Pricing Issues in International Marketing

Price can be defined in the ratio terms, giving the equation:

                             resources given up
price  =     ———————————————               
                                 goods received

With this equation there are several ways that the price can be changed:

·      “Sticker” price changes- the most obvious way to change the price is the price tag. You receive the same thing, but for a different amount of money.

·      Change quantity. Consumers respond negatively to an increased sticker price, and change in quantity are sometimes noticed less.

·      Change quality. Another way candy manufacturers have effectively increased prices is through a reduction in quality.

·      Change terms. In the old days, most software manufacturers provided free support for their programs. Nowadays, you either have to call a 900 number or have a credit care handy to get help from software makers. Another way to change terms is to do away with favorable financing terms.

Consumers often develop internal reference prices or expectations about what something should cost, based mostly on their experience. Retailers very often promote soft drinks, since consumers tend to have a good idea of process and these products are quite visible. The trick, 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. For 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."

Can you think of another way marketers can change the prices without the consumer knowing? Do you think this is ethical or unethical?