Posted in Marketing and Strategy Terms, Total Reads: 1258
Definition: All the Traffic Will Bear
‘All the traffic will bear’ is a business practice where the seller charges the buyer a price that seems to be a little excessive but is well within the range which the buyer is ready to pay for the product or service. This practice enables the seller to charge a price as high as possible, while still staying within the limit.
Charging “all the traffic will bear” is a profit maximisation objective. It is one of the pricing methodologies or approaches followed by sellers. When the demand is high, the product is priced at its maximum price. Also, when the supply is low, sellers follow this approach to maximise their earnings. As the supply and demand change, how much the traffic will bear will also change. This method is appropriate when the product life cycle is very short; because it will help the firm regain its investment along with profit quickly. What the traffic will bear in one market might be different from what the traffic might bear in another market. So the product should be carefully priced when following this policy. Also, when a company is charging all the traffic will bear, its rival can succeed by lowering the price, so this approach is disadvantageous when there is competition. In other words, it works for monopolistic markets. In case of competitive markets, if the traders decide on a common market price, that price is the best they can get while trying to charge all the traffic will bear.
For example, a hotel in Florida which was earlier charging $40 per night is now charging $160. Although customers now complain that the hotel is charging all the traffic will bear, the hotel was probably charging all the traffic would bear earlier also. The increase in price is because the supply-demand dynamics changed. With more damage being done to hotels and more houses being destroyed, more people are seeking shelter from fewer hotels and hence the increase in price.