Fixed-Price Examples of Pricing Strategy

by Priti Ramjee

The concept behind a fixed price is minimizing customer uncertainty of a final price, which may be due to market fluctuation, time-frame variables or potential changes to the scope of a project. A fixed price tells a customer that the risk of increased internal costs belongs to the company and not to him. However, a fixed price alone may not be enough of a strategy to convince customers to keep coming back. Additional incentives or contract provisions may be required for the fixed-price strategy to work for a company in a competitive environment.

U.S. Postal Service

The U.S. Postal Service is an example of an organization with efficient operations for lowering prices and taking risks on cost increases. Its pricing strategy of "Priority Mail Flat-Rate Boxes" allows customers to ship packages for a flat rate as long as the items fit "in the box." This fixed-price strategy with competitive pricing is designed to engage long-term customer relationships and potentially gain more revenue from each customer.

Energy Companies

Supply and demand, the value of the dollar, and speculation can make pricing on heating oil or propane volatile. To compete in the market, energy companies offer fixed-price strategies to customers, making fuel bills more predictable. Generally, an energy company fixes its fuel price until either a specified date or until the customer consumes her gallons, whichever occurs first. With high fuel prices, energy companies may consider -- in addition to a fixed price -- the strategy of offering downside protection for a fee, so if the market price goes down the customer pays the lower price.

Software Development Companies

Customer changes to specifications can affect pricing for a software development company. For this reason, programmers may prefer a fixed-price strategy rather than an hourly wage. Under this strategy, the customer pays a fixed price for the agreed specifications and an hourly wage for any additional changes. The fixed price may take into consideration costs as a result of potential disputes on the initial specifications.

Contracted Consultants

As a pricing strategy, clients may give the most difficult jobs to consultants on a fixed price. This strategy could work if the task is achievable and the consultant knows exactly what needs to be done and in what time-frame. The consultant may ask the client for a provision in the contract to allow modifications to the fixed price, just in case the scope of the project changes.

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