There are different methods that you can use to calculate the price of your product.
In the cost-plus method the exporter starts with the domestic manufacturing cost and adds:
- research and development
- freight forwarding
- distributor margins
- customs charges
The net effect of this pricing approach may be that the export price escalates into an uncompetitive range.
Marginal cost pricing
This method considers the direct, out-of-pocket expenses of producing and selling products for export as a floor beneath which prices cannot be set without incurring a loss.
This would include any product modifications plus economy of scale savings as the incremental cost of producing additional products for export should be lower than the earlier average production costs for the domestic market.
This method considers the perceived value of the product for the end buyer. It is more psychological than based on economics.
This method benchmarks the price on the closest competitor's pricing level or the market average.
Price adjustment strategies
These strategies try to make your product more price competitive by using:
- discount pricing and allowances
- discriminatory pricing
- promotional pricing (loss leaders to attract customers)