ONLINE CERTIFICATE IN EXPORT MANAGEMENT 2012

COURSE 3. PRICING YOUR PRODUCTS & BUDGETING FOR EXPORT

DO NOT OVERPRICE PRODUCTS IN FOREIGN MARKETS

ELIMINATE CERTAIN DOMESTIC COSTS FROM
YOUR EXPORT PRICES

Many U. S. exporters do not analyze their domestic pricing structure before establishing their export prices. They simply add their projected incremental cost to export and profit margin percentage on top of their current domestic prices - and this becomes their export ex factory gate (EX WORKS) price. This erroneous approach can and dramatically affect their competitive position within world markets. Do not make the same mistake! Analyze each cost item included in your domestic prices. Each domestic cost that you can eliminate will make your products that much more competitive in world markets! Also, you will find it easier to secure quality representatives because you will be providing them with more competitively-priced products to sell locally. It is easy to include duplicated domestic costs in your export prices and assume that your export representatives overseas will raise their prices accordingly without a problem. This is not realistic! There are limits to how high your representatives can raise their prices before your products are priced out of the local marketplace. Consider the following scenario in which you are the U. S. distributor of products from Germany. Note how a very high export ex works price from your German supplier can affect your pricing options in the United States. Put this example to use when you are negotiating prices with your export sales representatives. You are an importer in the United States. You want to purchase products from a German exporter for resale in the United States. Would you want to pay for the German exporter's domestic costs for advertising, sales promotions, trade shows, customer credit, warranty service, salaries, benefits, commissions and company vehicles? Of course not! They only apply to sales made in Germany. They should be deducted from the export price quoted to you. If they were included, you would have to add your domestic expenses on top of the exporter's domestic sales and marketing costs and then apply your profit margin. If you were forced to include the German exporter's domestic sales and marketing costs in your prices, do you think that you could offer a competitive price in the United States? Probably not! As you study the five export pricing methods in this lesson, you will learn of domestic costs that you can deduct from your export prices to make your products more competitive in global markets, i.e., Indirect Manufacturing Overhead and G & A Overhead.

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