Task Eight Task Eight International Pricing StrategiesI Pricing Considerations forI Pricing Considerations for International MarketingInternational Marketing1. Importance of Pricing in International MarketingFirst, price is the bridge connecting a companys expenses with its revenues.Second, price can serve as an indicator of a products value.2. Factors Affecting International 2. Factors Affecting International PricingPricing2.1 Internal Factors2.1.1 Corporate Factors2.1.1 Corporate Factors(1) Marketing ObjectivesProfit MaximizationMarket Share Expansion-Look at Mini- Case 8.1 Return on Investment(2) Production Costs(3) Transportation Costs(4) Overseas Distribution Costs2.1.2 Product Factors(1) Product Value and Positioning(2) Stage of Product Life CycleLook at Mini-Case 8.22.2 External Factors2.2 External Factors2.2.1 Environmental Factors(1) Taxes(2) Financial Risks2.2.2 Market FactorsSupplyDemandCompetitionLook at Mini-Case 8.3II The International Market Pricing ApproachesII The International Market Pricing ApproachesWhen launching new products or adjusting existing pricing strategies, international marketers will use different pricing approaches. 1. Cost-Based PricingFixed costs refer to those which do not vary with the quantity of products. The equipment, buildings, rent and management salaries all belong to this category.Variable costs mean costs that change with the quantity produced, such as raw materials and components.1.1 Cost-Plus Pricing1.1 Cost-Plus Pricing1.2 Variable Cost PricingIn calculation, this method only takes variable costs such as direct materials, direct labor, etc. into consideration. Fixed costs such as rent or building are discounted.1.3 Break-Even Pricing1.3 Break-Even PricingBreak-even point is the point at which the costs and revenues are equalWhen the quantity of products increases, the total cost increases as the variable costs are added. At the beginning, the total revenue is less than total cost. Gradually, as the quantity is more than 500 and less than 600, the total revenue and total cost converge at a pointthe break-even point.This method is not only used to find out the quantity of break-even point, but also used to calculate the lowest price in order to cover all costs when the quantity is fixed.Target Profit PricingTarget Profit PricingIn this approach, companies predict the production quantity and sales volume, and then estimate total costs. Lastly, according to the set profit, the companies calculate the price to guarantee the desired profit.2. Market-Orientated Pricing2. Market-Orientated PricingMarket-orientated pricing method considers relevant market elements rather than the sellers costs as the base to set the price.2.1 Perceived-Value Pricing2.2 Reverse Pricing2.3 Discrimination PricingTime PricingLocation PricingCustomer-Segment PricingProduct-Form Pricing3. Competition-Orientated Pricing3. Competition-Orientated PricingGoing-Rate PricingCompetitive PricingSkill Training 8.1Can you give some examples of the products that use the cost-based pricing, market-orientated pricing and competition orientated pricing? Can you explain why they have to use these pricing approaches?III Developing Pricing Strategies inIII Developing Pricing Strategies in International MarketingInternational Marketing1. Developing the Pricing Strategies for Existing Products1.1 Price UnchangedLook at Mini-Case 8.41.2 Price Changed1.2 Price ChangedPrice DecreaseReasons for a Price CutWays to Cut the PriceRisks of Price DecreasePrice IncreaseReasons for a Price IncreaseRisks of Price Increase1.3 Responses to Competitors 1.3 Responses to Competitors Price ChangesPrice Changes(1) Taking No Actions(2) Taking ActionsReducing Price or Initiating a Price CompetitionImproving Product Quality and Customer Perceived Value2. Pricing Strategies for New 2. Pricing Strategies for New ProductsProducts2.1 Market-Skimming PricingWhen a new product is introduced to the market, companies set high prices at the beginning.Situations Applied to Skimming Pricing Strategylook at Mini-Case 8.5Advantages of Skimming Pricing StrategyDrawbacks of Skimming Pricing Strategy2.2 Market-Penetrating Pricing2.2 Market-Penetrating PricingRather than setting a high initial price, some companies may use market-penetrating pricing- -an original low price to penetrate the market, attract millions of buyers and gain large market share.Look at Mini-Case 8.6Situations Applied to Penetrating Pricing StrategyAdvantages and Disadvantages of Penetrating Pricing2.3 Neutral Pricing2.3 Neutral PricingNeutral pricing takes the merits of above- mentioned two strategies. Using neutral pricing, companies set an initial price that is lower than that of skimming pricing but higher than that of penetrating pricing. The neutral price guarantees the profit as well as customers acceptance.3. Other Pricing Strategies3. Other