How to Price Your Product Competitively For Import and Export Markets
Be careful how high or low you go on your pricing markup
Typically, importers and exporters take a 10-15% markup over cost (called cost-plus pricing method), which is the price a manufacturer charges you when you buy products from them. In other words, if your supplier charges you $1.00 per unit for his product, you might mark it up to anywhere from $1.10 to $1.15 per unit, especially when you are moving millions of units. That markup becomes your profit or commission.
Consider the following criteria to determine just how high or low you can go on your markup:
If the product is a market "first," you can afford a higher price.
Is the product's quality magical? Or marginal? Price up or down accordingly.
If the product is already priced high, keep your markup low. If a major manufacturer (these generally achieve considerable economies of scale in production) is able to give you a low offering price, then you can afford to set your commission slightly higher. Be careful here, though -- this scenario can be deceptive. If your cost is low to begin with, it might mean that the product is a mass commodity rather than a specialty and that the market is already flooded with suspiciously similar, me-too items. If so, you have to keep your profit margin very tight.
Is the Product Already Established, or New-to-Market?
Sometimes you can price higher when a product is new to market just because your customers need and want novel product offerings.
But novelty also has its downside. A new-to-market product doesn't have the brand recognition, image and popularity that overseas customers tend to look for when they want a product with sure-fire consumer appeal.
Who's calling the shots, you or the customer? Did the customer ask you to find the product, or did you approach the customer and offer it?
This makes a difference. A customer who has asked you to source a product is usually more receptive to a slightly higher price because they really need the product. Don't lose your head here, though; never, ever get greedy. Your customer knows a rip-off when he sees one.
How you position the product determines the price at which you'll sell it. Use the product's pricing in the equivalent sector of the domestic market as a guide to your overseas profit margin. For example, if your price for a product is $1.00, you are targeting the upscale specialty market overseas, and the suggested retail price in a local upscale store is $8.99, you can take a higher profit margin.
Direct or Indirect Sale
If you sell directly to a customer, you can afford a higher profit margin. If your product is handled by a series of intermediaries -- say, an export trading company, an importer and a wholesaler -- before it gets to the retailer and end-user, remember that each of these "middlemen" will tack on their due percentage. If you price high at the beginning, your product will be priced right out of the market by the time it gets to an end-user. Nobody wins.
How Desperate Are You?
In a mood to see what you can get away with?
Then I won't stop you. But realize you may be making a big mistake from which you won't be able to recover -- losing a customer altogether. You may really need income and feel you've nothing to lose, but don't forget the priorities of a successful global marketer: the customer relationship comes first.
Price your products to stay in the global game. If you are up against unlimited competition, make sure you're offering comparable prices along with some extra form of value for your customers.
Are You an Internationally Known Celebrity or Star in Your Own Right?
That makes a world of difference. No matter what you are offering, your fans will buy your product at any price just because it's yours. The more popular you are, and the more difficult it is to get your product, the higher you can price it.
Mainstream pop culture is the best marketing tool there is -- look at Mickey Mouse and Lady Gaga! Consider yourself fortunate, and go for it!
Test your price out on your customer, with whom you have hopefully cultivated a strong relationship and to whom you've presented your product's positive sales attributes. See what reaction you get and then negotiate from there. If you priced the product with only a slim margin for yourself -- so slim you cannot afford to go any lower -- and your customer still balks, consider re-negotiating with your supplier.
Oftentimes, if you explain that the only way to sell the product overseas is to price it more competitively, they will agree to go back to the drawing board and see if they can rework the numbers. Don't pull this too often, though, because if you continue to have price problems the supplier will catch on sooner or later that you haven't properly checked out what the foreign market will bear.