Pricing in emerging markets—always tricky to manage because of fluctuating inflation rates, shifting interest costs, and volatile currencies—is becoming even harder for multinational corporations (MNCs) to master. These companies face rising competition, from other MNCs in premium niches and from local giants in middle-market segments, that is squeezing MNCs’ profit margins in many emerging markets. In addition, traditionally value conscious consumers have become even more price sensitive in these times of slower growth and higher inflation.
Compounding the problem is a lack of reliable consumer data and competitive information. Pricing is often an afterthought, even among MNCs, in emerging markets. Moreover, the time-tested pricing methods that companies use in their home markets simply don’t work abroad. Executives discover, to their surprise, that consumers in emerging markets view products and services—and their value—differently from consumers in developed markets. What’s more, spending power, willingness to pay, consumer segments, and the marketing, distribution, and selling of products and services also differ in emerging markets.
All those factors demand a fundamentally new pricing playbook—one that addresses not just price levels but also pricing structures, promotions, and the terms by which products must be sold to distributors and retailers. As emerging markets evolve at a dizzying pace, smart companies maintain their pricing effectiveness by deploying six dynamic strategies.
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