Zone pricing means making an average freight charge to all buyers within a specific geographic area. In other words, a seller pays the freight charges, billing each customer for an average charge.
Zone pricing example:
As an example, imagine a manufacturer in Mexico that ships its product into the United States. The company might divide the United States into five zones, billing customers in the same zone, the same amount for freight even though actual shipping costs may vary.
Advantages of zone pricing:
Zone pricing helps reduce the variation in delivered prices that result from F.O.B. shipping pricing. It also simplifies freight transportation charges.« Back to Glossary Index