Introduction

Establishing an appropriate export price is the most important part of the international marketing mix, as it is the only one that generates revenue. The product, promotion and distribution of your product are all costs that need to be evaluated and incorporated into your price in order to recover them, and make a profit. Export pricing is a bit more complicated than pricing domestically, due to the following conditions you must accurately manage:  

1. Your company’s motivations, concerns, experience and level of managerial commitment. Whether you are being proactive or reactive may govern your pricing policy. Proactive exporting with higher levels of management support may allow you to price more aggressively for long-term success. Limited levels of exporting experience generally means more concerns regarding information on mechanics, communications, sales effort, delivery and regulations. Often, support from international trade facilitators (like Food Export Association of the Midwest USA) can help you lower your costs of market entry.
   
   
2. The effect of export expansion on the overall cost of production. It is true that increased use of capacity may help spread out your fixed costs, and you may also consider eliminating your domestic price expenses from the international component. You must also consider what the additional costs of international trade may have on your product. In addition, higher commissions, lower prices, increased communications and travel, educating staff, and obtaining information may all have an impact on your overall pricing strategy.
   
   
3. The effect that regional, country or local characteristics of the destination market may have on your ability to price your product effectively. The buyer’s government or market may require you to add translations to your labeling, or adapt it in some other way. Of course, the applicable duties (tariffs) on your products usually have a significant impact on the overall cost, and therefore price, of your product. The most significant foreign market "wildcard" is culture. In other words, the preferences, expectations and attitudes of the consumers may require you to spend additional funds to adapt your product to meet their tastes. Some overseas markets may require less product modifications than others, but even in these countries, the effects of culture cannot be overlooked.
   
   
4. The cost of maintaining or adapting your products’ integrity through the export process. This includes the added values that export price escalation will have on the landed cost. This is where understanding how to properly use INCOTERMS, service providers, and quote precisely with pro-forma invoicing come into play. It is not uncommon for the price of a product to be much higher for the buyer to land the goods than it is for you to ship it off your dock. Those factors, added to the countries’ tariff and non-tariff barriers, usually have a significant impact on your customer’s ability to resell at a profit.

Essentially, export pricing breaks down into two categories. First is the price at which you are willing to sell your product to a given buyer in a given market (when it is still on your dock). Second is the price of the product when it has arrived on their dock. This is known as the "landed cost" and includes the export price escalation factors.