Competitive pricing is key to succeeding in a global market. There are now an estimated 213 million registered companies globally, each competing with one another on the basis of service, customer care, and pricing.
Price is one of the largest determining factors for consumers in terms of which products and services they buy. Companies know this and try to give consumers the best possible price for their service while maintaining profit. There are plenty of tactics that can be used for this, including price skimming and price localization.
Companies that operate over multiple regions or countries are increasingly turning to price localization as a way of bringing in more customers and growing their revenue.
This is particularly useful for SaaS businesses without many brick-and-mortar assets.
What Is Price Localization?
Price localization is the process of changing a currency or unit price of a product or service depending on a customer’s location.
There are two main types of price localization:
Changing the display currency
Changing the unit cost of a product
Changing the display currency is sometimes assumed to be a cosmetic change, but it can have a big impact. Customers who can browse products, particularly those which will have a sizable impact on their business operations, in their own currency will feel that the company is committed to succeeding in that nation’s market.
Additionally, consumers are more likely to trust a site that lists prices in the local currency.
Changing the unit price of a product or service is a bit more complicated.
Cost of living and working, and the level of competition in an area are two of the major factors that will influence your decision to change prices based on location.
The general rule of thumb is: high competition equals lower prices.
The opposite is also true. The logic behind this is that in areas dense with competition, your service is likely to struggle without offering low, competitive prices. In areas where there is less or no competition, you can afford to charge higher prices.
Price localization can be done on its own or as part of an ecommerce personalization strategy. Ecommerce personalisation is a popular strategy for driving business growth by engaging more with your customers’ needs and giving them a unique shopping experience.
Why Use Price Localization?
Used correctly, price localization can bring new customers into areas where there’s a lot of competition. It can also raise revenue in areas of low competition by charging according to customer need and whether they can easily obtain the same product or service elsewhere in their area.
Price localization is also a great addition to your strategy for driving sales with analytics. By gathering analytics data for the location of your customer base, you can develop a solid price localization plan to help drive sales.
How to Develop a Great Price Localization Strategy
Your strategy for price localization will depend on the scale and the nature of your business.
For example, a business offering contact center software across the Western United States will need to consider factors like varying cost of living, local competition, and urban/rural areas.
On the other hand, international cold calling systems businesses operating across 12 countries would need to consider local currency and global differences in service availability.
1. Pay Attention to Local Currency
This is the simplest way of introducing price localization into your business model. You can either give your customers the option to switch between currencies themselves or have the website load automatically with the local currency.
The former is a great option if your clients are also an international business. Some businesses like to conduct all of their business in the local currency, or they may prefer to use the US Dollar as an international currency.
The reason that local currency is a good way to go is that customers feel recognized and valued as an international customer. It can also help to build trust with international customers that their transactions will be secure.
2. Do Your Research
There can be a lot of research that goes into price localization but putting the work in pays off.
Firstly, you need to research what it is that your customers need based on their location. Price localization works off the premise that clients everywhere want their needs met while accounting for their varied geographical locations.
To do this, there are a number of approaches you can take:
- Ask existing clients how their needs could be better met
- Reframe your own business’ experience to consider customer location
- Research What have competitors found to be useful? Competitor blogs are your friend in this respect
- Analyze sales data by location for points of poor sales numbers
Secondly, you need to understand global differences in cost of living and of working. The below image shows the cost of living from low (green) to high (red) globally.
Price localization using competition only works so well. In areas with a high cost of working and low competition, you may find that you price yourself out of the market by pricing too high. Clients will pay for quality services that meet their needs - as long as they are actually able to.
It’s key that you understand market standard cost across countries and regions to price appropriately.
Another aspect of research you might consider is understanding what types of metrics measure customer satisfaction. Pricing is a key part of customer satisfaction, so understanding this will help you to see whether your strategy is effective or needs alteration.
3. Leverage the Power of Social Media
Social media is a great tool for building long-term customer relationships and keeping yourself attuned to customers’ needs. It also happens to be an effective way of reaching customers based on their location.
Although B2B marketing works a little differently than B2C marketing on social media, using the right platform and approach can still make a difference to your sales and income.
Consider targeting small businesses on social media that are more likely to rely on their social media presence than on their website for communicating with customers.
As an example, consider that you’re running an ad campaign on Facebook for payment management systems for small businesses. Your geographical target is the Eastern United States and the United Kingdom.
You can run an ad displaying different pricing models based on customer location. So, for this example, you would want to be offering lower prices in areas of high competition, like New York City or London, and higher prices in areas of lower competition.
Customer lifetime value can be greatly improved by interacting with customers in the online spaces that they use the most. You can also use social media as a research tool to find out the different financial needs of your customers
4. Don’t Forget About Packages
Bundle pricing and offering service packages is a great way to leverage price localization. By recognizing the specific needs of each area, you can tailor your bundles locally and price them according to need and competition
Let’s use a customer communication system (CCS) company as an example. Imagine that this CCS business targets new startups hoping to set up a communication system with their clients. A startup in an urban area with clients all in a small geographic region might need a system that can cope with lots of conference calling and strained VoIP infrastructure.
On the other hand, a startup in a rural area with clients spread across a wide region might need a system that is able to manage on poor internet connection. They may also need cloud solutions to communicate digitally with clients that they cannot easily meet physically.
This communications company should look into bundles that meet both of these needs. They should then price these according to customer location and the level of price competition they are likely to face as a result.
You might include perks like a small business phone number or a communication consultant to help companies meet their needs.
5. Keep Your Goals in Mind
Why are you developing this strategy? Always have the answer to this question in mind while developing your price localization strategy to keep you focused on achieving your goals.
For example, if your goal is to increase customers from a particular country by 10%, then you might want to focus on understanding if there are any overarching issues in that SaaS market that you can solve.
Additionally, look into offering packages or bundles that are unique to that market and its needs. Also consider average operating costs in that country and the level of competition.
If you’re working in a competitive global market, price localization should be a key business process for your company. It can help you to operate competitively and bring in more customers in a given area.
Finally, it can help to account for regional cost of working differences and individual business needs in a given part of your market, paving the way for a truly international storefront and beyond.