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7. Set your pricing model

Before setting your price, it is important that you understand the relative costs, demand and competition of your overseas market. Set your pricing based on the value your customers will get from your product or service, rather than on your overall costs. At the same time, determine the market price you will have to meet in order to be competitive.  There are a number of costs associated with taking your product or service overseas, some of which are directly related to exporting and others to setting up locally.

When defining your pricing model, consider the following:

  • What is the average disposable income of your target customer?
  • Are you positioning your product or service as budget or premium?
  • How mature is your industry – frontier or established?
  • What is the price of customer alternatives?
  • Does in-market culture impact price perceptions?
  • What’s your exposure to foreign currency fluctuations?
  • Production costs change – will you pass the added cost onto the consumer?

Add the costs of exporting or setting up your business locally to your standard operational costs. Once you have completed this process, determine whether or not you are able to set a price that meets customer expectations whilst at the same time not causing your business to experience a loss.

Consider the following when calculating the costs of exporting or setting up your business locally:

  • Freight handling
  • Import duty and taxes
  • Export licensing
  • Customs clearance/broker fees
  • Packaging and labelling
  • Logistics
  • Warehouse/shopfront
  • Utilities
  • Human resources (local and offshore)
  • Costs associated with operational modifications
  • Production and supply chain costs
  • Machinery and technology
  • Insurance
  • Banking charges (general fees, cross-border payments, etc.)
  • IP protection
  • Currency/exchange rates
  • Marketing
  • E-commerce fees (hosting, transaction fees, etc.)
  • Website construction and maintenance
  • Modifications to product or service to meet market demand
  • Market research and analysis
  • Consulting services (accounting, legal, etc.)
  • Travel to overseas markets

In general, it is best to price high and offer discounts initially, rather than price too low and find you need to raise the price later. Pricing will continually change, both as a result of information you receive and in response to market conditions.

Sumo, a digital communication and marketing agency, have put together a 3-step guide and calculator to help with pricing products. To access this guide and calculator, click here.