1. Chapter 14 Pricing Strategies and Tactics

2. Price Dynamics
Pricing is the only revenue generating element of the marketing mix.
Pricing is a means of attracting and communicating an offer to a potential buyer.
Pricing is a competitive tool.
Pricing can be used to position the product or service in the marketplace.

3. Different Pricing Strategy
Skimming
Is to achieve the highest possible contribution in a short initial time period, then gradually lowering the price as the market.
Market Pricing
Following competitive pricing in the target market; adjusting production and marketing mix to competitive conditions.
Penetration Pricing
Offering low pricing to generate volume sales which hopefully will compensate for low margins.

4. Market Skimming Charging a premium price
May occur at the introduction stage of product life cycle
Meet the demand of innovators and early adopters who are willing to pay higher.
Used consistently in consumer electronic industry

5. Penetration Pricing
Charging a low price in order to penetrate market quickly
Appropriate to saturate market prior to imitation by competitors
Packaged food product makers, with products that do not merit patents, may use this strategy.
1979 Sony Walkman

6. ASSESSMENT OF PRICING ENVIRONMENTS
INTERNAL
Marketing Mix
Product (e.g., old/new; standardized/differentiated
Distribution system (e.g., length)
Promotion needs (e.g., sales efforts)
Company characteristics
Extent of internationalization
Countries exported to
Management attitudes
Importance of exports
Overall price position of firm
EXTERNAL
Market-related factors
Nature of demand/target audience characteristics
Government regulations (e.g., duties)
Exchange rate stability
Industry-related factors
Competition intensity
Nature of competition
Pricing Policy Selection
Pricing Strategy Determination
Setting of Specific Price

7. The Setting of Export Prices
Pricing Policies Factors
profit maximization
market share
survival
return on investment
competitive policies
copy competitive pricing
follow competitive pricing
price to discourage competitive entry
Customer Purchase Factors
ability to pay
price-quality relationship
reaction to marketing mix
market support

8. Export Pricing Strategy
Cost-oriented pricing
Standard worldwide price- regardless of buyer’s location in the market(s)
Market-differentiated pricing
based on the dynamics of the marketplace
changes in competition, exchange rates, or other environmental changes etc.

9. Export-Related Costs Export-related costs
Cost of modifying a product for a foreign market
Operational costs of exporting
Cost incurred in entering the foreign market
Price escalation for exports results from
Clear-cut and hidden costs

10. Methods for combating price escalation
Reorganize the channel of distribution
Product adaptation
Change tariff or tax classifications
Overseas assembly or production

11. Negotiating Terms of Payment
Considerations
The amount of payment and the need for protection.
Terms offered by competitors.
Practices in the industry.
Capacity for financing international transactions.
Relative strength of the parties involved.

12. Terms of Payment Cash in Advance Letter of Credit Drafts
Not widely used except for first time transactions
Letter of Credit
Promise to pay
Irrevocable, confirmed, non-revolving
Drafts
Similar to personal check
Must obtain shipping documents prior to delivery
Documentary collection
Bank acts as collection agent
Draft may be sold at discounted rate for immediate cash

13. Managing Foreign Exchange Risk
Forward rate exchange market
“the exchange of currencies on a future date at an agreed upon exchange rate”
Spot rate transaction
“the exchange of currencies for immediate delivery”

14. Dumping Ranges of dumping Remedies for dumping Predatory dumping
is intentional selling at a loss to increase market share
Unintentional dumping
occurs when market factors cause the import’s selling price to fall below prices in the exporter’s home market
Remedies for dumping
Antidumping duty
are levied on imported goods sold at less than fair market value
Countervailing duties
are imposed on imports which are subsidized in the exporter’s home country