Pricing Your Product for the Overseas Market
Pricing Your Product for the Overseas Market
What are your projected raw material costs?
Is your product truly innovative, or does it fall into the category of a commodity?
Are you exporting your product or producing it in your target market?
How competitive is your target market? Are there other local suppliers of the product?
What are the economic conditions in your target market?
How will you handle foreign currency volatility?
Although there is no one “right” method to setting export prices, most companies do start with a “base price” (typically a lowest possible retail and/or wholesale price) and then factor in other considerations. A company may look at various methods of “cost-plus” pricing, or think about “penetration” pricing if they are interested in building market share quickly (it is important to be aware of any antidumping regulations in your target market).
As you put together your pricing, remember to include all the factors which add cost. In addition to product cost, think about special export packaging requirements (such as plastic pallets, for example), transportation costs (if you are including that in your quotation), any tariffs, duties or taxes which will be levied on your product, your collection and financial costs (which will depend on payment terms), exchange rate fluctuations, and any commissions which may be due to your overseas sales force.
Spend some time familiarizing yourself with different export payment terms. If you’re working with new customers or clients you most likely will not start with open account, but choose a more secure payment method such as cash in advance, letter of credit, or documentary collections such as sight drafts. And before you issue your first export quotation, be sure you fully understand Incoterms ranging from EXW to DDP (standard trade definitions commonly used in international sales contracts) – for more information, visit the International Chamber of Commerce website (http://www.iccwbo.org/incoterms/id3045/index.html).
Pricing Your Product for the Overseas Market - To learn more about this author, visit Carol B. Webster's Website.
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Some basic questions to ask yourself before getting started:
What are your projected raw material costs?
Is your product truly innovative, or does it fall into the category of a commodity?
Are you exporting your product or producing it in your target market?
How competitive is your target market? Are there other local suppliers of the product?
What are the economic conditions in your target market?
How will you handle foreign currency volatility?
Although there is no one “right” method to setting export prices, most companies do start with a “base price” (typically a lowest possible retail and/or wholesale price) and then factor in other considerations. A company may look at various methods of “cost-plus” pricing, or think about “penetration” pricing if they are interested in building market share quickly (it is important to be aware of any antidumping regulations in your target market).
As you put together your pricing, remember to include all the factors which add cost. In addition to product cost, think about special export packaging requirements (such as plastic pallets, for example), transportation costs (if you are including that in your quotation), any tariffs, duties or taxes which will be levied on your product, your collection and financial costs (which will depend on payment terms), exchange rate fluctuations, and any commissions which may be due to your overseas sales force.
Spend some time familiarizing yourself with different export payment terms. If you’re working with new customers or clients you most likely will not start with open account, but choose a more secure payment method such as cash in advance, letter of credit, or documentary collections such as sight drafts. And before you issue your first export quotation, be sure you fully understand Incoterms ranging from EXW to DDP (standard trade definitions commonly used in international sales contracts) – for more information, visit the International Chamber of Commerce website (http://www.iccwbo.org/incoterms/id3045/index.html).
Pricing Your Product for the Overseas Market - To learn more about this author, visit Carol B. Webster's Website.
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Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
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