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Global Pricing Issues & Strategies

Instructor: Lauren Riley

Lauren has taught college level organizational behavior and has a master's degree in Business Administration.

This lesson identifies common global pricing issues and strategies to overcome them. Topics include profit and cost factors, market factors and environmental factors, as well as how to manage these effectively.

Introduction to Global Pricing

Currency

Pricing is one of the four basic tenets of the marketing mix, and is integral to the success of a product or service. Imagine your firm is introducing a widget for the first time in a new market. You price is at $4.99, the same price it's always been in your existing markets. Quickly, you realize that no one is purchasing the widget in the new market.

Some quick research shows that your price point is much higher than the competitors', and that the local economy in your new market was hit hard by a dip in oil prices. You realize quickly that your customers are not willing to pay more for a new brand with no local reputation and are worried about spending money on 'luxury' widgets until the price of oil improves.

These are just two of the many factors you need to consider when pricing a product or service for a new market. In this lesson, we will cover the importance of market factors, profit and cost factors in pricing your product, environmental factors that will affect the price of your product, and finally, how to manage these issues effectively.

Profit and Cost Factors

Profit and cost factors should take into account the cost of building each widget. Costs should take into account both the direct costs, or costs that can be wholly attributed to the production of the widget, and indirect costs, which cannot be directly attributed to the production of a singular widget but are still needed to run your firm. Examples of direct costs include the materials and labor that go into making the widget, while indirect costs are things such as rent, utilities and the salaries of your management and support teams. Additionally, the amount of profit, or the unit price minus cost, your firm requires for each widget should be factored into the pricing strategy as well.

Profit and cost factors can vary drastically from market to market for the same firm. For example, you may be able to find a cheap manufacturer in one country who will produce your widget for you (thereby reducing shipping costs), but not in another. Make sure you are taking each and every cost factor into account before setting a price in a market, as it can be difficult to raise a price once a product or service has been introduced.

Market Factors

Now that you've determined how much your firm needs to make on each widget, it's important to find out what price the market can bear. Once again, these factors will vary from market to market and need to be assessed separately for each. Market factors include identifying who your competitors are, what their pricing strategy is, and identifying where your brand falls into that spectrum.

Are you positioning your widget as high-end? If so, your price should reflect the perceived value compared with its competition. If you're positioning as the affordable widget option, you need to make sure you are covering your costs while pricing at the lower end of the product range in that market.

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