Week 7 – International Marketing
Chapter 11 – Pricing Decisions
BASIC PRICING CONCEPTS
Law of one price: all customers in the market get the best product available for the best price
GLOBAL PRICING OBJECTIVES AND STRATEGIES
- Pricing strategy may vary from country to county
- Pricing objectives may vary depending on product’s life-cycle stage and the country-
specific competitive situation
- Factor in external considerations such as added cost associated with shipping,…
Market Skimming and Financial Objectives
- Price can be used as a strategic variable to achieve specific financial goals
- Market skimming = pricing strategy that is often part of a deliberate attempt to
reach a market segment that is willing to pay a premium price for a particular brand
or for a specialized or unique product
- Seek competitive advantage by pursuing differentiation strategies or positioning their
products in the premium segment
- Appropriate in the introductory phase of the product life cycle when both production
capacity and competition are limited
- Setting price deliberately high to limit demand to innovators and early adopters who
are willing to pay the price
- Once product enters growth stage, firm starts cutting price
Penetration Pricing and Nonfinancial Objectives
- Nonfinancial objectives: e.g. prices can be used as competitive weapon to gain or
maintain market position or other sales-based objectives
- Frequently set by companies that enjoy cost-leadership position
- Market penetration pricing strategy = setting price levels that are low enough to
quickly build market share
- First-time exporter is unlikely to use penetration pricing as it often means that the
product may be sold at a loss for a certain length of time (cannot absorb yet)
- If product not innovative enough for patent protection; use of penetration pricing to
gain market share before competitors copy product
Companion Products: Captive Pricing, a/l/a “ Razors and Blades”
Pricing
- E.g. razor handle has not value without blades
- “If you make money on the blades, you can give away the razor”
- Approach does not always work globally
Based on the book ‘Global Marketing’ by Warren J. Keegan and Mark C. Green
Chapter 11 – Pricing Decisions
BASIC PRICING CONCEPTS
Law of one price: all customers in the market get the best product available for the best price
GLOBAL PRICING OBJECTIVES AND STRATEGIES
- Pricing strategy may vary from country to county
- Pricing objectives may vary depending on product’s life-cycle stage and the country-
specific competitive situation
- Factor in external considerations such as added cost associated with shipping,…
Market Skimming and Financial Objectives
- Price can be used as a strategic variable to achieve specific financial goals
- Market skimming = pricing strategy that is often part of a deliberate attempt to
reach a market segment that is willing to pay a premium price for a particular brand
or for a specialized or unique product
- Seek competitive advantage by pursuing differentiation strategies or positioning their
products in the premium segment
- Appropriate in the introductory phase of the product life cycle when both production
capacity and competition are limited
- Setting price deliberately high to limit demand to innovators and early adopters who
are willing to pay the price
- Once product enters growth stage, firm starts cutting price
Penetration Pricing and Nonfinancial Objectives
- Nonfinancial objectives: e.g. prices can be used as competitive weapon to gain or
maintain market position or other sales-based objectives
- Frequently set by companies that enjoy cost-leadership position
- Market penetration pricing strategy = setting price levels that are low enough to
quickly build market share
- First-time exporter is unlikely to use penetration pricing as it often means that the
product may be sold at a loss for a certain length of time (cannot absorb yet)
- If product not innovative enough for patent protection; use of penetration pricing to
gain market share before competitors copy product
Companion Products: Captive Pricing, a/l/a “ Razors and Blades”
Pricing
- E.g. razor handle has not value without blades
- “If you make money on the blades, you can give away the razor”
- Approach does not always work globally
Based on the book ‘Global Marketing’ by Warren J. Keegan and Mark C. Green
