U.S. Small Business Administration

Now that you have information upon which to base these decisions, it is time to establish product or service pricing and develop promotion plans.
 
Pricing
   
When establishing a price overseas, you need to consider most of the same factors that you do for the domestic market:  the competition; costs including production, packaging, transportation and handling, promotion and selling expenses; the amount of demand for your product or service and its relationship to price; and the maximum price the market is willing to pay.

There are three common methods of pricing exports:

• Domestic pricing, using the product or service's domestic price as a base and adding export costs including packaging, shipping and insurance;
• Incremental cost pricing, determining a basic unit cost that takes into account the costs of producing and selling products for export, and then adding a markup to arrive at the desired profit margin; and
• Cost modification, reducing the quality of an item by using cheaper materials, simplifying the product or modifying your marketing program.

The rules of pricing are not hard and fast.  When making pricing decisions, you should also consider your company's objectives, the price sensitivity of your market and the uniqueness of your product.

Promotion

Once you have determined a price for your product or service, the next step is to promote it.  Critical to the success of your advertising and publicity is local assistance.  Because the needs and buying habits of foreign consumers are often very different from those of U.S. buyers, individuals familiar with the local culture should aid in the design of your promotion activities.

Advertising is a major medium of communication around the world as it is in the United States.  You must decide if advertising is important to the success of your product or service.  Chances are good that if you need it in the domestic market, you will need it even more overseas where customers are unfamiliar with you and your product or service.

You will also need to decide if you can afford advertising and if your profit margin can support an effective campaign.  An overseas advertising agency can help you make this decision.  It can also help you plan the campaign, because the available media may differ significantly from those in the United States.  For example, in some countries television and radio do not carry advertising.  In addition, advertising techniques and copy used in domestic markets may not be successful because of cultural differences or problems with translating the message from English into a foreign language.  This also may be true of the name of your product. Before you decide to use the same name for your product overseas as you do in the domestic market, it is wise to make sure there are no translation problems.

When investigating advertising alternatives, you also may want to consider outdoor advertising, such as billboards, posters, streetcar and bus signs, which tend to reach a wide audience.

Product packaging is another important promotional medium.  Like in the United States, it must attract the buyer's attention, identify the product and provide a reason to buy.  However, packaging designed for the domestic market often isn't appropriate overseas.  In addition, when designing packaging, you should also consider protection for your product against breakage and spoilage while in transport.

* Excerpted or reprinted with permission from Small Business Success, Volume 1, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration.