Pricing Strategies, Methods and Models

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International
Marketing
Chandan Bagwe

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1. Definition
 The marketing of goods and services
across national frontiers.
 Marketing in an internationally
competitive environment, no matter
whether the market is home or foreign

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Pricing

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What is Price ?

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Price is money charged for a product for
a service

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What are different factor while
deciding Price ?

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Factors
 Costs
 Competition
 Differentiation
 Exchange Rates
 Image
 Government: Taxes, Regulations, Subsidies,
Exemptions, Incentives

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How to calculate the price of a product
or a service ?

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Price = Cost + Profit

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Costs
 What are different types of costs?

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Costs
 Production Costs
 Fixed Costs: Land, building , Plant, Machinery,
Electricity
 Variable costs
 Labor, Raw Material,, Packaging
 Selling and delivery Costs
 Stocks, packing, transport, inspection, insurance,
marketing etc
 Marketing and promotional costs

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Methods
 Cost Based
 Price = FC + VC + Distribution + Marketing +
Profit Margin

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PRICING : Cost sheet of ZCCL for product 1 : Suits (in Rs.)
Particulars Amt (FOR 1
LAKH units)
Amt ( per
Unit)
FIXED COSTS
VARIABLE COSTS:
DISTRIBUTION & LOGISTICS
MARKETING COSTS
TOTAL COSTS
PROFIT (15% of SP)
SALE PRICE

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Particulars Amt (FOR 1
LAKH units)
Amt ( per
Unit)
FIXED COSTS
Land, Building, Plant, M/C, Salaries,
Other factory/Administrative expenses
VARIABLE COSTS:
Power & Fuel, Packaging
Raw Material Consumables for
Labour charges(manufacturing)
DISTRIBUTION & LOGISTICS
Stocks, Warehouse, Customs Duties & Taxes, Insurance,
Freight, Loading, Unloading, Transportation, Shipping,,
Inspection, Distributor and Retailer Markups
Export Incentives, Agent Commissions
MARKETING COSTS
Advertisements, PR, Events, Exhibitions, Sponsorships
TOTAL COSTS
PROFIT (15% of SP)
SALE PRICE

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PRICING - Premium Strategy in our category
Cost sheet of ZCCL for product 1 : Suits (in Rs.)
Particulars Amt (FOR 1
LAKH units)
Amt ( per
Unit)
VARIABLE COSTS: ( per unit will remain constant) 259000000 2590
Raw Material 10.36 Cr 1036
Power & Fuel 5.18 Cr 518
Consumables for printing/embroidery/washing 6.475 Cr 647.5
Labour charges(manufacturing) 3.885 Cr 388.5
FIXED COSTS: 1400
Rent including lease rentals 4.5 Cr 450
Salaries 3.9 Cr 390
Other factory/Administrative expenses 5.6 Cr 560
DISTRIBUTION & LOGISTICS 7 Cr 700
MARKETING COSTS 5.6 Cr 560
PROFIT (15% of SP) 10.5 Cr 1050
SALE PRICE 70 Cr 7000

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Pricing Example
www.shippingrates.com
$1 = 56.57 INR
Per 100 gm cost (Standard packaging)
INR USD
Factory Price 30 0.35
Domestic Freight 5 0.088
Export Documentation
and Insurance 7.5 0.13
Ocean Freight 10.12 0.18
Landed Cost 52.62 0.93
Import Duty (10% of
landed cost) 5.262 0.093
Wholesaler Markup
(15% on cost) 8 0.14
Distributor Markup
(25% on cost) 13 0.23
Retailer Markup (50%
on cost) 26.31 0.46
Total costs 52.572 0.93
Final Consumer Price 70.71 1.25
Profit Margin 35% 35%
4 boxes (@ 25 kgs) for $179 = 10126.03
100 kgs  10126.03 INR
1 kg  10126.03 / 100
0.1 kg (100 gms)  10126.01 / 100 x 0.1 = 10.12

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Pricing Strategies
 What are different Pricing Strategies ?

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Tata Nano

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Rolls Royce, Lamborghini

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Tata Tiago, Renault

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Maruti, Hyundai

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Strategy
 Dumping
 Selling in foreign market at price below the home
market price, or
 Selling below cost of production
 If foreign price is higher than home market then it is
called reverse dumping
 For excess stock
 To gain Foothold in new market
 Gov has anti dumping duties

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Pricing Models

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Pricing Models
1) Competitive Pricing

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Pricing Models
1) Competitive
Same, or average or less.
It is reactive
Its not for leaders

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Pricing Models
2) The Break Even Strategy

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Pricing Models
2) The Break Even Strategy
Cost Based for Paying the bills
May be good in the beginning
When Entering a new market place
Testing a market
To Acquire a large volume of customers (Not
good for a very long term)

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Pricing Models
3) Price to Time

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Pricing Models
3) Price to Time
Charge per Hour, Charge per Day, Charge per
Month.
Mainly used by professionals, lawyers,
Freelancers, consultants. (Job Economy to Skill
Economy)
Companies may not prefer it as they prefer to
pay for results. There is conflict of interest.

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Pricing Models
4) Price to Cost
% of all costs.
If costs increases, the price also increase.
It could also be conflict of interest for an
organization
Price should be result focused as well as time
focused

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Pricing Models
5) Price to Package
Bundle the multiple products and services to give a
good deal to the customer
Create an offer to the customer
It makes the offer irresistible.
In digital services it will be possible.

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Pricing Models
5) Price to Package
Per month charges
E-Commerce Sales: 50,000
SEO: 25000
Social Media: 25000
Package: 75,000 / Month for all three

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Pricing Models
6) Price to Positioning
- If you are a good brand, you can charge lot more
- Perception
- If you understand the supply and demand you
can charge more
- Can you create the demand

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Pricing Models
7) Price to Value
- If you sell results, people are ready to pay the
premium
- Increase revenue from X to X+Y.
or % growth from the base line.

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Pricing Models
8) Price
- If you sell results, people are ready to pay the
premium
- Increase revenue from X to X+Y.
or % growth from the base line.

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BEP

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Steps: Pricing Model