Exporting Your Services

Service Positioning & Pricing Issues

How a service is positioned, priced, and delivered is dependent on the business and cultural customs of the export market. The following questions and answers provide tips for success in positioning and pricing:

How should I position my service?
What should I keep in mind in finalizing a contract for service delivery?
How should I resource service delivery?
What quality factors will matter to foreign customers?
What are the most common problems with service quality?
How should I set a price for my service in a foreign market?
What are the most common pricing mistakes?
Why not just make our prices the same as, or slightly less than, our local competitors?
What about pricing in online bidding?
How big a variable is price in the customer’s purchase decision?
How can I find out how my competitors are pricing their services?

How should I position my service?

Usually you will position an export service similarly to your domestic positioning, which would be one of the following:

  • Efficiency
  • Value for money
  • Quality of service
  • Customization of service

 

If you are presently positioned based on low price instead, you may want to rethink your export positioning. It is difficult to be profitable while competing on price in an export market, since you inevitably have higher costs than your competitors in the target market.

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What should I keep in mind in finalizing a contract for service delivery?

Service delivery contracts can range from a handshake to dozens of pages of legal and technical specifications. In every case it is essential for the two sides to have the same understanding of:

  • The services to be provided.
  • Any preconditions to the provision of the services such as availability of the customer’s personnel, information, facilities, mobilization payments, weather conditions etc.
  • Which personnel are to provide the services, and which personnel or facilities are to be made available by the customer.
  • Dates on which provision of service is to commence and end.
  • What payments are to be made and when.
  • Whether or not there will be a fee withheld at source.
  • The circumstances under which the contract may be terminated, plus the implications in terms of completion of work, handover of work completed to date, partial payments, penalties and how “completion” of tasks will be determined.
  • Conditions under which payments may be held back.
  • Conditions for the return of bid or performance bonds.
  • Procedures to be followed if the customer does not make the personnel, information, and facilities available as agreed.


The process of drafting a contract is an excellent opportunity for ensuring a full understanding of customer expectations and provider capabilities. A contract is often considered to be a binding agreement outlining how the parties will work together. It will help to resolve any disagreements and will assist in ensuring partial or full compensation.

In developing a contract, it is important identify the governing law that will be used since countries have differing laws of contract: European countries use civil codes, some Arab countries use Islamic Code, whereas in Canada (with the exception of Quebec) contracts fall under the common law system. These differences will affect how contracts are enforced and the rights of the parties involved. It is important to specify in the contract what particular governing law will apply, and even the location (country or even the province) in case of litigation.

While it is not always necessary to have a lawyer draft the agreement, you should seek the advice of a lawyer if you have questions or concerns. It is, however, equally important for both parties to retain control and ensure the contract will: be realistic, ensure delivery of services as required by the customer, and guarantee payment as agreed. It is also a good practice to hire an independent translator to translate a contract’s contents back to the original language to help identify and clear up potential misunderstandings.

All parties need to have a clear record of decisions and responsibilities. The record may vary from a one page document to a formal contract, but its main purpose is to ensure each party understands the terms and conditions of the business deal. Should disputes arise, the record is an valuable tool for working out any differences. The most important part of a contract is the understanding of its role by both parties.

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How should I resource service delivery?

Before trying to convince potential customers to use your services, make sure you have the capacity to deliver those services effectively. Once you step into an export market, you open the door to new customer demands. Here are some issues you need to consider:

  1. Initial contacts
    • Service standards for response time
    • Hours the phone will be answered, and in which languages
    • Access by fax and e-mail

  2. Staff training on cultural issues

  3. Multi-site management
    • Making sure service in Canada doesn’t suffer as resources are allocated to export activities
    • Coordination with key overseas staff
  4. Consortia management
    • Coordination with overseas partners
    • Coordination with suppliers
  5. Back up capacity
    • Identifying other firms that can provide support in emergencies

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What quality factors will matter to foreign customers?

Just as in your domestic market, foreign customers will want to be sure their expectations are met. This means you need to actively shape customer expectations by educating potential customers about what you can deliver. Then you need to meet those expectations consistently. Typical service quality factors worldwide are:

  • Consistent service provision
  • On-time delivery
  • Respectful and courteous treatment
  • Culturally appropriate expectations of customers

What are the most common problems with service quality?

To ensure quality service, you will need to resolve the following apparent contradictions:

  • You need best staff to be in direct contact with customers, but company promotion often means moving away from direct customer contact.
  • You need staff to be highly motivated, but if you have a small company career paths may be “flat.”
  • You need staff to use the latest information technology, but there is little time available for training.
  • You need customers to cooperate, but customers may not know or accept their role in “co-production.”
  • You need staff to take initiative in solving customers’ problems, but staff also need to conform to standard service procedures.
  • You need staff to “recover” well with customers, but you may not have given them sufficient authority to act.

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How should I set a price for my service in a foreign market?

In pricing your service, you need to take into account both what people expect to pay for the service and what your break-even point is. You can calculate your break-even point by determining how much money you need to make (per service or unit of time) to cover both your fixed costs (overhead) and variable costs linked to providing that service. For professionals, you would calculate your daily break-even fee by totaling all of your costs and dividing by the number of days you have available to provide the service. In calculating the number of days available, be sure to deduct the days you will need for holidays, business development, professional development, and administrative work (which is likely to leave you with between 160-185 days available for paid work).

Your price needs to include hidden communication/transportation costs and other non-domestic expenses such as possible currency fluctuations prior to the end of the contract. You need to price your service in the currency most acceptable to your customer.

If a foreign country requires a certain percentage (often between 15 to 30 percent) of any professional fee be withheld at source for tax purposes, you will need to build this into your price. As a result of tax treaties, you will probably be able to recover the withheld amount…but that could take up to 18 months.

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What are the most common pricing mistakes?

Some common mistakes include using the wrong currency for calculations and neglecting to take into account:

  • Hidden travel and communication costs
  • Potential currency fluctuations
  • Fee holdbacks at source
  • Taking longer than expected to collect money owing
  • Subcontractor expenses
  • Translation/interpreter expenses

The biggest mistake is underestimating how long it will take to prepare and deliver a service in an unfamiliar market (different holidays, work ethic, etc.)

Why not just make our prices the same as, or slightly less than, our local competitors?

Your purpose is to make a profit. So, while you want to know your competitors’ pricing, you need to price your services in relation to your own breakeven point. If that places your price too high in relation to the competition, you should re-think whether or not to be in that export market.

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What about pricing in online bidding?

Because of the international online environment, it is particularly important to be careful about the currency you are using for bids and quotes. Most online bidding sites allow you to pose questions about the request for proposal before you submit your quotation – it is a good idea to use this service yourself and to monitor questions asked by your competitors.

You also need to be careful about the terms of the bidding site. Some allow the potential customer to select a successful bidder at any time, while others expect no selection to be made until the closing date for bids has past.

Generally speaking, when you are bidding on sales (e.g., airline tickets), a bid up to 20 percent below market rate may be successful. The best strategy is to monitor a site for several weeks before you bid seriously.

How big a variable is price in the customer’s purchase decision?

The role that price plays depends on the type of service you are offering. If you are offering a standard service already available in the target market, customers are likely to be very price sensitive. If, on the other hand, you are addressing an unmet need and offering either a unique service or a highly customized service, customers are likely to be relatively indifferent to price as long as they feel they are receiving good value for money. In fact, they may be willing to pay up to 10 percent extra to get exactly what they need from you.

Since, as an exporter, you have additional communication and travel costs, it is difficult to be profitable if you compete solely on price.

For office support services, customers are usually looking for a 40 percent savings over having the work done in-house. However, excellent quality control and timely delivery are also important factors.

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How can I find out how my competitors are pricing their services?

Colleagues familiar with the target market should be able to tell you how competitors are pricing their services. You can also “shop” for their services to find out for yourself or ask:

  • Current customers
  • Government trade officers
  • Embassy staff
  • Competitor’s subcontractors/suppliers
  • Ex-employees

You may also be able to get standard pricing information from:

  • Competitor’s websites and promotional material
  • Trade associations
  • Trade journals

You can also review successful online bids.