A crucial component to successfully selling your product or service overseas is to properly price your product for the foreign market. This can be a challenging and tricky task that requires weighing your company’s objectives with your costs, market demand and competition in the foreign market. The following five questions will help you to better define what you view as important and guide you when pricing your product or service so that you can successfully enter into a new foreign market.
- How does your company want to position itself with its overseas customers?
It is important that your company identify how it wants to brand its product or service in the foreign markets that you are considering selling to. What do you want to be known for? Will you be known as a quality product or service? Will you be known for your product’s value? You need to think about how your price point will be received and what it says about your product or service. Ask yourself, does my price reflect what I want my product or service to be known for?
- What price do you want to sell your product or service for overseas?
Selling your product overseas may require that you think about your product’s pricing differently than if you are selling your product domestically. Do you stand to make a profit or loss with your pricing structure given the different characteristics of a foreign market? Have you considered what your pricing options are if your company’s costs increase or decrease? Are your export prices going to be different from your domestic prices? You are entering a new market and therefore need to think about whether your product or service will be affected by elastic or inelastic demand. Are you able to increase or decrease your price based on demand for your product? Should you have different prices for different market segments or regions?
- What are your costs associated with exporting and selling your product overseas?
Exporting has additional expenses that can affect the final price and these expenses need to be accounted for in your product’s price. Added costs such as tariffs, currency fluctuation, shipping and transaction costs, value-added taxes (VAT) and custom fees are some of the expenses that the importer is typically responsible for. Additionally, you need to consider whether you are going to sell your product directly or indirectly to your customers overseas and what are the costs associated with each approach. Are you going to offer discounts to your foreign customers such as when they pay with cash or offer them quantity discounts?
- Are you planning on selling one product or an entire product line?
When entering a market you need to think about what your best selling product(s) are. Starting out by selling one or two products will get you into the market place and helps to establish brand recognition. Having an extensive product line maybe too costly an investment. Have you accounted for product modification, labeling and marketing costs in your product’s price? Also, you need to consider the costs associated with protecting your intellectual property (Patents, Trademarks and Copyrights) in the countries that you want to sell to.
- How does your price compare with your competition?
When thinking about pricing your product or service in a foreign market you need to do your research and know what your competition is doing in that region. This will help you to set a price. How does your desired price compare to your competition? How does it compare with the domestic goods already in that foreign market? You also need to take into consideration how your pricing will be viewed by the foreign market’s government. Do you think they will view your pricing as reasonable or exploitative? Are your prices in compliance with the foreign country’s anti-dumping laws?
