Module: 6.

Pricing Decisions
N Kiran Kumar
Asst. Professor
Department of Management Studies
Nitte Meenakshi Institute of Technology,
Yelahanka, Bangalore-64.

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 1

Management Studies, NMIt-Bangalore-64.
 Pricing Promotions

 Pricing Objectives
 International advertising
 Factors affecting pricing
 Sales promotion
 Approaches to
 Direct mailing
international pricing
 Personal selling
 Price escalations
 Exhibition
 Price quotation
 Generic promotions
 INCO terms
 Pricing strategy

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 2

Management Studies, NMIt-Bangalore-64.
1. Market penetration
2. Market share
3. Market skimming
4. Fighting competition
5. Preventing new entry
6. Shortening pay-back period
7. Early cash recovery
8. Meeting export obligation
9. Disposal of surplus
10. Optimum capacity utilization
11. Return on investment
12. Profit maximization

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 3

Management Studies, NMIt-Bangalore-64.
 International marketing objectives
 Costs
 Competition
 Product differentiation
 Exchange rate
 Market characteristics
 Image
 Government factor
 Export pricing
 Regulation of margins
 Price floors and ceiling
 Subsidies
 Tax concessions & exemptions
 Other incentives
 Government competition
 Taxes
 International agreements

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 4

Management Studies, NMIt-Bangalore-64.
 Cost Based Market Oriented Competitor Based Negotiated
pricing pricing pricing pricing

Customer Break Even

Determined pricing pricing

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 5

Management Studies, NMIt-Bangalore-64.
 Defining pricing
objectives

Analyzing market
characteristics

Calculating costs

Calculating value
Of incentives

Determining
Export pricing

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 6

Management Studies, NMIt-Bangalore-64.
 Market price range for similar products

Less local mark-ups on import price(%)

Less duty payable

Price
component Less documentation & freight costs in exporting country

Less forwarding, packing & marketing costs

Less agent’s commission, proportion of export overheads

Profit gap Profits

Fixed overheads Plus contribution to fixed overheads

Export incentives Less export incentives

Costs Direct production costs & variables production overheads

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 7

Management Studies, NMIt-Bangalore-64.
 Costs of exporting
 Marginal cost pricing
 Taxes, Tariffs & Administrative costs
 Inflation
 Deflation
 Exchange Rate Fluctuations
 Varying currency values
 Middlemen & Transportation costs
 Sample effects of price escalation
 Approaches to lessen price escalation
 Lowering cost of goods
 Lowering tariffs
 Lowering distribution costs
 Using foreign trade zones to lessen price escalation

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 8

Management Studies, NMIt-Bangalore-64.
 Incoterms
 EXW : Ex Works – CI & buyer’s receipt
 FCA : Free Carrier – CI, Docs evidencing delivery to the carrier (DE)
 FAS : Free Alongside ship – CI, DE & Export Licence (EL)
 FOB : Free on Board – CI, DE & EL
 CFR : Cost and Freight - CI, DE & EL
 CIF : Cost Insurance & Freight - CI, DE, Insurance policy & EL
 CPT : Carriage Paid To - CI, Transport Docs (TD) & EL
 CIP : Carriage & Insurance Paid To - CI, TD, Insurance policy & EL
 DAF : Delivered At Frontier – CI, Customary TD, warehouse warrant, block warrant or
delivery order
 DES : Delivered Ex Ship – CI, Bills of lading (BL) or delivery order
 DEQ : Delivered Ex Quay – CI, BL or delivery order & import licence
 DDU : Delivered Duty Unpaid – CI, BL & Delivery order (DO)
 DDP : Delivered Duty Paid – CI, BL / DO & Import Licence

A customer in Frankfurt, Germany asks for a quotation for 3000 pairs of shoes
at an agreed unit price of $2 . Calculate additional cost & quote for different terms

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 9

Management Studies, NMIt-Bangalore-64.
 If you Quote Price includes Additional Price ($)
cost ($)
EXW Export packing, making crates with shipping 300 6300
Ex Works marks
FCA Carriage & Insurance for delivery to railway 100 6400
Free Carrier station by road transport including insurance

FAS Rail transport to port (with insurance) & 310 6710

Free Alongside ship getting goods alongside ship
FOB Dock duties, loading goods on board ship. 100 6810
Free on board Preparing shipping documents
CFR Sea freight to Hamburg (nearest port to 875 7685
Cost & Freight Frankfurt)
CIF cost, insurance & freight (sea freight + 100 7785
marine insurance (port to port)
DEQ Landing charges at Hamburg 90 7875
Delivered Ex Quay
DDP Import duty on 3000 pairs of shoes 1200 9225
Delivered Duty Paid Transport by rail Hamburg to Frankfurt 150
Total 3225

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 10

Management Studies, NMIt-Bangalore-64.
 Types of information required
for export pricing
1. Costs
 Factory costs – prime costs & overheads including direct material costs, direct
labour costs, other direct costs or expenses, indirect materials, indirect labour,
factory supplies and other indirect costs or expanses
 Selling and distribution costs & margins
 manufacturer’s or exporter’s cost of selling his products including salaries of all sales
staff, traveling expenses
 The cost transporting product to the market including freight, insurance, port &
landing fees, cost of documents
 Cost plus profit charged by the importers and others in the chain of distribution fro the
performance of specialized functions
 Cost of marketing support & development – expenditure on advertising, sales
promotion, etc
 Administrative costs – these include salaries, office expenses, audit and legal fees,
stationery printing, etc
2. Foreign markets – size & nature of demand and also the nature & extent of
competition
3. Prices – comparative pricing patterns, methods / approaches, strategies adopted

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 11

Management Studies, NMIt-Bangalore-64.
 Check list of information required
for export pricing
1. Examine the market in which it distributes its products
2. Examine its own industry & other industries competing
3. Consider government activities both from the legal view
and the market to be served

 Information about the total market

 Information on competition
 Information on prices
 Information on government policies
 Information on production and costs
 Information on revenue & profits

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 12

Management Studies, NMIt-Bangalore-64.
 Promotions

 Promotions
 International advertising
 Sales promotion & Direct mailing
 Personal selling
 Exhibition
 Generic promotions

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 13

Management Studies, NMIt-Bangalore-64.
 Steps in developing effective communication

Communication
mix decision

Budget
decisions

Determining
the message

Determining
Communication
objectives

Identifying the
target audience

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 14

Management Studies, NMIt-Bangalore-64.
1 July 2019 N Kiran Kumar, Asst. Professor, Department of 15
Management Studies, NMIt-Bangalore-64.
1 July 2019 N Kiran Kumar, Asst. Professor, Department of 16
Management Studies, NMIt-Bangalore-64.
1 July 2019 N Kiran Kumar, Asst. Professor, Department of 17
Management Studies, NMIt-Bangalore-64.
1 July 2019 N Kiran Kumar, Asst. Professor, Department of 18
Management Studies, NMIt-Bangalore-64.
1 July 2019 N Kiran Kumar, Asst. Professor, Department of 19
Management Studies, NMIt-Bangalore-64.
1 July 2019 N Kiran Kumar, Asst. Professor, Department of 20
Management Studies, NMIt-Bangalore-64.
1 July 2019 N Kiran Kumar, Asst. Professor, Department of 21
Management Studies, NMIt-Bangalore-64.
1 July 2019 N Kiran Kumar, Asst. Professor, Department of 22
Management Studies, NMIt-Bangalore-64.
1 July 2019 N Kiran Kumar, Asst. Professor, Department of 23
Management Studies, NMIt-Bangalore-64.
 Promotions

 Global Advertising & communication

process
 Legal constraints
 Linguistic limitations
 Cultural diversity
 Media limitations
 Production & cost limitation
1 July 2019 N Kiran Kumar, Asst. Professor, Department of 24
Management Studies, NMIt-Bangalore-64.
 3. Message
2. Encoding channel
Advertising
Message 7.Noise media and / or
translated Competitive Personal
into Activities Sales force
appropriate 4. Decoding
Other sales
meaning People, Encoded
confusion message
& so on Interpreted
Into
6.Feedback
meaning
Evaluation of
1.Information 5. Receiver
Communication
source
Process & Action by
Marketer Measure of Consumer
with a action Responding
product To decoded
message

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 25

Management Studies, NMIt-Bangalore-64.
 Media Planning & Analysis
 Tactical considerations
 Availability
 Cost
 Coverage
 Lack of market data
 Specific information
 Newspaper
 Magazines
 Radio & television
 Satellite & cable TV
 Direct mail
 The internet
 Other media

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 26

Management Studies, NMIt-Bangalore-64.
 Personal Selling
It is the personal communication of information to persuade prospective customer
to buy something – a product, service, idea or something else
Importance :
 The success of the new product
 Keeping existing products in strong market position
 Constructing manufacturing facilities
 Opening new business and keeping them open
 Generating sales orders that result inshipping products to consumers all over
the world

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 27

Management Studies, NMIt-Bangalore-64.
 Personal Selling
Merits :
 It is most effective promotional method, as it involves direct dialogue with the
customers
 It helps in getting better feedback
 Helps in market intelligence
 Makes customer grievances handling easy
 Effective supplement to follow-up
 It is flexible
 Its possess personal touch due to specific focus
 It easy to explain product features and clarify the customer doubts

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 28

Management Studies, NMIt-Bangalore-64.
 Personal selling & sales Management
 Designing the sales force
 Recruiting marketing and sales personnel
 Expatriates
 Virtual expatriates
 Local nationals
 Third-country nationals
 Host-country restrictions
 Selecting sales & marketing personnel
 Training for international marketing
 Motivating sales personnel
 Designing compensation systems
 For expatriates
 For global sales force
 Evaluating & controlling sales representatives
 Preparing nationals for foreign assignment
 Developing cultural awareness
 The changing profile of the global manager
 Foreign language skills

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 29

Management Studies, NMIt-Bangalore-64.
 Problems in personal Selling
 Differences in regulations
 Cultural differences
 Media factors
 Infrastructure
 Cast factors
 Language factors
 Home country regulations

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 30

Management Studies, NMIt-Bangalore-64.
 Trade Fairs & Exhibitions
Types
 General fairs – horizontal fairs
 Specialized fairs – vertical fairs / solo fairs
Benefits
 Countries where advertisement is not permitted it becomes important
 It brings together at a convenient place potential buyers and sellers
 Provide opportunity for sellers to promote their product and contact both existing
and potential customers
 It an opportunity for them to collect the feedback
 To know the developments in the specific products
 Enable the visitors to know about the business opportunity
 Facilitates to gather competitive information
Three categories of visitors
 Nuisance
 Prospective customers
 Potential customers

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 31

Management Studies, NMIt-Bangalore-64.
 Role of Export Promotion
organization
These undertake export marketing communication by
 Advertising
 Sales promotion
 Public relations
These organizations are instrumental in
 Creating awareness about India’s export potentials
 Impressing foreigners about India’s industrial advances and technical
capabilities
 Improving the quality image of India

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 32

Management Studies, NMIt-Bangalore-64.
 Thank You!!..
Questions?..

1 July 2019 N Kiran Kumar, Asst. Professor, Department of 33

Management Studies, NMIt-Bangalore-64.