Grow your cross-border business with prices that attract and keep customers

Finding the right price point for your product is important to scaling your international eCommerce business

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For small- to medium-size enterprise (SME) businesses looking to expand to international markets, the costs can add up. Warehousing, shipping, foreign exchange costs, and fees are all things that a business owner needs to consider when looking outside of the domestic market. That’s why landing on the right price points for your products is one of the most important things to do  want to make money and remain competitive.

Why is pricing so important for businesses?

First, pricing helps you understand the difference between the cost and value of your product. The cost of your product is the amount you spend to produce it. The value is what your customer believes it is worth to them. Pricing should be in line with the value of the benefits that a product or service provides, as well as what your competitors charge.

Setting the right price point can help determine the value you get for your product, which affects profitability. In other words, the right price can make or break a company’s product line.

Psychologically, pricing sends an important message to customers. When prices are set high, customers see the quality of the products. In contrast, setting prices too low can send a message that your product isn't as good. Pricing products appropriately also secures the profits eCommerce businesses need to grow.

Determining the best pricing strategies and tactics for your product

Who is your target audience? What are they willing to pay? What are your competitors charging for similar products? There are so many variables that enter into a pricing decision that it’s easy for SMEs to get lost when trying to find the most effective pricing strategies to scale  eCommerce businesses.  

Pricing strategies and tactics are useful tools for SMEs to increase sales while remaining competitive, but not every pricing strategy is applicable to every business. eCommerce businesses expanding in the global market can determine the best pricing options by using:

  • Cost-plus pricing: Cost-plus pricing is the easiest way to determine the price of a product. SMEs make the product, add a fixed percentage on top of the costs, and then sell it for the total.
  • Competitive pricing: Beat out the competition. With competitive pricing, SMEs use their competitors’ pricing data as a benchmark to keep their prices below the competition.
  • Value-based pricing: Value-based pricing refers to setting a price based on how much the customer believes a product or service is worth.
  • Discount, bundling, and loss-leading pricing: Shoppers love sales, coupons, and any other markdowns. Try this low-price strategy to increase conversion rates and sales on your website and encourage customers to buy more than what they intended.

Match your pricing strategies to your business and customers

It’s important to understand that there is no one-size-fits-all approach to eCommerce profitability since each strategy, or a mix of strategies, will be as unique as the SME. It’s also important to know that pricing strategies are not fixed and need to be continually monitored and adjusted to fit customer demand, market conditions, and the business as it changes over time.

Here are a few of the best practices to keep in mind when determining a price for your product and finding your value proposition:

  • Identify your business objective. What is your ultimate goal for the product or service? Define this objective, put it into words, and keep it in mind as you use it as a guide to determine your pricing.
  • Evaluate and research the competition and their pricing. What makes your business truly different? Unless your product is unique enough to be worth the extra money, don’t set your prices higher than your competitor.  
  • Calculate costs. The actual cost of producing a product and bringing it to market is key to determining if exporting is financially viable. SMEs that do cross-border eCommerce sales should fully understand the cost of goods sold (cost of the materials and labor), attract people to their product, and cover any other variable costs such as logistics, warehousing, international marketplace fees, production time, packaging, promotional materials, ads, shipping, and loan repayments. Simply put:

Product Cost Formula = Direct Labor + Direct Material + Factory Overheads

Make sure your prices cover your own costs and time, are current, competitive, and meet your profit margins. Profitability calculators can be a useful business tool for this purpose. Or, you can use these formulas to work out your gross profit margin and your net profit margin as a percentage, depending on what your overall business objectives are:

  • Gross profit margin = (gross profit/sales) x 100
  • Net profit margin = (net profit/sales) x 100

Foreign transaction fees can add up and need to be considered when pricing your product. Fees are variable and are charged whenever someone buys a product from a company based in another country. “Non-market” costs include tariffs, customs fees, currency fluctuation, transaction costs (including shipping), and value-added taxes (VATs). SMEs should maximize margins, minimize fees, and spend less on currency conversions so there is more to spend on growth.

  • Hook customers with attractive pricing. Pricing is driven by the product value. Always keep pricing clear and easy for the customer to understand so as to build trust. While SMEs should not charge less than what their products are worth, they also shouldn’t price themselves out of the market by charging too much.

Pinning down pricing is one of the best ways for SMEs to improve conversion rates and scale eCommerce businesses. By working with a cross-border partner like LianLian Global, you can save more money and be more profitable while receiving competitive conversion rates with no hidden fees, deposit requirements, or transaction minimums.

Start growing your business today with LianLian Global.


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