Definition (1):
FOB-origin pricing is a geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the location.
Definition (2):
FOB-origin pricing simply refers to the pricing method where the purchaser or buyer pays the cost of shipping. The moment the ship leaves the factory or warehouse, the shipment responsibility is transferred to the purchaser. This can sound ideal and simple but the seller should listen to her/his customers. Based on which products the seller is selling and which target market is purchasing, the customers may not prefer this responsibility and cost.
The seller can offer different options for delivery so that the customers themselves may decide whether to take the premium delivery service or the economy delivery service. Thus, the customers remain completely in charge of their fate, and will not have any resentment towards the seller. Alternatively, the customers can also get the arranging opportunity of the delivery themselves. The distinguishing feature about this pricing method is that it is finally up to the customer how the required product will be delivered. The only demerit of FOB-origin pricing is that the geographical distance between the seller and buyer is reflected in the shipping cost.