I. Basic knowledge of pricing
1.Cost structure: cost of production, selling and delivery costs, taxes and tariffs.
a. Cost of production
? Costs related to the product manufacture: labor, raw materials,
component parts, salaries, heating & lighting, general maintenance of
the factory building and plant.
? Other ancillary costs directly allocated to the product:
warehousing/storage, distribution involving inter-factory transfer
handling, assembly costs.
b. Selling and delivery costs
? Fixed costs: salesman’s salaries
? Variable costs: packaging, transport, commissions, advertising and sales
trip expenses, insurance premium.
c. Customs duties: other costs factors taken into account by the exporter.
2. Points to be considered in pricing: be acceptable to the customers;
generate enough revenue to cover all its costs. a. International market level: relevant market data on competitive prices
for similar products
b. Policies and regulations: those applying to a particular market area
c. Exporters' purpose and importers' requirements:
d. Supply and demand relationship: the world market may fluctuate (rising
or falling of the market prices) with the change of it. e. Others:
? Adequate profit margin over your actual costs
? Details of the contract: quality and quantity of the products,
transportation costs, place and terms of delivery etc.
? Method of payment and fluctuations of foreign exchange rates
3. Approaches to pricing strategies
? Based on price range: high, low and moderate
? Based on market areas: ethnocentric, polycentric and geocentric pricing
Cost-oriented pricing methods以成本为导向的定价法
a. Break-even pricing损益两平定价法: a method of determining the quantity of sales where the firm’s revenues will equal its costs. b. Cost-plus pricing成本加成定价法: a method of adding to a basic cost
figure, an amount to cover profit and other unassigned costs.
c. Marginal cost pricing边际成本定价法: a method of calculating the
extra production costs involved.
noun: skimming price/loaded price/market price/competitive price/cost
price/basic price/invoice price
verb: go up/mark up/increase/rise/advance/raise/improve/lift/come
down/mark down/drop/fall/decline/cut down/reduce/bring down
adj.: reasonable/practicable/popular/on the low side/in line with the market
level/workable/attractive/low/high/on the high side/out of line with the
make a profit/gain profit/net profit/total profit/profit after tax/profit before
tax/profit margin/profit ratio/average rate of profit/to reap fabulous profit/
quick profits(easy profits)