PRICING POLICY OF THE FIRM IN INTERNATIONAL MARKETING, General...

THE PRICE POLICY OF THE FIRM IN INTERNATIONAL MARKETING

General

Prices and pricing policy are the most important elements of international marketing. To a large extent, it is precisely from the prices that the achieved commercial results depend, and the correct (or erroneous) pricing policy has a long-lasting and often decisive influence on the entire activity of the company's production and distribution complex. In many cases, the price of the product reflects both the competitiveness and market position of the firm. It's one thing to sell on a monopolistically high or average for the industry (market) prices and quite another - to be content with low prices to stay on the market. Although low prices when entering the foreign market do not always indicate low competitiveness of the goods.

The goal-oriented pricing policy for international marketing is the following: it is required to set such prices on goods and so change them in order to acquire a certain market share, to get the intended volume of profit. The price policy should help to solve operational problems related to the sale of goods at a certain phase of its life cycle, and to respond correctly to the activities of competitors.

The pricing policy is significantly influenced by the possible objectives of the firm. Let's consider some of them and analyze their influence on the firm's pricing policy.

Entering a new market

In order to attract the attention of customers to the company's products and gradually gain a foothold in the new market, it is advisable to set lower prices in comparison with the prices of competitors or with own prices at which the firm sells goods in the markets already mastered by it. Such a pricing policy is beneficial at the initial stage of penetrating a new market. Further, in process of gaining a certain market share and forming a stable clientele, the prices for the company's goods are gradually (stepwise) raised to the level of prices of other suppliers. It should be remembered, however, that the price increase should have an obligatory justification, for example inflation, growth of production and marketing costs, improvement of the quality of goods, expansion of the range. Increase in prices simply because you want this will have a negative impact on the company's operations.

Entering the market for a new product

As mentioned above, the exit with the pioneer goods, completely new or most efficiently satisfying the needs of customers, provides the firm with a monopoly position on the market for some time.

Suppliers in these cases use a price strategy known in the business community as "skimming cream" and that the firm establishes the highest possible price, which provides a rate of profit many times greater than the average for the industry.

Sometimes the price of such a product is even higher than the economic effect of the consumer (in comparison with the price of the goods that satisfy the needs of the old method), but prestige considerations often prevail over rationality.

However, the policy of "skimming" is usually limited in time. A high level of prices stimulates competitors to quickly create similar products or their substitutes. In the market of electronic computers, such products appear only 18 months after the release of the "pioneer" products.

Therefore, it is extremely important at the right time to start lowering prices in order to win new market segments and suppress the activity of competitors.

Position Protection

Each firm seeks at least to maintain that market share that it occupies. The main methods of the competitive struggle necessary for this are the price, technical level and other qualitative indicators of the goods, the terms of delivery, terms of payment, the volume and terms of guarantees, the volume and quality of service, advertising, public relations, etc.

Today non-price methods of competition prevail. However, price methods of competitive struggle have not lost their significance, although they have become more sophisticated, often hidden. The open price war is that the firm sharply reduces the price of a product that has long been successfully sold on the market. Often, in response, other firms reduce prices, and gradually the situation stabilizes, although, of course, weak competitors are forced to leave the market, and often even cease commercial activity. Currently, many companies prefer to improve the consumer properties of their goods while maintaining or some increase in sales prices. With the appropriate advertising, this hidden the discount from the price of the goods causes, as a rule, a positive reaction among the consumer, who often associates a low price with an unsatisfactory quality of the product.

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