Unit price is the price per certain unit of measure, for example per piece, kilogram, meter, liter, worked hour, or megabyte.
What does it serve for in practise?
In a variety of business models, a unit price is used to calculate how much a customer pays for a certain number of units purchased, such as the number of pieces, the energy consumed, or the number of hours worked. We use the unit price when we want to have higher yields due to the customer’s higher consumption, or, on the contrary, when we need to limit the customer’s consumption, or when the consumption of unit by the customer also means consumption of resources on the part of the provider. In the latter case, for example, a customer of a transport company is charged for mileage, because each kilometer of route also means a certain fuel consumption, vehicle wear and tear, driver’s time, and road user charges.
The opposite is the flat rate where the customer pays for an unlimited number of units or for a certain period of time. In some business models, a unit can be provided to a customer for a fixed fee (flat rate). There are also combined models where the customer, once a certain number of units included in the flat rate has been exhausted, begins to pay for each consumed unit. To calculate and determine the right business model that would be appealing to customers or that would differentiate the company from its competitors, it is important to know not only the unit costs (to determine profitability or break-even point) but also the unit price to calculate how many units we can include in the flat rate without losing profit.
Unit price is therefore a unit of measure for the amount of services, goods, or other products purchased. Business models that are based on unit pricing tend to be comprehensible to the customer while regulating their consumption or use. Unit price is stipulated in the offer.