How to price a product for export

The pricing of products to be exported is a particularly important process, because in addition to manufacturing costs, other factors involved in the transportation and delivery of goods to foreign markets must also be taken into consideration.

These factors may include:

  • Differences in exchange rates
  • Transportation of goods
  • Special packaging of exported products
  • Insurance of goods
  • Commission and other fees for intermediaries etc.

As in local markets, the demand for the product is of crucial importance in setting prices. For most consumer products, per capita income is an indicator of the dynamics of the market, while there are few products for which demand is so high that it is not affected by low per capita income of consumers.

As in local markets, competition has a definite influence on the selling prices of products. A new product in a new market might have a high price, whereas if a product is imported into a highly competitive market it may need to have a lower price in order to gain market share quickly.

However, when setting prices, the export objectives in each market are also taken into consideration. These objectives might include swift expansion in the market, replacement of existing products, slow but steady penetration, etc. These objectives and the overall pricing strategy are also influenced by the stage of development of the target market and the per capita income of potential consumers.

Some alternative forms of pricing:

  • Fixed pricing – the same price for all customers
  • Flexible pricing – different prices for different types of customers
  • Cost-based pricing – completely covering the fixed and variable costs of manufacturing and exporting the products
  • Variable cost-based pricing – covering the variable costs of manufacturing and exporting the products, while the fixed costs are covered by domestic sales
  • Penetration pricing – a low price for fast entry into the market, discouraging competitors
  • Pricing for markets with limited competition – high prices with large profit margins in markets with limited competition.

Once a pricing strategy has been chosen and the various costs have been calculated, the price is also based on the business’s desired profit margin.

To price its products as effectively as possible, a business should take all possible costs into consideration.

Below is a list of most of them:

  • Marketing and promotional costs: distribution, advertising, travel, printed promotional material, participation in trade fairs, etc.
  • Production costs: manufacturing costs per product, cost of packaging or assembly per product 
  • Packaging costs: Materials, mock-ups, labels, etc.
  • Organisation and administration costs: Transport safety, certifications etc.
  • Freight costs: Costs of storage, insurance and transportation
  • Financial costs: export financing costs, costs due to fluctuations in the exchange rate, costs due to changes in interest rates, etc.

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