The Global Marketing Mix: Pricing Decisions

Transcription

1 The Global Marketing Mix: Pricing Decisions Topic #

2 11-3 Pricing Factors Demand Factors (Value to Buyers) (Price Ceiling) Competitive Factors Final Pricing Discretion Distribution Channels Corporate Objectives Initial Pricing Discretion Regulatory Constraints Direct Variable Costs (Price Floor) 2

3 Pricing Factors Demand for an offering sets the price ceiling Consumer value perceptions and price sensitivity determines the maximum price charged Costs, particularly variable costs, determine the price floor The price must at least cover unit variable costs; otherwise, a loss will result for each offering sold Government regulations, such as predatory pricing Life-cycle stage of the offering greater price discretion exists earlier than later in the life cycle Profit margins of marketing channel members The price differentials of a firm s offerings to maintain perceived value differences among buyers Pricing Objectives Objectives include: Enhance brand image Increase market share Obtain an adequate ROI Maintain price stability in an industry or market They must then develop strategies to achieve those objectives Penetration Pricing Market Skimming 3

4 Market Skimming and Financial Objec4ves Market Skimming Charging a premium price May occur at the introduc5on stage of product life cycle Luxury goods marketers use price to differen5ate products LVMH, Mercedes- Benz 2015 by Pearson Education 11-7 Penetra4on Pricing and Non- Financial Objec4ves Penetra5on Pricing Charging a low price in order to penetrate market quickly Appropriate to saturate market prior to imita5on by compe5tors Packaged food product makers, with products that do not merit patents, may use this strategy to get market satura5on before compe5tors copy the product by Pearson Education

5 Price as an Indicator of Value Value is the ratio of perceived benefits to price: Value = Perceived Benefits Price Price as an Indicator of Value Consumers determine value by judging the worth and desirability of an offering relative to substitutes that satisfy the same need Comparing the costs and benefits of substitute items gives rise to a reference value 5

6 Companion Products or Razors and Blades Pricing Products whose sale is dependent upon the sale of primary product Video games are dependent upon the sale of the game console If you make money on the blades, you can give away the razors. Cellular service providers subsidize the phone and make money on calling plans X-Box Game System and Sports Game 2015 by Pearson Education The Target- Cos4ng Process Determine the segment(s) to be targeted, as well as the prices that customers in the segment will be willing to pay. Compute overall target costs with the aim of ensuring the company s future profitability. Allocate the target costs to the product s various func5ons. Calculate the gap between the target cost and the es5mated actual produc5on cost. Obey the cardinal rule: If the design team can t meet the targets, the product should not be launched by Pearson Education

7 Export Price Escala4on Export price escala4on is the increase in the final selling price of goods traded across borders by Pearson Education Export Price Escala4on 2015 by Pearson Education

8 Cost- Plus Pricing Cost- based pricing is based on an analysis of internal and external cost Firms using western cost accoun5ng principles use the Full absorp4on cost method Per- unit product costs are the sum of all past or current direct and indirect manufacturing and overhead costs 2015 by Pearson Education Currency Fluctua4ons January 2000 January 2002 January 2007 January 2013 $1= 101 $1= 130 $1= 113 $1= by Pearson Education

9 Infla4onary Environment Defined as a persistent upward change in price levels Can be caused by an increase in the money supply Can be caused by currency devalua5on Essen5al requirement for pricing is the maintenance of opera5ng margins 2015 by Pearson Education Compe44ve Behavior If compe5tors do not adjust their prices in response to rising costs it is difficult to adjust your pricing to maintain opera5ng margins If compe5tors are manufacturing or sourcing in a lower- cost country, it may be necessary to cut prices to stay compe55ve 2015 by Pearson Education

10 Global Pricing: Three Policy Alterna4ves Extension or Ethnocentric Adapta5on or Polycentric Geocentric Mercedes moved beyond ethnocentric pricing when Toyota began offering Lexus Mercedes value at $20k less. In 1993, Mercedes boosted employee produc5vity, increased low- cost suppliers and invested in produc5on facili5es in the U.S. to move to beder pricing by Pearson Education Extension Pricing Ethnocentric Per- unit price of an item is the same no mader where in the world the buyer is located Importer must absorb freight and import du5es Fails to respond to each na5onal market 2015 by Pearson Education

11 Adapta4on or Polycentric Pricing Permits affiliate managers or independent distributors to establish price as they feel is most desirable in their circumstances AIDS drugs meant for Africa are smuggled into Europe Sensi5ve to market condi5ons but creates poten5al for gray marke5ng 2015 by Pearson Education Geocentric Pricing Intermediate course of ac5on Recognizes that several factors are relevant to pricing decision Local costs Income levels Compe55on Local marke5ng strategy 2015 by Pearson Education

12 Gray Market Goods Trademarked products are exported from one country to another where they are sold by unauthorized persons or organiza5ons Occurs when product is in short supply, when producers use skimming strategies in some markets, and when goods are subject to substan5al mark- ups 2015 by Pearson Education Price Fixing Representa5ves of two or more companies secretly set similar prices for their products Illegal act because it is an5compe55ve Horizontal price fixing occurs when compe5tors within an industry that make and market the same product conspire to keep prices high Ver5cal price fixing occurs when a manufacturer conspires with wholesalers/retailers to ensure certain retail prices are maintained 2015 by Pearson Education

13 Transfer Pricing Pricing of goods, services, and intangible property bought and sold by opera5ng units or divisions of a company doing business with an affiliate in another jurisdic5on Intra- corporate exchanges Cost- based transfer pricing Market- based transfer pricing Nego5ated transfer pricing 2015 by Pearson Education Countertrade Countertrade occurs when payment is made in some form other than money Op5ons Barter Counterpurchase or parallel trading Offset Compensa5on trading or buyback Switch trading 2015 by Pearson Education