Page 152 - DMGT547_INTERNATIONAL_MARKETING

Unit 8: Pricing Decisions for International Markets

This implies that there are several ways that the price can be changed: Notes
“Sticker” price changes: The most obvious way to change the price is the price tag— you
get the same thing, but for a different (usually larger) amount of money.

Change quantity: Often, consumers respond unfavourably to an increased sticker price,
and changes in quantity are sometimes noticed less, e.g. in the 1970s, the wholesale cost of
chocolate increased dramatically, and candy manufacturers responded by making smaller
candy bars.

Notes For cash flow reasons, consumers in less affluent countries may need to buy smaller
packages at any one time (e.g. forking out the money for a large tube of toothpaste is no
big deal for most American families, but it introduces a greater strain on the budget of a
family closer to the subsistence level).
Change quality: Another way candy manufacturers have effectively increased prices is
through a reduction in quality. In a candy bar, the “gooey” stuff is much cheaper than
chocolate. It is frequently tempting for foreign licensees of a major brand name to use
inferior ingredients.
Change terms: In the old days, most software manufacturers provided free support for
their programs—it used to be possible to call the WordPerfect Corporation on an 800
number to get free help. Nowadays, you either have to call a 900 number or have a credit
card handy to get help from many software makers. Another way to change terms is to do
away with favourable financing terms.
Reference Prices: Consumers often develop internal reference prices, or expectations about what
something should cost, based mostly on their experience. Most drivers with long commutes
develop a good feeling of what gasoline should cost, and can tell a bargain or a rip-off.
Reference prices are more likely to be more precise for frequently purchased and highly visible
products. Therefore, retailers very often promote soft drinks, since consumers tend to have a
good idea of prices and these products are quite visible. The trick, then, is to be more expensive
on products where price expectations are muddier.
Marketers often try to influence people’s price perceptions through the use of external reference
prices—indicators given to the consumer as to how much something should cost. E

Example:

Manufacturer’s Suggested Retail Price (MSRP). This is often pure fiction. The suggested
retail prices in certain categories are deliberately set so high that even full service retailers
can sell at a “discount.” Thus, although the consumer may contrast the offering price
against the MSRP, this latter figure is quite misleading.
“SALE! Now $2.99; Regular Price $5.00.” For this strategy to be used legally in most
countries, the claim must be true (consistency of enforcement in some countries is, of
course, another matter). However, certain products are put on sale so frequently that the
“regular” price is meaningless. In the early 1990s, Sears was reported to sell some 55% of
its merchandise on sale.

“Was $10.00, now $6.99.”
“Sold elsewhere for $150.00; our price: $99.99.”

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