The pricing dilemma of Global brands

A UBS study was conducted on «Prices and Earnings» 2009 to analyze an international comparison of purchasing power in 73 cities around the globe. For the first time, a non-food product was used in the study to compare working hours. The product chosen was the iPod nano with 8 GB of storage which is an ideal example of a globally uniform product. An average wage-earner in Zurich and New York can buy a nano from an Apple store after nine hours of work. At the other end of the spectrum, workers in Mumbai, need to work 20 nine-hour days – roughly the equivalent of one month's salary – to purchase an iPod nano. While this study aims to compare the working hours internationally. For a branding professional this study once again re-affirms the key challenge that branding professionals face while managing brands having an international footprint - that of 'Right Pricing'. Pricing has always been one of the crucial factors that determine the success or failure of a brand in a market. It's becoming increasingly complex in a scenario of global launches and internet distribution. The complexity is to appeal to a global clientele while balancing the wide differences in the purchasing powers and all this without lowering the brand value and infact maintaining the same perception in the price-value equation in the mind of the consumer worldover.

Hankinson and Cowking (1996) describe a classification of global pricing strategies as ethnocentric, polycentric and geocentric. The ethnocentric strategy is a type of cost-based pricing ,whereby prices vary per region or country based on the variations in freight, duty and other add-on costs. This is typically the approach of a brand that manufactures in its home country and exports its products. The strategy can be successful so long as consumers are ready to pay a premium for the imported brands and the add on costs are negligible in relation to the price. The polycentric approach allows for prices to vary according to different market and competitive conditions. Local brand management is free to set prices as it sees fit, subject to financial objectives set by the organization. For some brands this price disparity induces parallel import. A case in point is that Iphone is far cheaper in United States than it is in India. The geocentric approach takes into account local market and competitive conditions, but aligns local pricing with the global pricing strategy. This approach allows prices to vary, but keeps a check on them to ensure that the brand does not get out of line in one or more countries.