Appendices to CBI Export Planner - crecer

CBI Export Plannerd. If your organisation does not (yet) have a good financial information system on theelements which constitute your cost-price, you should develop such a systemimmediately. Without it, you will never be able to do a good exporting job.Methods for market pricingIf your primary aim in the target market is to offer your products at a price-level that doesnot exceed that of your competitors, your importer will be the first one to tell you that.Actually, you should try to price slightly lower, some 15% if possible, particularly whenentering the market. This is called Penetration Pricing: trying to gain the customer’spreference because your price is irresistibly low compared to your product quality.The reverse policy is called Skimming, but that will only be used when offering a uniqueproduct with obvious customer benefits - and unfortunately only few exporters can offersuch. a product.You will probably try to apply the Penetration Pricing method. The Japanese car makersused it very successfully. Be careful: don’t price it too low, as not to create suspicion inthe minds of the prospective buyers.What is more, you may raise the suspicion that you are ‘dumping’, offering your goodsbelow cost price. That is not only foolish but also illegal, invariably leading to ‘retaliateaction’ from your competitors who will be quick to notify the governmental taxinspectors.Try to find a balance between the quality and the price of your product. In fact youshould try to price it at the “perceived value level”. Market research will tell you howconsumers perceive that level to be. A penetration price will probably lie somewherebetween 5 and 20% below the current price.Never confuse the buyers. Try to create stability and reliability in your pricing as well.Your importer will judge your performance by it.Having gained a certain foothold in the target market, you gradually may want toincrease your profit by increasing your price. That is logical, as long as the customeraccepts it. That goes for your trading partner too. He has a vital task in your price-settingpolicy.How do you know if the customer will accept that price-increase? That depends upon the“Price-elasticity of the demand”.Essentially, price-elasticity describes how much the price can be changed beforecustomers begin to react by buying less when the price is increased or by buying more ifthe price is decreased.Convenience goods (like many packaged staple foods) do not meet much reaction whenprices increase moderately. Consumers will buy anyway. Shopping goods (moreexpensive consumer items) receive a stronger reaction, because the buyers startcomparing the product with other brands or substitutes to satisfy their needs. Industrialgoods meet even less reactions, unless the buyers can choose from a multitude ofsuppliers - and drop you when they can buy it a dime cheaper.44 III - The export marketing mix