Some of these factors are controllable by the export company, but others are not. Export pricing is an art it is not simply reducible to a set of rules or cost calculations. Flexibility is essential in any export pricing operation.
Many firms that are just starting to export assume that setting an export price for their products merely involves calculating production and marketing costs, and then addition on an amount of profits.
Export pricing is much more complex than this. It includes of course, an evaluation of a firm’s costs of producing the product and bringing it to the market, but it also entails an assessment of the marketing situation for the product.
The market, and the company’s objectives in that market, should be the starting point for pricing decisions. Cost information should be used only to determine whether that market can be satisfied at a profit. This duel assessment – looking at the market as well as the costs, is central to successful export pricing.
The dual assessment of market and costs does not make it any easier to establish the “right” price, which is the basis for laying down the appropriate approach to export pricing.
In export marketing the exporter often has to accept a price for his product that is lower than the price he can get in the home market. This is why business people are often reluctant to go into exporting. They overlook the fact that exporting can be profitable, even if prices sometimes do have to be lower.
To understand how to market at a lower price and still make a profit, one must examine the whole question of costing and pricing.
A decision on what price to set for your product(s) will have to be taken:
i. The costs
ii. The market
iii. The intended profit margin