Successful international expansion doesn’t happen by chance or a stroke of luck. It requires detailed research, planning and the development of a concrete go-to-market (GTM) strategy. In our blog, the importance of a GTM strategy we revealed the 5 pillars which collectively form an effective GTM strategy. In this article, we’re going to look at “Numbers” to help you create your international pricing strategy. Learn which factors to consider to help you decide how much to charge for your products/services in your new target market. Show
When it comes to pricing, you’ve already established a pricing strategy in your domestic market. Developing an international pricing strategy is more complex because you are throwing unfamiliar factors into the mix, such as: currency fluctuations, regulatory and compliance variations, cultural differences. A good starting point is to look at internal (goals, objectives, brand positioning, product attributes) and external factors (demand, competitors, market trends) as these will influence your pricing strategy. A useful guide to look at is the 7Cs of international pricing model to ensure you cover all areas. 7Cs of international pricing strategyDr. Chris D’Souza developed the 7Cs of international pricing1. These are primary and secondary factors which you’ll need to account for before setting your international pricing strategy.
International pricing strategiesOnce you have accounted for the 7Cs, there are different pricing strategies to choose from. Let’s look at each strategy in greater depth2. Penetration pricingPenetration pricing is commonly used to attract new customers by offering a lower price than your competitors. This is often used when a new product/service attempts to “penetrate” a competitive market. We saw the streaming platform, Disney+ deploy this tactic when they entered the streaming market. Against established players, such as Netflix, Disney+ offered a reduced annual subscription price of £50 when they entered the UK market in March 2020, to entice new customers. Economy pricingEconomy pricing is a volume-based pricing strategy. Your product is priced low to gain revenue through volume purchases. The German food discounters Aldi and Lidl both capitalise on economy pricing to drive their ambitious global growth plans. Premium pricingThis marketing tool is about charging high prices in the hope that the higher price will give the impression of a higher quality. When considering this strategy, a brand which immediately springs to mind is Apple. Their products including iPhones, iPads, MacBooks are more expensively priced than their competitors. The perception is that Apple products are of higher quality because of these premium prices. Price skimmingThis is where you enter a market charging a high price, but once competitors follow, you lower your prices. This tactic has been deployed by Sony’s PlayStation game consoles. When Sony launches a new PlayStation console, they initially charge a high price, but the price is gradually decreased over time as competitors launch rival consoles. Promotional pricingPromotional pricing is a method where you offer a price reduction for a limited time in order to boost sales. These promotions are usually supported by marketing campaigns. These could be flash sales (Black Friday), buy one, get one free (BOGOF) deals, often seen in supermarkets or seasonal offers (Boxing day/January sales). Psychological pricingThis strategy integrates sales tactics and pricing. It utilises techniques to form a psychological or subconscious impact on consumers. Various common tactics are [3]:
VersioningThe idea behind versioning is to use differential pricing by offering different versions of a product or service. We’re all familiar with the Goldilocks and the three bears’ story: the porridge was either too hot, too cold, or just right. Let’s apply this principle to your products/services, where you could create a premium, (high quality, faster, priority), or stripped down (lower quality, off peak) versions; or meet unique customer needs (package size, extended warranties). This technique is famously used by the airline industry, where passengers have the option to fly in either economy, business or first class. Sandwich PricingThis tactic involves “sandwiching” your competitor’s price between two of your own products. The idea is you have a more expensive version with more benefits, a cheaper version with less features, as well as a mid-priced offering. This tactic is designed to drive customers towards your mid-priced item. Competitive pricingHere, you are setting your prices based on your competitor’s prices. This is often used where the product is largely homogeneous, and when you are operating in a highly competitive market. A classic example is between Pepsi and Coca Cola. Both brands compete over pricing, quality, and features. Their prices remain similar. Value pricingValue pricing is where you price your product or service based on what it is worth to your customer based on their needs, perceptions, and preferences. This tactic largely ignores competitor prices and your own costs. This strategy is often adopted by restaurants, art, and consultancy services. Price elasticity of demandAnother aspect to take into consideration is price elasticity of demand. This refers to how price changes affect consumer demand. If your customers are still buying your product despite price increases, your product is inelastic. On the contrary, price changes affect elastic products e.g., clothing, soft drinks, cars. In an ideal world, your product or service should be inelastic. Examples of inelastic products could be fuel, tap water, cigarettes, and products by Apple. Creating your international pricing strategyIt goes without saying, it’s important to regularly review your pricing and you may use a combination of the pricing strategies. Paul McIntosh, Founder of Bridgehead advises, “At the end of the day, you have to find a price that your customer is willing to pay, whilst offering any middlemen such as wholesalers/retailers the margins they desire. You must cover your own internal costs, as well as hit your margin targets. Setting a pricing strategy is a team effort and a fundamental part of your overall GTM strategy.” Make sure your go-to-market strategy is successful – we will develop & implement it, achieving quantifiable results within 90 days, guaranteed. Contact our specialists today. Sources: Insights on international expansionIf you enjoyed our top tips for new exporters, join our Discovery Lite portal for free. You’ll get access to a monthly insights magazine and bonus downloadable materials to help your business reach new markets: Let’s connectIn which pricing strategy is a new product offered for a heavily discounted or free to attract more customers?Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. The lower price helps a new product or service penetrate the market and attract customers away from competitors.
What is the best pricing strategy for a new product?The 5 most common pricing strategies. Cost-plus pricing. Calculate your costs and add a mark-up.. Competitive pricing. Set a price based on what the competition charges.. Price skimming. Set a high price and lower it as the market evolves.. Penetration pricing. ... . Value-based pricing.. What are the 4 pricing strategies?What are the 4 major pricing strategies? Value-based, competition-based, cost-plus, and dynamic pricing are all models that are used frequently, depending on the industry and business model in question.
In what pricing strategy are customers asked how much they would pay for a product?11. Value-Based Pricing Strategy. A value-based pricing strategy is when companies price their products or services based on what the customer is willing to pay.
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