An important component of successfully selling your product or service in a foreign market is to set the correct price for that market’s consumer. This process involves looking at elements specific to exporting that you do not take into account when pricing your product for the domestic market. This article addresses four key elements that can affect how you set your product’s price for export. The first is developing your company’s objectives to identify your goals prior to entering a foreign market. The second is calculating the costs associated with exporting your product so that you can determine your final consumer price. The third element is to understand the consumer demand in the foreign market and adapting your product and pricing to meet those demands. The fourth is studying what your competition is doing in that foreign market so that you can competitively build your brand in that market.
1. What Are Your Company’s Foreign Market Objectives?
Your company’s objectives for entering into a foreign market are a key component when it comes to deciding how to price your product or service. Therefore, it is essential that your company analyzes the goals it wants to achieve in each potential foreign market.
Are you looking to break into a new market? Has your company set its sights on a long-term strategy for growth in a certain market? Are you thinking of selling a product that is new or already available in that market? When thinking about your company’s marketing and pricing objectives you need to determine where the best markets are to implement them.
Having different objectives in different markets that takes into account the consumers’ needs and demands in a particular foreign market and not simply applying a universal market strategy will allow you to enter multiple markets successfully.
2. What Is The Market Demand For Your Product?
When looking for new foreign markets to sell to, you need to take into account the level of demand for your product. Consumer demand can affect how you price your product overseas just like it can domestically. You need to identify the type of customer that you want to target and set your price to appeal to them. Market demand for your product can be affected by factors such as the per capita income of a country, whether your product is elastic or inelastic and currency fluctuations.
One way to determine product demand and in turn set your product price is to look at the market’s per capita income. If you are entering into a market with a low per capita income, you may consider modifying your product so that you can lower the product’s price and become more competitive.
Due to a product’s high demand, some products are inelastic and tend to do well even if there is a price or quantity change. While other products are elastic and the demand will be affected positively or negatively depending on the price of the product. You need to determine where your product fits in this scale and adapt your price to meet these needs. Study the market by looking at how products with similar characteristics are priced by observing what your competition is doing.
When selling overseas you need to be mindful of variations in the U.S. and foreign currencies because these fluctuations can have an effect on your goods. If the U.S. dollar is weak than your product may be more appealing then products offered by local sellers or other competitors who’s prices may have been affected due to inflation.
3. What Are The Costs Associated With Selling Your Product Overseas?
Companies who are interested in exporting will find it useful to first determine their product’s export price. When thinking about exporting your product overseas you need weigh the actual cost of producing and marketing your product for export with the potential financial benefit of exporting your goods. These calculations are a critical company exercise that will help you to calculate a final consumer price for the foreign market you are interested in exporting your product to.
To best determine your export price you need to analyze all of your expenses that go into producing and selling your product for export. This approach may yield a different product cost and final price when compared to your domestic sales. The reason for this is because you are taking into account only the expenses that go into exporting your product or service. For instance, you may modify your product for the foreign market which may decrease or increase your cost.
Examples of expenses that are attached to exporting your product are travel expenses, costs involved with dealing with foreign agents, logistics and freight costs, customs and tariffs fees, market research and special packaging and label costs for the foreign market. When you have determined your actual costs for export, you can than come up with a consumer price for the foreign market.
4. What Is Your Competition Doing?
When selling your product internationally it is important to remember that you may have to adjust your product’s pricing and that your domestic sales may be different from your international ones. You need to remember that you have competitors overseas just like you do domestically. Applying the same strategy of evaluating your competitors’ prices allows you to stay in the game.
What you need to keep in mind when exporting is that you will have different competitors in different markets and that you will not be able to universally apply the same pricing structure in every market that you enter. You need to individually evaluate each market and your competitors within that market to see how you can gain the upper hand.
In some cases you may be forced to sell below your desired price point so that you can break into a market and establish yourself in that market. In turn, by entering foreign markets where your product is new and there is little competition will allow you to set your desired price point.
