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For new exporters, it's surprisingly easy to overlook some of the considerations involved in pricing products to be sold overseas. Here are guidelines for accurately pricing exports in foreign markets.
The most straightforward pricing strategy is "cost-plus," says Roberta Ford, director of the U.S. Department of Commerce's U.S. Commercial Service in Columbus, Ohio. "Start with the domestic pricing, then add any costs related to exporting the product, including freight forwarding, credit insurance, distributor margins, customs charges and profit." Export business owners can contact freight forwarders to get cost estimates for shipping overseas.
However, the cost-plus pricing strategy doesn't always result in competitive pricing for international trade.
— Kristina Bovay, principal of Voice Marketing Inc.
"You need to do market research before establishing international pricing strategies," says Kristina Bovay, principal of Voice Marketing Inc. and small business advisor in Vancouver, British Columbia. "Is the product's market clearly defined? What are the cultural, societal and/or lifestyle influences that you need to be aware of in terms of building your pricing strategies? You need to 'fit or match' your products and services to the marketplace. For example, if you produce a 'cheap' product it won't fit into a luxury market. Luxury buyers are expecting high value and quality and are prepared to pay for it."
Patrick Hayes, regional manager in the SBA's Cleveland U.S. Export Assistance Center agrees that research is key. "Pricing considerations should include a thorough understanding of the cost of getting your product into a given country and determining whether you can still be competitive if there are the same types of products already being offered there."
Pricing low can be tempting because it can make it easier to break into a foreign market, but many experts advise against it, as it can be difficult to increase prices later.
And there may be no need to price low. According to John Nevell, regional manager of international trade programs in the Office of International Trade in Chicago, U.S. goods are highly coveted overseas because they are associated with quality. "There is cache to owning American goods," Nevell says. Foreign customers often prefer American products for the quality and brand. "Last year, for example, General Motors sold more Buicks in China than they did in the United States."
Quality tends to be important to foreign customers regardless of the product, says Papa Omar Diop, director of the International Trade Assistance Center at Columbus, Ohio's Small Business Development Center. "If I make a high-quality pen, I can't compete on price with a Chinese pen manufacturer. But I can show my customer that my pen will last at least three times as long as my competitor. That quality translates into savings over the long term."
Export businesses can benefit from the services of a trusted online foreign exchange provider that helps them calculate dollar exchange rates and enables them to make and collect international payments on the go with laptops, tablets or smartphones.
The Southern United States Trade Association has an online pricing sheet that can help new export business owners consider all costs involved in selling overseas. The U.S. Small Business Administration (SBA) also has a detailed export business planner with worksheets on costs, pricing and more. To find export resources in the U.K. and Canada, small business owners can visit Gov.uk and the Canada Border Services Agency website, respectively.
Example: 1USD = xx INR
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