w Pricing is the only revenue generating element of the marketing mix.
w Pricing is a means of attracting and communicating an offer to a potential buyer.
w Pricing is a competitive tool.
w Pricing can be used to position the product or service in the marketplace.
Different Pricing Strategy
n Is to achieve the highest possible contribution in a short initial time period, then gradually lowering the price as the market.
n Following competitive pricing in the target market; adjusting production and marketing mix to competitive conditions.
n Offering low pricing to generate volume sales which hopefully will compensate for low margins.
ASSESSMENT OF PRICING ENVIRONMENTS
1 Market-related factors
• Nature of demand/target audience characteristics
• Government regulations (e.g., duties)
• Exchange rate stability
2 Industry-related factors
• Competition intensity
• Nature of competition
1 Marketing Mix
• Product (e.g., old/new; standardized/differentiated
• Distribution system (e.g., length)
• Promotion needs (e.g., sales efforts)
2 Company characteristics
• Extent of internationalization
• Countries exported to
3 Management attitudes
• Importance of exports
• Overall price position of firm
The Setting of Export Prices
Customer Purchase Factors
w ability to pay
w price-quality relationship
w reaction to marketing mix
w market support
Pricing Policies Factors
w profit maximization
w market share
w return on investment
w competitive policies
n copy competitive pricing
n follow competitive pricing
n price to discourage competitive entry
Export Pricing Strategy
n Standard worldwide price- regardless of buyer’s location in the market(s)
n Dual pricing differentiates between domestic and export prices
n based on the dynamics of the marketplace
l changes in competition, exchange rates, or other environmental changes etc.
w Export-related costs
n Cost of modifying a product for a foreign market
n Operational costs of exporting
n Cost incurred in entering the foreign market
w Price escalation for exports results from
n Clear-cut and hidden costs
Methods for combating price escalation
n Reorganize the channel of distribution
n Product adaptation
n Change tariff or tax classifications
n Overseas assembly or production
Negotiating Terms of Payment
n The amount of payment and the need for protection.
n Terms offered by competitors.
n Practices in the industry.
n Capacity for financing
n Relative strength of the
Terms of Payment
n Cash in Advance
l Not widely used except for first time transactions
n Letter of Credit
l Promise to pay
l Irrevocable, confirmed, nonrevolving
l Similar to personal check
l Must obtain shipping documents prior to delivery
n Documentary collection
l Bank acts as collection agent
l Draft may be sold at discounted rate for immediate cash
Managing Foreign Exchange Risk
vForward rate exchange market
n “the exchange of currencies on a future date at an agreed upon exchange rate”
vSpot rate transaction
n “the exchange of currencies for immediate delivery”
w Ranges of dumping
n Predatory dumping
l is intentional selling at a loss to increase market share
n Unintentional dumping
l occurs when market factors cause the import’s selling price to fall below prices in the exporter’s home market
w Remedies for dumping
n Antidumping duty
l are levied on imported goods
sold at less than fair market value
n Countervailing duties
l are imposed on imports which are subsidized in the exporter’s home country