Understanding your export pricing options

Getting your pricing right is one of those areas where exporters, particularly first-time exporters, can find themselves in trouble. Pricing is not an easy task – with so many variables at play, potential profit can quickly turn into a disaster. Put those back of the envelope calculations away; it’s time to get your pricing strategy right and achieve greater profitability and competitiveness.

It’s critical you take a disciplined approach and capture all costs associated with exporting and selling your product, and work out how you are going to recover these once you start moving your product offshore. You’ll need to think about delivery costs, packaging variations, tariffs and currency fluctuations. Your foreign customers and consumers are going to look at what you are selling products for in New Zealand – so you may not have the option of just adding these costs on top. This is where pricing gets tricky, and you will need to take a more calculated strategy.

Consider your pricing options now and work out an acceptable price that will make you a profit – but not price you out of your market. If you discover that you’re unlikely to make a profit, then you are better equipped with the information to decide whether to walk away now and focus your resources on making money elsewhere.

Understanding pricing options

This Export Essentials guide introduces you to a few essential guidelines that will help you to establish the right pricing strategy for your business. You’ll find information on:

  • Key issues to allow for in your export pricing
  • Common pricing strategies
  • Two pricing methods, Cost Plus and Top Down, and the importance in using both in parallel
  • Exchange rates, quoting and forward exchange contracts
  • Top tips for export pricing

Download our free guide on this page and become clear on your pricing model and strategy.

Watch this four-minute video of Jai Basrur, NZTE Beachhead Advisor and James McLeod, Made4Baby sharing their thoughts on pricing products for offshore markets. James is very clear on their product and price positioning being mid-point in the market, and advises distributors that their product is not for the supermaket shelves as they are not a mass produced small margin product.

If you are looking for a more in-depth understanding of the approaches to pricing and strategies for export then register now and join us at the next Export Essentials Workshop. We’ll give you practical tools and techniques to take your business global.

Jai Basrur: The way I like to look at pricing strategy, or like to define pricing strategy, is that it’s that strategy which will enable you to achieve your vision and your objectives. Your strategy answers, broadly, three or four questions; it answers questions like: Where are you going to play? Who’s your customer? What are your capabilities? How do you win? 

James McLeod: So, we tend to sit in that mid-tier quality product that we can sell through department stores, pharmacies, health shops, baby stores. And look, you see that model not only in New Zealand but internationally as well. So, internationally, whenever we enter a Distribution Agreement we say, “No” to supermarkets, you know, or we say to them “We are not a mass-produced small-margin product.”

Jai Basrur: But of course you also need to look at what’s happening in the market in terms of competition and make sure that you match that competition; there’s no point going and saying, “I’ve got a great product. I’m going to price over the market.” It doesn’t work that way. Markets are quite unforgiving and they are also great levellers, and I think it’s important that when you look at cost we cater for that in our pricing strategy.

James McLeod: Whatever you price your product for in New Zealand you should be pricing that at the same internationally. International customers, they’re not stupid, they’re savvy; they will look at your New Zealand price. So, to us, it’s important to price it at the same or there or thereabouts. So, when you’re pricing your product you really have to start at your local market Recommended Retail Price and then work backwards. So, you’ve got a retailer who wants a margin, you’ve got your distributor or your sales rep who needs a margin to run their business, and then you’ve got your own margin that you know your accountant’s told you that you need to be making to run your own business. Now, if that’s not enough when you get to your margins then you have to really ask yourself “Is this the right market for our product to be in?” And at made4baby we price everything in New Zealand dollars, so we don’t play with any exchange rates. We’re a small business; we are not set up to play the currency market, so we price everything in New Zealand dollars and it’s up to our distributors to, you know, make a windfall out of those prices or currency changes.

Jai Basrur: My suggestion to the exporters is: Before you go into a market get a good understanding of your capabilities, your capacity and your costs and your capital, what I will call “The Four Cs.”

Exporter guide

Use these templates to help you work out your export pricing
  • I want to find out about tax requirements for export
    NZTE doesn’t provide tax or legal advice as we are not specialists in this area – the best option is always to get professional advice on this matter. 

    To find tax a lawyer in New Zealand, the New Zealand Law Society provide a useful tool on their website.

    Your local Chamber of Commerce may be also able to recommend tax or legal experts who have knowledge of particular export markets, and have worked with other export companies. You can find your nearest chamber online on the New Zealand Chamber Network web page.

    For some markets, NZTE holds lists of tax lawyers and accountants that our team is aware of – to check if a list of contacts is available for the market you’re looking at, contact our Advisor Team on 0800 555 888 or send us an enquiry
  • Who can I talk to in my region about business training, advice and connections?

    The Regional Business Partner (RBP) network has specialist business advisors available to provide you with advice, information and connections to support your business. They can help you:

    • identify the next steps for your business
    • connect you with the local business community, industry networks and clusters
    • match you with a mentor from Business Mentors NZ
    • provide access to Capability Development vouchers
    • provide access to research and development (R&D) funding
    • help you navigate the support you can get from Government agencies.

    The RBP network is made up of these local Economic Development Agencies and Chamber of Commerce: 

  • How do I protect my business against a buyer defaulting on a payment?
    The Export Credit Office can help you protect your business from cancelled contracts or payment defaults that are due to commercial or political events beyond your control. 
     

Export Essentials Workshops

Develop your export plan in our practical two-day workshop