Extension pricing is called also an ethnocentric pricing or single export-pricing is a pricing policy when a price per unit will be the same globally. Other types of pricing policies are a polycentric pricing policy and geocentric pricing policy. Choosing the pricing policy mainly depends if company has centralised or decentralised structure of making decisions. In case of an extension pricing policy, decisions are made centrally. The extension pricing has below characteristics :
- does not take into consideration geographical location of buyer,
- does not respond to prices of competitors in each national market,
- does not respond to market conditions in each national market,
- importer and customer covers freight and import duties,
- discount matrices are used (existing pricing constructs),
- pricing is based on hierarchy of products,
- is used for companies which has global customers,
- is used for products with low level of differentiation,
- refers mainly to companies with international marketing,
- might be established in specific time, for example annually.
The advantages and disadvantages of an extension pricing policy
The main advantage is that an extension pricing policy creates extreme simplicity of pricing processes. There is no need to focus and look for information about local market conditions and competitors, which makes implementation of policy quite fast. Moreover, it reduces time spent on setting prices in the system as there is no need to differentiate prices in markets. On the other hand, an extension pricing policy causes that the company is not responding to changing circumstances of local markets and actions of competitors. Profit of the company is not maximised.
Brand extension pricing
When the company decides to extend its brand from the main brand, it will also require to work out policy towards pricing. Firstly the marketing research should be accomplished with all discoveries in marketing techniques, promotions, brand values but also policy of pricing extension.
Author: Ewelina Gał
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