One price policy – definition and meaning
A one price policy is a strategy in which the seller offers the same price to every customer. In other words, the price does not vary according to payment method or promotional offers. It is the opposite of a differential pricing approach or a variable price policy. With a one price policy, customers cannot negotiate the price. They cannot negotiate the price because the company won’t allow it.
Do not confuse this term with single price policy. Under a single price policy, the company offers all its goods at one price. For example, it sells its pens, rulers, notebooks, and highlighters for $3 each. In other words, everything in stock costs the same.
Under a one price policy, the seller shows no discrimination. The seller charges all similar types of purchasers the same price. Also, the terms of sale are the same. Negotiating or bargaining are out of the question.
Under this type of policy, if the seller offers a discount, it offers them on equal terms to all purchasers.
One price policy supporters say it is a fair trade practice that gains customer confidence. It gains customer confidence because they know exactly where they stand with the company.
In today’s advanced economies, retailers have adopted a one price policy. In many developing countries, however, sellers still use a variable-price policy. Put simply; customers negotiate and bargain.
Variable price vs. one price policy
Variable price policy
With a variable price or negotiated price policy, sellers sell the same product to different purchasers at different prices.
Some customers receive offers that include lower prices, but others don’t. We call them favored customers.
Under a variable price policy, the seller grants terms of trade on unequal terms to purchasers. Terms of trade, for example, include allowances and discounts.
In developing nations, it is common for sellers to use variable pricing. For example, in India, negotiating retail prices is common practice.
One price policy
With a one price policy, the customer knows that negotiation is not possible. In other words, there are no favored customers.
In this type of policy, the seller treats every customer equally, regardless of location and other factors.
One price policy pros and cons
– There is a uniform return from each sale. This assures certain profits.
– The seller has lower selling costs.
– There is no waste of time negotiating prices. In other words, sales personnel can achieve each sale more rapidly.
– It is easier for mail order sellers and those who sell through automatic vending machines. In fact, with vending machines, a one price policy is the only option.
– The seller does not have flexibility. Sales personnel are stuck. For example, if a potential customer asks for better terms, there is nothing the employee can do.
– There is a risk of losing valuable customers. In other words, some people would have bought if the seller had offered a better deal. By being inflexible, the seller risks losing valuable sales.
– When you offer discounts, you encourage bulk buying. If there is just one price, the seller might lose out on big sales. In other words, by being flexible on price, you are more likely to get large orders.
– Price flexibility is a weapon the seller can use against rivals. For example, imagine the sales staff of one company cannot alter prices but those of another can. Which company is more likely to gain market share?
“A one price policy dictates that, at a given time, all customers pay the same price for any given item of merchandise.”