Setting prices for exports
Pricing for exports is different from pricing for local markets. There are different business conditions and different currencies to consider. To price exports correctly it is important firstly to calculate the total costs involved in in exporting your product or service to the new overseas market and of course to have clear understanding of the potential demand for your products and services.
Exporting is often burdened by a number of costs that you don’t occur in your local market, such as:
- Shipping ex-factory to port of departure
- Air or sea freight and insurance
- Import duty and taxes
- Customs clearance/broker fee
- Ground transportation from port of entry to the warehouse or the customer
- Warehouse fees
- Break-bulk fees, if third party warehouse applies
- Agent's commission or importer's mark-up
- Travelling expenses
- Overseas market research costs including credit checking
- International communication costs including calls, translation services
- Product changes for differing market needs, compliance with foreign standards etc
- Product liability cover
- Marketing and promotional costs, foreign language brochures, website, new packaging etc
- Transportation and insurance costs
- Local support, customer service and business presence costs
In setting prices for products there are many approaches. Two of the most common include, Cost Plus (where you work outwards from your ex-factory price to the end customer) and Top Down (where you work from the ideal end customer price backwards to you). Setting a price that takes into consideration both approaches is probably the best course of action given that using only one method could mean that you set too high or too low a price. Setting prices for services is often more difficult and here a number of methods can be used including:
Competitive pricing (economic or very affordable), Premium pricing (highest price the buyer can afford),
Beachhead pricing ( pricing to be perceived as excellent value for money)
Finally, exchange rates are volatile and prices and quotations must factor in this risk.
Crossfort Partners can help businesses looking to enter overseas markets to price their products and services effectively both in terms of penetrating the market, maintaining market competitiveness and of course optimizing profit.