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Information about Zone Pricing

Geographical pricing, in marketing, is the practice of modifying a basic list price based on the geographical location of the buyer. It is intended to reflect the costs of shipping to different locations.

There are several types of geographic pricing:
  • FOB origin (Free on Board origin) - The shipping cost from the factory or warehouse is paid by the purchaser. Ownership of the goods is transferred to the buyer as soon as it leaves the point of origin. It can be either the buyer or seller that arranges for the transportation.
  • Uniform delivery pricing - (also called postage stamp pricing) - The same price is charged to all.
  • Zone pricing - 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. Instead of using circles, irregularly shaped price boundaries can be drawn that reflect geography, population density, transportation infrastructure, and shipping cost. (The term "zone pricing" can also refer to the practice of setting prices that reflect local competitive conditions, i.e., the market forces of supply and demand, rather than actual cost of transportation.)
Zone pricing, as practiced in the gasoline industry in the United States, is the pricing of gasoline based on a complex and secret weighting of factors, such as the number of competing stations, number of vehicles, average traffic flow, population density, and geographic characteristics. This can result in two branded gas stations only a few miles apart selling gasoline at a price differential of as much as $0.50 per gallon.

Many businesspeople and economists state that gasoline zone pricing merely reflects the costs of doing business in a complex and volatile marketplace. Critics contend that industry monopoly and the ability to control not only industry-owned "corporate" stations, but locally owned or franchise stations, make zone pricing into an excuse to raise gasoline prices virtually at will. Oil industry representatives contend that while they set wholesale and dealer tank wagon prices, individual dealers are free to see whatever prices they wish and that this practice in itself causes widespread price variations outside industry control.
  • Basing point pricing - Certain cities are designated as basing points. All goods shipped from a given basis point are charged the same amount.
  • Freight-absorption pricing - The seller absorbs all or part of the cost of transportation. This amounts to a price discount, and is used as a promotional tactic.

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Marketing is a social process which satisfies consumers' wants. The term includes advertising, distribution and selling of a product or service. It is also concerned with anticipating the customers' future needs and wants, often through market research.
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Gasoline or petrol is a petroleum-derived liquid mixture consisting mostly of aliphatic hydrocarbons and enhanced with aromatic hydrocarbons toluene, benzene or iso-octane to increase octane ratings, primarily used as fuel in internal combustion engines.
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monopoly (from Greek monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a product or service, in other words a firm that has no competitors in its industry.
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Discounts and allowances are reductions to a basic price. They could modify either the manufacturer's list price (determined by the manufacturer and often printed on the package), the retail price (set by the retailer and often attached to the product with a sticker), or
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Promotion is one of the four key aspects of the marketing mix. The other three elements are product management, pricing, and distribution. Promotion involves disseminating information about a product, product line, brand, or company.
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Pricing is one of the four p's of the marketing mix. The other three aspects are product management, promotion, and place. It is also a key variable in microeconomic price allocation theory.
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Marketing is a social process which satisfies consumers' wants. The term includes advertising, distribution and selling of a product or service. It is also concerned with anticipating the customers' future needs and wants, often through market research.
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In marketing, geo (also called marketing geography) is a discipline within marketing analysis which uses geolocation (geographic information) in the process of planning and implementation of marketing activities.
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Distribution is one of the 4 aspects of marketing. A distributor is the middleman between the manufacturer and retailer. After a product is manufactured it is typically shipped (and usually sold) to a distributor.
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