Revenue grows, margins shrink. It is one of the most common signs that pricing logic built for the home market has been carried abroad unchanged. The price list looks fine until freight, duties and channel costs take their share.
The price that works at home
At home you know your costs, your competitors and your channel. Abroad, each of those changes. A price that leaves a healthy margin domestically can leave very little once it has crossed a border and passed through an importer and a distributor.
Where margin leaks
- Freight and logistics, which add cost before the product reaches the buyer
- Duties and taxes in the destination market
- Channel margins, taken by importers, distributors and others along the way
- Discounts given to win the first order, which then become the price
Build the price from the market backwards
Start from what a buyer in that market will pay, given competitor price positions. Take away channel margins, duties and freight. What is left is what you can actually earn. Compare it with your cost, and you can see immediately whether the market works.
Make channel margin visible
Model each layer of the channel so you can see who earns what. It shows where a distributor's margin is too thin to motivate them, or too thick to justify. A pricing and margin gap review against today's prices is a useful first step.