Price Flashcards
What are international pricing decisions affected by?
Internal and external factors
What are the internal factors affecting international pricing decisions?
Firm level factors are product factors
What are the firm level factors affecting pricing?
Corporate and marketing objectives Competitive strategy Firm positioning Product development Production location Market entry modes
What are the product factors affecting pricing?
Stage in PLC Place in product line Most important product features Product positioning Product cost structure
What are the external factors affecting international pricing decisions?
Environemental factors and market factors
What are the environemtnal factors affecting pricing?
Government influences and constraints
Inflation
Currency fluctuations
Business cycle stage
What are the market factors affecting pricing?
Customer perceptions Customers ability to pay Nature of competition Competitors objectives, strategies, strengths and weaknesses Grey market appeal
What is price escalation?
A price-related phenomenon caused by the summulation of all cost factors in the distribution channel including ex works price, shipping costs, tariffs and distributor mark up
What are the tactics for countering price escalation?
Rationalising the distribution process (Reduce the number of links in the distribution process)
Lowering the export price from the factory
Establishing local production of the product
Pressurizing channel members to accept lower profit margins (This may be appropriate is these intermediaries are dependant on the manufacturer for much of their income.
What is market pricing?
A pricing strategy involving charging a final price based on competitive prices
What are some of the factors affecting customer sensitivity to price?
Most distinctive product
Greater percieved quality of products
Consumers less aware of substitues in the market
Difficulty in making comparisons
Proportion price represents of total expenditure of the customer
What are the categories in the diffusion of innovation?
Innovators, Early Adopters, Early majority, late majority and laggards
Who are ‘innovators’?
The first group to adopt a new product, represents about 3% of the market
Who are ‘early adopters’?
The second group to adopt a new product, about 13% of a market
Who are the ‘early majority’?
The third group to adopt a new product, about 34% of the market.
Who are the ‘late majority’?
The fourth group to adopt a new product, about 34% of the market.
Who are the ‘laggards’?
The final group to adopt a new product, about 16% of the market
What is price skimming?
A pricing strategy which involves charging a high price at the top end of the market with the objective of acheiving the highest possible contribution in a short time
What are the problems with skimming?
Having a small market share makes the firm vulnerable to aggressive local competition
Maintenance of a high quality product requires a lot of resources
If product is sold more cheaply at home or in another country grey marketing is likely
What is penetration pricing?
A price strategy involving charging a low price with the objective of achieving the highest possible sales?
What are the motives for penetration pricing?
Intensive local competition
Lower income levels of locals
View of exporting as marginal activity
What is experience curve pricing?
Price changes are based on the idea that total unit costs of a product in real terms can be reduced by a certain percentage with each doubling of cumulative production. Combination of the experience curve with accumulated production of the product with typical market development within an industry.
What is bundle pricing#?
A pricing strategy based on grouping products and services in a system-solution product in order to overcome possible customer price concerns
What is the basic approach to pricing across countries?
Price standardisation versus differentation
What is the global pricing contract?
When a customer requires one global priice per product from the supplier for all its foreign SBU’s and subsidaries, a global pricing contract has been requested
What is parallel importing?
Occurs when a product is sold more cheaply in one market than another, giving a third party the opportunity to trade between a cheaper market and a more expensive market.
What are the solutions to parallel importing?
Eroding differentials Changing the product Changing dealerships Buy back warranties or guarantees
What is marginal cost pricing? (Dumping)
Selling price covers the variable cost
Fixed costs covered by sales in other markets
What are the conditions of marginal cost pricing?
Little speedy intervention
Output represents a small proportion
Resource use have no more profitable use
No impact on principal markets
What is transfer pricing?
A term used to describe the prices charged for intracompany movement of goods and services
What are the approaches to trasfer pricing?
Transfer at cost - The transfer price is set at the level of the production cost and the international division is credited with the entire profit that the firm makes
Transfer at arms length. Here the international division is charged the same way outside the firm.
Transfer at cost plus - This is the usual compromise, where profits are split between the production and international divisions.
What is grey market appeal?
When someone buys your product from one cheap market and sells it at a higher price in another market
What is the price level?
The price set when entering the market
Can other elements of the marketing mix affect pricing?
YES
