Establishing price in a foreign market

Valerie Berset-Price

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Valérie Berset-Price, owner of international business consulting firm Professional Passport, is the expert behind the Vancouver Business Journal’s advice column: Going Global: Business insight on an international scale.

Dear Valérie,

My company is interested in selling our line of food products internationally. We keep receiving emails from potential foreign distributors, and we decided that in 2013 we would take advantage of this opportunity to make up for the soft domestic market we’re still experiencing. As the person in charge of setting up our international structure, I am wondering how we should go about establishing prices in countries that have a different standard of living than ours. Do you have any recommendation or scale that other exporters follow with regard to international price structure?

Thank you!

Steve

Valerie Berset-Price

Dear Steve,

What you are referring to is the purchasing-power parity index (PPP), which shows that a Starbucks Latte might be 40 percent more expensive in Geneva, Switzerland, than here in Vancouver. PPP, also often used under the name of “The Big Mac Index,” is the tool economists use to equalize the economic fluctuations that exist between the different currencies countries use throughout the world.

The best way to establish the price of a product or service for a foreign market is, however, to visit the country of interest and find out how similar products are priced. This exercise allows for so much more than the establishing of price. It allows for great observations on how the product is distributed, packaged and marketed to the foreign client. Taking the time to visit the country of interest will provide you with a much deeper insight into the cultural mores and shopping habits of your potential customers than establishing the price from afar through an economical tool.

I hope this helps!

Valérie

Do you have a question for Going Global? Email Valerie@vbjusa.com. Please note that the Vancouver Business Journal and Valerie Berset-Price reserve the right to publish your letter or an edited version in all print and electronic media.

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