Royal Mail Quality of Service

Royal Mail Quality of Service

Research Study Conducted for
Royal Mail, Postwatch and PostComm

June - July 2004
Background & Objectives                                    1
Methodology                                                3
  Sample                                                   3
  Qualitative Stage                                        4
  Quantitative Stage                                       6
  Presentation and Interpretation of the Data              7
Summary of Findings                                        8
Main Findings                                             10
  Familiarity with Royal Mail                             10
  Favourability towards Royal Mail                        12
  Strategic Priorities                                    22
  Customers’ Preferences                                  28

Statistical Reliability
Conjoint Analysis
CHAID Analysis
Comments from medium and top 500 businesses
Topline Results : Domestic and small business customers
Topline Results: Medium and top 500 business customers
Royal Mail Quality of Service

Background & Objectives
This report contains the findings of a survey conducted by Market & Opinion
Research International (MORI) on behalf of Royal Mail, Postwatch and
Postcomm. This survey is part of a larger review process undertaken by
Postcomm to ensure that the new Royal Mail Quality of service targets, to take
effect from April 2006 as part of the new price control, reflect customer
expectations and requirements.

Overall Objectives
The current quality of service targets derived from Royal Mail’s internal End to
End target were put in place before the licence of 2001 and subsequently updated
after an interim review process by Postcomm in March 2005. It is believed by all
parties that these targets need to be reviewed. In particular, the new targets to be
incorporated into the 2006 licence (which will run up to 2011) need to reflect the
needs of all customers on the basis of their current habits, requirements and
preferences. This is very important as the revision of Royal Mail’s obligations is
considered by all parties to be fundamental to the future of the postal service in
the UK.

Research Objectives
In this context, the main objectives of the study were to:

1. Establish customer requirements of a Universal Postal Service in terms of
   speed of delivery, reliability and security

2. Assess customer expectations of quality over the period of the next price
   control (up to 2011)

In particular, the outputs from the survey were not to be a new set of targets to
be included in the new price control, but rather a first step in understanding the
current perceptions and day-to-day service requirements of Royal Mail’s
customers across all sectors. It was also important to gain an insight into how
much customers are willing to pay for the services provided by the Royal Mail.

Due to Royal Mail’s obligation to provide a universal postal service in the UK1 it
was essential for this piece of research to be fully encompassing and include
customers from all sectors, both business and domestic, high value and low
value, across the whole of the UK.

1   Postal Services Act, 2000

Royal Mail Quality of Service

The understanding gauged in this study should help Postwatch, Postcomm and
Royal Mail through the remainder of the review process to put forward
recommendations for workable and customer-based quality of service standards
that will be incorporated into the 2006 Royal Mail price review.

Royal Mail Quality of Service

Given the overall objective of this piece of research, it was important to ensure
that the views of all types of customers were included. At the same time, it was
crucial that the appropriate research methods were applied to reflect the needs of
each audience. For these reasons, we broke down Royal Mail’s customer base
into four segments: domestic, small business, medium business and top 500
business customers. A brief definition of each of these customer typologies

•   Domestic customers. All members of the public are customers or potential
    customers of Royal Mail. This may be through receipt of mail only or
    through despatch too. The majority of domestic customers receive more
    mail than they send, but their expectations and requirements concern both
    these aspects of the postal service. The majority of domestic customers only
    use the most basic of Royal Mail’s products: First Class and Second Class.
    Few use a more tailored service such as Special Delivery, Recorded or
    Redirection, although many have not got a clear idea of how these services
    differ from each other.

•   Small business customers. There are around 3.75m2 registered enterprises
    in the UK with around 95% employing less than 10 people. Individually,
    many of these businesses are not large Royal Mail customers, and tend to
    have a similar relationship with Royal Mail and similar expectations and
    concerns as domestic customers; they tend to receive more mail than they
    send and items are sent predominately by the standard services.
    Furthermore, should these business customers wish to complain about any
    aspect of the Royal Mail service, they are advised in the first instance to call a
    general (business) customer service line rather than a designated Royal Mail

•   Medium businesses, which may be a company of any size, are those that
    have particular value (at least £5,000 per year) to Royal Mail as a customer
    and have their own account with Royal Mail. These businesses, as well as
    having the general requirements of all customers, will also tend to use one or
    more of the bulk mailing products: Presstream, Mailsort or business response
    services. They are also likely to have more contact with Royal Mail advisors
    or account handlers, for such issues as organising bulk mailings, docket
    checks etc.

•   Top 500 businesses. These are those that are, by value, the top 500 Royal
    Mail accounts. Typically these are organisations posting vast volumes of mail
    on a regular basis, and comprise utility companies, financial institutions and
    mail-order subscription organisations. For these organisations, the focus is

2Small   and Medium Enterprise Statistics for the UK 2001, Small Business Service DTI

Royal Mail Quality of Service

    on the delivery of their items, as the success, timelines and price of delivery
    are fundamental to their business performance.

MORI identified and recruited the sample of domestic and small business
customers for all the stages of the research project. As for medium and top 500
business customers, Royal Mail provided MORI with contact details of the
principal contacts in these organisations, from which we were able to draw the

Qualitative Stage
To achieve the objectives set for this study, it was felt that both a qualitative and
a quantitative phase were needed.

Qualitative research was conducted with the purpose of gauging initial insight
into the needs and expectations of different kinds of customers. In order to
reflect the different needs of the various customer groups, we conducted a
mixture of focus groups and depth interviews as outlined below.

Focus Groups – Domestic and Small Business Customers
Both domestic and small business customers share similar relationships with and
expectations towards Royal Mail, and do not feel out of place talking about their
needs with their peers. With this in mind, a total of 12 focus groups were
conducted throughout the UK among domestic and small business customers, as
detailed in the table overleaf.

Participants to some focus groups were given a simple pre-task requiring them to
keep a note of the following:

       • How many times they posted items in the preceding seven days

       • How much post they received (and if possible at what time) and to
         keep the outer packaging

       • Whether the post was First Class, etc.

       • What the posting date was on any mail received compared to the date
         received and to find out about their nearest post boxes and post

This was intended to make sure that, referring to their seven day postal diary,
participants would be able to give a more realistic focus for their expectations
and perceptions of Royal Mail. Comparison with the control groups (i.e. those
where no diary was compiled), allowed us to verify the extent to which top-of-
mind perceptions of the postal service are influenced by real facts.

Royal Mail Quality of Service

Table 1: Focus Group Structure

Group  Business/                                         Age/         SEG/                 Pre-
                 Country           Place     Rurality                             Date
Number Domestic                                         Turnover      Sector              task?

                                                          More                       7
1          Business   Scotland   Edinburgh    Urban                     Any                No
                                                        than £1m                   June

                                                        Less than                    7
2          Business    Wales     Bridgend     Rural                     Any               Yes
                                                          £1m                      June

3          Business   England     London      Urban       Any         Services            Yes

                         N.                                                          3
4          Business               Belfast     Urban       Any          Retail              No
                       Ireland                                                     June

5          Domestic   Scotland   Edinburgh    Urban      45-64         ABC1               Yes

6          Domestic    Wales     Bridgend     Rural      35-54         C2DE                No

7          Domestic   England     London      Urban      25-44         C2DE               Yes

                         N.                                                          3
8          Domestic               Belfast     Urban      35-54         ABC1                No
                       Ireland                                                     June

9          Domestic   England     Exeter      Rural      25-44         ABC1               Yes

10         Domestic   England     Exeter      Rural       65+          C2DE               Yes

11         Domestic   England    Stockport    Rural      25-34         ABC1                No

12         Domestic   England    Stockport    Urban      18-24       C1C2DE                No
                                                                                  Source: MORI

Depth Interviews – Medium and Top 500 Business Customers
Due to the individual nature of Royal Mail accounts, it was not appropriate to
carry out focus groups with account managed businesses. Businesses working in
different sectors may have completely different priorities, requirements or
expectations and use different services (e.g. Presstream, Mailsort 1 etc)
independently from the amount they spend on postage.

Royal Mail Quality of Service

For this reason, we conducted 10 one-on-one depth discussions, 5 with medium
and 5 with top business customers, in June 2004. These were conducted over the
telephone, allowing us to conduct interviews with businesses all over the country.

Interviews lasted around 40 minutes and were carried out with individuals with
whom Royal Mail deals on the account and have the main decision influencing
capacity on this.

Quantitative Stage
The findings from the qualitative phase of this study were fed into the design of
the questionnaire to be administered to the various groups of customers. As in
the case of qualitative research, there were differences in the questionnaires and
the methods used for the different audiences.

Telephone Interviews – Domestic and Small Business Customers
Telephone interviews were conducted among domestic and small business
customers between 1 and 21 July 2004.

In the case of domestic customers, 2,000 interviews were carried out using a
quota sample drawn from a cross-section of the UK population. Data were then
weighted to the known population profile.

We also conducted 300 interviews among a sample of small business customers
drawn from our in-house company’s database. Quotas were set on types of
business and region, to ensure that a sufficient number of interviews were
achieved in each country.

The same questionnaire (see appendices for the full questionnaire) was
administered to the two groups and the average interview length was 13 minutes.
In addition to the quantification of different elements discussed in the focus
groups, a simple pair-wise trade-off exercise was included in the survey, aimed at
testing the relative preference for attributes of the postal service, namely, delivery
target, hitting delivery target and price.

Online Interviews – Medium and Top 500 Business Customers
Interviews among medium and top 500 business customers were conducted
online between 7 and 23 July 2004. An e-mail was sent to potential participants
inviting them to take part in the study by clicking on a link that would take them
to a secure page of the MORI website, where the survey was hosted. In total, we
achieved 605 interviews with medium business customers and 100 interviews
with top 500 business customers.

At the heart of the quantitative stage of the survey among medium and top 500
businesses was a conjoint analysis exercise, designed to gain an insight into the
preferences of these important customers (more details about this type of analysis
are provided in the main report as well as in the appendices). Given the

Royal Mail Quality of Service

complexity of such type of analysis, it was felt that an online survey represented
the best approach for these segments. In fact, a questionnaire administered
online can handle complex systems and analysis. In addition, an online survey is
very flexible and can be completed at a convenient time for the respondent,
which is a major benefit in the case of a business sample.

Presentation and Interpretation of the Data
Results are presented as percentages. Where percentages do not add to 100%,
this may be due to rounding of figures or where respondents were able to
provide more than one answer to a question.

As a sample of the population rather than the whole population was interviewed,
results are subject to sampling tolerances, and not all differences between sub-
groups may be statistically significant. For more information on sampling
tolerances, refer to the Appendices.

An asterisk (*) in the table denotes a value of less than 0.5%, but greater than
zero. Mean score calculations are derived from raw data.

It should be noted that the findings of this research are based on customers’
perceptions of their use, their future requirements and their perceived experience
of Royal Mail and not necessarily based on actual real life situations. Thus the
findings show what customers say they would do within a given set of parameters
which may or may not be the actual behaviour in reality.

Publication of the Data
MORI’s Standard Terms and Conditions apply to this study, as to all those that
we undertake. No press release or publication of the findings from this study
shall be made without the prior approval of MORI. Such approval will only be
refused on the grounds of inaccuracy or misrepresentation of the research

Royal Mail Quality of Service

Summary of Findings
Reputation of Royal Mail
•   Royal Mail’s reputation varies across different customer groups. The
    organisation is well known across its entire customer base, though domestic
    and small business customers tend have a more favourable opinion than
    account managed customers

•   Across all customer groups, favourability towards Royal Mail is lower than
    the comparable organisations, including the Post Office

•   Many say their opinion of Royal Mail has deteriorated over the last six
    months; more than half of account managed customers say this

•   The relatively low level of favourability towards the organisation is, at least,
    partially explained by Royal Mail’s underperformance on some critical service
    factors. In particular, only a minority of customers rate Royal Mail highly on
    ‘reliability’, ‘delivery on promises’, ‘accountability’ and ‘meeting expectations’
    - all of which are positively correlated with favourability. In line with the
    overall attitudes, medium and especially top 500 business customers are
    particularly critical of Royal Mail’s performance on these same dimensions

Strategic Priorities
•   Conjoint analysis further shows the need for Royal Mail to focus on
    ‘reliability’ and ‘delivery on promises’

•   The percentage of mail delivered on the specified day is key to all audiences.
    Among most domestic and small business customers it is more important
    than the actual time of delivery itself and on a par with price

•   Experience of loss has a significant negative impact on Royal Mail’s overall
    reputation. The first basic expectation, shared by all, is for their post to be
    delivered. Loss is therefore viewed as unacceptable by the majority, especially
    among account managed customers

Royal Mail Quality of Service

Customer Expectations
•    Most customers are more service, rather than price focused and place more
     value on an improvement in service than on a reduction in price. However,
     this varies with customer profile, especially by age among domestic
     customers, type of business among account managed customers and typology
     of products used among all type of customers

•    Given the importance of reliability and delivery on promises, all customers
     expect mail to be delivered within its target. Very few are prepared to accept
     a slippage in delivery of more than two working days after the target day for
     delivery of ALL remaining items

•    Only a minority of medium and top 500 business customers would be
     prepared to pay more in order to reduce frequency of loss. Domestic and
     small business customers are more indulgent; more than half say they would
     accept an increase in price to reduce the number of items that go missing.
     Many also say they agree to an increase in price if it leads to a more reliable
     service. This is not true, however, of the majority of account managed

•    Account managed customers have very high expectations when it comes to
     delivery and collection times; these are often critical to their own business
     operations. Only a minority are prepared to pay more to reduce the window
     of delivery

    ©MORI/22377                                                       Janette Henderson
                                                                        Kieron Culligan
                                                                         Andrew Gunn
                                                                         Mara Galbiati

Royal Mail Quality of Service

Main Findings
Familiarity with Royal Mail
Royal Mail is well known across all the audiences included in this study; most feel
they know it very or fairly well. None of the account managed customers and
only a small proportion of domestic and small business customers feel they know
almost nothing of the organisation.

   Overall familiarity with Royal Mail
   Q     How well do you feel you know Royal Mail?
                              Know very         Know a fair          Know just a        Heard of/know
                              well              amount               little             almost nothing

   Top 500
                                 39%                                      53%                         8%

   Medium                       36%                                     54%                         10%

   Small                             48%                                  36%                   12% 4%

   Domestic                         46%                                  37%                    14%     3%

 Base: All Top Businesses (100), Account managed businesses (605), small businesses (300) consumers (2,000)

Domestic and small business customers are also more likely than account
managed customers to believe they know Royal Mail very well, with nearly half
saying so. This does not mean that these customers actually know Royal Mail
better, but that the level of knowledge that they require to feel they know it very
well may not be as high as it is among account managed customers. This is
further supported by the findings in the qualitative stage of this survey, revealing
that domestic and small business audiences often confuse Royal Mail and the
Post Office. In addition, most account managed customers deal with Royal Mail
on a daily basis and may be more aware of the complexity of the organisation and
of a number of areas with which they may not be familiar. However, this result
may suggest a need to communicate better with members of this important

As one might expect, account managed customers vary in their level of
knowledge of Royal Mail. In general, the bigger users of Royal Mail (both in
terms of expenditure and number of items sent) are more likely to believe they
know Royal Mail very well, rising to 48% among those who spend more than
£50,000 per month on postage.

Royal Mail Quality of Service

In addition, Royal Mail is rather better known than the Post Office and BT
among account managed customers. Nine in ten feel they know Royal Mail very
or fairly well, compared to seven in ten who feel the same about the Post Office
and six in ten who say they know BT at least fairly well. Similarly, they feel they
know Royal Mail rather better than their main courier, known well by seven in

Likewise, among domestic and small business customers Royal Mail is better
known than British Gas, whilst it is on a par with the Post Office and BT in
terms of familiarity, as shown in Table 1 below.

 Table 2: Familiarity with Royal Mail
                            Know very        Know fairly well       Know just a
                              well                                     little
                                 %                  %                      %
 Account managed
 customers (705)
 Royal Mail                      36                 54                    10
 The Post Office                 16                 52                    30
 BT                              14                 44                    38
 Your main courier               32                 38                    20
 Small business
 customers (300)
 Royal Mail                      48                 36                    12
 The Post Office                 51                 35                    12
 BT                              54                 35                     8
 British Gas                     33                 30                    24
 Domestic customers
 Royal Mail                      46                 37                    14
 The Post Office                 50                 37                    11
 BT                              48                 36                    13
 British Gas                     36                 32                    19
                                                                      Source: MORI

Royal Mail Quality of Service

Favourability towards Royal Mail
Customers were asked to rate how favourable they are towards Royal Mail. The
findings to this and subsequent questions reveal a clear difference between
domestic customers and small businesses, on the one hand, and medium and top
500 businesses on the other, with top 500 businesses generally least favourable of
the four groups.

Throughout, domestic and small business customers hold very similar views
about Royal Mail. Both are consistently more positive towards Royal Mail than
account managed customers, with around seven in ten favourable to the
organisation compared to a little over half of medium customers (56%) and less
than half top of 500 businesses (43%).

   Overall favourability towards Royal Mail
   Q     How favourable or unfavourable is your overall opinion or impression of
         Royal Mail?
           Very                      Fairly                   Fairly unfav             Very unfav
           favourable                favourable
                                                                                                       NET FAV

   Top 500        2%               41%                                              22%            12%          +9

   Medium           8%                      48%                                          19%          8%        +29

   Small                 22%                             50%                                  10%     7%        +56

   Domestic                27%                               44%                            11%       8%        +52

   Base: All Top Businesses (100), Account managed businesses (605), small businesses (300) consumers (2,000)

Domestic customers who live in Northern Ireland or Scotland are particularly
favourable towards Royal Mail (83% and 80% favourable respectively). Younger
(16-24 year olds) and older (60+) segments are also more favourable than others
(76% and 78% respectively). It is worth noting, though, that these groups, and
especially residents of Northern Ireland and older respondents, tend to be more
positive towards all the organisations measured.

Favourability is also higher among those domestic customers who use the First
Class service less; over three-quarters of those who use it for up to half of their
mail are favourable towards Royal Mail (77%), compared to 70% of those who
send most of their items by First Class post. Higher levels of expectations may
explain this result – those choosing to use the more expensive First Class service
may demand a better service and be more disappointed if their expectations are
not met.

Royal Mail Quality of Service

As one might expect, personal experience has a strong impact on attitudes
towards Royal Mail and favourability scores drop among those who have had
items missing in the post – especially in the recent past. Over one-third of
domestic customers (36%) who have experienced loss in the last six months are
unfavourable towards Royal Mail, compared to 8% who have never had such an
experience. Among small business customers, only 5% of those who have never
had an item missing in the post are unfavourable towards the organisation,
compared to 24% of those who have.

Among domestic customers, heavier users of the postal system tend to be less
favourable towards Royal Mail. Indeed, heavier users are also more likely to have
experienced loss in the past, and this probably has a negative impact on their
overall attitude towards Royal Mail. In addition, bigger spenders may have higher
expectations of the quality of the service that Royal Mail should provide.

This may also explain the relatively low favourability scores attributed to this
organisation by medium and, especially, top 500 business customers. Less than
half of top 500 business customers are favourable to Royal Mail and very few are
very favourable. Medium business customers are slightly more positive towards
Royal Mail, but less than one in ten is very favourable and nearly one in three
unfavourable to the organisation.

               I can’t think of anything particularly good
                                          Top 500 business customers

               I couldn’t say ‘bloody hell they have done well here’. There
               isn’t anything
                                          Top 500 business customers

As found with domestic and small business customers, favourability drops even
further among large users, with 42% of those who spend over £50,000 monthly
on postage unfavourable compared to 39% favourable. On the other hand, the
proportion of those favourable rises to 62% among businesses spending less
(between £400 and £10,000 per month on postage) whilst around one quarter
(24%) are unfavourable.

The type of service used most often is also a discriminator of favourability, with
less than half of users of Mailsort 3 favourable (49%) compared to nearly three in
five users of First (58%) and Second Class services (57%) or their equivalents.
Mailsort 3 users tend to be bigger spenders and more dependent on the postal
service than users of other products. Their potentially higher expectations and
need for a flexible product may therefore explain the lower overall favourability

Those who are more familiar with the organisation also have a better opinion of
it, confirming that there is a need for better communication with key customers
in order to improve mutual understanding and the overall relationship. The need
for Royal Mail to be more personal and proactive in the relationship-building

Royal Mail Quality of Service

process is also highlighted by a number of participants in the qualitative in-depth

                                 The personal touch is disappearing and information is
                                 sometimes only available on the website
                                                            Medium business customer

                                 We have had about 4 or 5 account managers in the last
                                 year and so there has not been continuity to build up a
                                 relationship with someone we can depend upon. If we have
                                 got any questions we have no real way of knowing who we
                                 are supposed to speak to
                                                            Medium business customer

Favourability in context
Domestic and small business customers were also asked to rate the Post Office,
BT and British Gas, while account managed customers were asked to rate the
Post Office, BT and their main courier. Generally speaking, Royal Mail is less
well rated than these other organisations, the exception being British Gas, which
is less well rated than Royal Mail among small business customers.

The charts below show the relative position of each organisation in terms of
familiarity and favourability. The horizontal axis shows the mean familiarity (on a
scale of 0-4 where 0 = never heard and 4 = know very well). The further to the
right of the chart an organisation sits, the better people think they know it. The
vertical axis represents mean favourability (on a scale of –2 to +2, where -2 =
very unfavourable and +2 = very favourable) and the higher up an organisation is
positioned, the better regarded it is.

                Royal Mail in Context - domestic and small
                             Small Businesses                    Domestic Customers

                                                                       Post Office



                              British Gas
                                                                             Royal Mail

                      2.5           2.7              2.9             3.1             3.3     3.5          3.7
                Base:   All small businesses (300); All domestic customers (2,000)

Royal Mail Quality of Service

Domestic and small business customers are on balance favourable to all four
organisations. Indeed, both audiences think more positively of both the Post
Office and BT than Royal Mail. Domestic customers have also a better opinion
of British Gas, despite its lower familiarity score.

However, Royal Mail is less well rated than the comparators (BT, Post Office and
‘Your main courier’) among medium and top 500 business customers.
Favourability towards their main courier is the highest, suggesting that lower
levels of favourability are not due to the nature but to the quality of the service.
Couriers may represent one of Royal Mail’s main competitors and continued
perceived underperformance by Royal Mail might drive some of its biggest
customers to approach alternative organisations.

               Couriers such as DHL generally provide a high standard
               of service. They have strong communication channels and
               you get hold of service staff very quickly to place an order or
               enquire about parcels location. The account managers are
               always available and you get a quick response to any
               problems which may arise
                                             Medium business customer

               We rely less on Royal Mail than previously. Now we use
               other couriers
                                                  Business customer

               As the postal service is becoming more open to competition,
               the firm is starting to set up contingency plans and is
               looking into using other suppliers in the event of a break
               down of the postal services, such as when a strike takes
                                           Medium business customer

Royal Mail Quality of Service

                Royal Mail in Context - account managed
                                  Top 500 Businesses                Medium Businesses

                                                                     Your main courier


                                                Post Office                                Royal Mail


                       2.5               2.7             2.9             3.1             3.3            3.5           3.7
                Base:        All Top 500 Businesses (100); all account managed businesses (605)

Changing Perceptions of Royal Mail
On balance, all four audiences say that their opinion of Royal Mail has
deteriorated in the last six months, with over half of account managed customers
actually saying it has got worse compared to around two in five domestic and
small business customers. Undoubtedly recent negative publicity about the
organisation will have had an impact, but the deterioration in opinion is unlikely
to be due exclusively to unfavourable media attention, but points to a reduction
in service quality.

                Royal Mail is seen to be deteriorating
                Q       Over the last six months, would you say your opinion of Royal Mail has
                        got better, worse or remained about the same?
                                 Got a lot         Got a little                     Got a little worse        Got a lot worse
                                 better            better
                                                                                                                     NET better

                Top 500  4% 11%                                                      28%                      27%            -40

                Medium                9%                                              30%                     24%            -44

                Small                  3%                                                         19%          20%           -36

                Domestic 3%                4%                                                     18%          20%           -30

                Base: All Top Businesses (100), Account managed businesses (605), small businesses (300) consumers (1,000)

Royal Mail Quality of Service

Even among domestic and small business customers, who tend to be more
favourable to Royal Mail, very few have seen their opinion of Royal Mail improve
in the recent past. The majority have not changed their views on the
organisation, but the balance among the remainder is negative, with a significant
proportion (nearly four in ten among) thinking worse of it than they did six
months ago.

                    Their focus has become a little more laid back because they
                    think that we can’t do without them (i.e. Royal Mail), so
                    they make their own rules
                                        Small business customer, London

                    We still need to send things by mail, but the service from
                    the mail has got so terrible in the area where my offices are
                                     Small business customer, Edinburgh

Once again, the opinion of those domestic and small business customers who
have had items missing in the post is more likely to have deteriorated (51% and
50% respectively) than those who have not, confirming that personal experience
is a key factor behind perceptions and reputation of Royal Mail. This is
particularly relevant considering that the number of those claiming to have lost
items in the post is significant – over half say they have experienced loss in the
past, including 31% who have done so in the last six months.

   Half have experience of loss
   Q       As far as you are aware, have you had any mail you sent go missing in
           the post?
                              Yes – last 6 months        Yes – ever    No

       All with items
       missing in the                  31%
       last 6 months

       All with items                  31%               21%

       All respondents                 31%               21%            48%

   Base:    All domestic customers (2,000)

As we have already seen, heavier users of the postal system and of the First Class
service tend to be less favourably disposed to Royal Mail than lighter users,
especially among domestic customers. Similarly, they are also more likely to say
that their opinion of Royal Mail has got worse in the recent past.

Royal Mail Quality of Service

On the other hand, those whose opinion of the organisation has got worse drop
to 24% (from 38%) among 16-24 year olds and to 19% among residents of
Northern Ireland.

Among larger business customers opinion is more polarised, with fewer saying
their opinion of Royal Mail has not changed over the recent past. A bigger
proportion of top 500 and medium business customers say they think better of
Royal Mail than they did six months ago, compared to domestic customers and
small business, but the opinion of the majority has deteriorated over this period
of time. Indeed, qualitative research revealed that some believe the future will
not bring any improvement either, at least for a while.

                I think that the quality of service of Royal Mail will
                probably get worse before it gets better. The large internal
                changes that are taking place will certainly have an impact
                on the service level
                                            Medium business customer

The biggest spenders are particularly likely to report deterioration in their opinion
of Royal Mail, with a third of those spending over £50,000 monthly on postage
saying that their opinion of the organisation has got a lot worse.

As one might expect, favourability and change of opinion towards Royal Mail are
strongly correlated across all audiences, with the unfavourable most likely to say
their opinion has deteriorated.

 Table 3: Change of opinion towards Royal Mail
                                    Got better         Got worse          Remained the
                                          %                  %                    %
 Account managed
 customers (705)
 Favourable                               18                 35                   48
 Unfavourable                             2                  83                   14
 Small business customers
 Favourable                               4                  26                   71
 Unfavourable                             2                  88                   10
 Domestic customers (2,000)
 Favourable                               9                  24                   66
 Unfavourable                             2                  79                   19
                                                                               Source: MORI

Royal Mail Quality of Service

Worryingly though, a significant proportion of those customers who are
favourable towards Royal Mail have seen their opinion of the organisation
deteriorate over the past 6 months. Indeed, even among these groups, more say
their opinion has got worse than say it has got better.

Use of CHAID analysis
The strong correlation between favourability and change in opinion towards
Royal Mail is further highlighted by the results of the CHAID analysis carried out
on the data.

CHAID analysis tests the strength of association between a key characteristic or
behaviour and other factors and allows one to cluster a population according to
the tendency to exhibit such a characteristic (see appendix for more details).
CHAID analysis reveals that opinion towards the current service is the main
discriminator when it comes to favourability.

Confirming what we have seen so far, personal experience of loss is a second
level differentiator – those who have had such an experience are more likely to be
unfavourable towards Royal Mail.

Critical Service Success Factors
Qualitative research was used to identify which factors are critical to customers in
terms of service delivery from any organisation, not just Royal Mail. These were
then tested in the quantitative research both in terms of their importance to
service in general (i.e. not just Royal Mail) and in terms of the performance of
Royal Mail on these factors.

The research shows that although medium and top 500 business customers have
a slightly different agenda from the other two segments, the most important
factors are common to all.

Of particular importance are reliability, delivery on promises and trustworthiness.
All factors measured are important to varying degrees and play a critical role in
determining what excellent service means, as the following two charts show.

Royal Mail Quality of Service

   Many important factors in service delivery
   Q Thinking about the service you receive from companies and organisations, I
   would like to know how important each of the following aspects are to you
                                                       Top 500                           Medium

                 Delivery on promises
                  Keeping to schedule
                 Meeting expectations
                      Value for money
    Understanding customers’ needs
                 Access to information
                                            50      60          70        80        90        100
                                                   % Critical/ Very Important
   Base: All Top 500 (100) and account managed businesses (605)

   A similar pattern is seen across all customer types
   Q Thinking about the service you receive from companies and organisations, I
   would like to know how important each of the following aspects are to you
                                                  Small Business                Domestic Customers

                 Delivery on promises
                Putting customers first
                 Meeting expectations
                  Knowledgeable staff
                      Value for money
              Knowing who to contact
                      Individual service
                                            50      60          70        80        90        100
                                                   % Critical/ Very Important
   Base: All small businesses (300) and domestic customers (2,000)

Although there are some small variations, overall the degree of importance of
each of these factors is agreed upon across all sub-groups.

Royal Mail’s Performance
In line with the findings so far, domestic and small business customers rate Royal
Mail more positively than account managed customers on all factors. However, a
certain degree of criticism can be found across all four groups on most

Royal Mail Quality of Service

Reliability, for example, is perceived to be the most important factor, generally,
across all audiences. As one might expect, it also seems to be very relevant when
it comes to postal services specifically:

                 ‘I’d like to stick the letter in the post box with a first class
                stamp on it and not even worry about it’
                                      London, Small business customer

                Reliability is very important especially with any kind of
                mail product. It is important to trust the Royal Mail to
                deliver on time
                                           Medium business customer

Although net ratings of Royal Mail on this dimension are positive across all
audiences (i.e. more think the service offered by the organisation is at least fairly
good than think it is poor), less than one in five medium and top 500 business
customers think that the reliability of Royal Mail’s service is ‘excellent’ or ‘very
good’ (19% and 17% respectively). Among top 500 business customers, a similar
proportion (15%) thinks that the service is ‘very poor’ or ‘terrible’.

Reflecting their generally more positive disposition towards Royal Mail, domestic
and small business customers are more positive about the reliability of Royal
Mail’s service – 29% and 32% respectively think that this is excellent or very
good, compared to 12% and 10% who think it is very poor or terrible. However,
the qualitative research suggested that even the most positive audiences feel that
Royal Mail’s service reliability standards have been falling in the recent past.

                You lose faith in the reliability of Royal Mail
                                              Wales, Domestic customer

                I think very often you cannot rely on the post
                                     London, Small business customer

It is worth noting, though, that not all agree with this point of view.

                ‘I don’t think I’ve ever sent a letter that hasn’t been
                delivered on time
                                     Stockport, Domestic customer

                They are there whatever the weather
                                           Exeter, Domestic customer

Overall, across all four audiences, heavier users of the postal service and those
who have experienced loss tend to be more critical of Royal Mail’s performance
on most of the factors. Thus, they are more likely to rate Royal Mail
performance in terms of reliability more negatively, as shown in the following

Royal Mail Quality of Service

 Table 4: Rating of Royal Mail’s reliability
                                         Excellent / Very       Terrible / Very
                                              Good                   Poor
                                                 %                       %
 Small business customers (300)                  29                      12
 Ever experienced missing items (189)            22                     17
 Never experienced loss (108)                    41                      3
 Domestic customers (2,000)                      32                      10
 Items missing in past 6 months (629)            15                     23
 Never experienced loss (946)                    45                      3
 Up to 10 items sent (1,842)                     33                     10
 More than 50 items sent (36)                    23                     24
 Up to 10 items received (958)                   36                      8
 More than 50 items received (68)                25                     25
                                                                       Source: MORI

In addition, the level of familiarity with the organisation has an impact on how
Royal Mail is believed to perform on all the factors describing excellent service.
In particular, those who know the organisation very well are more likely to
describe the service provided by Royal Mail as excellent or very good in relation
to all the service success factors than those who do not feel their familiarity with
the organisation is as high. The need for better communication with key
customers to improve familiarity scores emerges once again. This is particularly
true for bigger business customers who are less likely to feel they know Royal
Mail very well and tend to be more critical of the organisation on all dimensions.

Among account managed customers, users of Mailsort 3 are particularly negative
towards Royal Mail’s performance on all these dimensions, reflecting the general
more unfavourable attitude of this group of customers towards the organisation
and its service delivery.

Strategic Priorities
Although all the factors mentioned are felt by customers to be important in
defining excellent service, it is important to identify which areas need immediate
focus and action.

The following charts show Royal Mail’s performance on each factor in relation to
its importance among medium and top 500 business customers. The horizontal
axis shows the mean importance (on a scale of 0-4 where 0 = not at all important
and 4 = critical). The vertical axis represents mean ratings of Royal Mail’s
performance on each of the factors (on a scale of –2 to +2, where -2 = very
unfavourable and +2 = very favourable). The quadrant lines on the chart
represent the average importance and the average ratings scores for each

Royal Mail Quality of Service

attribute, and the point at which the lines meet marks the average position for the
two. Factors found in the top right quadrant are those with a higher than average
rating and on importance on which Royal Mail is perceived to be performing
well. Factors in the bottom right quadrant, on the other hand, are those where
Royal Mail is not perceived to perform as well, despite the fact that these aspects
are assigned higher than average level of importance.

Therefore, the chart suggests that the main areas of focus for Royal Mail in order
to improve the satisfaction of medium and top 500 business customers are
‘delivery on promises’, ‘meeting expectations’ and ‘reliability’. All three factors
are of relatively high importance to these audiences, but Royal Mail’s perceived
performance is only average or lower. Top 500 business customers are
particularly critical when it comes to ‘reliability’. ‘Accountability’ is another factor
that deserves particular attention. When it comes to Royal Mail’s perceived
accountability, dissatisfaction among account managed customers is high, with
more rating its performance poor rather than good. This is possibly a reflection
of the perceived lack of a single, continuous, personal and reliable point of
contact to whom these customers can turn with problems and queries, as
emerged from the qualitative in-depth discussions with this audience.

                    Royal Mail Performance on important factors –
                    Top 500 Businesses
                                              Knowledgeable staff
                                    Top 500 businesses


Royal Mail Rating


                     0.2                                               Value for money                Delivery on
                                  Access to information            Understanding                      promises
                                                                   customer needs                                   Keeping to
                    -0.2                                                           Accountability
                            2.5           2.7                2.9             3.1         3.3          3.5           3.7
                    Base:     All top 500 businesses (100)                                                                         2

On the positive side, Royal Mail is perceived as a trustworthy company by many,
especially among medium business customers, a factor which is felt to be a key
indicator of excellent service.

Royal Mail Quality of Service

                    Royal Mail Performance on important factors –
                    Medium Businesses
                                             Knowledgeable staff

                                   Medium businesses

                     0.6                                        Value for money          Trustworthiness
Royal Mail Rating

                     0.4          Access to information                                 Keeping to
                                                                                        schedule               Reliability
                                                              Understanding                           Delivery on
                     0.2                                      customer needs                          promises
                                                    Flexibility                     Meeting


                            2.5           2.7           2.9        3.1            3.3           3.5          3.7
                    Base:     All medium businesses (605)                                                                    1

It is also felt that Royal Mail offers good ‘value for money’, although this
attribute is not perceived as important as those previously mentioned (though
important nonetheless).

Use of Key Drivers Analysis
These results become even more meaningful when the correlation between some
of these factors and overall favourability towards Royal Mail is taken into
consideration through Key Driver Analysis. This is a regression technique that
looks at the underlying influences on satisfaction which are not currently
measured in the E2E system. In particular, this is used to find out which factors
are most strongly correlated with another factor (favourability to Royal Mail in
this case).

Analysis of the results for top and medium businesses reveals that of all the
factors tested in the survey, ‘meeting expectations’ is most strongly correlated
with favourability. In effect, improving the perception of these audiences on
Royal Mail’s capacity to meet expectations would have the most positive impact
on the overall favourability towards Royal Mail, all other things being equal.
Other factors positively correlated with favourability are ‘accountability’,
‘reliability’ and ‘trustworthiness’.        As already discussed, ‘reliability’,
‘trustworthiness’ and ‘meeting expectations’ are also amongst the most important
factors felt to describe excellent service.

Royal Mail Quality of Service

   Key Drivers to Favourability – Top 500
  and Medium Businesses
        Showing strength of drivers
     64% of Favourability with Royal Mail
             explained by model
                                                                 Meeting your
                                                    40 %         expectations

                                                     21%        Accountability/
                                                             Taking responsibility

          Q3 Favourability
           with                                       21%
           with Royal
                Royal Mail
                      Mail                                         Reliability


   Base: All medium and top 500 businesses

The relatively poor performance of Royal Mail on three of these dimensions no
doubt goes some way to explain its low favourability score among top and
medium business customers. It also stresses the need to concentrate on these
areas in order to improve Royal Mail’s reputation among its most profitable

As shown in the charts overleaf, ‘reliability’, ‘delivery on promises’ and
‘accountability’ also constitute areas of focus for small business and domestic
customers. ‘Putting customers first’, a factor that was not taken into
consideration among medium and top 500 Business customers, is also an area
where Royal Mail is considered to under-perform given its importance.

Once again, Royal Mail’s ‘trustworthiness’ is rated very highly, together with the
‘value for money’ and ‘individual service’ offered by the organisation. However,
these last two factors are not among those considered most important for
excellent service (though, as mentioned earlier, that is not to say that they are

Royal Mail Quality of Service

                    Royal Mail performance on important
                    factors – Small Businesses

Royal Mail Rating

                                                                   Value for money
                                Individual service
                                                                           Knowledgeable staff
                                                                                                            Delivery on
                                                             Meeting expectations            Putting        promises
                    0.5                                                                      customers
                                                                       Accountability        first     Reliability

                                               Knowing who to contact
                          2.5                                                3.0                                          3.5
                                                                 Relative Importance
                    Base:       All small businesses (300)

                    Royal Mail performance on important factors –
                    Domestic Customers

Royal Mail Rating


                                                       Value for money              Knowledgeable
                    1.0         Individual service                                  staff              Trustworthiness
                                                                                              Delivery on
                                            Meeting expectations
                                                              Accountability                  Reliability
                                               Knowing who to contact              Putting customers first

                          2.5                                                3.0                                          3.5
                                                                 Relative Importance
                    Base:       All domestic customers (2,000)

None of these three factors figure among the key drivers to overall satisfaction
among small business customers. In addition ‘trustworthiness’ and ‘individual
service’ are relatively weak drivers to overall favourability among domestic

Once again, it is ‘reliability’ which is the strongest factor driving favourability
towards Royal Mail among both audiences, followed by ‘putting customers first’

Royal Mail Quality of Service

and ‘meeting expectations’ and, in the case of domestic customers, ‘delivery on
promises’. Royal Mail needs to enhance its performance on each of these
dimensions, in particular, in order for overall favourability to improve among
these customer types.

  Key Drivers to Favourability – Small
        Showing strength of drivers
     56% of Favourability with Royal Mail
             explained by model

                                                  49%               Reliability

                                                  28%           Putting
                                                                Putting customers
          Q3 Favourability
           with Royal
                Royal Mail

                                                   23%            Meeting
                                                                  Meeting your

   Base: All small business customers

  Key Drivers to Favourability – Domestic
        Showing strength of drivers
     54% of Favourability with Royal Mail               %
             explained by model                    28

                                                    24 %          Meeting
                                                                  Meeting your

                                                    17% Delivery on promises
                                                        Delivery on promises

          Q3 Favourability
              Favourability                         17%        Putting
                                                               Putting customers
           with Royal
                Royal Mail
                      Mail                                             first

   Base: All domestic customers                                 Individual
                                                                 Individual Service

Royal Mail Quality of Service

Customers’ Preferences
In the real world, customers’ choices are based on a trade-off process, through
which different service attributes are evaluated against price and each other. To
simulate this trade-off process and understand the true relative importance of
different aspects of the postal service, conjoint analysis has been used. This type
of analysis is a well established research and statistical technique, described in
more detail in the appendices.

In this case, different analysis models have been applied to domestic and small
business audiences and medium and top business audiences, to accommodate
different interviewing techniques and reflect the level of choices generally made
by each group3.

The full conjoint exercise was administered to top 500 and medium business
customers only. As for the other two audiences, this analysis was applied in the
form of a pair wise trade-off exercise (see appendices for more details).

Domestic and Small Business customers
The following table details the attributes and levels used for domestic and small
business customers during the survey.

    Table 5: Attributes and Levels
                           Price             Delivery Time            Mail delivered
                                                                       within time

    Level 1                 35 p                 By 5 pm                     88%
    Level 2                 28 p                 By 12 pm                    92%
    Level 3                 21 p                      -                      96%
                                                                            Source: MORI

These attributes and levels were combined to offer a number of different options
to choose from, as illustrated by the following chart.

3 It is not practical to administer a full conjoint exercise via the telephone survey. Furthermore,
we believed a simpler exercise to be more appropriate for small business and domestic
respondents because we wanted to ensure that the survey was sufficiently easy to understand
across the complete spectrum of Royal Mail’s residential customer base.

Royal Mail Quality of Service

   Example conjoint decision

                Proposition A                                Proposition B
                          35p                                          28p
              92 out of 100 letters                        92 out of 100 letters
          delivered next working day                   delivered next working day
                   by 12pm                                       by 5pm

          Which is your preferred proposition?              - Proposition A
                                                            - Proposition B
                                                            - Can’t decide

By presenting customers with a range of such propositions, we were able to
assess the relative importance to domestic and small business customers of the
three different factors considered in this analysis – price, delivery time and
percentage of mail delivered within time targets. As shown by the following
chart, the conjoint analysis shows that all three factors are valuable to both
audiences, and choice among these customer groups is not dictated by one
dominant factor. It also confirms the similarity between the two groups.

   Small businesses are similar to domestic customers

                                     Domestic                    Small
     % of variance

       Delivery                                                    35%
       percentage                      42%

       Delivery time                                               27%
       of day                          21%

      Price                            37%                         38%

 Base: Consumers (1879), small businesses (280), excluding R squared < 50%

Royal Mail Quality of Service

However, especially among domestic customers, price and percentage of mail
delivered within time targets are slightly more valued than delivery time targets.
The fact that time of delivery per se is not as valuable as delivery within the
promised timeframe further stresses the importance to this audience of a service
which delivers on its promises and on which customers can rely:

                  I wouldn’t mind any time (of delivery), as long as it kept to
                  that, because you can build around that structure. So that
                  is the reliability
                                              Wales, Domestic customer

The importance of delivery on promises for domestic customers is further
emphasized in the following chart. As can be seen, two-thirds of domestic
customers say they would choose a product which is more likely to achieve its
modest specification than one in which the percentage delivered on time is
sacrificed for an earlier delivery

   Delivery on promise is preferred by more




               Delivery on promise : 28p, 5pm delivery, 96% delivery on target
               Quick delivery : 28p, 12pm delivery, 88% delivery on target
               Prefer both equally

 Base: Consumers (1,879), excluding R squared < 50%

This is also true for small business customers, although these tend to attribute
more importance to the time at which their post is delivered (ie 12pm or 5pm)
than their domestic counterparts, at the expenses of the proportion of items
achieving the next working day delivery target. There may be a bigger need for
business correspondence to get quickly to its destination, but small business
customers are not prepared to pay more in order for this to happen. This is
presumably because the time at which mail is received by businesses is more
fundamental to the successful operation of the business than the running of
domestic households.

Royal Mail Quality of Service

Delivery percentage becomes even more important for those domestic and small
business customers who mostly use First Class for their mail. As one might
expect, price is less important among this group, although its value is still

   There is differentiation in use of current
    Small businesses            Up to half of items             More than half of
                                sent by 1st class *          items sent by 1st class
     % of variance
       Delivery                                                         41%

       Delivery time                                                    29%
       of day
       Price                                                            30%

       Share                             27%                             73%
 Base: Small businesses, excluding R squared < 50% (280), *Note: relatively small sample size

   Relative importance by use of 1st Class
   Consumers                                       Use of 1st class
                                Up to half of items     More than half of items
     % of variance               sent by 1st class         sent by 1st class

       Delivery                          33%
       percentage                                                         44%

       Delivery time
       of day                                                             22%


 Base: Consumers, excluding R squared < 50% (1879)

In particular, as shown in the chart overleaf, small business customers using First
Class for most of their mail are more likely to favour service over price

Royal Mail Quality of Service

    Low price produce less important for heavier users of
    First Class among small businesses

                         All small                           Small businesses
                        businesses                         sending more than half
                                                            of items by 1st class


                   Service based product : 35p, 12pm delivery time
                   target, 96% delivery
                   Price based product : 21p, 5pm delivery time target,
                   88% delivery

  Base: Small businesses, excluding R squared < 50% (280), *Note: relatively small sample size

On the other hand, price becomes more relevant amongst those small business
and domestic customers who have a greater propensity to choose the cheaper
Second Class alternative, thus suggesting that this service is still necessary to meet
the need of specific groups of customers.

   Price sensitivity increases with age
         Domestic                                         Age group
                                     16-24            25-44      45-59                  60+
     % of variance
       Delivery                                                       40%

       Delivery time                                                  24%
       of day                                         19%
       Price                                          33%             36%

 Share of total items sent (est.) 8%                    42%            31%             19%
 Base: (1879) Consumers excluding R squared < 50%

Similarly, older domestic customers, who are less likely than others to use First
Class for the majority of the mail they send, are also those who place the biggest
value on price. In fact age is by far the largest distinguishing factor. No other
demographic criteria show such a difference in sensitivity between service

Royal Mail Quality of Service

attributes. Furthermore, the increase in importance of price among the older
groups comes almost entirely at the expense of the importance of delivery
percentage, i.e. a lower spec service at a lower price is preferred to a higher spec
service at a higher price among older groups.

   High service vs Low price product - both are

                 All consumers                                                Over 60s



                                         59%                     54%

                    High service product : 35p, 12pm delivery time target,
                    96% delivery
                    Low price product : 21p, 5pm delivery time target, 88%
 Base: All domestic customers (1,879) and over 60s (456) Consumers excluding R squared < 50%

This is further validated from the analysis shown above; customers aged 60 or
older favour a lower price / lower service product compared to residential
customers in general.

Younger customers appear to be the least price sensitive segment, however, even
though their usage of the First Class Service is significantly lower than among
those aged 25-59.

Surprisingly, perhaps, the impact of ‘wealth’ on price sensitivity seems to be much
weaker than age. For instance, the relative importance attributed to price by those
who do not work is only slightly higher than the importance attributed to it by
those working full-time.

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