Invention Pricing Policy

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Definition: Invention Pricing Policy

Invention pricing policy is when price of products globally is neither kept at a common price nor are the prices kept absolutely vaguely without keeping a track on external factors, local factors etc. Invention pricing policy is the strategy which is the mixture of the two pricing strategies i.e. extension pricing strategy and adaptation pricing strategy. It takes into account the market sensitivity factors like local market pricing, competitor prices, income levels of people and also cost of production. It also has a control from headquarters to prevent the arbitrage. It is also known as geocentric pricing policy.

So, any international organization should set prices of products based on hybrid model just like the inventive pricing policy.

Extension pricing strategy is the strategy to keep a single price of a product globally. This does not take into consideration the market sensitivity. It is also known as ethnocentric pricing policy.

Adaptation pricing strategy is the strategy of keeping different prices in different markets. It does not allow the arbitrage to occur when the disparities in local markets exceeds the transportation and duty costs due to strict control of headquarters. It is also known as polycentric pricing policy.

Since pricing is a function of cost therefore should be fixed such that it reach the break-even cost as well as earn some extra profits to the producer of the goods. Pricing of goods become even more difficult when the product is sold at the international markets. Not only cost of production should be taken care of but also other costs like shipping cost, storage cost, import duty, exchange rates etc. should be also taken into account while deciding the final price of the product. The price of the products that are sold internationally are called as global pricing. There are three kinds of global pricing strategies, they are:

• Extension pricing

• Adaptation pricing

• Inventive pricing

Hence, this concludes the definition of Invention Pricing Policy along with its overview.


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