Pricing Your Product For Import and Export Markets
Typically, importers and exporters take a 10-15% markup over cost—called the cost-plus pricing method. This is the price a manufacturer charges you when you buy products from them. In other words, if your supplier charges you $1.00 per unit for his product, you might mark it up to anywhere from $1.10 to $1.15 per unit, especially when you are moving millions of units. That markup becomes your profit or commission. A retailer walks a tightrope when it comes to marking up a product to create profit and has many issues to consider.
When the product is already priced high, keep your markup low. If a major manufacturer—these generally achieve considerable economies of scale in production—is able to give you a low offering price, then you can afford to set your commission slightly higher.
Be careful here, though as this scenario can be deceptive. If your cost is inexpensive to begin with, it might mean that the product is a mass commodity rather than a specialty item. The market may already be flooded with suspiciously similar, me-too items. If so, you have to keep your profit margin very tight to stay competitive.
Stay in the Global Game
Price your products to stay in the global game. If you are up against the unlimited global competition, make sure you're offering comparable prices along with some extra form of value for your customers. This value could come in the guise of customer service after the sale or in offering free shipping.
In a mood to see what you can get away with? I'm not here to stop you, but realize you may be making a big mistake from which you won't be able to recover—losing a customer altogether. You may really need income and feel you've nothing to lose, but don't forget the priorities of a successful global marketer, the customer relationship comes first.
Product Uniqueness and Quality
If the product is a market first or unique item, you can afford to charge a higher price. Also, consider the product's quality. If it is marginal or outstanding, price it accordingly.
Sometimes you can price higher when a product is new to market just because your customers need and want novel product offerings. However, novelty also has its downside. A new-to-market product doesn't have the brand recognition, image, and popularity that overseas customers tend to look for when they want a product with sure-fire consumer appeal.
How you position the product determines the price at which you will sell. Look at the product's pricing in the equivalent sector of the domestic market. Use this price as a guide to your overseas profit margin.
For example, if your price for a product is $1.00, you are targeting the upscale specialty market overseas, and the suggested retail price in a local upscale store is $8.99, you can take a higher profit margin.
Import Customer Contacts
Your pricing scheme will also depend on who is calling the shots, you or the customer. It makes a difference if the customer requested the item or if you approached the customer with the product.
A customer who has asked you to source a product is usually more receptive to a slightly higher price because they really need the product. Don't lose your head here, though. Never, ever get greedy. Your customer knows a rip-off when they see one.
If you sell directly to a customer, you can afford a higher profit margin. If your product is handled by a series of intermediaries—say, an export trading company, an importer, and a wholesaler—before it gets to the retailer and end-user your margin will be less. Remember that each of these "middlemen" will tack on their due percentage. If you price high at the beginning, your product will be priced right out of the market by the time it gets to an end-user. In this case, nobody wins.
Your Exporting Star Power
Perhaps you are a star in your niche market. That makes a world of difference. No matter what you are offering, your fans will buy your product at any price just because it's yours.
The more popular you are, and the more difficult it is to get your product, the higher you can price it. Mainstream pop culture is the best marketing tool there is—look at Mickey Mouse and Lady Gaga. Consider yourself fortunate, and go for it.
Testing Your Product Pricing
Test your price out on your customer, with whom you have hopefully cultivated a strong relationship and to whom you've presented your product's positive sales attributes. See what reaction you get and then negotiate from there. If you priced the product with only a slim margin for yourself—so slim you cannot afford to go any lower—and your customer still balks, consider re-negotiating with your supplier.
Oftentimes, if you explain that the only way to sell the product overseas is to price it more competitively, they will agree to go back to the drawing board and see if they can rework the numbers. Don't pull this too often, though, because if you continue to have price problems the supplier will catch on sooner or later that you haven't properly checked out what the foreign market will bear.