By Mitchell Goozé
As a business owner, how can I get the information necessary to set pricing in another country?
This is a complex question, which includes the need to think about not only the value proposition, but also the inherent commerce issues in the target country.
Let’s start with the easy part, the value proposition. You already have a domestic pricing strategy for your product. In a truly global market it can be difficult, if not impossible, to charge materially different prices in different countries without creating a so-called grey market where products are bought by third parties in one country and then sold by them into another country below the suggested retail price in that country. This can be obviated if the version in one country will not operate in another country.
So, the question now is, “Can I charge more in these markets to cover my added costs?” The answer is: “It depends.” What are the added costs? Do your competitors have those same costs, or are you at a cost disadvantage because of how you’re trying to do business in that country? Just because you have a “cost-add,” that doesn’t inherently translate into a “value-add” to the customer. Customers pay for the value they receive, not for your costs in providing that value.
To determine “fair market value” in another country, start with the simple approach of looking for a similar product for sale in that country. How is it being priced? If what you are providing is truly a different — and better — solution, then what does the current solution cost in that country? Will the additional price you want to charge really be valuable enough in that country to induce customers to make the switch? Are you going to offer the first product of its type in that country? If so, consider that “first-mover advantage” is not usually true. The expression “the second mouse gets the cheese” is typically more accurate in these situations.
What other costs are there to doing business in the country you’re considering? Seek out input from your country’s embassy or trade mission in the target country; often, they can provide valuable information about these issues. Also, don’t forget to use the Vistage network to ask other members about their experiences in the target country, which can also be very valuable.
Really, what it all comes down to is value and alternatives. Is the value you’re providing worth it to enough people with the money to pay for it? The answer could be surprising; it continues to amaze me how many luxury items are bought in supposedly poor countries at the same or higher prices than they would be available in their home country. Pricing strategy isn’t a simple issue, but should be a subject of considerable debate, and you need a global pricing strategy in today’s market if you are going to venture overseas.
A recognized expert in marketing, innovation and leadership, strategic positioning, and customer relationships, Mitch Goozé is an experienced general manager and leader with operating experience in the high-technology and consumer products industries. Mr. Goozé has served as a member of the Board of Directors of several major private companies and is a Certified Speaking Professional (CSP) who’s been named Marketing Resource of the Year by Vistage International. Contact him at email@example.com.
Originally published: Jan 30, 2012