PRICING FOR INTERNATIONAL MARKETS

Presented byNirajan kumar(268) Nawnit kumar(266) Prince (275) Shashwat vishal(285)

INTRODUCTION

International pricing is one of the most critical and complex issues that global firms face so it can give a break or a boost to companys revenue. It is important because:

Price is the only marketing mix that generates revenue all other entail costs. Lack of the coordination in the global market will give rise to gray market or parallel trade situation 4 Cs are the main drivers of global pricing strategies of any company operating internationally: COMPANY, CUSTOMER, COMPETITION and CHANNELS

PRICING POLICY
Selecting the pricing objective Determining demand Estimating costs Analysing competitors costs, prices, offers Selecting a pricing method Selecting the final price

THE PRICING OBJECTIVE

Survival Maximum current profit Maximum market share penetration pricing Maximum market skimming Product quality leadership

COST BASED / MARKUP PRICING

Price of good is based purely on the cost of making goods, with little thought to market conditions. fixed cost + variable cost + profit = price of product

Markup price= unit cost / (1 desired return on sales)

DEMAND / CUSTOMER BASED PRICING

Marketers set prices according to the customers ability and willingness to pay. These demand levels may vary from one country to another, within the same country among different segment, or even within the same segment over time.

COMPETITIVE PRICING
Setting the price of a product based on what the competition is charging. Competitive pricing is used more often by businesses selling similar products. Going rate pricing, the firm base its price largely on competitors price, charging same, more or less than major competitor. Ex- FMCG product

PRICE QUALITY STRATEGIES

quality

Price

PRODUCT MIX PRICING

Product line pricing- Product line pricing is a pricing strategy used to sell different products in the same product range at different price points based on features or benefits. Ex- Dove Pears Lux Rexona Lifebuoy Liril

Optional feature pricing- company offer optional product, feature and services along with their main product. Ex- car

Two part pricing fixed price + rental(variable) price Ex- electricity bill, car hire,

NEW PRODUCT PRICING

Penetration pricing Price is set at low when the product is launched in order to cover large market.

Skimming pricing A marketer sets a relatively high price for a product at first then lowers the price over a time. It is only applicable for innovative product.

DUMPING PRICING
It occurs when manufacturers export a product to another country at a price either below the price charged in its home market, or in quantities that cannot be explained through normal market competition.

TRANSFER PRICING
Price of goods transferred from a company's operations or sales units in one country to its units elsewhere in the world is know as transfer pricing. Following criteria should be considered while making transfer pricing decisions: Tax regimes Local Market conditions Joint-venture partner Morale of local country managers

TRANSFER PRICING METHODS

Variable Cost Method

Transfer price = variable cost of selling unit + markup

Full cost Method

Transfer price = Variable Cost + allocated fixed cost

Market Price Method

Transfer price = current price for the selling units in the market

Negotiated price method

GLOBAL PRICING POLICIES

Polycentric Pricing

Multi-Domestic firms give wide leverage for subsidiaries on pricing resulting in different prices in different countries Results in gray markets Use a regional (global) standard pricing Plus a local markup. Base price is derived from cost plus formula Affected by local tax laws leading to gray markets

Geocentric Pricing

Geocentric Pricing

E.g: HP uses a global standard price in USD plus regional markup. This avoids gray trade but loses competitive position when competitors discount their products IBM discounts products where they have competition, but to prevent gray market, IBM sells services at a higher price for gray goods

Ethnocentric Pricing
Have a common price all over the world A global standard price Ideal for big-ticket industrial items such as Aircrafts, computers etc. There is no competition from local manufacturers.

PRICE ESCALATION
Costs of exporting Taxes, tariffs, and administrative costs Inflation Varying currency values Middleman and transportation costs