Exporting Fact Sheet - Determine Your Export Price

Summary

Pricing Methods:

• domestic costs plus mark-up - take your base domestic cost (including mark-up), subtract domestic promotional expenses, and add your export costs (documentation expenses, freight charges, customs duties, international sales and promotional costs, etc.)
• full-cost pricing - take your base domestic cost, subtract domestic promotional expenses and your mark-up, add your export costs and then factor in your profit.
• marginal cost pricing - take the fixed cost of producing an additional unit for export. There may actually be a cost saving if additional units of the product can be produced without increasing the fixed costs or in certain instances where some of the fixed costs are covered by domestic production and do not need to be added to export expenses. Any costs to modify the product, as dictated by the target market, are then added to the production costs to establish a "floor price." This serves as a benchmark and will indicate when the company is incurring a loss. Using the floor price as a base, variable export costs (packaging, transport, labelling, advertising/promotion) for the product can be added. Some of the variable costs (such as the initial translation costs, designing of promotional materials, etc.) will be one-time or start-up expenses.

Pricing Strategies:

Your approach will vary depending on your goals and the overseas market. Do you have a new or unique product? Are you selling excess or obsolete products? Can you demand a higher price for your product because of brand name recognition or superior quality? Are you willing to reduce profits to gain market share for long-term growth? These are just some of the points to consider when deciding which of the following approaches to pricing you will take:

• flexible pricing - your product is sold at different prices in different markets depending upon your customer base.
• static pricing - you sell your product at the same price in all markets.
• market penetration - your product is sold at the lowest price possible without going below cost or "dumping".
• skimming - used if you have no competition. You sell your product at a higher price until a competitor enters the market.

Follow this link for an example of an Export Costing Worksheet - http://www.cbsc.org/sask/export_worksheet.cfm

Prepared by Canada/Manitoba Business Service Centre