Pricing Decision learning objectives and others

good for presentating

1. Assc. Prof. DR. Kardison Lumban Batu, SE., MSc ., CPM Faculty of Economics & Business Diponegoro University

2. LEARNING OBJECTIVES Review the basic pricing concepts that underlie a successful global marketing pricing strategy. Identify the different pricing strategies and objectives that influence decisions about pricing products in global markets. Summarize the various Incoterms that affect the final price of a product. List some of the environmental influences that impact prices . Apply the ethnocentric/polycentric/geocentric framework to decisions regarding price . Explain some of the tactics global companies can use to combat the problem of gray market goods . Assess the impact of dumping on prices in global markets . Compare and contrast the different types of price fixing . Explain the concept of transfer pricing . Define countertrade and explain the various forms it can take.

3. Review the basic pricing concepts that underlie a successful global marketing pricing strategy. Price skimming . Penetration pricing . Competitive pricing. Charm pricing. Prestige pricing. Loss-leader pricing.

4. Price skimming Best for: Businesses introducing brand new products or services. Price skimming is a popular pricing method for new businesses. The strategy involves setting the price of the product or service considerably higher than its actual value . Since this is a brand new product that customers aren’t familiar with, they have no idea how to evaluate it properly. But, once competitors enter the picture, the market catches up with that product or service and the price will then come down to its real market value. This strategy ensures that profit margins, in the beginning, are significantly higher in order to get back R&D and marketing costs. Example of price skimming: Apple Apple is a popular example of a brand that uses price skimming as an effective and profitable pricing strategy .

5. Penetration pricing Best for: New businesses that want to gain market share quickly This pricing strategy is different from price skimming in that the price is set very low as a way to quickly gain market share. The idea behind this is that by the time the company raises the price, the customer is so used to the product or service that they are willing to continue using it at its full price. Example of penetration pricing: Host Gator Web hosting services are among the most common examples of this concept at work.

6. Competitive pricing Best for: All types of small to medium businesses Competitive pricing is a general pricing strategy that any business can use to sell its products or services in a competitive and profitable way . Example of competitive pricing: McDonald’s and Burger King Franchises like McDonald’s and Burger King have similar value menus, which offers a great example of competitive (and profitable) pricing in the fast-food industry.

7. Charm pricing Best for: Supermarkets and retailers that sell everyday products Charm pricing is a type of psychological pricing that has to do with using the price of a product or service to influence the customer’s perception of quality, savings, fair value, etc. This strategy is commonly used by supermarkets and retailers where prices normally end in “99”, or “9 ”. This has been shown to induce customers to purchase more based on the way human brains work . Specifically, customers see $10.00 and $9.99 as two very different prices . To their subconscious minds, $9.99 is $9, which is way cheaper than $10.00. Example of psychological pricing: Costco

8. Prestige pricing Best for: Businesses that sell luxury products and services This is yet another type of psychological pricing used by businesses. It’s also known as premium pricing or image pricing. Although charm pricing is among the most commonly used pricing strategies, it isn’t effective for ALL types of products and services . Example of prestige pricing: Nike

9. Identify the different pricing strategies and objectives that influence decisions about pricing products in global markets. Pricing strategy in marketing, in simple terms, is  adjusting prices according to market determinants . Price is the value one assigns to a good or service which they determine by research. A pricing strategy considers market conditions, consumer willingness to pay, competition, trade margins, costs incurred

10. Summarize the various Incoterms that affect the final price of a product. Incoterms inform sales contracts defining respective obligations, costs, and risks involved in the delivery of goods from the seller to the buyer, but they do not themselves conclude a contract,  determine the price payable, currency or credit terms, govern contract law or define where title to goods transfers .

11. Factors That Affect Pricing Decisions Competitors Customers The Economy and Government Laws and Regulations Product Costs

12. List some of the environmental influences that impact prices . The Political and Regulatory Environment . The Economic Environment. The Competitive Environment . The Technological Environment. The Social and Cultural Environment . Consumer Behavior Social trends

13. Apply The Ethnocentric – Polycentric -Geocentric Framework To Decisions Regarding Price . Ethnocentric In the ethnocentric approach,  a firm follows the same price throughout the world . A firm following a polycentric approach allows its regional managers to fix the product prices based on the circumstances in which they operate.

14. What Is A Polycentric Pricing Strategy? An approach in global marketing in which an organization allows an affiliate or subsidiary to set the most desirable price, provided it is profitable, in its own region ; also referred to as the Polycentric Approach

15. Geocentric Pricing Strategy An approach to global pricing in which affiliate or subsidiary companies supply information about local market conditions and the corporation then sets prices accordingly to maximize profits in each national market.

16. What Is Polycentric Vs Geocentric Approach? Polycentric Attitude: Polycentric attitude refers to the belief that the best approach of work and practices of business are known by the employees of the host country. Geocentric Attitude: Geocentric attitude refers to a global view that emphasizes the usage of the best approach and people from around the world.

17. What Is An Example Of A Geographic Pricing Strategy? For example, a company may offer its products or services at a lower price in one geographic area if the shipping costs are less expensive or if other businesses sell similar goods in that region at a higher pricing point

18. Explain Some Of The Tactics Global Companies Can Use To Combat The Problem Of Gray Market Goods . Common gray market goods include  cameras, cars, watches and even pharmaceuticals . Numerous methods for limiting the harms of gray goods exist for brands to employ.

19. What is an example of a gray market in pricing? For example, this goods market may include  electronics or gadgets that some unauthorized dealers import to resell outside the authorized territory . These goods might be available at consumer-friendly prices or lower rates that attract buyers.

20. What Is Grey Market In International Marketing? Also known as parallel importing, gray marketing is the sale of genuine branded products that have been diverted from authorized distribution channels or that have been imported into another country without the consent and knowledge of the brand owner.

21. Assess the impact of dumping on prices in global markets . Dumping enables consumers in the importing country to obtain access to goods at an affordable price. However, it can also  destroy the local market of the importing country, which can result in layoffs and the closure of businesses . The WTO and EU regulate dumping by putting tariffs and taxes on trading partners

22. What is dumping effect in economics? A gradual increase in income stimulated by a drop in the interest rate demand for money depending on interest rate and income

23. Thank you