Price Policy
The purpose of this essay is threefold. First,to identify specific factors and the environment affecting an export price policy. Second, to analyse thisthese factors within our firm and to extract the best decisions given our starting point. Finally, to consider the above and to give guidelines governing thatwhat should be applied in the international marketing price. It should be noted that in some cases due to an information deficiency, assumptions should be madee. “Pricing is the moment of truth” (Stottinger,2001).
Probably this affirmation is essentially valid in domestic marketing, even more in international marketing. Surprisingly, the literature in this area is characterized by a gapthere is a gap in the literature in this area. Given theirits importance, pricing havehas not attracted much academic research interest compared with other tools of marketing (Stottinger, 2001). Nevertheless, this should not be and cannot be a barrier for the quality of this essay. Albaum and Duerr (2008) no havehave not given a clear message regarding the level of difficulty about practice of establishing an international price.
However, for a large influx of authors export price differs from domestic price, and due to thatthis the environment is sui generis in each country (Jain, 1989). It is the writer? s opinion that an overview of the challenge gives the impression that it is somewhat more difficult than in domestic marketing. Sometimes the pricing affair is too tangled to be pliant to a general sort of description (Diamantipoulous and Mathews, 1995). In summary, despite of finding similar market threats in the international “arena”, every market havehas non-identical consequences and a “constellation”of elements (Kublin,1900).
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All of this leads to talk of international factors affecting pricing. The goal is to analyze the factors and bring them in line with our product. Sometimes these factors are so-called such aslabelled “Internal” and “External” factors (Tellis, 1986). The writer’s intention is not to follow the system of any author concretely and to blend the most important literature and match with the firm. To avoid excessive interminable details, these factors are exclusively factors that differ from domestic factors, or actorsthose such as competition, or buyer’s perception that are present in the domestic market but now are completely unknown in the new scenario. Cost has been and is being one of the most vital factors affecting price determination (Albaum & Duerr, 2008). It is useful because the system cost creates a limit where prices below are not permitted to stayit creates a system where prices are not permitted to stay below a certain limit. (Simon,1995). Historically, the quandary is somewhere between direct cost and full cost.
The choice of the cost floor depends on the company's goal. In the futureLater the company'sthis goal will be explained, but so far, it is enough to say that full costs fits better. The company objectives are to build a new market in the long-run, and using full cost enabling the company to recovered all the cost.. Apart from a “new” packaging, the new central cost is based on transportation. It is important to take into account theat volume of the product when consideringis another important costs. (Albaum & Dueer).
In some cases companies fail due to only takinge into account this factor (Backman, 1953). It given that should we mightis essential that we emphasize other factors. Market conditions: it is time to analyze demand. An important idea of our demand is the concept of elasticity. Should I give as done thatThe elasticity of our customer tends not to be inelasticgreat. A pPerson who owns a pedigree dog or an exotic animal, tends to give allwant the best for their animals, and consequently are less price-sensivitysensitive (or there is less price sensitivity).
Broadly speaking, they buy regardless of price, but always in the limits of consumer? s price awareness. "The better differentiated the product, the more difficult it is to make a comparison between different products and the higher the quality and the prestige image of the product, the lower the price sensivity". (Nagle, 1987). Theseis three characteristics should beare present in our product, therefore the customer should tend to be “inelastic” Competition is a pivotal factor and reflects supply in economic theory.
Cost draws a minimum price, demand delineates a maximum price, and competitors will condition a final price between these limits. (Albaum & Duerr, 2008). Due to lack of information, it should be assumingassume some level of competition. The firm must expect some degree of competition, but owing to the kind of product (premium product for a pedigree animal) the market should be clearly delimited. Anyway, in this stage the advice for the firm should be to stay aware of our nearest competitors and extract value information of the background of our competitorsfrom our competitors’ background.
Legal or political: widely speaking, after the Treaty of Maastricht and the constitution of the European Community the legal or political issues between European countries have been removed. It Ccan be interesting to mention one aspect of the legislation related with our product, and in last instance it can affect price decision. The European Parliament has passed some regulation concerning to animal feeds, certifying that Community legislation on animal health is properly binding and fulfilling.
The law of the EU is directly applicable in UK, therefore, it should be noticed that if our firm has passed the controls for selling in UK there is not going to be a problem achieveing a license to sell around Europe. It is not necessary to argue about economic themes since has been created a homogeneous economic area has been created. Company policies and marketing mix: It is inevitable to speak about the product of the company. Price should be related to product considerations (Albaum & Duer, 2008).
The characteristics of the product – i. e type of demand, physical and psychological attributes, packaging, quality, degree to which competitors are considered acceptable substitutes differentiation, state of maturity and so on – influence the prizeprice. (Kaplan, Dirlam, Lanzillotti,). Assuming that Edzell Wood has a product range and product positioning similar to that sold for garden and aviary birds under the Charnwood brand some specifications should be made for relating price and product.
If the product range is large and product positioning is premium, this makes it advisable to establish a rather high price. To what extent will depend more or less highon its weighting with other factors. Some studies, under some premises, have showned that "high price" is associated with "high quality"(?????????????? ) It can be interesting to speak about the nature of the product that Edzell is selling and to connect this with the buyer’s perception, another relevant factor.
Following Nelson (1970) (Darbi and Karni 1973) goods can be divided into two types: experience good and credence goods. ” An experience good is one whose features can be ascertained only upon consumption. A second category might be that of credence goods, when quality cannot be determined even after consumption". With all probability, our product may be among experience goods and credence goods. It is the writer's opinion that in this field the labels brand didn't succeed because it is a kindthe type of good where the brand plays a crucial role.
Have you seen animal feeds branded by tesco? The consumers are in part blind and are using non - physical attributes to value the utility of the product and transform this utility in terms of money. It might be a compulsory stop to speak at length about terms such us value and utility but it is beyond the scope of this essay. Suffice it to say that if the consumer is not in a position to judge accurately the value of the product directly, consumers intending to reduce the risk will be willing to pay higher prices as safeto remain safe.
Pet owners or Zoological centres want to give all the best for their animals. People don’t eat feeds animalsanimal feed and consequently cannot check the quality of the product. It is the total package including complementary features such as veterinarian advice, delivery, support with any problem related with the animal and food, analysis of components, demonstration about quality, certificates, as well as the symbolic features such as prestige and status that are perceived as delivering more value than our competitors in a pricing point (Hanna & Dodge, 1995).
The company should take advantage of this. It is time put on the table matto analyse how the pricing philosophy and pricing objectives play a strong role in this process. In line with previous aspects it should be speak about price strategy. It is strongly adviceadvisable to the firm to follow a strategic pricing related to a product differentiation. The firm should stressed differentiation through product characteristics and position in the industry that are conducive to putting the emphasis on the value of our brand name and enjoying some price premiumpremium prices in consequence.
Pricing models can be mixed and matched. Probably there is no a strategy price (skimming,sliding down the demand curve, ando so on) that fsuits perfectly with our task. The price strategy should be a relatively high price related with a high premium product, putting the emphasis in the quality and the complementary features. It should try to implement some promotions to try to encourage the customer to know the product in the first stage. It can be dangerous to play upping or downing the price, becausedue to the quality image can be affected.
The objective of our price strategy should integrated goals such uas, obtaining the highest return on investment, maintaining or increaseing market share, meeting a specified sales goal, meeting a specified profit goal, profit maximisation, meeting competition and so on (Teacher). The objective of our price strategy should integrate goals such as, obtaining the highest return on investment, maintaining or increasing market share, meeting a specified sales goal, meeting a specified profit goal, profit maximisation, meeting competition and so on (Teacher)
Firm and management: the international experience of the firm and commitment to the venture are important factors. Assuming that Edzell does not have international experience and it is a small enterprise it should be noticeded that it is important to advise the firm's members about the importance of pricing decisions. Furthermore, the firm should be completely conscious and to have a strong commitment withto go internationalexpanding internationally. This is commonly forgotten in some companies, especially smaller ones. , Aall of thisthese factors influence setting the right price.
It is usual to forget this in some companies, especially in small companies. A crucial place occupies the price decision controlPrice decision control occupies a crucial place – the step within the firm at which the decision is tooktaken. (Myers,Cavusgil, Diamantopoulous, 2002). To verifyied that the person who sets the prices has the skills to do it. It is important not to forget channel distribution as a factor affecting price. A product ishas much more than a physical value,value; it is also on how it is sold and after-sales service and so on.
The customer’s willingness to pay is directly influenced by these features. The firm should teach the channel distribution how to give this high quality service. Remembering that animal feed is a very intangible product for the buyer and these details are the key point to give a message in consonance with our price. In our case, assuming that direct export has been choosedchosen the goal should be relatively factibleachievablee(? ). Also regarding channels and distribution our firm should avoid structures tending to result in export-price scalationthe escalation of export price (Cavusgil and Zou, 1994).
It is necessary to highlight that a good relationship with the channels is very useful to control the final price. (Bowersox et al, 1992). It is the writer? s opinion that the choice ofto choose a direct mode of exportationing hasis have been influenced by theseis parameters. Our company should weight up the benefits of pricing the goods and services in euros or in sterling. Intuitively, most eurozone customers will prefer to see prices in euros. Using a sterling prices list may lose part of our business. The main disadvantage of making and accepting euro payments is that it exposes our firm to currency risks.
One way to hedge against exchange rate movements can be to arrange a forward foreign exchange contract - this is an agreement initiated by you to buy or sell a specific amount of foreign currency at a certain rate, on or before a certain date. In the field of price quotation, our exportations should use the system definition based on Incoterms (International Commercial Terms). Although the detail of which incoterms should be choosechosen is beyond the scope of this essay, exporters should consider some factors.
Between others; shipment, insurance coverage, availability of information, currency convertibility problems, and son on (Albaum ; Duerr, 2008). Ultimately, price quotations should be in a form that customers and channels find suitable, and at least as convenient for the customer as those offered by competitors. Anyway, the price quotations should be reflected in the final price. All of these factors should be complemented with some basic guidelines. Pricing flexibility is a principle that should guide all the decisions. The right placeprice(? today, cannot be the right price tomorrow. The issue, more than to think if our price havehas to be higher, lower or the same level compared with our domestic prices or the competition prices it is to set the right price in the right moment. Probably, some factors hashave been omitted but not forgotten due to limited space. And always remember that setting a price “It is not a science, but it is an art. ”” (John I. Leahy, Black ; Decker) Bibliography Stottinger, B. (2001) Strategic export pricing: a long and winding road. Journal of International Marketin, 9 (1). 40-55
Jain, S. C (1989) “Standardization of international marketing strategy: some research hyphoteses” Journal of marketing, Vol 53, January, pp. 70-9 Kublin, M. (1990) “A guide to export pricing”, Industrial Management, Vol. 32 No. 3, pp. 29-32 Diamantopoulos, A. and Mathews, B. (1995), Making pricing decisions: A study of Managerial Practice, Chapman ; Hall, London. Mathews, B. Cavusgil, Diamantopoulos, A. (2002), Antecedents and actions of export pricing strategy: A conceptual framework and research propositions. European Journal of Marketing, Vol. 36, No ? , 2002, pp. 159-188.
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