International Marketing - Pricing Decisions

International Marketing - Pricing Decisions

• Agenda topics for the presentation include introduction to international marketing, market selection/entry, cultural role, product/branding decisions, international pricing, international distribution, international communication/advertising.

Entering New Markets - Pricing Approaches

• Penetration pricing: A low price to quickly enter a market and saturate it before competitors can copy.
• Skimming: A high price at the product introduction phase, often decreasing over time.

Agenda, Pricing Decisions

• 5.1 Price-Value Positions: Understanding the relationship between price and customer value in different market segments.
• 5.2 Price Determination: Methods for establishing pricing strategies.
• 5.3 International Price Discrimination: Differences in pricing based on customer segments and regions.
• 5.4 Price Monitoring: Tracking pricing changes, market responses, and competitor actions to adapt pricing strategies.

The International Price Management Process

• This consists of four sequential processes: Strategy Development, Analysis, Price Decision, and Implementation.
• • Strategy Development: Defining the desired price objectives and strategies.
• • Analysis: Evaluating current market situations and competition.
• • Price Decision: Determining the optimal pricing strategy and structure.
• • Implementation: Putting the chosen pricing strategy into practice.

Four Price Positioning Strategies (Price-Value)

• A visual representation showing four price positioning strategies based on relative value and quality, including:
  • High Relative Quality/High Relative Price (Premium Price): Examples include luxury products and high-tech items.
  • Middle Relative Quality/Middle Relative Price: Products of average quality and price fall into this category.
  • Low Relative Quality/Low Relative Price (Discounting): Products and services aimed at price-conscious buyers.
  • Low Relative Quality/High Relative Price: products with poor quality yet high price.

Example Honda in Vietnam

• Honda, once the dominant motorbike brand in Vietnam (90% market share in the 1990s) adopted a lower pricing strategy for their motorbike models to counter the rise of competitors. They subsequently launched new models in line with prices in 2001 which succeeded in driving competitors away from the market by providing similar quality at a lower price point.

International Transportation Costs and Incoterms

• International Commercial Terms (Incoterms) are standard frameworks for handling transport costs and risks in international trade, with clearly defined liabilities and costs for each stakeholder. Specific terms mentioned include EXW, FCA, FOB, CFR, and CIF to define who bears the risk and cost at different stages of transport.

Incoterms Example

• The presentation provides an example of an American Jeep Grand Cherokee imported to Japan with cost breakdown from the initial factory price to the final price, including components like exchange rate adjustments, shipping, customs, and distribution fees.

Cost-Based Factors for Prices

• International price differences can be caused by varying tax rates, transportation costs, fluctuations in currency exchange rates, and trade barriers.

Price Discrimination - Idea

• A visual representation of the concept of price discrimination, contrasting uniform pricing with price differentiation, highlighting the potential for additional profit from customer segmentation.

Price Discrimination Example

• An example using a fictional scenario with two consumers to illustrate how optimal pricing based on willingness to pay can maximize profit compared to a uniform pricing strategy. The example involves calculating an optimal uniform price and differentiated prices.

Negative Impacts of Price Discrimination

• Adidas faced backlash in New Zealand for charging significantly higher prices on their merchandise compared to other countries. This led to customer protests, boycotting, and negative publicity, illustrating the negative consequences of inconsistent and perceived unfair pricing in different regions.

Different Price Tags (Multi Currency)

• Retailers face challenges with price tags, especially when displaying product prices in multiple currencies across different countries. Pricing strategies need to account for regional consumer perception of cost. There are issues with unnecessary or misleading data.

International Price Discrimination Process: Stages

• Stage 1: Identify whether price differences exist between countries.
• Stage 2: Determine whether these price differences can be sustained.
• Stage 3: Estimate the price elasticity in different countries.
• Stage 4: Establish the optimal pricing strategy on an international level.
• Stage 5: Determine a suitable price corridor range across countries.
• Specific stages of the process and strategic considerations for navigating price discrepancies in various regions and maintaining a price corridor.

2. Stage - International Product Differentiation (1/2)

• Product differentiation (like branding, additional services, quality/performance) in international markets to cater to varying consumer demands in different countries. Examples mentioned include package sizes, flavors, or additional services.
• A brief overview of approaches to successfully differentiate products regionally.

2. Stage - International Product Differentiation (2/2)

• Further examples of product differentiation in international markets such as package sizes, flavor preferences, product ingredients and technical standards.

Product Differentiation - Examples

• This section illustrates how product differentiation is used in international markets. Examples include the variation in the functions of technological products such as iMac, Hewlett-Packard printers, and Nintendo’s Gameboy Advanced (depending on whether they are used for personal or regional/international use).

Price Monitoring, International Conditions

• Pricing changes need to be monitored (in international contexts), considering factors such as regional market size, political stability, technological changes, and economic downturns to forecast product performance and optimize pricing decisions.