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Global Pricing Strategies: Keegan's Steps, Market Skimming, Penetration, and Holding

Learn Keegan's four steps to a global pricing strategy, market skimming, penetration, and holding approaches, cost-plus pricing, and handling multinational pricing challenges including grey markets, foreign currency issues, and economic conditions.

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Global Pricing Strategies: Keegan's Steps, Market Skimming, Penetration, and Holding

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  1. Pricing Decisions • Keegan’s four steps to global pricing strategy • General pricing strategies • Problems with pricing for multinational markets • Problems with foreign currency and economic conditions • Grey markets

  2. Global Pricing Strategies - Four Steps 1 Determine the price elasticity of demand (Inflexible demand will allow for a higher price) 2 Estimate fixed and variable manufacturing costs (product adaptation costs must be calculated) 3 Identify all costs associated with the marketing programme 4 Select the price that offers the highest contribution margin Warren J. Keegan (1995)

  3. Pricing Strategies • Market skimming • Market penetration • Market holding • Cost-plus pricing

  4. Market Skimming - Sony BetamaxHarvey Schein, President - $1,295 at launch!

  5. Market Penetration - Daewoo ‘blitz’ the market

  6. Market Holding • Maintain their share of the market • Currency fluctuations often trigger price adjustments • Price adjustments can mean lower, or no profit margin • strong home currency could mean manufacturing/licensing abroad

  7. Cost-plus • Adds-up all cost of production (and shipping) • Easy to make quotes • Ignores demand and competitive pricing in target market • Consumer and competitor value issues must always considered in a rational pricing strategy

  8. Problems of multinational pricing • Co-ordination across various markets? • Do we maintain a ‘uniform’ pricing policy across markets? • How to transfer price between and across markets? E.g. Sandvik (Sweden) • Parallel imports or ‘Grey’ markets?

  9. Problems with foreign currency and economic conditions • Which currency for pricing in international markets? • How to deal with fluctuating exchange rates? • Strategies for high inflation rates?

  10. Grey Markets • Products must be available internationally (as products are standardised in global markets) • Low trade barriers (tariffs, legal restrictions, transport costs) • Price differentials must be great enough (so that grey marketers can make a profit) Duhan and Sheffet (1988)

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