7/28/2019 chapter6-exportpricing-120509073441-phpapp02

1/9

EXPORT PRICING

Price is an imp element of marketing mix.Developing a right pricing strategy is critical to anorganizations success. Price is a significant

variable, as in many cases; It is the main factoraffecting consumer choice. Its significance isfurther emphasized as it is only element of

marketing mix that generates revenues.

7/28/2019 chapter6-exportpricing-120509073441-phpapp02

2/9

FACTORS DETERMINING

INTERNAL FACTORS

Costs

Objectives of the Firm

Product

Image of the Firm

Promotional Firm

Product Life Cycle

EXTERNAL FACTORS

Competition

Demand

Consumers

Economic Conditions

Channel Intermediaries

Market Opportunities

7/28/2019 chapter6-exportpricing-120509073441-phpapp02

3/9

BASIC DATA REQUIRED

I. Product Information

Cost of production

Cost of distribution

Nature of the Product

Nature of Demand

II. Market information Market structure

Terms of payment offered bycompetitors

Terms of payment required byimporters

Price of substitutes Tariffs & Quotas

Trade preferences and TradeAgreements, etc

III. Other Relevant Information

Companys policy

Political Restrictions on trade

Bilateral / multilateralAgreements

Sales in units and rupees

Availability of shipping or airservices

Warehousing facilities andcosts

7/28/2019 chapter6-exportpricing-120509073441-phpapp02

4/9

MARGINAL COST PRICING

The marginal costing is more preferred to total cost plus

approach, since it takes into account only those costs which are

directly attributable to export production.

Fixed Costs

Variable Costs

Marginal cost pricing is justified or advisable

7/28/2019 chapter6-exportpricing-120509073441-phpapp02

5/9

PRICING STRATEGIES

Skimming Pricing Strategy

Penetration Pricing Strategy

Probe Pricing Strategy

Follow the Leader Pricing Strategy Differential Trade Margin Pricing Strategy

Standard Export Pricing Strategy

Differential pricing or different market Pricing Strategy

Transfer Pricing Strategy Trial Pricing Strategy

Flexible Pricing Strategy

7/28/2019 chapter6-exportpricing-120509073441-phpapp02

6/9

SKIMMING PRICING STRATEGY

ADVANTAGES

Higher Profits

Development Expenses

Sensing of demand

Suitability

No Blocking of funds

Feasible for short term

Prestige Status

DISADVANTAGES

High price may prevent quick sales

High price may create the problem

of brand loyalty among customers,

as they may not repeat their

purchases because of high price

This strategy is not feasible in long

run

More competitor may be induced

to enter the market because of highprofit margins

There may be blocking of funds, if

there are no good sales, etc

7/28/2019 chapter6-exportpricing-120509073441-phpapp02

7/9

PENETRATION PRICING STRATEGY

ADVANTAGES

Quick Sales

Brand Loyalty

Economies of Large Scale

Less Competition

Brand Leadership

Long term strategy

Suitability

No Blocking of funds

DISADVANTAGES

Low profit may cover up the

development expenses within a

short period of time

Funds may be block if there are

no quick sales in spite of low

prices

Buying may doubt the quality of

goods as customer equate low

price to low quality

It may be difficult to raise price in

later stages, etc.

7/28/2019 chapter6-exportpricing-120509073441-phpapp02

8/9

EXPORT PRICING QUOTATIONS

Free On Board

Obligations

Cost & Freight

C & F = FOB price + Freight

Cost Insurance & Freight

CIF = FOB price + freight + marine Insurance

7/28/2019 chapter6-exportpricing-120509073441-phpapp02

9/9

BREAK EVEN ANALYSIS

BEP = FC / SP VC Or FC / C

Where, SP = selling price , FC = Fixed Cost , VC = variable cost , C =

contribution (i.e., profit)

It is the technique commonly used in costing to analyse the cost

volumeprofit relationship.

Break even technique is concerned with finding out that level or

point at which the sales will break even (no profit no loss)

The point or the level at which sales break even is called Break

Even Point