• FOB origin (Free on Board
  Free On Board
  FOB is an initialism which pertains to the shipping of goods. Depending on specific usage, it may stand for Free On Board or Freight On Board. FOB specifies which party pays for which shipment and loading costs, and/or where responsibility for the goods is transferred...
  
   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

Gasoline

Gasoline , or petrol , is a toxic, translucent, petroleum-derived liquid that is primarily used as a fuel in internal combustion engines. It consists mostly of organic compounds obtained by the fractional distillation of petroleum, enhanced with a variety of additives. Some gasolines also contain...

 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

Monopoly

A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

 and the ability to control not only industry-owned "corporate" stations, but locally owned or franchise

Franchising

Franchising is the practice of using another firm's successful business model. The word 'franchise' is of anglo-French derivation - from franc- meaning free, and is used both as a noun and as a verb....

 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
  Discounts and allowances
  Discounts and allowances are reductions to a basic price of goods or services.They can occur anywhere in the distribution channel, modifying either the manufacturer's list price , the retail price , or the list price Discounts and allowances are reductions to a basic price of goods or services.They...
  
  , and is used as a promotion
  Promotion (marketing)
  Promotion is one of the four elements of marketing mix . It is the communication link between sellers and buyers for the purpose of influencing, informing, or persuading a potential buyer's purchasing decision....
  
  al tactic.

See also

• Incoterms
• Pricing
  Pricing
  Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a...
  
  
• Marketing
  Marketing
  Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
  
  
• Geo (marketing)
  Geo (marketing)
  As a general term, Geomarketing is the integration of Geographical intelligence into all marketing aspects including sales and distribution. Geomarketing Research is the use of geographic parameters in research methodology starting from sampling, data collection, analysis, and...
  
  
• Distribution
  Distribution (business)
  Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...
  
  

Links

• Zones of Contention in Gasoline Pricing (LA Times)
• Zone Pricing (state of Illinois)
• Balance Sheet of Gouging (Cato Institute)