Pricing and methods of payments


Selling internationally can give you great benefit, from higher margins to expanded market and a broader range of customers for your company’s products.
Pricing is an extremely critical task for an enterprise and a very powerful strategic variable.
The final price for a product may be influenced by many factors which can be categorized into two main groups:

Internal factors:

  • Marketing objectives
  • Financial objectives
  • Key selling feature
  • Costs
  • Organizational consideration

External factors:

  • Nature of the market and demand
  • Customer and channel partner expectations
  • Competition
  • Other environmental factors (economy, resellers, government)

There are different ways to set selling prices

  • Cost-based pricing
  • Market perceived-value pricing
  • Competition-based pricing
  • Auction pricing

Methods of payment

One of your greatest risks is that of not being paid. Once international sales have been made, it is essential to use appropriate payment methods in order to reduce the risk on non-payment.
When negotiating terms of payment, please consider:
When will payment take place?
How will payment take place?

Main methods of payment

  • Cash/ Payment in advance: this method is risk free for exporter and high risk for importer
  • Letter of credit(L/Cs) or documentary credits: it is of low risk for both exporter and importer
  • Bank collections/draft or bills of exchange: It is of risk for exporter if the buyer default on payment , low risk for importer
  • Selling on open account: high risk for exporter, low risk for importer
  • Credit cards: potentially high risk for exporter
  • Consignment sales: high risk for exporter
  • Foreign currency : High risk for exporter
  • Counter trade/barter: High risk for exporter

Choice of payment methods and payment methods

Determining factors for choice of payment

  • Financial risk involved
  • Credit insurance cover (availability or not)
  • Number of available suppliers
  • Relative size of the importer
  • The importing countries and the currency in use

Tips regarding payment methods

  • Ask the foreign exchange division of your bank for advice and support
  • Check on the creditworthiness of importers
  • Use chambers of commerce to assist you with creditworthiness checks
  • Contact and negotiate with the importer personally
  • Explore all venues of personal intervention before using legal experts