Setting Export Prices with a Marketing View

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Setting export prices with a marketing view

Price is the only one of the 4 P's that produces revenues. Set the right price is fundamental as pricing for the foreign market is more complex than in the home market. Exporter must decide whether its exported product price will be higher, at the same level or lower than in the domestic market. Too often, in fact, companies forget to think about the customers and define prices just looking at the production costs. This behaviour is likely to drive a company to a below-average performance because it does not take into account the customer's point of view and the company's strategy.

Marketers, first of all, have to consider price boundaries such as the price floor, the price ceiling and the optimum price. Price floor (or minimum price) is determined by the cost of the product or service. The competitive prices for comparable products create a price ceiling. In fact, if competitors do not adjust their prices in response to rising costs, management will be severely constrained in its ability to adjust prices accordingly. The higher is the competition in the market, the more difficult will be to push prices up. The USA automobile market is a good example concerning the competitive influence: if a manufacturer decides to move up its price, it is likely to loose market share. Between the lower and the upper boundary for every product there is an optimum price. This is a function of the demand for the product as determined by willingness and ability of customer to buy.

As pricing in international markets is a difficult exercise, marketing decision-makings have to be careful to the surrounding environment, in which the company is placed and works, in order to determine the correct price strategy. Price escalations, or extra costs, are very common factors for exporters. Gathering information, transportation, freight insurance, special documentation, adaptation (modifies to product and/or packaging), administrative fees...
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