Product Transportation Charges - Marketing
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All right. So as marketers after we design
the product and decide what features it should
have, figure out how to promote it and where
to make it available to customers, we have
to tune in on exactly what is the right price.
There are a lot of things that play into this,
like production costs and our particular strategy.
But another thing we have to consider is the
cost of transporting the product. And this
depends on what our product is and where we
are in relation to our buyers or our customers.
But for some products, transportation costs
can be pretty considerable. So there are different
ways that we can handle this situation. One
is what's called free onboard pricing. In
this case, we guarantee to get the product
to a Port, in other words, a major shipping
location, and we cover the cost to that point,
and then the buyer pays for any shipping beyond
that point. So that's one way we could sort
of split the cost with the buyer. In another
case, we use what's called zone pricing. This
is where we sort of average the cost of getting
a product to a buyer based on the region that
they're in, and we charge that average price
for everybody in that region. In this way,
the buyer is paying the cost, but we're kind
of averaging it out across the different people
in that 1, 1 or region. Lastly, one option
we could take is what's called freight absorption
pricing, and this is where we're just going
to pay the cost of delivery or transportation
outright. These different options have different
implications for us in terms of developing
market share or improving performance in a
given area or how we compete with other products
like ours. In any case, when we set our final
price, we have to figure out how exactly we
want to charge for product transportation.