How to Build Out Pricing for New Markets: A Complete Guide
Expanding into a new market is an exciting opportunity, but one of the most critical and challenging aspects is setting the right price. Pricing too high can alienate customers, while pricing too low can erode profits and hurt brand perception.
A structured pricing strategy helps brands enter international markets successfully while maintaining profitability, competitiveness, and long-term sustainability.
In this guide, we’ll break down:
✅ Key factors that influence pricing in new markets
✅ How cost-plus pricing ensures financial stability
✅ Other pricing strategies for international success
✅ Practical examples and case studies
1. Understanding International Pricing Factors
Before setting prices, brands must analyze the market and identify factors that influence costs, competition, and consumer behavior.
Key Factors to Consider:
📌 Cost Structure:
Raw materials, production, labor, and shipping
Additional duties, tariffs, and import fees
📌 Market Demand & Consumer Purchasing Power:
How much are customers willing to pay?
Research GDP per capita and disposable income levels in the target market
📌 Competitive Pricing:
How are local and international competitors pricing similar products?
Look at pricing tiers (budget, mid-range, premium)
📌 Exchange Rate Fluctuations & Inflation:
Currency fluctuations can impact final pricing
Inflation in emerging markets may increase costs over time
📌 Regulatory & Tax Requirements:
Some countries impose VAT or sales tax, which affects retail pricing
Certain industries may have price regulations (e.g., pharmaceuticals, food)
📌 Cultural Perceptions of Pricing:
In some markets, discounts drive sales, while in others, premium pricing signals quality
Example: Japanese consumers often associate higher prices with premium quality
2. Why Cost-Plus Pricing is Crucial for New Markets
Cost-plus pricing is one of the most reliable and sustainable pricing models for global expansion.
What is Cost-Plus Pricing?
Cost-plus pricing is a straightforward formula that ensures your business covers all costs while maintaining a target profit margin.
📌 Formula:
Selling Price=Total Cost+(Total Cost×Profit Margin %)
Why Cost-Plus Pricing Works for Global Markets
✅ Ensures Profitability: Covers all direct and indirect costs to prevent financial losses.
✅ Protects Against Unforeseen Costs: Tariffs, exchange rate changes, and import duties won’t eat into margins.
✅ Scalability: Works for B2B and B2C models and can be adjusted for different regions.
✅ Simplicity: Easy to calculate and apply across multiple products and markets.
3. How to Calculate Cost-Plus Pricing for International Markets
Step 1: Calculate the Total Landed Cost
Landed costs include all expenses incurred to get a product into a new market.
| Cost Category | Example Amount (USD) |
|---|---|
| Production Cost | $5.00 |
| Shipping & Freight | $1.50 |
| Import Duties & Tariffs | $2.00 |
| Distribution & Warehousing | $1.00 |
| Marketing & Local Advertising | $2.50 |
| Total Landed Cost | $12.00 |
📌 Tip: Different countries have different import duties and logistics costs, so these must be calculated separately for each market.
Step 2: Add the Desired Profit Margin
Let’s assume a 40% profit margin:
Selling Price=12+(12×0.40)=12+4.80=$16.80
🔹 Key Takeaway: Cost-plus pricing ensures every unit sold is profitable, regardless of market conditions.
4. Other International Pricing Strategies
While cost-plus pricing is a strong foundation, other strategies can help brands stay competitive in global markets.
A. Competitive Pricing (Market-Based Pricing)
Prices are set based on competitor benchmarks.
Works well for highly competitive industries (e.g., electronics, fashion).
Example: If similar products sell for $20-$22, setting a price at $21 helps attract customers.
📌 Best for: Ecommerce & mass retail brands
B. Value-Based Pricing
Pricing is based on customer perception and perceived value rather than cost.
Example: Apple charges premium prices because customers perceive high value and innovation.
📌 Best for: Luxury, tech, and high-end brands
C. Penetration Pricing (Introductory Pricing)
Lower initial price to gain market share, then increase pricing over time.
Example: Netflix entered markets with low pricing and gradually increased subscription costs.
📌 Best for: New brands entering competitive markets
5. Adjusting Pricing for Different Countries
Since costs, taxes, and consumer purchasing power vary by country, brands often need market-specific pricing.
Example: Global Price Adjustments for a Skincare Product
| Country | Cost-Plus Price (USD) | Local Price Adjustment | Final Selling Price (USD) |
|---|---|---|---|
| 🇺🇸 USA | $16.80 | Competitive Benchmark (+$3) | $19.80 |
| 🇨🇦 Canada | $16.80 | VAT & Import Taxes (+$2) | $18.80 |
| 🇯🇵 Japan | $16.80 | Luxury Pricing Strategy (+$5) | $21.80 |
| 🇮🇳 India | $16.80 | Affordability Adjustment (-$3) | $13.80 |
📌 Key Takeaway: A flexible pricing strategy is crucial for adapting to different markets while maintaining profitability.
6. Common Pricing Mistakes to Avoid in New Markets
❌ Mistake #1: Using the Same Price in Every Market
🔹 Solution: Always adjust for local costs, competition, and consumer expectations.
❌ Mistake #2: Ignoring Hidden Costs (Taxes, Tariffs, Compliance)
🔹 Solution: Calculate total landed costs before setting a price.
❌ Mistake #3: Over-Pricing in Emerging Markets
🔹 Solution: Adjust pricing for affordability while maintaining margins.
❌ Mistake #4: Not Factoring in Currency Fluctuations
🔹 Solution: Use hedging strategies or price adjustments to protect against forex volatility.
Final Thoughts: Setting a Winning Pricing Strategy
The right pricing strategy can make or break your market entry success.
✅ Use Cost-Plus Pricing as a Foundation – Ensures every sale is profitable.
✅ Adjust Pricing for Each Market – Consider import costs, taxes, and purchasing power.
✅ Combine Other Strategies for Maximum Success – Competitive pricing, value-based pricing, and penetration pricing can complement cost-plus pricing.
By implementing a well-researched pricing strategy, brands can successfully enter new markets, maintain profitability, and scale globally.
📌 Helpful Resources for International Pricing:
