LESSONLESSON 18-118-1GOALSGOALS

Identify the factors that Identify the factors that must be considered by must be considered by businesses when businesses when setting prices.setting prices.

Describe pricing Describe pricing methods used by methods used by businesses.businesses.

Discuss some pricing Discuss some pricing factors that are unique factors that are unique to global markets.to global markets.

INTERNATIONAL PRICING ACTIVITIES

Price Planning for Int’l Marketing

Every business must decide what amount to charge.

Must decide how to get goods and services to customers.Factors: Export costs, foreign currencies,

availability

Price is the monetary value of a good or service.

Price Planning for International Marketing

Three main factors influence the price a company charges for goods & services:CostsConsumer demandCompetition

Costs

1. The cost to modify a product to meet cultural or legal restrictions.

2. Tariffs and other taxes that must be paid when selling to customers in another country.

3. Fees to acquire export or import licenses4. Expenses for the preparation of export documents.5. Changes in the exchange rate for a nation’s currency.6. Transportation costs due to selling to buyers at a great

distance.

Consumer Demand

When prices are high, consumers tend to buy less than when prices are low.

Lower incomes, higher prices, and needs for other items result in reduced demand for a good or service.

0

500

1000

1500

2000

2500

3000

3500

4000

4500

$1 $2 $3 $4 $5 $6 $7 $8

SupplyDemand

Competition

If many companies are selling an identical product, consumers have more choices.

Competition keeps prices _______.

Price Selection Methods

1. Markup Pricing

2. New Product Pricing

3. Psychological Pricing

4. Discount Pricing

Markup Pricing

Markup is the amount added to the cost of the product to determine the selling price.

Example:Example:Percentage × Cost = Markup

40% × $50.00 = $20.00

Cost + Markup = Selling Price$50.00 + $20.00 = $70.00

New Product Pricing

1. Competitive pricing -Sell at a comparable price if there is already competition in mkt.

Examples: gas, pizza, groceries2. Skim pricing -sets a relatively high

introductory price. Attracts buyers who are not concerned with price.

Examples: MP3 players & Tivo when 1st introduced.3. Penetration pricing -setting a relatively low

introductory price for a new product. Gains strong acceptance. Takes away sales from the competition.

Psychological Pricing

1. Promotional pricing Loss leader – very low-priced items to attract

customers to come and make other purchases2. Odd-even pricing –

$4.95 and $9.99 Bargain Oriented $175 and $12.50 Quality Conscious

3. Prestige pricing – set high prices to project status, influence, and power.

4. Price lining-All merchandise in a category is same price. All CD’s $12.99. All Suits $150

Discount Pricing

Seasonal discountsCash discounts – discount for paying bills

quickly or on time.Quantity discounts – encourages more sale.

Different price for amounts 1-4, 5-9, 10 or more

Trade discounts - Manufacturer to distributor discount.

Pricing in Global Markets

Difficult to set prices across national borders.Setting prices high enough to cover unexpected

fluctuation in exchange rates is common.Two additional methods IB’s use to minimize risk.Countertrade

Direct exchange of products or services between companies in different countries minimizes these risks.

Dumping Set prices extremely low, lower than what is charged in home

country. This drives out competition. Dumping is not good for economy.

Assignment Due on Thursday (20 Points)

Bring in an example of the following pricing methods (LABEL each).

1. Promotional Pricing

2. Odd-Even Pricing

3. Prestige Pricing

4. Price Lining

BONUS: Any of the Discount Pricing methods will be bonus.

LESSONLESSON18-218-2GOALSGOALS

Contrast direct and Contrast direct and indirect channels of indirect channels of distribution.distribution.

Describe the activities of Describe the activities of agents, wholesalers, and agents, wholesalers, and retailers.retailers.

Explain the role played Explain the role played by global intermediaries.by global intermediaries.

GLOBAL DISTRIBUTION ACTIVITIES

Distribution Channels

Distribution Channel - the path taken by a good or service to get from producer to final user.

When to use wholesalers? Retailers? Depends on product and customer.

1. Direct Distribution Channel –

2. Indirect Distribution Channel –

3. Intermediary –

Intermediaries

Common Distribution Channels

Channel A Channel B Channel C Channel D

Consumer Consumer Consumer Consumer

Producer Producer Producer

Retailer

Wholesaler

Agent

Retailer Retailer

Wholesaler

Producer

Distribution Channel Members

Agent (broker) - *does not take ownership.Wholesaler – *buys large quantities, sells

to retailers.5 main functions:

Provide information - Processing orders - Storing and transporting - Financing and taking possession - Promoting -

Distribution Channel Members

Retailer – *store or business, sells directly to final users.

Serve customers 5 ways:Product Selection – Convenience – Product Quality – Sales Staff Assistance – Special Services –

Retailers

Convenience storesGeneral merchandise retailersSpecialty storesDirect sellersOnline retailersAutomatic vending

International Retailing Activities

Vehicles converted to mini-restaurants allow companies to serve customers at temporary locations.Sporting eventsParksFairs,Concerts

ATMobiles (portable cash machines)Sidewalk merchants/vendors

Global Intermediaries

Export management company (EMC)Export trading company (ETC)Freight forwarderCustoms broker

LESSONLESSON18-318-3GOALSGOALS

Summarize the shipping Summarize the shipping requirements for requirements for international distribution.international distribution.

Compare transportation Compare transportation modes available to modes available to international distributors.international distributors.

MOVING GOODS AROUND THE WORLD

Preparing for Shipping

PackingAvoid breakageMaintain the lowest possible weight and volumeProvide moisture-proof surroundingsMinimize theft

Preparing for Shipping

LabelingName and address of the shipperCountry of originContainer’s weightSize, # of packages, destinationLabels for hazardous material

Documentation

Bill of lading Contract between the exporter and the transporter.

Contains….

Certificate of origin Documents the country in which the goods were produced.

Export declaration US Dept of Commerce if more that $500.

Destination control statement Verifies the country to which the goods are being shipped.

Insurance certificate Amount of insurance coverage for fire, theft, water damage.

Transportation in the Global Market

Physical DistributionMotor carrierRailroadWaterwayPipelineAir carrierIntermodal movement