Post on 19-Dec-2015
description
Global Marketing
Lecture ten:
Global pricing decisions
Global pricing case study:
Factors influencing pricing strategy
• Company and product factors• Market factors• Environmental factors
Special issues in global pricing
Lee and Carter, 2012
Specific export costs
• Additional freight handling costs• Last minute product modifications• Packaging and labelling• Documentation requirements• Insurance• Delays in custom clearance• Vaguely worded contracts or agreements
Special trade terms in exporting• Ex-works or ex-warehouse
– The price is set from the works or warehouse. Most favourable to the seller
• Free on rail or on truck (FOR/FOT)– The buyer bears the cost of
rail or truck transport which is included in the price
• Free alongside ship (FAS)– The buyer nominates a
ship and the price includes transport to that vessel only
• Free on board: named port of shipment (FOB) – enable the seller to provide
an additional service by including in the price of putting goods on a vessel
• Cost, insurance, freight (CIF)– Most common as very user
friendly for the buyer
Cost reduction strategies
Lee and Carter, 2012
Pricing decisions
• Standardisation• Adaptation• Corridor/Invention
Influencing the response to pricing
• Consumer response• Competitor response
The IKEA experience
• In developed markets– Positioned as a low-priced mass-market brand
• In emerging markets– Low prices are the norm in emerging markets– Ikea targets a growing middle class that aspires to
international lifestyle products– Price is less of a selling point in these markets– DIY does not work well here so Ikea is developing
services for delivery, assembly and installation– Ikea prices are lower in China – Ikea aiming for market share and sales growth in early
years in China and India rather than profit
Pricing objectives
Rate of return Market stabilisation Demand-led pricing Competition-led
pricing To reflect product
differentiation
Market skimming Market penetration Early cash recovery Prevent new entry
Pricing approaches Markup Pricing
◦ Where a standard markup is added to the cost of the product or service◦ Full or marginal costing methods
Target-return Pricing◦ Basically a cost based approach◦ Price is determined by a target ROI
Competitive or Flexible Cost-Plus Pricing◦ Same as target-return but adjustment is made to account for local market
conditions, nature of the customer, size of order, and competitive conditions◦ Going-rate pricing◦ Competitive bid or tendering pricing
Market-based Pricing◦ Perceived value pricing – based on market’s view of pricing◦ Psychological pricing – based on price and quality perceptions◦ Market penetration or dynamic incremental pricing – aim to retrieve only the
variable and international marketing costs, regardless of fixed costs.
Price adaptation
• Geographical pricing• Price discounts and allowances• Promotional pricing• Market/use pricing• Product mix pricing
Vaseline example of market pricing
13 ouncesList price in US: $2.99Price per ounce of jelly: $0.23
0.35 ounceList price in US: $1.99Price per ounce of jelly: $5.69
The global price setting decision process
Lee and Carter, 2012
Global Marketing
Lecture ten:
Global pricing decisions
Module leader: Giovanna Battiston
g.battiston@shu.ac.uk