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Base Point Pricing

 

DisciplinesMarketing > Pricing > Base Point Pricing

Description | Example | Discussion | See also

 

Description

Set your prices based on a combination of basic costs plus transportation costs. The base point is the location from which transportation is charged.

The major part of transportation cost is typically to another country where factors such as containerization and import duties may be important. Where the destination is a larger country and where internal transportation costs are high (for example with heavy goods), then this may also need to be considered.

Where competition in a country or market is strong, then the base point price is the basis for competition. This means international shipping may be removed when there are local companies against who you must compete.

Example

A steel manufacturer uses base point pricing to visibly separate the high transportation prices from the product price.

An international white goods manufacturer sets a base point per region and then charges a separate shipping cost.

Discussion

A tricky element of this strategy is in deciding on the base cost, as this is where you will be getting your profit (unless you price higher than actual transportation costs). For this, other pricing strategies may be considered.

The separation of base and transportation costs can make the price charged to customers seem lower as they focus on the base price and see transportation as a necessary extra.

Online prices often incorporate shipping so they can say shipping is 'free', which is often expected or a key competitive factor. Be careful if this is a significant for your customers.

It is not uncommon in some industries for the base cost to be standardized, which effectively amount to price fixing.

See also

Cost-Plus Pricing

 

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