Foreign Market Intelligence
What are my market pricing options; how do I determine my export prices?
Ideally, you want a pricing strategy that covers your costs, meets the competition, attracts buyers, and still makes a profit. That's a tall order, complicated by the fact that your "optimum" price in one market may not work in other markets. Whatever the market, price planning must start with your baseline unit costs. Your baseline export costs include your fixed costs to produce the product for export, plus variable costs to market and deliver the product abroad. Fixed production costs for export could be higher or lower than costs for the domestic market. They might be lower if you're exporting a stripped down or no-frills model; higher if you have to redesign your product to accommodate different sizes and technical standards abroad.
Variable export costs might include any or all of the following: market research, postage, overseas phone/fax calls, promotion, travel, credit checks; translations; consultant/legal fees, performance bonds, export documentation, any special packaging, labeling, freight forwarding fees, transportation to destination, cargo insurance, agent/distributor commissions, training, warehousing, product warranties, service contracts, banking fees, credit insurance, credit-carrying costs.
Once you determine your baseline costs, your price above that can be whatever the market will bear. That's usually a function of market demand, ability to pay, the competition, and your product's particular attributes (new or unique, superior quality, brand recognition). Price flexibility is important, since it's unlikely you'll dominate in any given market. You might consider volume discounts or low introductory pricing to gain a foothold in the market. You might also offer delayed payments or credits to offset a higher price or further sweeten your established price. See the exporting lesson titled Pricing, Quotations and Terms in the Export Tutorials section of this website for more information.