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Export Pricing

Prices must be set to enable a company to achieve its marketing strategy to develop an overseas market. Different factors will determine a pricing strategy depending on economic and political factors, competitor pricing, consumer demand and the desired rate of return on the investment. 

Quotations

• Proforma Invoice
  A proforma invoice is an advance copy of the final invoice if the order is placed. A proforma acts as a quotation and can also be used to obtain payment in advance.
• Price Lists, Estimates, Quotations and Tenders
  This Business Link guide outlines how to present your prices to your customers. It tells you how to create a price list, how to prepare quotations and estimates and how to price a tender for a contract.

Pricing Strategies:

• Demand-led Pricing: Demand-led pricing is based on consumer demand for the product. Demand is affected by factors such as income levels, the availability of substitute goods, and whether the products are necessities or luxury items. High levels of demand can lead to increased prices.
• Cost-based pricing: Cost-based pricing is determined by calculating the product costs, overheads, profit margin and additional costs relating to the international sale. This TradeYorkshire guide can help you identify the different costs that need to be included when setting your export price.
  A Guide to Cost Based Pricing
  Penetration Pricing: Penetrationpricing aims to rapidly capture market share by offering low prices. Prices may be increased once market leadership is obtained and competitors are squeezed out.
  Price Skimming: A company charges a high price hoping to maximise profits on a new product before competition emerges. The price can be reduced later when level of demand has been determined or as competition increases.
  Flexible Pricing: Flexible pricing is when a company offers the same product at different prices to different customers, with the aim of maximising returns within a specific time.
  Static Pricing: Static pricing offers the same price to all customers. This strategy is easy to maintain but competitors can easily under-cut or price-match which can reduce your market share.

Pricing in Foreign Currencies:
If your business exports goods or services, you will need to decide whether to quote in either the domestic or local currency. If you quote in local currency you will need to manage the risk of exchange rate fluctuation and how to receive foreign currency payments.

• Foreign Currency and Exchange Risks: Business Link guide
  This guide is aimed at businesses which regularly deal with foreign customers. It explains how to price goods or services, how to combat the risk of exchange rate changes and the practicalities of dealing in foreign currencies.
• Forward Foreign Exchange Contracts
  This is an agreement to buy or sell an amount of foreign currency at a specified rate of exchange on or before a certain date. This means you know exactly the amount of currency you are going to receive and eliminates the exchange rate risk. Forward foreign exchange contracts can be arranged through most UK clearing banks.
• The Foreign Exchange Market 
  This SITPRO briefing explains the risks involved with sales and purchases made in a foreign currency and the actions you can take to reduce the risks.
• Currency Converter 
  The xe.com website provides up-to-date information on currency exchange rates and also provides a currency converter facility which allows you to input an amount and convert it to another currency for an exact conversion.

For more information please contact us