How Much Should it Cost? Pricing Products for Global Customers

Jan 05 2021 | PayPal editorial staff

Among the many challenges of a strong export strategy, correctly pricing goods and services is perhaps the most important. How do you account for the complex variables of selling overseas? Here are the top issues to consider when pricing for overseas markets.

The Universal Questions

Pricing for international markets starts with many of the same factors that go into domestic pricing. How is the item perceived – a commodity, or a differentiated product? What is the consumer perception of your product, and how will pricing affect that perception? Does the price reflect the true cost of the product, and is it sustainable? Is demand elastic?

These questions are the foundation for any decision-making around costs, and basic market research is key.

Tip: Read reviews of similar products to get a basic sense of how local markets perceive your offerings.
 

Local Logistics

The financial viability of a product is highly dependent on local factors. Shipping and overseas distributors can quickly drive up costs compared with domestic sales operations.

Additionally, regulatory actions can influence major swings in costs: foreign governments’ tariffs, customs fees, and other administrative overhead must be clearly evaluated to avoid surprises. Further, companies should firmly understand different countries’ anti-dumping laws and processes for determining whether pricing is exploitative.
 

The Local Income Landscape

To calculate the market opportunity for consumer (and often B2B) goods and services, income demographics are crucial. You can start with the per-capita income to determine the number of target customers. Other demographics such as household net worth and income by age and city can be crucial as well, particularly if your business is pursuing a highly-targeted audience, such as expats or specific high-income segments, that are outliers from the general population.

Beyond income, global currency fluctuations can also make goods more or less affordable. For example a strong Singapore dollar can make Singaporean products less competitive in the international market.

Tip: Get country-by-country economic indicators at WorldBank.org
 

The Trillion-Dollar Market Opportunity

When it comes to making the leap to international exports, the opportunity is too big to ignore: the global “middle class” is expected to reach 1.2 billion people by 2030, corresponding to an unprecedented jump in disposable income.

In businesses worldwide, the question is not whether to implement an international sales strategy, but how to do it.
 
The contents of this site are provided for informational purposes only. The information in this article does not constitute legal, financial, IT, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, IT and legal advice before making any business decision.

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