Download Notes on 7: Global Pricing Strategies

Notes on 7: Global Pricing Strategies
Key factors in global pricing

Price is an integral part of the marketing mix that can be changed quickly without huge
cost implications.

Price is the only element in the mix that generates revenue, whilst all the others are
cost generating, and this makes it a very important strategic marketing instrument.

However, price should not be treated in isolation as a quick fix, but should be
integrated with the other marketing mix elements.
The environmental factors in pricing
Environmental factors are the external and uncontrollable variables in the foreign markets.
Environmental factors include:

government influences and constraints: import controls, taxes, price controls

inflation

currency fluctuations

business cycle stage.
The market factors in pricing
The market factors are arguably the most important in determining price, and in particular,
the Gross Domestic Product.
Market factors include:

government influences and constraints: import controls, taxes, price controls

inflation

currency fluctuations

business cycle stage

competitors’ objectives, strategies and relative strengths/weakness.
The firm-level factors in pricing
There are several important firm-level ingredients, not least of which are the market
objectives and strategies.
Firm-level factors include:

corporate and marketing objectives – global or country-specific

competitive strategies

firm positioning

service development – proactive or reactive

market entry modes.
The service factors in pricing
The critical factor is the relationship between the price being charged and the perceived
value of the product, since consumers will see the price as being too high if they cannot
relate it to their value of the product.
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Service factors include:

position in range of services – prime, intermediate or secondary service

most important service features: quality, reliability, speed etc.

positioning in the market - unique selling points

cost structure.
Pricing strategies in global marketing
There are six key strategies available:

return on investment (ROI)

market stabilisation

early cash recovery

prevent new entrants

pricing to reflect service differentiation

market penetration.
Pricing methods
There are many pricing approaches available to the global marketer:

market skimming

cost plus pricing

determining the base price

penetration pricing

marginal cost pricing

market holding.
Price standardisation or differentiation
The general guidelines adopted by the organisations lead to either standardisation or
differentiation of prices.
Price differentiation is determined by differences in:

average industry prices

price segments

methods and importance of special offers

importance of own brands

strength of local competitors

retailer power

terms and conditions

consumer preferences

price interest and awareness.
Price standardisation is determined by:

internationalisation of competition

homogenisation of competitive structures
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
international activities of large retail organisations

increased danger of cross-border arbitrage.
Terms of sale and payment
In the hospitality industry, the sale of services, and payment for them, will have some impact
on the pricing policy, although it could be the reverse - the pricing strategy of the business
will affect the required terms of sale and payment.
There are several different options available within the industry:

self-service technology

cash/card/cheque payments

package deals

credit systems

business accounts

online services.
Other considerations in pricing
The additional factors to consider in pricing strategies are the three other aspects of the
marketing mix:

product

promotion

place.
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