International Marketing Practices

Price

Price is the amount of money that a customer gives up to acquire a given quantity of goods or services. In general, factors affecting pricing decisions are:

• Customer reaction to pricing (price elasticity). Price elasticity is the sensitivity of customers to a price change in terms of increases or decreases in the quantities that they will purchase. If demand is elastic, a small change in price will result in significant changes in demand; consequently, if demand is inelastic, changes in price have little impact on demand. Customer reaction depends, in part, on the availability of acceptable substitutes and the urgency of their need. • Impact of wholesalers and retailers. Distribution channel entities (wholesalers and retailers) affect pricing decisions through the different roles they play in the warehousing, distribution, and selling process. • The competitive environment. The degree of influence a company may have over pricing is affected by the competitive environment. In a market-controlled price environment, such as hardwood lumber or engineered wood products, competition is high, products from competing suppliers seem similar, and there is little control over pricing. • Other costs. Product development, manufacturing, and distribution are additional costs that firms may incur. Pricing Strategies icing impacts sales volume , profits, cash flow, inventory levels, image, potential for government regulation, and market competitiveness. Therefore, it is important to establish pricing objectives and strategies to clarify the role of pricing in corporate strategy. For small to medium sized manufacturing firms, pricing objectives are typically profit -oriented, the goal of which is to achieve a target return on investment and maximize profits. Larger firms tend to be more sales- oriented when pricing their products. The goals of a sales-oriented pricing objective are to increase market share, maximize sales revenue, and generate traffic to the company [93]. Once pricing objectives have been established, a strategy is implemented to achieve them. There are a number of pricing strategies a company can adopt; however, the three basic strategies are skimming, market-based pricing, and penetration pricing. In a skimming pricing strategy, the objective is to achieve the highest possible profits in a short time. For this strategy to be successful, the target segment must be relatively insensitive to price and willing to pay a premium for a unique product. In market-based pricing , the company sets a price that is competitive in the target market and adjusts costs to achieve a desired level of profitability. A company adopting a penetration pricing strategy reduces the price

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