Pricing strategies for international markets are influenced by a number of factors.

Buying decisions and the consumer's decision-making process.

It isn't enough to have a pricing objective.A firm has to look at more than one factor before setting prices.The factors include the offering's costs, demand, customers whose needs it is designed to meet, the external environment, and other aspects of the marketing mix.Before setting prices for products or services in international markets, a company needs to research the factors for each market.Before organizations can compete successfully in other markets, they need to understand buyers, competitors, economic conditions, and political regulations.We look at the factors and what they mean.

How will buyers respond?Three important factors are whether the product offers value, how many buyers there are, and how sensitive they are to changes in price.To determine how price sensitive customers are, companies must gather data on the size of markets.Will customers buy the product?Will they believe that the value is not equal to the cost or will they choose an alternative?How much buyers are willing to pay is equally important.Judgment and research are needed to figure out how consumers will respond to prices.

Demand for products is affected by price elasticity.There is a pair of sweatpants with an elastic waist.It is easier to stretch an elastic waistband in sweatpants than it is in dress slacks.The amount of stretch or change is called elasticity.If you pull on the sweatpants, they may stretch.If the price changes, the demand for a product may change as well.The price of a twelve-pack of sodas could change to $1.50 a pack.People are more likely to buy more soda at a lower price.The waistband on a pair of dress slacks is the same regardless of whether you pull on it or not.Demand for some products will not change even if the price goes up.The price elasticity of demand is calculated using a formula.

When consumers are sensitive to price changes, they buy more of a product at low prices and less of it at high prices.TVs, stereos, and freezers aredurable goods that are more price elastic than necessities.People are more likely to buy them when their prices go down than when they go up.Price inelasticity is when the demand for a product stays the same and buyers are not sensitive to price changes.Demand for many basic food and first-aid products is not affected by price changes.

The elasticity of demand is affected by the number of competing products.The percentage of a person's budget allocated to different products and services also affects price elasticity.Some products, such as cigarettes, tend to be relatively price inelastic since most smokers keep purchasing them regardless of price increases and the fact that other people see cigarettes as unnecessary.Utility companies in markets in which they have a monopoly face more inelastic demand since there are no alternatives.

Pricing decisions will be affected by how competitors price and sell their products.If you wanted to buy a certain pair of shoes, but the price was less at one store than another, what would you do?Companies that want to establish and maintain loyal customers will often match their competitors prices.If you find the same product for less somewhere else, Home Depot will give you an extra discount.If one company gives you free shipping, other companies will too.Consumers can compare the prices of merchants before making a purchase decision with so many products sold online.

Pricing decisions are affected by the availability of substitute products.If you can find a similar pair of shoes at a third store, would you buy them?There is a good chance that you will.The five forces model discussed in Chapter 2 "Strategic Planning" requires merchants to look at potential entrants as well as direct competitors.

Pricing decisions are affected by the economy.Interest rates and unemployment levels are factors in the economic environment.Companies lower their prices when the economy is weak.Currency exchange rates affect pricing decisions.

Federal and state regulations affect pricing decisions.Regulations are designed to protect consumers, promote competition, and encourage ethical and fair behavior by businesses.The Robinson-Patman Act limits the ability of a seller to charge different prices for the same products.The intent of the act is to protect small businesses from larger businesses that try to extract special discounts and deals for themselves in order to eliminate their competitors.There are cost differences, market conditions, and competitive pricing that can justify price differences.Under all circumstances, the practice isn't illegal.Seniors and children are offered discounted menus at restaurants.matinees are usually less expensive than evening shows and the movies charge different prices based on age and time of day.The price differences are legal.We will talk about price differences later in the chapter.

When firms agree to charge the same prices, it is illegal.Consumers have to pay a high price regardless of where they purchase a good or service because of price fixing.Video systems, liquid crystal display manufacturers, auction houses, and airlines are examples of offerings in which price fixing existed.When a company is charged with price fixing, it is usually ordered to take some type of action to reach a settlement with buyers.

Price fixing is not uncommon.Nintendo and its distributors in the European Union were charged with price fixing and increasing the prices of hardware and software.The prices of the liquid crystal displays used in computers, cell phones, and other electronics were fixed by the three companies.British Airways and Virgin Atlantic Airways were involved in price fixing.Two large auction houses used price fixing to set their commission.

The CEO of American Airlines in the early 1990s was involved in one of the most famous price fixing schemes.Howard Putnam was the CEO of Braniff Airlines, which was fierce competitors in the Dallas market.Putnam taped the conversation and turned it over to the DOJ.Their conversation was like this.

Putnam: "I think it's dumb to pound each other and neither one of us makes a dime."Raise yourfares by twenty percent.Putnam said he would raise mine the next morning.We can talk about anything we want to.al., 1983

Unfair trade laws require sellers to keep a minimum price for similar products.State laws prevent large businesses from selling products below cost to attract customers to the store.A predatory pricing strategy is when a company sets low prices to drive competitors out of business.

In many states, bait-and-switch pricing is illegal.When a business tries to lure in customers with a low priced product, it's called bait and switch.Sales personnel try to sell more expensive products when customers take the bait.Customers are sometimes told that the cheaper product is no longer available.

You may have seen bait-and-switch pricing used to sell electronic products.While bait-and-switch pricing is illegal in many states, stores can add warnings to their ads stating that there are no rain checks or that limited quantities are available to justify trying to get you to buy a different product.Even if the product sells out quickly, the advertiser needs to give at least a limited amount of the advertised product.

When a pricing decision is made, the costs of the product have to be taken into account.There are costs related to promotion and distribution.When a new offering is launched, its promotion costs can be very high because people need to be made aware that it exists.The stage in the product life cycle can affect the price.In other markets, a product may be in a different stage of its life cycle.The Koreans felt that the phone was not as good as their current phones and that it was somewhat obsolete.If a company has to open brick-and-mortar storefronts to distribute and sell the offering, this too will have to be built into the price the firm must charge for it.

The breakeven point is the point at which total costs and revenue are equal.Revenue must be greater than costs for a company to be profitable.The company suffers a loss if total costs exceed revenue.

Fixed costs and variable costs are included in total costs.Overhead expenses are costs that a company must pay regardless of their level of production or sales.Rent, leasing fees for equipment, contracted advertising costs, and insurance are some of the fixed costs of a company.The rent you pay for an apartment is one of the fixed costs that a student may incur.If you stay there for the weekend, you have to pay your rent.Variable costs can change with a company's level of production and sales.Variable costs include raw materials, labor, and commissions.Variable costs, such as the cost of gasoline for your car or your utility bills, can vary depending on how much you use.

Consider a small company that makes and sells specialty DVDs.The retail price for the DVDs is what the manufacturer's selling price is.Consumers are charged an additional fee when they buy the DVDs from the retailers.The manufacturer has charges.

The breakeven point is determined by the fixed and variable costs.If you want to make sure all costs are included, you should highlight the fixed and variable costs in the same color.How many units the manufacturer must sell to break even is calculated using the formulas below.

The BEP is the total fixed costs minus the contribution per unit and the variable costs.

The breakeven point in dollars is determined by the number of units to break even.The BEP in dollars would be 25,000 units, or $375,000.

A firm has to look at a number of factors before setting prices.The costs, customers whose needs it is designed to meet, the economy, and government regulations are some of the factors included in the marketing mix.Environmental factors and customers buying behavior must be looked at by firms in international markets.Revenues must surpass total costs for a company to be profitable.