Discuss establishing carrier pricing objectives and identify the areas in which objectives can be set

Answer 1

Carrier pricing decisions are grouped into three categories: setting prices for new services; modifying prices over time; responding to price changes. These are considered strategic decisions because of their impact on carrier market position.

Carrier pricing objectives reflect overall company objectives and how the carrier will compete in its markets. Pricing objectives for service offerings may change as the carrier moves through its product life cycle. Several different pricing objectives are utilized in the transportation industry. These include: survival-based pricing, unit volume pricing, profit maximization, skimming, penetration, sales-based pricing, market share pricing, and social responsibility pricing.

Demand estimation is one of the most difficult tasks associated with pricing, and results in potential revenue estimation. After revenue is estimated, costs must be established. It has to be decided which costs should be included in the total cost analysis, and how costs behave at different levels of output.

After demand and cost estimates are made, the price may be set, Methods to set prices include: demand-based, cost-based, profit-based, and competition-based. As a part of setting prices, adjustments to the price in the form of discounts and geographical factors have to be considered. When using discounts and allowances, it should be remembered that the discount or allowance should be the result of a reduction in carrier costs due to action by the customer. The discount or allowance given should not exceed the cost savings to the carrier.