School of Economic Sciences > Extension Economics > Step 6: Pricing

Step 6: Pricing

Typically, international pricing is more “negotiable” than may be the case domestically. To set a price, most successful exporters work backwards by first setting an attractive price in the foreign market. Then you consider shipping costs, including insurance, and costs associated with international inspections and regulations. An important feature in quoting a price or writing a pro forma invoice is determining where geographically you have responsibility for the shipment and where that responsibility is transferred to the importer. Another feature to consider is the exchange rate and that the exchange rate may fluctuate between the time of your quote and the payment. If there is no way this can be done such that the remaining price at your production center is high enough to be profitable, then that market should not be considered.

Step 6.1: Cost Considerations

In order to “price backwards,” you must have a good idea of the costs of exporting that are beyond those for domestic sales. There are additional costs in international business such as freight forwarding, duties, customs charges, and fluctuations in exchange rate. After these costs are considered, the potential exporter can formulate a price quote to foreign customers.

Action:

Sample responses to inquiries from agents and distributors (PDF) (SBDC)
Sample sales and purchase order contract (PDF)
Export price quotation worksheet (PDF) (SBDC)
Export price quotation worksheet (PDF) (USDC)
Sample quotation(PDF)
Sample Pro Forma Invoice 1 (PDF)
Sample Pro Forma Invoice 2 (PDF)
Sample Pro Forma Invoice for Agriculture (PDF) (USDA)

Step 6.2: Market Demand

Demand for your product is a function of various factors such as the number of consumers, consumer preference, attitude, price and income. Countries also differ in demographics.

Action:

Analyze the price elasticity in the relevent range for you produce in the foreign market.

Step 6.3: Competition

The final factor to consider in determining what price to charge for your good in the foreign market is the level of competition in that market. Consider both the level of domestic competition as well as the level from firms exporting to the same market from other countries. You may also need to consider the role of government in the foreign market in price setting.

Action: Determine your price as a function of quant

Disclaimer: This manual is a demonstration based on interviews of successful exporters. Each individual case is specific and optimal strategy may differ from those discussed here. References to sources and documents outside of WSU Extension and the IMPACT Center are for reader convenience. WSU does not review, control, or take responsibility for their content, nor does WSU or any person therein explicitly or implicitly endorse the positions or policies of these sources.

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