Selling and Pricing strategies of public utilities are different from other organization. Discuss.
As compared to other organizations, selling and pricing strategies or policies of public utilities are different. Sales Policies of Public Utilities:
Public utilities provide essential goods or services that are required by the public to fulfill their needs and products of daily use have large demand from public.
Different producers in the same area cannot charge different rates because only one undertaking applies a particular product in a particular area. So service discount is not required. Such concerns don’t have rivals, or competitors.
Government grants franchise to these undertakings. With the help of franchisee, such concerns have the right to interfere with private property and right to make use of public property like lands, roads, buildings etc.
In order to sell the products or services, no middlemen or intermediaries are involved by such concerns. Public utilities either supply the products or services directly to the consumers or sell through their own distribution network. For example water and electric supply, transport undertakings etc come in contact with consumers directly.
Public utilities do not have problems of credit collection from customers. If customers do not pay the bills by a specified date, in case of electricity undertakings, such concerns have the right to stop the supply. In case of railways and road transport undertakings, dealings are on cash basis.
Like other business units, public utilities are not required to advertise their services and goods. But they have to make the public aware about the service which they provide. It is the duty of a transport undertaking to make the public aware of the new services introduced by such an undertaking on various routes, changes in routes, changes in the things etc. Customers can make use of the service effectively if they are informed properly and it even leads to utilization of full capacity.
Pricing Policies of Public Utilities:
Price can be determined by considering demand and supply. Some markets may have an elastic demand for products of public utilities while others may have an inelastic demand. The demand for bus service is elastic if used by general public or tourist. But if bus service is used by students and office goers on a regular basis, the demand is inelastic. Undertaking have to charge less price from students and office-goers and can charge more price from tourists and general public.
Electric supply undertakings charge more for electricity supply for domestic purposes as compared to agricultural purposes. In other words, public utilities can demand lower price in one market and higher price in others.
Such an aspect refers to increasing demand for products or services. In order to utilize the production capacity of the undertaking fully and properly, it is essential to promote demand. Demand promotion helps in spreading overhead costs over large output. In this aspect, demand of the services is promoted provided by pubic utilities. Sometimes, transport services like roadways and railways provide monthly or season tickets to many regular passengers at concessional rates.
Social welfare considerations play a significant role in fixing the price. As product’s price is not fixed on economic basis, some of the public utilities touch everyday life of people and are affected with public interests. Services are given at concessional or subsidized rates to the low income consumers or poor people.