1. 15 Pricing decisions and terms of doing business

2. Pricing
Only area of global marketing mix where policy can be changed rapidly without large direct cost implications
Decisions in global markets are affected by complexity of influential factors

3. Figure 15.1 International pricing framework
Firm-level factors
Environmental
factors
Product factors
Market factors
Other
elements
Pricing strategies
Terms
Firm performance

4. Internal factors affecting international pricing decisions
Firm-level factors
Corporate and marketing objectives
Competitive strategy
Firm positioning
Product development
Production location
Market entry modes
Product factors
Stage in PLC
Place in product line
Most important product features
Product positioning
Product cost structure

5. External factors affecting international pricing decisions
Environmental factors
Government influences and constraints
Inflation
Currency fluctuations
Business cycle stage
Market factors
Customers’ perceptions
Customers’ ability to pay
Nature of competition
Competitors’ objectives, strategies, strengths and weaknesses
Grey market appeal

6. What is this? Price escalation
What price-related phenomenon is caused by the summation of all cost factors in the distribution channel including ex-works price, shipping costs, tariffs, and distributor mark-up?
There follows an explanation of some key terms:
Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness.
Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries.
Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions.
Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image.
Price escalation

7. Tactics for countering price escalation
Rationalizing the distribution process
Lowering the export price from the factory
Establishing local production of the product
Pressurizing channel members to accept lower profit margins

8. Factors influencing customer sensitivity to price (1)
More distinctive product
Greater perceived quality of products
Consumers less aware of substitutes in the market
Difficulty in making comparisons
Proportion price represents of total expenditure of the customer

9. Factors influencing customer sensitivity to price (2)
Perceived benefit for customer increases
Product is used in association with a product bought previously, such that components and replacements are highly priced
Costs are shared with other parties
Product or service cannot be stored

10. What is this?
What price strategy involves charging a high price at the top end of the market with the objective of achieving the highest possible contribution in a short time?
There follows an explanation of some key terms:
Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness.
Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries.
Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions.
Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image.
Skimming

13. iPhone 6

14. Problems with skimming
Having a small market share makes the firm vulnerable to aggressive local competition
Maintenance of a high-quality product requires a lot of resources
If product is sold more cheaply at home or in another country grey marketing is likely

15. What is this? Market pricing
What price strategy involves charging a final price based on competitive prices?
There follows an explanation of some key terms:
Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness.
Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries.
Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions.
Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image.
Market pricing

16. What is this? Penetration pricing
What price strategy involves charging a low price with the objective of achieving the highest possible sales?
There follows an explanation of some key terms:
Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness.
Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries.
Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions.
Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image.
Penetration pricing

17. Motives for penetration pricing
Intensive local competition
Lower income levels of locals
Fundamentally, there are four ways of using information to create business value
(Marchand, 1999):
1 Managing risks. In the twentieth century the evolution of risk management stimulated the growth of functions and professions such as finance, accounting, auditing and controlling. These information-intensive functions tend to be major consumers of IT resources and people’s time.
2 Reducing costs. Here the focus is on using information as efficiently as possible to achieve the outputs required from business processes and transactions. This process view of information management is closely linked with the re-engineering and continuous improvement movements of the 1990s. The common elements are focused on eliminating unnecessary and wasteful steps and activities, especially paperwork and information movements, and then simplifying and, if possible, automating the remaining processes.
3 Offering products and services. Here the focus is on knowing one’s customers, and sharing information with partners and suppliers to enhance customer satisfaction. Many service and manufacturing companies focus on building relationships with customers and on demand management as ways of using information. Such strategies have led companies to invest in point-of-sale systems, account management, customer profiling and service management systems.
4 Inventing new products. Finally, companies can use information to innovate – to invent new products, provide different services and use emerging technologies. Companies such as Intel and Microsoft are learning to operate in ‘continuous discovery mode’, inventing new products more quickly and using market intelligence to retain a competitive edge. Here, information management is about mobilizing people and collaborative work processes to share information and promote discovery throughout the company.
View of exporting as marginal activity

18. Gillette relies on product line pricing

19. What is this? Bundle pricing
What price strategy is based on grouping products and services in a system-solution product in order to overcome possible customer price concerns?
There follows an explanation of some key terms:
Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness.
Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries.
Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions.
Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image.
Bundle pricing