International Pricing Strategies

Kati Czerniawska, Mona Hollborn, Jutta Merz und Anna Tissen

In times of globalization every company distributes products and services all over the world. This leads to increasing competition which requires the companies not only to upgrade their products and use technology skillfully, but it also accelerate the companies need to find an ideal marketing strategy. (Cf. Wolffe, http://tinyurl.com/bmxyzxz, 06.06.2012)

The Marketing Mix model is a common tool, which is used to assist implementing a marketing strategy in the national market, but it can also be used for the international market. It consists of the 4 Ps: product, price, place and promotion. The price is the only “P” which generates profit, whereas the other 3 Ps require costs. Therefore, setting the right price plays a key role in generating sufficient revenue and profit. The crucial question is: How much are the intended customers willing to pay? It can be concluded that developing a pricing strategy is an indispensable factor in successful marketing strategies. (Cf.

The development of a pricing strategy depends on a detailed analysis of the target market, e.g. geographic location and the competition, e.g. strength of the competitors. (Cf. Adams, http://tinyurl.com/c6chapk, 06.05.2012).

Moreover, it should be considered that international pricing is much more complex than domestic pricing due to:

  • currency fluctuations
  • tariffs
  • credit risks
  • distribution channels
  • government regulations, e.g. anti- dumping laws
  • methods of payment.

(Cf. Katulli, http://tinyurl.com/5ux7f5, 06.05.2012)

The companies in the USA, Germany and China use different types of price segments in national and international markets.  There are three different segments:

  • low-price segment
  • medium-price segment
  • premium-price segment.

(Cf. Homburg / Krohmer, 2009, p. 188)

In the German market a low-price segment is used. As Germany’s GNP is high, Germans can choose between products they want to buy. Thus it is important that the price is orientated on the competition. Moreover, German consumers are willing to pay more for high quality products and environmental protection.

In other countries Germany’s companies can generate high revenue by implementing premium prices. Germany is regarded as an innovative country, which produces high quality goods. Foreign countries are willing to pay more for these qualities. (Cf. Simon/ Fassnacht, 2009, p.31)

In the USA a low-price segment is also used. This is demonstrated by cheap imports from China. Nevertheless, high revenue can be reached because the population of the USA is huge and mass consumption is common. For the consumers in the USA the price is the most important criteria considered when deciding whether to buy or not to buy a product or service. A good service, in addition to the product, is regarded as a standard, which should not be underestimated by international marketers. The environmental aspect is, in contrast to Germany, less important or not important at all to many Americans. (C.f. nameless author, http://tinyurl.com/c6f75m3, 06.05.2012)

In the international market the price segment of the USA is similar to the German pricing strategy. Owing to the fact that the USA is regarded as a highly innovative country, US companies generally implement their products in the premium price segment.  (C.f. Nameless author, http://tinyurl.com/cnhzad9, 06.05.2012

China, in contrast to Germany and the USA, uses the same low price segment in- and outside of the country. Evidence for this is the low labor costs.

In the national market a population of 1.3 Billion presents a large consumer base. Although consumption per capita is low, the large population provides the opportunity to sell exceptionally low-end products incredibly successfully. Moreover, it has a high future potential as buying power is increasing. Over 63% of shoppers rank price as the number 1 factor in deciding whether to buy a product or not. (Cf. Nameless author, http://tinyurl.com/cmncpdr, 06.05.2012 and nameless author, http://tinyurl.com/cdtv6fs, 06.05.2012)

In the international market China’s products are regarded to be low quality. Therefore other countries are not willing to pay higher prices for them. Furthermore they cannot provide their products in such low prices without imports from China, e.g. the USA.

The message for international marketers is clear: responding to regional differences and consumers needs is obligatory. Simply adopting one strategy for the whole of a region could prove costly. The smartest marketers should make sure that any international operations take regional circumstances into account. (Cf. Nameless author, http://tinyurl.com/cmncpdr, 06.05.2012)

Bibliography

1)    Adams,R., six steps to a successful business with Ronda Adams, in: http://www.usatoday.com/money/smallbusiness/startup/week4-table-competition.htm,  06.05.2012

2)    Homburg, C./ Krohmer, H. (2009), Grundlagen des Marketingmanagements, 2. Auflage, Wiesbaden

3)    Kotulli, A., Global Pricing, in: http://www.slideshare.net/kvarun/global-pricing, 06.05.2012

4)    Nameless author, China- SWOT Analysis, in: http://www.oppapers.com/essays/China-Swot-Analysis/180931, 06.05.2012

5)    Nameless author, Der Weg in den US Markt, in: http://www.gaccca.org/beratungsleistungen/der-weg-in-den-us-markt.html, 06.05.2012

6)    Nameless author, How Culture can effect costs, MarketingWeek in: http://www.marketingweek.co.uk/how-culture-can-affect-cost/2064557.article, 06.05.2012

7)    Nameless author, Telekom sieht wachsenden Markt in den USA, in: http://www.onpulson.de/themen/3294/telekom-sieht-wachsenden-markt-in-usa/, 06.05.2012

8)    Simon, H./ Fassnacht, M. (2009), Preismanagement, 3. Auflage

9)    Wolffe, M., Factors to Determine an International Pricing Strategy, in: http://www.ehow.com/list_6926030_factors-determine-international-pricing-strategy.html, 06.05.2012

 

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Über Prof. Dr. Heike Simmet

Prof. Dr. Heike Simmet Professorin für Betriebswirtschaft Speaker und Beraterin
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