Basing-point pricing
Basing-point pricing is a pricing strategy used in the manufacturing and construction industries. It involves setting a base price for a product at a certain location, known as the basing point. The price of the product is then adjusted based on the cost of shipping the product from the basing point to the customer’s location.
For example, if a manufacturer sets a basing point price of $100 per unit at their manufacturing plant in city A, and a customer in city B wants to purchase the product, the final price would be calculated by adding the cost of shipping from city A to city B to the base price of $100. This ensures that customers located further away from the basing point pay a higher price to cover the additional shipping costs.
One of the advantages of basing-point pricing is that it simplifies pricing for customers and reduces the complexity of shipping costs. However, it can also lead to higher prices for customers located closer to the basing point, as they end up paying more to cover the shipping costs for customers located further away.
- Advantages of basing-point pricing:
- Simple pricing structure
- Transparent cost allocation
- Reduction in shipping complexity
In conclusion, basing-point pricing is a pricing strategy that can be beneficial for manufacturers and customers alike, but it is important to consider the potential drawbacks and ensure that pricing is fair for all customers.
For more information on basing-point pricing, you can visit Wikipedia.