1 CHAPTER XIX PRICING IMPORTED GOODS & DISTRIBUTION CHANNELS  Cost of Imported Merchandise  Value Marketing  Distribution Channel  Selection of Sales Representative  Sources of Information

2 Cost of Imported Goods (1) FOB price (2) Ocean or air freight (3) Marine insurance premium (4) Bank charge (5) Unloading charge (6) Customs duty (7) Merchandise processing fee (.25%) (Minimum $25 & Maximum $485) (8) Harbor maintenance fee (.125%) (9) Customs broker's fee (10) Customs bond fee 1 Landed cost at importer's harbor

3 Cost of Imported Goods (11) Trucking from harbor to warehouse (12) Storage at warehouse (13) Product liability insurance 2 Net cost to importer 1 Single transaction bond premium: $3.00 per thousand dollars of value plus duty (general merchandise) 2 Applicable to imports with no domestic representation by a foreign manufacturer

4 Cost of Imported Goods  Product Liability Insurance Premiums  Fruit$4.522 per $1,000 receipts  Computer components$6.016  Tools$7.140  Clothing$4.011  Shoes$1.924  Plastic piping$  China (Tableware)$6.260  Pens/Pencils$2.992  Giftware$4.962  Premiums are normally higher for start-up operations

5 Cost of Imported Goods  Retail price: Minimum four times FOB price  General markup (1) Mail order items: 300 percent (2) Wholesaler: 30 to 50% (3) Retailer: 100% (4) Importer: Minimum 30 to 50% when stock carried, 10 to 20% when no stock  Do not import anything without a firm order. Better get a letter of credit from a buyer.

6 Cost of Imported Goods  Until you have built up strong distribution channels, stick to sample sales without carrying stock.  Stipulate key specifications in your purchase order and letter of credit  The 3rd party inspection such as SGS International is recommended if you import from unfamiliar suppliers

7 Value Marketing Value Marketing (1 ) Offer products that perform (2) Give more than the consumer expects (3) Give guarantees: a no-question-asked guarantee or a longer guarantee (4) Avoid unrealistic pricing (5) Give the consumer the facts: Detailed information (6) Build relationship (Relationship Marketing)-Frequent-buyer plan, 800 numbers, and membership clubs

8 Distribution Channel Distribution Channel  The success of a product: 30% product & 70% marketing  One region or one market segment and be successful. Very difficult to "serve it all" and be successful.  Consumer products:  Importer--> Sales Rep--> Wholesaler--> Retailer--> Public  Importer--> Wholesaler--> Retailer--> Public  Importer--> Sales Rep--> Retailer--> Public  Importer--> Retailer--> Public  Importer--> Public

9 Distribution Channel Distribution Channel  Industrial products:  Importer--> Sales Rep-->Distributor--> End User  Importer--> Distributor--> End User  Importer--> End User Sales Representative = Manufacturer's Representative

10 Selection of a Sales Representative (1)Through referrals. Most successful manufacturer's representatives do not advertise. a.Referrals from other sales agencies: Agencies selling other products to the same market b.Referrals from other importers: Importers of similar but noncompetitive products c.Referrals from potential buyers of your products

11 S election of a Sales Representative Advertising (2) Advertising a.In the industry publication: Every industry has its own magazine. b.In MANA's Agency Sales magazine or Directory of Manufacturer's Sales Agencies Manufacturers' Agents National Association (MANA, c.Trade show: A sign "Reps Wanted in ________"  Thorough investigation of the representative's credentials before signing any agreements

12 Sources of Information  PIERS (Port Import Export Reporting Service) 