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:

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 internationalisation of competition
homogenisation of competitive structures
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.