In the age of globalization, investing in accurate export pricing strategies to export your agricultural products sounds good. If you are new to the perishable industry, it is a must to understand the complexities of the cost strategies to export your sensitive goods. You must keep in mind that the market value can’t determine the true value of any particular product you are selling. The challenges faced by market factors and the cost structure are a bit complicated and can have repercussions for your export business.
What is Export Pricing?
Export pricing plays an important role in the global shipping business. It's not limited to making a profit but also speaks a lot about managing factors like exchange rates, tariffs, and local market conditions. These influences can have an impact on the perishable goods that you are exporting to the international market.
Some factors that can determine the final cost of the agricultural product are:
- Demand for goods in the market.
- Cost of manufacturing the product.
- Buyers are willing to pay in their local currency.
- Price of the competitor’s
- Tariffs of the importing country
- Supply Chain Costs
- Internal factors such as the delivery time, the variety of goods
- Objectives of the exporter
Pricing Strategies In Global Export
When it comes to an export pricing strategy, you need to consider several factors that can assess the agricultural product’s price and meet your profit expectations.
Let's briefly discuss some of the methods of export pricing:
Market-Driven Strategy : This method is the best approach for export pricing. This pricing involves adjusting your product's price depending on market conditions such as demand, supply, inflation, and competitive rates. It enhances flexibility to respond to changes in steady and well-built markets. On the other hand, excess market exposure can bring down your standard pricing.
Skimming Pricing Strategy: This strategy involves charging an increased price for your commodity to recover initial expenses and maximize a high profit margin, but at the same time, it can lead to a decline in market share. You can sell the products in well-established markets. The exporters who just stepped into the new markets are not in favor of paying high prices.
Penetration Strategy: This pricing method opts for a low cost to infiltrate the market and isolate competitors. It is also known as dumping, which is mainly used for the mass consumption of goods.
Preemptive Pricing: Both penetration and preemptive pricing strategies are the same. In preemptive pricing, the exporter’s aim is to demoralize the competition. This method involves setting prices below the actual cost of the product on the belief that holding market dominance can be profitable. Despite the risks involved, if managed properly, this pricing strategy can help companies dominate the market and gain virtual monopolies.
Marginal Cost Pricing: This cost strategy is best used when the exporter considers only variable or direct costs in determining the price. If you are not interested in recovering fixed and/or preliminary costs from your sales and consignments, you can go for marginal cost pricing. This helps lower product prices but comes with the risk of a slower path for neither profit nor loss.
Competition-Based Pricing : Through this strategy, businesses can fix their product’s cost depending on market conditions. This pricing is easy to adopt but is vulnerable to sudden cost fluctuations in the leader’s prices.
Before embarking on your perishable export, you need to take some factors into account:
Choose an Export Destination : The first thing you need to do is identify your desired target audience in your area of export. Addressing your competitors and having a clear understanding of their pricing strategies enables you to quote your products based on market demand and the amount the buyers are willing to pay.
Product Requirements: Before showcasing your agricultural products in the international market, you need to make sure that your perishable goods abide by the particular nation’s regulations. It is necessary to modify your inventory to meet these regulatory requirements. Estimate the pricing of your perishable goods to understand how it might affect demand in the target market.
Logistics Provider: You can choose to ship your perishable goods by land or sea route. You can set the cost of your agricultural products and other additional costs, such as tariffs, customs duty fees, local taxes, and inspection services, based on your desired transport. Choosing the wrong incoterm can impact the entire logistics, potentially influencing your pricing strategy.
Documentation: In addition to regulatory and customs compliance, proper documentation is crucial to avoid additional costs when exporting shipments across international borders. You need to have specific documents like MSDS certification, which are applicable for non-hazardous perishable goods delivery. Each market mandates its own set of paperwork for imported agricultural products, requiring time and resources for preparation.
Factors to Influence a Balanced Strategy
Pricing strategies pave the way for precise and streamlined export pricing. As an exporter, you shouldn't stick to a single pricing strategy, ignoring the changing mobility of the international market. Customer expectations, demand-supply dynamics, local currency fluctuations, and supply chain changes require a good amount of attention as they can impact the upgrade of your pricing strategy over time.
Keep in mind that very high pricing can cut off your buyers, while pricing too low can result in huge losses for your perishable export business. You need to keep an eye on the market trend and adjust prices accordingly. It is wise to maintain a competitive pricing method for bulk orders.
Some pro-tips for optimizing export pricing:
- Export pricing is the ideal method to address duplicate and unnecessary expenses in your supply chain. These adaptive measures can contribute to streamlining distribution channels and boosting operational efficiency.
- Consider using a slab-based pricing strategy for certain agricultural products, offering different prices as per the volume of purchase orders. It's advisable to lower prices for bulk orders, making sure that the importers don't exploit it.
- When it comes to selling your perishable goods in volatile markets, fluctuations in the cost can be a boon to your pricing strategy. This approach reduces the possible risks from direct declines in trading currency values and protects against potential losses.
Warnings
- Don’t depend solely on your agricultural product’s local selling price. Both are distinct and not interlinked.
- Avoid following a strict pricing strategy, as it can be tough to change or adopt a better export pricing method.
- Though not directly related to pricing, ensure your terms and conditions have a precise and good understanding of all cost components. Unnoticed components could result in an unforeseen price increase, negatively affecting profitability.
Conclusion
In a nutshell, a successful export pricing strategy requires adapting measures to align with market trends and maintaining flexibility in accordance with different order volumes. It's crucial to stay alert in the event of currency fluctuations and ensure clarity in terms to avoid an unexpected price increase.
Citrus Freight has efficient export pricing strategies to keep a balanced market environment for your perishable goods. At Citrus Freight, we do a cross-check of your agricultural product’s cost to avoid a price hike in the market.