reasons. This Marketing Data Warehouse is used to mail around 6 million pieces a year via Royal Mail, in individual mailings of up to 600,000, as well as smaller mailings. The quality of the data is crucial to us in making both mailings and customer purchases deliverable. Our Marketing Data Warehouse is built each weekend from the transactional systems, and as a part of this build we PAF process all records each weekend, and load the corrected data into the database alongside the original data. It’s not an ideal solution, but is a pragmatic response to the restrictions of our environment, and enables us to mail good quality addresses, and to remove duplicate records (over 100,000). If we simply count the number of addresses processed per week, at 1p per unit, this would be completely unaffordable. Should this happen we would have to re-engineer our operations to remove redundant processing. Also, when a new PAF file was available we would still have to process the whole file (currently around 2.6 million records), at a cost of £26,000 assuming the minimum cost of 1p per record. This is again unaffordable. It is not in Royal Mail’s interests to price users out of PAF processing records in this way. We therefore urge Royal Mail to reconsider their proposals to ensure our costs do not rise significantly.
Typical feedback from a service provider is as follows:
95% of our PAF usage is to achieve maximum postage discount for our clients. We would either enhance an address or add a DPS suffix to an address. Therefore, the primary principle of PAF is to assist with the automation of the postal process. Reading through the consultation document there is very little discussion surrounding PAF and postal system. All the working examples are for call centres. In paragraph 10 of the consultation document, Royal Mail acknowledges the wider use of PAF in areas such as database marketing, e-commerce and fraud management. However, these areas have no additional benefits to Royal Mail. On the traditional mail side, Royal Mail directly benefits from the automation of the
postal system through the use of PAF validated addresses. If Royal Mail wish to promote mail and strive for full automation in the postal system then they should be encouraging the use of PAF validation by mail customers.
There is also a potential conflict of interest for Royal Mail. The more changes they make to PAF then the more revenue they could generate from address updates. Worthwhile having some limits on the number of addresses that can be changed in a year or at least some authority checking on the necessity of the address changes. I believe there is a conflict of interest with Royal Mail being both the provider and an end user of PAF (through mailing system). It would be better to have the administration and selling of PAF as an independent organisation.
Q.6 Do you believe that a different model would better meet the principles that underpin licence simplification?
Yes, a flat rate payment model.
Q.9 Are there any further simplification or changes that might be required?
Due to the short notice for the consultation period, during a holiday period, and the lack of notice provided proactively to us as a solutions provider, we can’t currently comment on this except to say that it is probable that changes will be required.
Q.10 Are the ways you use PAF® covered by the proposed terms?
Same answer as Q9.
Q.13 Do you think Transactional pricing is an appropriate way to price PAF®?
As explained above and made crystal clear in the typical responses from two of our users, transactional pricing is NOT an appropriate way to price PAF for batch usage. It will simply lead to a large exodus by batch users of PAF and a significant reduction in the use of direct mail and delivery by mail.
Q.14 Do you think ‘by Transaction’ is an appropriate way of measuring usage?
There are significant systems and auditing problems associated with measuring usage by transaction.
Q.15 Does your organisation have the capability to measure ‘Usage by Transaction’?
Our software does not measure volume of usage and it will not be possible to do this in a foolproof way. It will also lead to significant challenges for audit.
Q.16 Are there situations or Types of Use that you don’t think suit transactional measurement?
Batch database and mailing list cleansing.