international market.ppt

Chapter 5 Pricing for international market The role of pricing in the marketing-mix: Product ,promotion and distribution create value, pricing attempts to capture some of this value Pricing is the most dynamic marketing-mix element Price pressures are increasing -consumers are more value-conscious -markets become more transparent -many industries face overcapacities -promotion dollars are increasingly being allocated into price-promotion Pricing objectives Pricing is an active instrument of accomplishing marketing objectives Profit Return on investment Market share Total sale volume Inventory …… (1) Full-cost versus variable-cost pricing In variable-cost pricing, firms concern only with the variable cost of producing goods to be sold in overseas markets. In full-cost pricing, firms insist that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of total fixed and variable cost. Conditions for variable-cost pricing : Sufficient capacities No intervention from governments in new markets New markets are isolated from home market It’s a short-term strategy, and should account for only a small percentage of the total sales volume. (2) Skimming versus penetration pricing A skimming pricing policy is used when the objective is to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for the value received A penetration pricing policy is used to stimulate market growth and capture market share by deliberately offering products at low prices. The decision of which policy to follow mainly depends on: The level of competition The innovativeness of the product Market characteristics Benefits of skimming strategy Shorter payback period Profits before obsolescence Room for future price reductions Avoid price increase Prestige/quality connotation Fewer financial demands Benefits of penetration strategy Market develops faster Ec