GEOGRAPHICAL PRICING STRATEGIES

Ritisha Choudhary 100Riya Swati 101

Rohit Kumar Gourav 102Rucha Mirashi 103

Sana 104Akanksha Sangode 105

Saumya Gupta 107

GEOGRAPHICAL PRICINGAdjusting an item's sale price based on the buyer's

location. Sometimes the difference in sale price is based on

the cost to ship the item to that location or what the people there are willing to pay.

Geographical pricing might result in a California-grown avocado costing less in San Francisco than in Omaha, for example.

Companies will try to gain maximum revenue in the markets in which it operates, and geographical pricing enables such practices.

Geographic Pricing Strategies :

In pricing, a seller must consider the costs of shipping goods to the buyer.

These costs grow in importance, as the freight becomes a larger part of total variable costs.

Pricing policies may be established whereby the buyer pays all the freight expense, the seller bears the entire cost, or the seller and the buyer share this expense.

Point-of-Production Pricing In a widely used geographic pricing strategy, the

seller quotes the selling price at the point of production and the buyer selects the mode of transportation and pays all freight costs.

Usually referred to as FOB factory pricing, this strategy is the only one in which the seller does not pay any of the freight costs.

Under FOB factory pricing, the seller nets the same amount on each sale of similar quantities.

The delivered price to the buyer varies according to the freight costs.

Uniform Delivered Pricing The same delivered price is quoted to all

buyers regardless of their locations. This strategy is sometimes referred to as

"postage stamp pricing" because of its similarity to the pricing of first-class mail service.

Zone-Delivered Pricing This divides a seller's market into a limited

number of broad geographic zones and then sets a uniform delivered price for each zone.

Zone-delivered pricing is similar to the system used in pricing package-delivery services.

Freight-Absorption Pricing To penetrate distant markets, a seller may be willing to absorb part of

the freight cost. Thus, under freight-absorption pricing, a manufacturer will quote to

the customer a delivered price equal to its factory price plus the freight costs that would be charged by a competitive seller located near that customer.

A freight-absorption strategy is adopted to offset competitive disadvantages of FOB factory pricing. With FOB factory price, a firm is at a price disadvantage when trying to sell to buyers located in markets near competitor's plants.

The reason? Since buyers pay the freight costs under FOB factory pricing, these charges will grow as the distance between the supplier and the customer increases. A nearby supplier has an advantage over more distant suppliers – at least with respect to freight costs. Freight absorption erases any price advantage due to differences in freight costs.

Example of FOB..Harley Davidson IndiaHigh price due excessive tariff rate coupled

with taxes.

Price in India Price in US

Rs. 15,51,534 ($23460.67) $16,699

Introducing LUPs in rural areasExample :Coca-cola introducing “ chota coke” at

coinage pricing of Rs 5.

iPhone 5S world price index shows it is most expensive in Jordan – and India

Iphone 6s

Houses in Mumbai vs houses un Raipur

Offering smaller SKUs at low price targeting daily and weekly wage earners

Videocon was one of the first companies to enter the rural market with a plethora of products in the home appliances attacked market leader Philips.

Zone Pricing Strategies Prices increase as shipping distances increase.

This is sometimes done by drawing concentric circles on a map with the

plant or warehouse at the center and each circle defining the boundary of a

price zone.

Zone Pricing (contd.) Pricing of gasoline based on a complex and secret weighting of factors :number of competing stationsnumber of vehicles average traffic flowpopulation densitygeographic characteristics

Zone Pricing (contd.) Courier Services Based on Distances :

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