The most important pricing factors for export products
The most important pricing factors for export products
Good product pricing is one of the most important keys to the export process. Many companies make common mistakes in this regard, including converting prices from the local currency to the currency of the importing country, regardless of the considerations of competing products in the market, especially if they have similar characteristics.
Pricing is the process of evaluating and setting the price of the sale of the product, and has a significant impact on the competitiveness of the product in the market and thus the percentage of profits to be achieved. It is necessary to study the feasibility of marketing to study the relationship between many variables such as price and demand and prices of competitors.
Prices must therefore be realistic and ensure that profits continue to be earned to allow activity in a foreign country.
Due to the importance of good product pricing for export, we will present the most important factors to consider during the pricing process.
Export pricing factors
There are three axes based on export pricing: cost, demand, and competition.
For cost, all costs must be calculated at the final price, including the costs incurred in the importing country. In addition, it should be borne in mind that the exported product or service competes with the same in all countries of the world. Therefore, the price must be logical and appropriate and includes sufficient profits to continue the export business.
There is no fixed method for export pricing so you should pay attention to several factors that allow the issuer to request a higher price:
- Availability of inventory of the commodity.
- Shipping speed and delivery.
- Availability of after sales service
- The product should be distinguished from that of the other country.
- High quality product.
- There is a trademark that describes the value of the product
- The size and variety of products offered.
- Good sales marketing.
- Dispute settlement quickly.
Factors that raise the export price
- The quality of the packaging and the presence of the brand distinctive.
- Freight costs and export procedure.
- Customs clearance costs and payment of local taxes.
- Insurance costs.
- Marketing costs.
- Change currency rates.
- Costs of storage and distribution of the product in the importing country.
Factors that reduce the export price
- Government assistance in export financing.
- Exemption from tax duties.
- Manage operations efficiently.
- Add on cost
Calculate the total cost of any product including shipping costs, customs duties, taxes, insurance, etc., then add a percentage, which is the profit of the exporter at the time of sale.
This added ratio depends on the source market and the product.
One of the main drawbacks is that you will not get good prices if the item is sold in a market where there are many competitors.
- Marginal pricing
It is the additional cost only for any product while the fixed costs are distributed to the total production volume.
This is a particularly competitive route for new exporters.
- Predatory pricing:
Here, the exporter sets a low price in order to remove competitors from the market and prevent the entry of new exporters without loss.
- Competitive pricing:
New exporters use competitors ‘prices as they make little difference between source products and competitors’ products.
- Penetration Pricing
Is to put the price of the product low for the purpose of entering the foreign market only and not to cancel the competition.
- Psychological pricing
Pricing depends on the psychological factors of the buyer, since the fractions are better than the correct number or the high price gives the impression of higher quality.
- Dynamic pricing
It is widely used in electronic websites and depends on the customer’s interest in the product and available stock.
- Highlight the price
The markets are divided into smaller sections and each department is asked a different price depending on the possibility of payment.
Although the price of the product is very important, some buyers prefer the price and quality of the product together. If the price and the product are good, the buyer looks for the source’s ability to perform well.
There are some factors that affect the buyer’s decision including:
- Product-related factors: such as property rights, environmentally safe, good packaging, product definition, technical features, product quality and warranty.
- Price factors: such as payment terms, escalation.
- Performance factors: product availability, shipping, delivery time, spare parts and after sales services.
- Promotional factors: such as advertising, advertising, personal selling.
- Place factors: availability of distribution channels, sales centers and logistics.
General issues in export pricing
There are some important points in the pricing process that the issuer should consider, such as:
Increase in fixed costs:
Any fixed costs must be taken into account when pricing a product, especially if marginal pricing is the method used, as it may increase the price of the product.
It is a problem that is very frequent in many markets and should be dealt with well in the contract to avoid further fines.
It must be ascertained that there are certificates required for the export process such as certificate of origin and commercial invoices and so on, to avoid rejection and return of the product.
Is a batch based on documents and therefore must be written in a precise manner and fully compatible with the contract of sale.
If the sale is in foreign currency, the exchange rate must be established at the time of signing the contract to avoid any additional costs.
From the above, it is clear to you how important the pricing of the product is in the export process, the extent of its impact on the survival of the foreign market and the reflected strength of competition and the quality of the product and the ability to perform well.
Therefore, you should be very careful in pricing your product or service to ensure your company’s growth and sustainability.