Calculating price

There are different methods that you can use to calculate the price of your product.

Cost-plus method

In the cost-plus method the exporter starts with the domestic manufacturing cost and adds:

  • administration
  • research and development
  • overhead
  • freight forwarding
  • distributor margins
  • customs charges 
  • profit

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.

Buyer-based pricing

This method considers the perceived value of the product for the end buyer. It is more psychological than based on economics.

Competition-based pricing

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
  • rebates
  • discriminatory pricing 
  • promotional pricing (loss leaders to attract customers)

Based on material produced by Austrade Canada; Tradeport; and Australian Business Limited