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Pricing locally could be a driver for global success

Dan Wilkinson explains why firms need to fully understand their product, the local market and the customer

open air food market

The route to sustained growth for many players in the software industry inevitably lies in expanding the company’s international reach. With sales opportunities around the world in abundance, firms will be looking at ways to repeat the successes they’ve seen at home.

While Europe remains the preferred step-up for some, many may find joy in exploring a host of new territories for growth and are increasingly looking at emerging and developed markets, such as the Americas, the Middle East and Asia.

Regardless of where you choose, the benchmark for success remains the same: how will it impact the bottom line? Such a strategy demands careful consideration as to how the local market acts, and how your product fits in. Start by asking yourself: it is priced right, and does it solve local customer issues?

New regions call for new strategies

Depending on the location of choice, sales conversion rates could anywhere between five times higher or lower, and will impact the effectiveness of entering a region. Customers in Brazil, for example, may not have as high an appetite to pay for software in the same way as people in Germany. Therefore it’s important that you consider how to tailor the product and pricing to each market.

Localising software to a territory’s most popular currency, and existing pricing structure can be daunting, but this preparation work, namely reaching an understanding for the local traits of the targeted market, will help. It takes knowing your future customers and their buying power to form a strategy to maximise conversion - especially in emerging markets.

In practice, this means researching the territory you want to expand into, establishing which currencies people use, levels of disposable income, competitors’ local pricing, the size of your industry in that market, and the demand.

Selling your product in the local currency can have a dramatic effect on checkout conversion, and is the reason you should always offer local currency where possible. But that doesn’t mean you need to offer your software at a local price. You can also test pricing increases or decreases, and whether this leads to a dramatic shift in sales. Such testing could not only provide measurable data but also give you a chance to adjust and learn.

Local pricing in action 

To take an example, one vendor offered their software in only USD to customers from developing markets such as Brazil, only to see a poor sales return. But after their research showed the average income was lower in these countries against their home market, they decided to sell in local currency and at a slightly lower price point. Despite the discount, this changed strategy saw the vendor acquire many new customers, and see revenues soar.

Lowering prices in certain territories can, however, occasionally lead to customers using a fair degree of sneakiness to spoof their location, and claim a product at the lowest price on offer around the world. But there are a handful of ways to avoid this, such as asking customers to enter a postcode and cross-referencing this with their IP address to see if it matches up with the postcode they provided.

When it comes to pricing, whether for foreign markets or home territories, you must never underestimate the importance of having a clear understanding of your product, the market and the customer. The value in taking some time to consider all these factors will allow you to maximise the strengths and opportunities that lay before you, not to mention revenue.

Dan Wilkinson is content manager at Paddle

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