1. Product cost
Cost is a key factor in the pricing of an enterprise. The enterprise’s product pricing is based on cost as the lowest limit. Only when the product price is higher than the cost can the enterprise compensate for the production costs and obtain a certain profit.
(1) Purchase cost refers to the supplier’s procurement cost, which generally includes the factory purchase price and domestic express delivery costs.
(2) Cross-border e-commerce platform cost refers to the relevant fees paid to the cross-border e-commerce platform based on maintaining the operation of the cross-border e-commerce platform, which generally includes promotion costs, platform annual fees and activity deductions.
(3) Cross-border logistics costs are an important part of the actual cost of the product and will vary depending on the cross-border logistics model.
(4) After-sales maintenance costs are the costs incurred due to returns, exchanges and damage rates after the sale of products. Many small and medium-sized cross-border e-commerce sellers ship through China, with long lines, many points and long cycles. Product damage, loss and even disputes over consumer returns and refunds often occur, which is costly. Therefore, this cost should be clearly calculated when calculating costs.
(5) Other costs include packaging costs, labor costs, etc.
2. Pricing target
Pricing target refers to the expected purpose that an enterprise wants to achieve by determining or adjusting the price of a specific product. Pricing targets can generally be divided into profit targets, sales targets, market share targets and stable price targets.
(1) Profit target is an important part of an enterprise’s pricing target. Profit is a necessary condition for the survival and development of an enterprise, and is the direct driving force and ultimate goal of the enterprise’s operation. Therefore, profit target is adopted by most enterprises. The maximum profit target does not necessarily lead to high prices. Too high prices will lead to a decrease in sales volume, and the total profit may be reduced as a result. Sometimes, high profits are obtained by adopting a low-price strategy and then gradually raising prices after occupying the market; sometimes, enterprises can adopt a solicitation pricing strategy, setting low prices for some products and selling them at a loss to expand their influence, attract consumers, drive the sales of other products, and then seek overall benefits.
(2) Sales target is to seek to maximize sales while ensuring a certain profit level. The sales volume of a certain product in a certain period and under certain market conditions is determined by the sales volume and price of the product. Therefore, maximizing sales is neither equal to the maximum sales volume nor the highest price. For products with high price elasticity of demand, the loss caused by lowering prices can be compensated by increased sales. Therefore, enterprises should adopt the strategy of small profits but quick turnover, ensuring that the total profit is not lower than the minimum profit of the enterprise, and try to reduce prices, promote sales, and expand profits. On the contrary, if the price elasticity of demand for products is low, price reduction will lead to reduced revenue, while price increase will increase sales. Enterprises should adopt the strategy of high prices, high profits, and limited sales.
(3) Market share, also known as “market share”, refers to the percentage of a company’s sales in the total industry sales. Market share is a direct reflection of the company’s operating conditions and the competitiveness of its products. As a pricing target, market share and profit are highly correlated. In the long run, a higher market share will inevitably bring high profits. An analysis of the impact of marketing wars on the profit system in the United States points out that when the market share is below 10%, the return on investment is about 8%; when the market share is between 10% and 20%, the return on investment is above 14%; when the market share is between 20% and 30%, the return on investment is about 22%; when the market share is between 30% and 40%, the return on investment is about 24%; when the market share is above 40%, the return on investment is about 29%. Therefore, using market share as a pricing target has the possibility of obtaining long-term higher profits.
(4) Stable prices are usually a necessary condition for most companies to obtain certain target returns. The more stable the market price, the lower the operating risk. The essence of a stable price target is to influence the entire market price through the pricing of the company’s products and avoid unnecessary price fluctuations. According to this target pricing, the market price can be relatively stable over a long period of time, reducing the company’s losses caused by price competition.