Determining the Right Price in Export
Setting the right price is essential for success in any market; It is often the most influential factor in a customer's purchasing decision process. Price contributes to expectations for a product or service and affects how consumers evaluate their purchase, which can determine whether they will become repeat customers. Pricing is a multi-faceted strategic decision, the first being your business objectives for the chosen market. The pricing strategy you choose will vary according to your short and long-term goals. Marketing and pricing targets may need to be adjusted for specific markets due to cultural or economic differences.
Whatever your goals, the universal goal is to make a profit; The strategy chosen will simply determine how you do it. In order to make a pricing decision that will result in your desired profit margin, it is important to have a comprehensive understanding of all your costs (fixed and variable) associated with financing the production, transportation, marketing and export of your goods or services.
Price selection should not be made without conducting market and competitor research. Market demand for your product can affect the price you can charge. A useful measure to use when determining the solvency of the consumer, especially in developing countries, is income per capita. Your competitor's prices cannot be ignored either. These are the companies you will be compared to, making it very important that your price reflects the value you offer relative to your competitors.
The value can be represented by the equation:
Value = Benefit "“ Cost
To add value to your offering, you must either find a way to lower its price or add more consumer benefits.
Ensure appropriate policies when transacting in a different currency
implementation will help you deal with fluctuations in currency valuations and limit negative effects on profits.
Penetration pricing: Entering at a low price to quickly attract customers and gain market share. This can be a very effective short-term strategy, but keep in mind that it can be difficult to change expectations and then raise them once consumers are accustomed to a low price. If your product is loyalty-inducing or you can generate replacement costs, this will help neutralize the effects of the price increase.
Price shift: Starting with a high price to maximize profits from high-end consumers and early adopters in the market who have the tools and desire to own the latest and greatest products; then lowering the price to attract a larger portion of consumers seeking more value for their purchases.
Flexible pricing: Adjusting prices for different types of customers. This may include different pricing between or within markets. Offering different models of your product with different levels of features allows you to stratify prices and broaden the range of customers you are targeting. For services, this is used to take advantage of different customer needs and maximize revenue. For example, in the airline industry there are different price groups: first class, economy, bus.
Competitive pricing: This strategy, which sets a price based on the price of the competition, is commonly used when multiple companies sell the same product with little distinction from each other. If you're using this strategy, try to find subtle differences to highlight, such as better customer service or a longer warranty, that will increase your value at this price point or allow you to charge a little more and not get into a price war.
Full-cost pricing: Covers both fixed and variable costs of export sales. With this method, once the total cost of your exports has been determined, simply add the profit margin you want to the total cost and this will give you the price you need to charge.
Marginal cost: Covers only the variable costs of production and exports while you pay overhead and other fixed costs from domestic sales. If manageable, this method works well with a penetration strategy. It helps cover the additional costs associated with selling internationally and allows more of that market price point to be considered profit.
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