So, you thought determining the price of your product was simply putting a desirable price tag to it?
Think again! It can’t be merely wishful. Can it? On the other hand, adventurous manufacturers like Apple have always sought, fought and got the price they wanted. Thus, the question is, how do you choose a price that will leverage your ROI and maximise your sales?
Actually, it turns out that the process of determining the price of your product is just as complicated as the various processes involved in its manufacture. Pricing is never a random affair. It takes strategizing, processing of various ideas, lot of number crunching, and considering the financial and political climate of the country you want to export to as well. These will help you to arrive at the perfect price for your product. If you aim too high, there are chances your product may not sell as much, and if you aim too low, your profit margins will take a big hit. During times of such confusion, when you need to arrive at a conclusive pricing decision, here are five essential factors to consider before giving your product a price tag
1) Cost of the Product
The most crucial factor to take into account when developing a pricing strategy is considering the actual cost that went into making of the product. These costs are generally divided into two main sectors: Direct Costs and Indirect Costs.
- Direct Costs are usually the costs you incur for actions like acquiring raw material, paying labour charges to the workers and other direct expenditure involved while assembling the actual product.
- Indirect Costs are the ones that pertain to the manufacturing office and administrative costs. These are in addition to the costs incurred for selling and distribution of the product.
The export market is full of competitors who are willing to one up on you in terms of pricing. In such scenarios, where competitors take the cake, there are two viable options to decide an effective price for your product. You can either charge a reasonable price for your product and enjoy the benefits of bulk exports; or you can charge a higher amount by ensuring that your product is top-of-the-line and far more superior in quality when compared to any of your competitors.
3) Supply vs. Demand
The pricing of your product is also dependant on the demand of your product versus the available supply of it. If the supply of your product is more than the demand, it is obvious that the price range of your product will have to be on the lower side. Now, when the demand is high and the supply of your product is scarce, the pricing can be strategized in a manner that allows you to reap optimum profits.
4) Government Offered Incentives
The governments of developing countries, such as India, are offering their exporters various incentives regarding their trades. It becomes easier for exporters to attach beneficial prices to their products. Exporters of developing countries receive various financial benefits like tax exemptions, customs and excise duty exemptions and trade agreements. These make it easier for exporters to charge their consumers a reasonable amount.
5) Branding and Reputation
Brands have the advantage of pricing their products on a higher and more evolved pricing scale. This is based on the reputation and quality measures they have established for themselves in the market. As an established brand name, pricing becomes easier because the consumer trusts your product more and is willing to pay for the quality benchmark set. In this case, exporters working on a smaller scale can realign their prices to a lower cost, in order to target the consumers who are keen on opting for a more reasonable option.
Each one of the above is instrumental in determining the export price of your product, which can make/break a deal after hours of deliberating with a potential client. Therefore, now that you have a fair idea on how to select the best price range for your product, you can gear up and start exporting to the right consumers. Hop on!