How to price your product for export
The price you choose to sell your product overseas will be one of the major contributors to your competitiveness, and will impact both the number of sales and your profit margin. In order to determine the right price for a specific market you will need to:
Analyse your costs
There are five main factors relating to cost that you should consider:
• The cost of producing your product:
This should include all your production costs, as well as modifications for export compliance, standards compliance, translations of labels, packaging, etc.
• The cost of marketing your product:
Your choice of market entry will impact on your marketing costs, eg. Entering a market through agents, distributors, directly to endusers, on-line, etc..
• The cost of exporting the product:
Freight costs, customs costs, licenses, currency hedging, insurances, This includes the cost of protecting your product: Trade marks in country of export, etc..
• The cost of promoting the product:
Promotional material, translations, trade shows, etc…
• The cost of financing the export:
The impact on your cash flow. The length of your trade cycle will be stretched when exporting; To export, you may need substantial funds upfront to pay for production costs and only receive payment for your export at a much later date. It can leave a gap in your cash flow and put severe strain on your working capital.
2) Analyse your product
• The unique features of your product:
Your Unique Selling proposition (USP). What differentiates your product from others in your target market.
• The quality and design of your product:
How it compares with the other products in the market of entry
• The impact of dramatically increasing your production:
Can you get extra staff, warehousing space, extra raw materials, etc…
• The legality of your product in the country of export:
Are there any export restrictions imposed by Australia? Is the product allowed to be sold, are there any customs restrictions for entry, etc…
• The cultural impact of your product:
Does the product fit the culture of the country. For example, does it conflict with their religion, politics, etc…
• The product standard:
Does the product and the labeling comply with their industry standards
• The warranty/product support:
what system will you have in place for defective and/or damaged products and customer service
3) Analyse the Market
• The size of your market
• Your competitors
• Your company image in the Country of Export
• Your market entry strategy
After analyzing your cost, product and market as above, you will be able to:
1st: Identify all your product costs including all your freight and customs costs to destination country
2nd: Confirm your ideal export price reflecting your required profit margin; that is, the price you will sell your product for. Not the final sells price to the end user.
3rd: Do a pricing analysis in the country of export in order to understand your price positioning, asking yourself, what price is an equivalent product sold for.
4th: Determine the market position you wish to take, for example 2 dollars shop or expensive boutiques.
5th: Work out your ideal Recommended Retail price (RRP) by adding the costs in the exporting country such as taxes, commissions, agents/distributors margins and various distribution costs.
Once you have followed all the above steps and you have left to do is Sell the product!