A uniform geographical pricing strategy has more advantages than a pricing strategy that tailors prices domestically. This pricing is easy to assimilate and calculate, serving all customers uniformly/equally. The benefits of the same are outlined as follow:
Enhances profitability for huge chains: Huge retailers that operate in competitive markets do not have many benefits to reap by switching to a static pricing model. As it can intensify competitiveness, that could result in lower pricing and declined profitability.
Aligns online and offline pricing â€“ As per recent research, several firms use uniform pricing as stores have also spread virtually across various regions and are inclined to match offline and online pricing.
Benefits certain customers â€“ The uniform geographical price could fall between lower and higher prices in competitive and non-competitive markets respectively. Thus, the customers in non-competitive markets would benefit from lower prices.
Promotes customer goodwill and fair competition â€“ Uniform pricing protects brand equity by restraining dealer competitiveness and ensuring prices across distinct geographical regions.
Limitations of Uniform Geographical Pricing
As per studies, uniform pricing costs retailers approximately 7% of gains on an average, prohibiting companies from selling products at higher prices to affluent market segments. The limitations of uniform pricing are as follows:
This pricing results in declined volume among customers belonging to lower-income groups.
It also considerably increases the prices paid by poorer customer segments relative to the richer ones.
This pricing policy can be easily imitated or undercut by competitor firms.
The single pricing strategy may not satisfy all market segments as some high-end consumers may perceive the prices as low and consider the product to be less appealing. And, thus look for a superior alternative.
Such static pricing may restrict companies from capturing every section of the market continuum.
In Uniform Geographic Pricing, the companies quote the same price that includes transportation costs for all customers regardless of the customerâ€™s location. The transportation expenditures are charged as average to all consumers. The seller pays the freight charges and the purchaser is billed with an identical flat freight charge. Uniform Geographical Pricing policy is a common phenomenon in industrial and retail markets. As per studies, 21% of United States (US), 27% of Germans, and 32% of Japanese companies exclusively use uniform pricing methods. In the US, this pricing strategy is practiced in the consumer goods market for several food and cleaning categories (such as cereals, juices, baking mixes, coffee, oils, and shortening, etc.). The majority of home products and food manufacturing companies use a uniform pricing policy for almost all products. The manufacturing firms such as Colgate, Palmolive, Procter & Gamble, Lever Brothers, and Clorox execute uniform pricing methods. In this growing era of online commerce, many web/internal retailers are also adopting uniform pricing methods. Amazon.com has been increasingly benefit from Uniform Geographical Pricing, as customers have fewer reasons for comparative shopping.
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