Demand Elasticities at the Intensive and Extensive Margins for Advertising Mail Traffic in the UK

Advertising letter mail competes for marketing budgets against a range of different media types. Since the early 2000s, its share of total advertising expenditure in the UK declined by approximately half to account for less than a tenth by the end of 2018. However, advertising mail remains an important component of UK letter volumes, accounting for over three billion items and around a third of addressed inland letters in 2018. A number of factors impact the demand for advertising letters, some outside the control of postal operators and decision-makers (such as economic conditions and advances in new technology), but price is a factor that can influence demand. Here we investigate advertising price elasticities using a rich source of UK customer data.