m

1. International Pricing and
Promotion

3. • Components of pricing as competitive tools in
international marketing
• The pricing pitfalls directly related to
international marketing
• How to control pricing in parallel imports or gray
markets
• Price escalation and how to minimize its effect
• Countertrading and its place in international
marketing practices
• The mechanics of price quotations

4. • Setting the right price for a product or service
can be the key to success or failure
• An offering’s price must reflect the quality and
value the consumer perceives in the product
• As the globalization of world markets continues,
competition intensifies among multinational and
home-based companies
• The marketing manager’s responsibility is to set
and control the actual price of goods in different
markets in which different sets of variables are
to be found

5. • Pricing as an active instrument of accomplishing
marketing objectives
- The company uses price to achieve a specific objective
• Pricing as a static element in a business decision
- Exports only excess inventory
- Places a low priority on foreign business
- Views its export sales as passive contributions to sales
volume

6. • Occurs whenever price differences are greater than
the cost of transportation between two markets
• Major problem for pharmaceutical companies
• Exclusive distribution
Parallel imports develop when importers buy products
from distributors in one country and sell them in another
to distributors who are not part of the manufacturer’s
regular distribution system.

7. Full-Cost versus Variable-Cost Pricing
• Variable-cost pricing – the firm is concerned only with the
marginal or incremental cost of producing goods to be sold in
overseas markets.
• Full-cost pricing – companies insist that no unit of a similar
product is different from any other unit in terms of cost and
that each unit must bear its full share of the total fixed and
variable cost
Skimming versus Penetration Pricing
• Skimming – a company uses when the objective is to reach a
segment of the market that is relatively price insensitive and
thus willing to pay a premium price for the value received.
• Penetration pricing policy – used to stimulate market and sales
growth by deliberately offering products at low prices.

8. • Costs of exporting
- Price escalation
• Taxes, tariffs, and administrative costs
- Tariff – fee charged when goods are brought into a country
from another country
- Administrative costs include export and import licenses,
other documents, and the physical arrangements for getting
the product from port of entry to the buyer’s location
• Inflation
- In countries with rapid inflation or exchange variation, the
selling price must be related to the cost of goods sold and
the cost of replacing the items

9. • Deflation
- In a deflationary market, it is essential for a company to keep prices low
and raise brand value to win the trust of consumers
• Exchange rate fluctuations
- No one is quite sure of the future value of currency
- Transactions are increasingly being written in terms of the vendor
company’s national currency
• Varying currency values
- Changing values of a country’s currency relative to other currencies
- Cost-plus pricing
• Middleman and transportation costs
- Channel diversity
- Underdeveloped marketing and distribution channel infrastructures

10. • Lowering cost of goods
• Lowering tariffs
• Lowering distribution costs
• Using foreign trade zones to lessen price
escalation
• Dumping

11. • Opens the door to a large segment of nominally
financed foreign firms that can be sold on a lease
option but might be unable to buy for cash
• Can ease the problems of selling new,
experimental equipment because less risk is
involved for the users
• Helps guarantee better maintenance and service
on overseas equipment
• Helps to sell other companies in that country
• Revenue tends to be more stable over a period of
time than direct sales would be

12. • Why purchasers impose countertrade:
- To preserve hard currency
- To improve balance of trade
- To gain access to new markets
- To upgrade manufacturing capabilities
- To maintain prices of export goods
- To force reinvestment of proceeds from weapons deals

13. • Types of countertrade
- Barter
- Compensation deals
- Counterpurchase or offset trade
Product buyback agreement
• Problems of countertrading
- Determining the value of and potential demand for the goods offered
- Barter houses
• The Internet and countertrading
- Electronic trade dollars
- Universal Currency/IRTA
• Proactive countertrade strategy
- Included as part of an overall market strategy
- Effective for exchange-poor countries

14. • Benefits:
- Lowering duty costs
- Reducing income taxes in high-tax countries
- Facilitating dividend repatriation when dividend
repatriation is curtailed by government policy
• Arrangements for pricing goods for intra-company
transfer:
- Sales at the local manufacturing cost plus a standard
markup
- Sales at the cost of the most efficient producer in the
company plus a standard markup
- Sales at negotiated prices
- Arm’s-length sales using the same prices as quoted to
independent customers

15. • May include specific elements affecting the price:
- Credit
- Sales terms
- Transportation
- Currency
- Type of documentation required
• Should define quantity and quality

16. • Cartels
- Exists when various companies producing similar products
or services work together to control markets for the types
of goods and services they produce
- Example: OPEC
• Government-influenced pricing
- Establish margins
- Set prices and floors or ceilings
- Restrict price changes
- Compete in the market
- Grant subsidies
- Act as a purchasing monopoly or selling monopoly

17. • Pricing is one of the most complicated decisions areas
encountered by international marketers.
• International marketers must take many factors into account,
not only for each country, but often for each market within a
country.
• Market prices at the consumer level are much more difficult to
control in international than in domestic marketing.
• Controlling costs that lead to price escalation when exporting
products from one country to another is one of the most
challenging pricing tasks facing the exporter.
• Countertrading is an important tool to include in pricing policy.
• Pricing in the international marketplace requires a
combination of intimate knowledge of market costs and
regulations, an awareness of possible countertrade deals,
infinite patience for detail, and a shrewd sense of market
strategy.

19.  Local market characteristics that affect the
advertising and promotion of products
• The strengths and weaknesses of sales promotion
and public relations in global marketing
• When global advertising is most effective; when
modified advertising is necessary
• The effects of a single European market on
advertising
• The effect of limited media, excessive media,
paper and equipment shortages, and government
regulations on advertising and promotion budgets
• The communication process and advertising
misfires

20.  The role of interpersonal selling in international
marketing
• The considerations in designing an international sales
force
• The steps to recruiting three types of international sales
people
• Selection criteria for international sales and marketing
positions
• The special training needs of international personnel
• Motivation techniques for international sales
representatives
• How to design compensation systems for an international
sales force
• How to prepare Americans for foreign assignments
• The changing profile of the global sales and marketing
manager

21. - Advertising
- Sales promotions
- Trade shows
- Personal selling
- Direct selling
- Public relations
• Objective: the successful sale of a product or
service

22. • Sales promotions
- Marketing activities that stimulate consumer
purchases and improve retailer or middlemen
effectiveness and cooperation
- Short-term efforts directed to the consumer or
retailer to achieve specific objectives
• In markets with media limitations the percentage of
the promotional budget allocated to sales promotions
may have to be increased
• Product sampling

23. • Bridgestone/Firestone Tires safety recall
• Global workplace standards
• Building an international profile
• Corporate sponsorships
The role of public relations (PR) is creating good
relationships with the popular press and other media to
help companies communicate messages to customers, the
general public, and governmental regulators.

24. 1. Perform marketing research.
2. Specify the goals of the communication.
3. Develop the most effective message(s) for the
market segments selected.
4. Select effective media.
5. Compose and secure a budget.
6. Execute the campaign.
7. Evaluate the campaign relative to the goals
specified.

26. • Marketing problems require careful marketing
research and thoughtful and creative advertising
campaigns in country, regional, and global
markets, respectively.
• Increased need for more sophisticated
advertising strategies.
• Balance between standardization of advertising
themes and customization.
• Consumer cultures

27. • Different cultures usually agree on the benefit of
the primary function of a product
• Other features and psychological attributes of
the item can have significant differences
- Cameras
- Yogurt
- Almonds
• Blue Diamond – assumes that no two markets will
react the same, that each has its own set of
differences, and that each will require a
different marketing approach and strategy

28. • Pan-European communications media highlighting
need for more standardized promotional efforts
• Costs savings with a common theme in uniform
promotional
packaging and design
• Legal restrictions slowly being eliminated

29. • If not properly considered, the different
cultural contexts can increase the probability of
misunderstandings
• Effective communication demands the existence
of a “psychological overlap” between the
sender and the receiver
• It can never be assumed that “if it sells well in
one country, it will sell in another”

31. • Laws that control comparative advertising vary
from country to country in Europe.
• Comparative advertising
• Advertising of specific products
• Control of advertising on television
• Accessibility to broadcast media
• Limitations on length and number of
commercials
• Internet services
• Special taxes that apply to advertising

32. • Language is one of the major barriers to
effective communication through advertising
• Translation challenges
• Low literacy in many countries
• Multiple languages within a country

33. • Knowledge of cultural diversity must encompass
the total advertising project
• Existing perceptions based on tradition and
heritages are often hard to overcome
• Subcultures
• Changing traditions

34. • Media limitations may diminish the role of
advertising in the promotional program
• Examples of production limitations:
- Poor-quality printing
- Lack of high-grade paper
• Low-cost reproduction in small markets poses a
problem in many countries

35. • Availability
• Cost
• Coverage
• Lack of market data
• Newspapers
• Magazines
 Radio and television
• Satellite and cable TV
• Direct mail
• The Internet
• Other media

36. • Managed by advertising agencies
- Local domestic agency
- Company-owned agency
- Multinational agency with local branches
• Compensation
- Commonly 15 percent throughout the world
- Some companies moving to reward-by-results

37. • Consumer criticism
• Deceptive advertising
• Decency and blatant use of sex
• Self-regulation
• Government regulations

39. • Decisions must be made regarding the numbers,
characteristics, and assignments of sales personnel
• Different market requirements regarding direct sales
and customer approach
• Territory allocation
• Customer call plans

40. • The largest personnel requirement abroad for
most companies is the sales force
• Expatriates
- Numbers are declining
- Important for highly technical or involved products
- High cost
- Cultural and legal barriers
- Limited number of high-caliber personnel willing to live
abroad
• Virtual expatriates
- Manage operations in other countries but don’t live
there

41. • Local nationals
- Transcend both cultural and legal barriers
- Familiar with distribution systems and referral networks
- Headquarters personnel may ignore their advice
- Lack of availability
- Sales positions viewed negatively
• Third-country nationals
- Expatriates working for a foreign company
• Host-country nationals
- Work restrictions

42. • Management must define precisely what is
expected of people.
• Prime requisites:
- Maturity
- Emotional stability
- Breadth of knowledge
- Positive outlook
- Flexibility
- Cultural empathy
- Energetic and enjoy travel
• Mistakes can be costly
• A manager’s culture affects personnel decisions

43. • The nature of the training program depends on:
- The home culture of the sales person
- The culture of the business system and foreign market
• Continual training is important in foreign markets
• Companies should provide home-office personnel
with cross-cultural training
• The Internet now makes some kinds of sales
training much more efficient

44. • National differences must always be considered
when motivating the marketing force
• Individual incentives that work effectively in the
U.S. can fail completely in other cultures
• Communications are important in maintaining
high levels of Motivation
• A company needs to make clear the opportunities
for growth within the firm

46. • Fringe benefits
• Compensations comparisons between the home
office and abroad
• Short-term assignment compensation
• Using a compensation program to recruit,
develop, motivate, or retain personnel

47. • Do involve representatives from key countries.
• Do allow local managers to decide the mix
between base and incentive pay.
• Do use consistent performance measures (results
paid for) and emphasis on each measure.
• Do allow local countries flexibility in
implementations.
•Do use consistent communication and training
themes worldwide.

48. • Don’t design the plan centrally and dictate to
local offices.
• Don’t create a similar framework for jobs with
different responsibilities.
• Don’t require consistency on every performance
measure within
the incentive plan.
• Don’t assume cultural differences can be
managed through the incentive plan.
• Don’t proceed without the support of senior sales
executives worldwide.

50. • In the U.S., emphasis is placed on individual
performance, which can easily be measured by sales
revenues generated
• In many countries evaluation is more complex where
teamwork is favored over individual effort
• The primary control tool used by American sales
managers is the incentive system
• In other countries, corporate control and frequent
interactions with peers and supervisors are the
means of motivation and control

51. • Foreign assignments typically cost from 150-400
percent of the
annual base salary
- This cost increases if the expatriate returns home
before completing the scheduled assignment
• The planning process must begin prior to the
selection of those going abroad and extend to
their specific assignments after returning home

52. • Concerns for career:
- An absence will adversely affect opportunities for
advancement
• Concerns for family:
- Education of the children
- Isolation from family and friends
- Proper health care
- The potential for violence

53. • Evaluation of an employee’s family
- 75 percent of families sent abroad experience
adjustment problems with children or marital discord
• Cross-cultural training for families as well as the
employee
• Local ombudsmen

54. • Commit to reassigning expatriates to meaningful
positions.
• Create a mentor program.
• Offer a written job guarantee stating what the
company is obligated to do for the expatriate on
return.
• Keep the expatriate in touch with headquarters
through periodic briefings and headquarter visits.
• Prepare the expatriate and family for repatriation
once a return date is set.

55. • Most expatriate failures are cause by lack of an
understanding of cultural differences and their
effect on management skills.
• Good cultural skills can be learned and
developed.
• Cultural skills provide the individual with the
ability to relate to a different culture even when
the individual is unfamiliar with the details of
that particular culture.

56. • Fewer companies today limit their search for
senior-level executive talent to their home
countries
• Some companies believe that it is important to
have international assignments early in a person’s
career, and international training is an integral
part of their entry-level development programs
• Many companies are active in making the foreign
experience an integrated part of a successful
corporate career

57. • Many believe that learning a language improves
cultural understanding and business relationships
• Many believe that to be taken seriously in the
business community, the expatriate must be at
least conversational in the host language
• Many companies are making stronger efforts to
recruit people who are bilingual or multilingual

58. • An integrated marketing communications (IMC) program
includes coordination among advertising, sales
management, public relations, sales promotions, and direct
marketing.
• Currently companies are basing their advertising strategies
on national, subcultural, demographic, or other market
segments.
• The major problem facing international advertisers is
designing the best messages for each market served.
• The availability and quality of advertising media vary
substantially around the world.
• Advances in communication technologies are causing
dramatic changes in the structure of the international
advertising and communications industries.

59.  The company’s sales force is on the front line of a
marketing organization.
• The role of marketers in both domestic and foreign markets
along with the composition of international managerial and
sales forces is rapidly changing.
• The recent emphasis on using local personnel operating in
their own lands has highlighted the importance of adapting
U.S. managerial techniques to local needs.
• The development of an effective marketing organization
calls for careful recruiting, selecting, training, motivating,
and compensating of expatriate personnel and their
families.
• The most practical method of maintaining an efficient
international sales and marketing force is careful,
concerted planning at all stages of career development.