Introduction
As a service exporter, it becomes a challenging task to price your services. You need to do the right research and price your service in a way that creates an equilibrium. It should be both profitable and competitive yet appealing to a potential international client.
Several factors play a major role when it comes to pricing. It is not about undercutting the competition or chasing the lowest price. It requires a great deal of understanding in the value you can provide, and communicating it effectively to your clients, while also ensuring that the price reflects the expertise, effort, and positive impact you can bring to their business.
Let us understand more about pricing for services, as an IT exporter, here:
How to determine the pricing of your service?
Since export involves a deep understanding of the ever-evolving economic landscape, there are various types of pricing models for a service export:
- Value-based pricing- This method involves setting a price based on the value provided to the client. Prices are based on the perceived value to the customer rather than the cost.
- Competitive market-based pricing- Here, you price your service as per the current market rate of the services. You must do some research to understand what the ongoing rates are and set a competitive price based on it. Additionally, do not forget to compare prices with competitors and establish a competitive edge.
Geographical- In this method, pricing for services should vary depending upon a specific geographical location or market.
Cost-plus method- This method determines the cost by calculating your costs and adding a markup percentage to ensure profitability.
Subscription method- For ongoing services or long-term deals, consider a subscription model with monthly or annual fees.
2 factor to help you set the right pricing
Understanding various economic conditions, customer preferences and competitive landscapes across different countries can be challenging for export services businesses. You must consider a few factors that can play a major role in helping you price your export services:
Legal Compliance- Familiarise yourself with the various payment laws, international fees, etc. for your target market. Complying with these regulations may involve additional expenses or complexities you must factor into the pricing structure. If you add these charges, remember to discuss it with the client and itemise it in your invoice
Currency Rate Fluctuation- Fluctuating exchange rates can significantly impact export pricing. Keep monitoring the exchange rate fluctuations closely to ensure that pricing remains competitive and profitable in different markets. For the international market- do not forget to do your fair share of market research to understand the target market or country’s local culture, legalities and other economic indicators. This can help in smooth functioning for a newbie service exporter and can help you solve any potential crisis with ease.
Build a competitive edge through smart pricing.
If you’re working for clients abroad or in this case, exporting your services, then you need to understand how to develop a price for the global market. Here are some tips that can help you to define your service’s pricing.
Do market research- Any goods and service provider or business should always begin its export journey by doing thorough research. Understand the demand for your services in different markets to set competitive and realistic prices. Research what your competitors are charging for similar services. Look at both local and international competitors. Additionally, identify different customer segments and their willingness to pay.
Give an estimate price- After market research, there should be some understanding of the market and what price you can quote to the clients. Determine the minimum price you need to cover your costs, you must then markup a percentage that ensures profit while remaining competitive.
Create a balance- Find an ideal balance between value and business goals. These elements lead to significant benefits for your business. Increased profitability increases cash flow, leading to conversion rates and expanded market penetration and market share.
Set the pricing tactics- Be tactical, initially say if a competitor charges a higher price for an identical offering, you can establish a more affordable price point. Conduct a comprehensive competitive analysis, understand the strengths and weaknesses and formulate an appropriate pricing strategy. Additionally, plan for any discounts or promotions and how they will impact on your pricing and profitability. Offering discounts or promotions during the initial stages helps you find more interested clients.
Mistakes to avoid
There are a few mistakes which people often make when initially setting up the prices for their service export. Thus, here are a few things one must avoid to have better experience in the international market.
Rigidity – Avoid being rigid. Whether it is about the project or pricing, do not be rigid. Communicate with your client and highlight your USP to explain your pricing, try to be flexible to negotiate pricing and other aspects of the project. Additionally, regularly review and adjust prices based on market dynamics, customer feedback, and changing costs. Continuously evaluating these factors ensures optimal pricing strategies.
Pricing – Do not overprice your service. This can lead to losing future customers due to high fees. Similarly, avoid underpricing, as it can devalue your brand. Conduct market research before setting up the service price.
- Communicate clearly – Ensure your pricing structure is clear and transparent to avoid misunderstandings. Clearly communicate the value and benefits of your services to justify your pricing to clients. Account for additional costs related to exporting services, such as travel or compliance with foreign regulations.
Summing up
The global market is extremely competitive so having a well-defined pricing strategy is the key to flourishing in your export business. By systematically and strategically setting up your service prices, you can navigate this balance between profitability and market penetration, paving your way through the complexities of entering and thriving in international markets with ease.
Breaking into the US market with your IT export services can be a game-changer. Start with thorough market research to understand your target audience and their needs. Craft a compelling value proposition, emphasizing the unique benefits you offer. With these steps, you’ll position yourself as a trusted, go-to provider of IT services in the US, setting the stage for sustained growth and success.
