Price & Pricing International pricing considerations Global Pricing objectives and strategies Factors for price setting

Price setting methods Environmental influences on pricing decisions Grey Markets Transfer Pricing Global pricing Alternatives

Price is the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. Price is the result of an exchange & from that trade we assign value to the goods, services or assets. Price is the result of an exchange or transaction that takes place between two parties. Theory of price says that it is interaction between two opposing consideration. On one side is demand & other side is supply. Pricing Method adopted by a firm to set its selling price. It usually depends on the firm's average costs, and on the customer's perceived value of the product in comparison to his or her perceived value of the competing products.

Global pricing is one of the most critical and complex issues in international marketing. Price is the only marketing mix instrument that creates revenues. All other elements entail costs. A companys global pricing policy may make or break its overseas expansion efforts. Multinationals also face the challenges of how to coordinate their pricing across different countries.

Managers must determine the objectives for the pricing objectives



Unit Sales Market Share Return on investment

They

must then develop strategies to achieve those objectives

Penetration Pricing Market Skimming Competition Pricing. Product line Pricing. Bundle Pricing. Psychological Pricing. Premium Pricing. Optional Pricing

Internal Marketing objectives Marketing Mix costs Organizational Consideration

External Nature of market and demand Competitor costs Prices and offers Other environmental elements

 Cost

Oriented Methods Value Oriented Methods Market-Based Methods

1. Cost-plus or Mark-up pricing

This is the simplest method of pricing which involves a calculation of the fixed and variable cost per unit and adding the desired profit margin on the total cost.

2. Target return on investment pricing

Under this method the desired return on investment is added to the total cost to arrive at the price.

3. Target profit or Break-even pricing

This method uses the break even analysis (BEA) to evaluate the revenue and profit scenarios at several pricing alternatives. In BEA total cost is segregated in Fixed cost which is assumed to remain unchanged at difference scale of production & Variable cost is constant per unit.

1. Perceived value pricing

In this method the manufacturer

collects buyers perception of the value (price) and fixes the price around the average perceived value. Cost and demand are secondary factors in this method of pricing

2. Customer value pricing

Organization charge very low price to create special customer value for the product. by those organizations who have substantial width and depth in their product line or mix.

Adopted

1. Going-rate pricing

The organization simply bases its price at the prevailing market price. Organizations selling undifferentiated product may determine the price equal to competitive level. If the product can be differentiated to some extent, it may price slightly above the prevailing market price. If the marketer has higher image or goodwill, it can afford to set the price above competitive level. It is popular in highly competitive market. Organizations believe that more buyers can be attracted by the lower price

2. Pricing above competition

3. Pricing below competition

Currency Fluctuations Inflationary Environment Government Controls, Subsidies, Regulations Competitive Behavior Sourcing

Exporting
1. Weak Domestic Currency = Favorable Exchange Rate 2. Strong Domestic Currency = Unfavorable Exchange Rate

Market Holding Strategy Price Transparency

  

Maintain Operating Margins Price adjustments Technologically Adept

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2. 1.

Controls Pricing Controls Escrow Accounts / Cash Deposits Putting money in a non-interest account in order to import products. Subsidies Govt. Monetary assistance paid to a firm for support or to encourage an activity that, otherwise, may not take place. Can distort trade markets Regulations Affects price by regulating trade and competition practices within a company

Pricing is bound by costs and demand as well as competition. Raise prices in response to rising cost Lowering prices to stay competitive

Outsourcing Change in Distribution Structure Fewer distribution points Direct marketing

Trademarked products are exported from one country to another where they are sold by unauthorized persons or organizations Occurs when product is in short supply, when producers use skimming strategies in some markets, and when goods are subject to substantial mark-ups

Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdiction Intra-corporate exchanges Cost-based transfer pricing Market-based transfer pricing Negotiated transfer pricing Benefits: - Lowering duty costs - Reducing income taxes in high-tax countries - Facilitating dividend repatriation when dividend repatriation is curtailed by government policy

Extension Adaptation Geocentric

Ethnocentric Per-unit price of an item is the same no matter where in the world the buyer is located Importer must absorb freight and import duties Fails to respond to each national market

Polycentric Permits affiliate managers or independent distributors to establish price as they feel is most desirable in their circumstances Allows more competitive pricing Sensitive to market conditions / currency fluctuations but creates potential for gray marketing

Best suited to global competitive marketing Intermediate course of action Recognizes that several factors are relevant to pricing decision

Local costs Income levels Competition Local marketing strategy

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