Basing point pricing is a system where the seller sets a uniform price for a product, which includes the cost of transportation from a designated location (the “basing point”) to the buyer’s location. In this pricing method, the seller establishes specific basing points, usually geographically strategic locations, and charges customers a set price for the product plus the cost of shipping or transportation from the basing point to the customer’s location.
The rationale behind basing point pricing is to ensure that customers in different locations, even those far from the manufacturing site, pay similar prices by including the shipping costs in the product price. However, the actual shipping or transportation cost might not be the same for all customers but is averaged out for simplicity in the pricing structure.
This method was more commonly used when transportation costs were higher and varied significantly between different locations. However, modern logistics and transportation efficiencies have made it less prevalent in today’s business environment.