1. Pricing Determinants
The final price that end users are willing to pay for your exports are not equivalent in all overseas markets. Hence, to determine the most suitable export price, you need to address the following questions:
- What type of market positioning and perception does your company want to convey through its pricing?
- Is the price competitive in your target market?
- What pricing options are available if your company’s costs increase or decrease?
- Is the demand for your product in the foreign market elastic or inelastic?
- Does the target country’s antidumping law pose a problem?
Three main determinants underlie your final export price: cost, demand in the target market, and competition.
To ensure all costs related to export are captured, you will benefit from grouping these costs into three main categories:
i. Local Export Costs
ll the local export costs that you should take into account are:
ii. International Export Costs
- Initial licensing costs (fees of setting up a business, etc.)
- Cost of funds (including bank charges)
- Production and modification costs (raw material, salaries, machinery amortization, etc.)
- Packaging and labelling
- Quality assurance
- Logistics and warehousing for raw materials or final goods
- Documentation cost
- Product liability insurance or other insurances
International export costs to consider include, but are not limited to:
iii. Other Export Costs
- Freight costs
- Travel to target markets
- Promotional fees or discounts
- Import duties or taxes
- Agent/broker and distributor commissions
- Research into international markets
- Export-related training and seminars
- International communications and marketing costs
- Productions of export literature (including translations)
It is also crucial to take into account additional costs or fees that are usually charged by the importer such as tariffs, customs fees, currency fluctuation, shipping, and value-added taxes (VATs). These costs can substantially weigh on the final price paid by the importer.
Therefore, it is crucial that you familiarize yourself with International Commercial Terms or INCOTERMS
. We provide an explanation about them in the logistics section of the guide.