Pricing of an international product

Standard world-wide pricing or dual pricing?

There are many things to consider when setting a price on an international product. First the pricing environment should be assessed. The internal issues affecting the pricing include: marketing mix, company characteristics and management attitudes. The external issues can be divided in to two: market related factors such as demand and government regulations and industry related factors such as competition intensity. Secondly the pricing policy should be selected on the basis of objectives, competitive posture, decision control and flexibility. Thirdly the pricing strategy should be determined. There are several pricing strategies, but here are a few: standard world-wide price, cost-based pricing, market-based pricing, skimming, dumping, penetration pricing etc. The fourth stage is to set the final price.

With world-wide pricing the image of the product can be seen as commonly acknowledged the same all over the world. It also diminishes grey markets and the people who travel a lot can rely on the product to be of the same quality when it costs the same everywhere. There are only few companies who use this sort of pricing, one of them being Louis Vuitton. 

Differentiated pricing also has its advantages. The biggest being that you can set a competitive price on the market and not worry if the world-wide price is too high or too low in the eyes of the consumers in that particular market. This is called market-differentiated pricing and it is mostly affected by competitors prices, exchange rates and the environment over all. The other option is to use cost-oriented pricing. This has two methods: cost-plus method which allocates domestic and export costs to the product and marginal cost method which considers direct costs of producing and selling exports as floor price. Cost-oriented pricing can be tricky as it may lead to price escalation if the costs of all exporting costs are high and mark-ups will be piled on top.