Libérez la croissance mondiale : le pouvoir de la tarification localisée

If you restrict your marketing to a local audience, you will fail to take advantage of the global reach that the subscription-based economy offers.

Consumers prefer to shop locally and use their currency. Therefore, it is essential to ensure your prices are correct in all your target countries. In the European Union, you can quickly increase your revenue by switching from euros to dollars in your pricing.

Additionally, there’s a chance to construct your market pricing according to the strength of each worldwide market because different markets have varied saturation levels. We will show you how localization can have a significant impact and how to localize for growth so you can get started on the correct track to growth.

In this article, we will talk about the power of localized pricing

What Is Cost Localization?

Price localization is used to make prices more in line with local currencies, market situations, and people’s ability to buy things. There are two ways for companies to localize their prices: they can either show prices in the local currency or set up pricing models specific to the area.

Businesses can benefit from price localization in two ways: first, by offering customers the most value for their money, and second, by more correctly and reasonably pricing their products for their customer base and local market. This method makes discovering consumer behavior across price points and attracting customers in untapped markets easier.

Price localization is also known as pricing localization, geographical pricing, location pricing, zone pricing, localized pricing, or price internationalization.

This helps businesses to fix their product prices more accurately and relatively to their customer base and local market while providing customers with the best possible value for the product or service they buy. It is an ideal way to attract customers in new markets and understand buying behavior at different price points by tailoring pricing strategies to specific geographic regions or locations.

Importance of Cost Localization

A company that only deals in one currency must catch up on many potential profits, even if converting currencies is easy. Customers in other marketplaces will be severely discouraged from purchasing if they cannot see prices in their native currency.

However, changing currencies is only part of entering new markets. Changing with the times of the local market is also essential. Businesses risk losing consumers or alienating existing ones due to excessively high or cheap costs if they do not consider regional pricing trends.

They will permanently lose against a competitor who has a pricing plan that is both competitive and tailored to the specific needs of their local market.

For instance, a clothing company that bases its prices and inventory on currency conversion alone would need help competing with a store that caters to local demand and budgets. Things like median income and personal style would be disregarded in this case.

Top 3 Approaches of Localizing Pricing

Approach 1 – Localization for Cosmetics

One of the simplest ways to localize prices is through cosmetics. It has nothing to do with significantly altering costs. It merely displays identical items under many names and currencies.

Using a website localization service and a payment processor that handles international transactions is all needed for online enterprises like eCommerce and SaaS. Similar to how a website may be customized to support several languages, the same logic applies to currencies.

Cosmetic localization should be a minimum requirement for every business. It is easy enough for startups to use that they may start seeing results right away.

Approach 2 – Market Localization

The term “market localization” describes the process by which businesses modify their prices to meet the needs of specific regional markets. To accomplish this, they need to consider how people’s purchasing power, cost of living, political and economic stability, local competition, and other factors impact people’s perceptions of prices.

A company’s product line determines the specifics of how demand-based pricing works.

An excellent example would be gasoline. It is more expensive in cities, cheaper in the suburbs, and astronomically costly in rural locations with 50 miles of petrol stations. Gas station owners have the right (and, economically speaking, the need) to charge whatever they want in places like the mountains because there is not much demand.

Approach 3 – True Localization

Optimizing prices in real-time according to cultural characteristics, consumer preferences, and local expenses is what accurate price localization entails, instead of just converting currencies. To achieve genuine localization, businesses learn how much clients can spend in various locations by conducting extensive price sensitivity research.

Geographic pricing exemplifies true localization by factoring in area economic realities, purchasing power parity, and market saturation. The Big Mac Index is an excellent example of this idea since it compares the prices of Big Mac burgers from McDonald’s in different nations. The operational costs and ingredient sourcing charges are higher in Western Europe, Australia, and New Zealand; therefore, a Big Mac costs more. But in South America and a lot of Asia, you can have the same burger for a lot less money.

Implementing actual price localization takes a lot of work. Companies must take many elements into account. These include, but are not limited to, transportation costs, local manufacturing prices (if relevant), transportation fees, delivery charges, currency fluctuations, cultural preferences, and taxes and fees. This method usually yields the best ROI and most consistent outcomes.

Usually, early-stage businesses do not have enough data to implement this degree of pricing localization completely. However, every growing late-stage company looking to make a big splash in global markets should consider genuine pricing localization techniques.

Companies can improve their price to match local customers’ expectations and willingness to pay by performing extensive market research, researching local economic situations, and recognizing cultural nuances. In addition to increasing revenue possibilities, this strategy boosts consumer satisfaction and the brand’s impression in many locations.

The Reason Why Localized Pricing is Important

Reason 1 – Boosts Sales in Specific Markets

If done effectively, price localization can help a business gain clients in competitive or underserved markets. It also lets corporations set rates based on client demand and ease of delivery in low-competition areas to maximize profits.

The Big Mac Index is a remarkable real-life example of price localization. It compares the prices of a Big Mac burger in different countries to see how much money people can spend. This measure shows how companies like McDonald’s change their prices based on how the market is doing in each area.

For example, it costs about $8 in Switzerland but less than $2 in Venezuela. McDonald’s would have trouble in both countries if it tried to set the price of the Big Mac at a single global level, like $5.

The standardized price would mean less profit because it takes more to run a business in places like Switzerland, where prices are already high. On the other hand, fewer people would be ready to pay the relatively higher standard price in markets with lower costs, like Venezuela.

McDonald’s can make its pricing plan work best in each market by setting appropriate prices for those who live there and can afford food. This method brings in more customers and makes the most money by setting prices that align with how the local market works and what customers expect.

Reason 2 – Maximizes the Benefits of the Exchange Rate

As the value of one currency changes against another, it can be more expensive for companies worldwide to process payments in a single currency.

Customers would rather pay in their currency, so companies that only take one must convert the amount of the transaction, which costs extra money and puts them at risk of changes in the exchange rate.

Payment gateways and banks usually charge business fees based on the exchange rate when more than one currency is used. However, the exchange rate must be estimated and accounted for immediately. Instead, the bank or payment provider changes the currency at a rate that is good for them.

The result is that the vendor gets a slightly smaller amount on every foreign transaction because the banks add a markup to the exchange rate.

These fees might not seem like much for small transactions. Still, as the number of foreign transactions rises, they can quickly add up to significant amounts, costing businesses thousands or even tens of thousands of dollars in lost revenue.

Businesses that automatically show and accept payments in customers’ local currencies can escape these hidden bank fees that come with cross-currency transactions. This helps them make more money from sales around the world.

Reason 3 – Helps Keep Track of your Position in Local Markets

Customers in different markets may not think your prices are worth what they say if you do not localize them. Customers may buy less of a product or service when the price listed is much higher than what they thought it would cost. This difference between what something is worth and how much it costs can appear in two ways.

For starters, if a buyer thinks a product or service is worth less than its price, they will not buy it and may even decide not to buy it.

For example, if a smartphone costs $1,000 in a place where most people think a high-end device should cost around $600, the difference in what people think the phone is worth could turn people away from buying it.

A customer may think an item is worth more than its listed price, but if the company fails to follow this rule, they could lose money or give the idea that the item or service is not worth the money.

For instance, if a high-end watch costs $500 in a market where people pay over $1,500 for one, the low price might make people wonder about the product’s quality or authenticity.

It’s hard to know how local markets will react to prices, so businesses can figure out what prices are fair in new areas by comparing them to competitor prices through localized pricing tactics. Companies can position themselves in a way that makes potential customers think they are getting a good deal by ensuring their prices align with what the local market expects and what their competitors are giving.

Reason 4 – Helps The Finance Team Handle Billing in Multiple Currencies

Price localization may add additional steps to the payment process at first sight. On the other hand, companies with global operations would do well to localize their pricing strategies to avoid poor management and the manipulation of currency exchange rates.

When businesses take payments in different currencies, they must ensure that the proper exchange rates are used for all currency conversions. Doing this can lead to correct financial records, which can be a big problem during audits and could incur fines or penalties.

For example an American software company sells its goods worldwide without changing the prices. Suppose a customer in Germany buys a $100 software license, and the company changes the money from US dollars to euros using an old or wrong exchange rate.

If so, their accounting system will record the wrong amount. Numerous currency deals can compound these issues. The finance team finds keeping correct records and balances the account more challenging.

Read here to learn about how to price your product at Shopify.

Businesses can speed up the billing process by showing prices in the customer’s local currency from the start. This way, they do not have to make any complicated currency changes, and there is less chance that their financial records will be wrong. This makes the finance team’s job easier and helps ensure that accounting rules and standards are followed, which can help avoid legal and financial problems.

Conclusion 

To conclude, pricing localization helps enterprises enter worldwide marketplaces. Company prices can be adjusted to reflect regional currencies, market conditions, and purchasing power to give clients the most value and match local market rates.

Localizing prices in familiar currencies means improving the customer experience and allowing enterprises to adopt area-specific pricing structures based on market saturation and equal purchasing power. This approach finds untapped business opportunities by exposing customer behavior across price points.

Understanding local economic situations, cultural differences, and client preferences is essential for localized pricing. It can boost revenue, customer satisfaction, and brand presence abroad, making it worth the effort.

Price localization becomes a competitive advantage as organizations expand globally. In the ever-changing subscription-based economy, organizations can gain market share, customer loyalty, and sustainable growth by adjusting pricing strategies to local markets.