Flat rate

The Flat Rate refers to “A charge or level of payment that is the same in all cases”.^[1] This regards the regular amount a person is charged, whether it be in a given time period or per use. For example, in a majority of fitness centres, a person who is interested in signing up for the first time usually has to pay a specific signup fee. This fee is considered to be the Flat Rate that consumers pay, or is also known as the “Flat Fee”. Though it is subject to change, the pricing will never fluctuate per consumer or use. Flat rates stay the same regardless of amounts of customers. A flat fee, also referred to as a flat rate or a linear rate, refers to a pricing structure that charges a single fixed fee for a service, regardless of usage.^[2] Rarely, it may refer to a rate that does not vary with usage or time of use. Another term used is "flate", a hybrid of "flat" and "rate".

The Benefits

It allows for a business to develop a dependable stance in a market, as it provides consumers with a well-rounded price before the service is undertaken. For instance, a technician may charge $150 for his labor.
Provides the ability to cover the potential costs the service may bring about. The service may result in inevitable expenses such as parts needed to fix the issue or items required to complete the order.
Placing a Flat rate pricing scheme in a business doesn’t require a restricted structure. The pricing system can be adjusted to suit the business of which is using it, therefore management can work out the pricing that best matches the company’s objective, efforts, costs, and so on.

The Issues

The fixed pricing restricts the company’s capability to meet the needs of individual consumers, meaning that people are more incline to search for the cheaper alternative.
The restriction that fixed pricing brings allows for pricing competition to thicken. Other companies in the same industry will compete for the lowest pricing, resulting in tough competition.
Requires updating due to inflation. This can lead to unprecedented loses, and an increase in price companies need to charge to keep up with costs.

Usage

There are Flat rates in the postal service, regarding the delivery of items. Postage Companies use different forms of post, may it be different size boxes or envelopes, to avoid having to weigh the item to generate the cost. This lets them have an on-hand cost which consumers can identify, removing the hassle of estimate the cost for your item or items. USPS (United States Postal Service) offers flat rate pricing for packages selling different postage options varying in size and shape.^[3] This provides consumers with an array of options upfront, creating a sense of ease. When shipped in higher volumes, USPS saves money but it can cause issues if both the flat rate and regular delivery systems are used simultaneously as the result it costly.^[4] Flat rate also passes into Advertising services. There is many aspects types of advertising, one of those being advertising online. Purchasing advertisements on websites such as Facebook, Twitter and YouTube is sold a flat rates on the size (More towards Images and Posts) and length of the advertisement (More towards Video media). Advertising on YouTube pitches at a flat rate of $0.30 per view.^[5] This means that when a person runs by the YouTube home page, search page, or wherever the ad you have place is running, then you get charged $0.30. Tradesmen such as Electricians, Plumbers, Mechanics, and so on, also charge flat rates. This flat rate is to cover their labour for their service. In a survey undergone in 2014 in Australia, the average labour rate for a painter was $39.92 per hour.^[6]

Telephony

American Telecommunications companies commonly offer a flat rate to residential customers for local telephone calls. However, a regular rate or Message Rate is advantageous for those who only make a few short calls per month. Flat rates were rare outside the USA and Canada until about 2005, but have since become widespread in Europe for both local and long distance calls and are now also available for mobile phone services, both for traditional GSM/UMTS voice calls and for Mobile VoIP.

Most VoIP services are effectively flat-rate telephony services, since only the broadband internet fees must be paid for PC-to-PC calls, and the calls themselves are free. Some PC-to-telephone services, such as SkypeOut offer flat rates for national calls to landlines.

Television

Premium television or Pay TV usually charges a flat monthly fee for a channel or a bundle or "tier" of channels, but some Cable television companies also offer Pay per view pricing.

Internet

Electricity

A flat rate for electricity is different from that for other services. An electric utility that charges a flat rate for electricity does not charge different rates based upon the demand that the customer places on the system. A customer pays the same amount whether they use the electricity in bursts during mid-day, when demand and the utility's costs are highest, or if they spread it out over the entire day. However, if the customer uses a different amount of electricity, they are charged a higher or lower amount. Residential customers and small businesses are usually charged a flat rate, though not the same rate per kilowatt-hour. A special type of electricity meter, a time of use meter, is required to charge a non-flat rate. Time of use meters can lower a customer's electricity bill, if they use electricity mostly during off-peak hours. Some utilities will allow a customer to change to a time of use meter, but they charge for the cost of the meter and installation.

Real estate

In real estate, "flat rate" is an alternative, nontraditional full service listing where compensation to the listing agent is not based on a percentage of the selling price but instead is a fixed dollar amount that is typically paid at closing. The rate is generally less than a gross 6% commission, resulting in a lowered cost of selling real estate. "Flat rate" is different from "flat fee" in several ways: i) it is generally substantially more than a "flat fee" rate; ii) it generally represents a full service listing as opposed to a "flat fee" limited service listing; and iii) it is usually paid at closing, as opposed to a "flat fee", which is usually paid when the listing agreement is executed.

Transport

In most parts of the world regular users of public transport, especially commuters, make use of weekly, monthly or yearly season tickets that allow unlimited travel for a fixed fee. In some countries year passes are available for the entire national railway network (e.g. the Bahncard100 in Germany for about €3000 and the Oesterreich Card offered by the Austrian Federal Railways). Some, such as the Eurail Pass, are intended for foreigners, in order to encourage tourism.

Road users are normally charged a combination of fixed and variable fees, in the form of vehicle duty and fuel duty. Motorway tolls in some countries (Switzerland, Austria, Czech Republic, Slovenia) are paid by purchasing weekly, monthly or annual stickers attached to the windscreen.

At some stage, the concept of the flat rate was even introduced into passenger air traffic in the form of American Airlines' AAirpass.

Parcel/document delivery

In dealing with the shipping of parcels and documents, a "flat rate for international deliveries of packet size #1" would mean that the same shipping charge (for example US$15.00) would be applicable to all packets of this size, regardless of their designated destination (country of recipient), and regardless of the quantity of their contents, i.e. whether they contained one sheet of paper or were filled to the maximum.

Labor

Flat rate is a pricing scheme whereby the customer pays a fixed price for a service regardless of how long the worker takes to carry out the service. Flat rate manuals are based on timed studies of the typical time taken for each type of service. Flat rate helps provide a uniform pricing menu for service work and helps establish the worth of performing a particular job. In recent times some automotive companies have begun using computer algorithms to calculate labor times with a high degree of accuracy.

The benefit to the customer is that if a worker takes longer than this, the cost does not rise. The downfall to the customer is that this can lead to overpaying in some cases.

The benefit to the worker is that it promotes incentive to learn how to do the work more efficiently. This system can also cost the worker if they do not perform a job within the allotted time such as in the case of an inexperienced worker or on a job where there is something preventing the service from being performed that the labor manual can't take into account. In automotive shops this is common due to rusted, seized, or stripped bolts or aftermarket installations. In some circumstances automotive technicians can get paid 0 hours for working a 12-hour day.

It can be difficult to compare prices between hourly-paid and flat-rate services, and this sometimes causes rejection of flat rate shops over hourly ones.

However, many shops do not use flat rate manuals and instead set their prices by evaluating what they believe the market will bear.

Medical

One of the newest areas where flat rate pricing is just beginning to make inroads is the medical industry. The concept has held a particular interest^[7] because of the high and rising costs of health care delivery despite legislative attempts to address them, such the Affordable Care Act aka Obamacare.^[8] While there have been pilot programs launched by major insurance carriers such as UnitedHealthcare to control costs in especially costly medical conditions like cancer,^[9] for now the primary application of flat-rate pricing has been in medical imaging, such as x-rays, MRIs, mammograms, ultrasounds, etc. Regional companies such as Med Health Services Inc.^[10] in the Pittsburgh area and Northwest Radiology Network of Indianapolis^[11] have been among the first in the nation to implement the practice on a trial basis.

References

This article is issued from Wikipedia - version of the Sunday, April 03, 2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.