Price localization is a very important factor when it comes to expanding your business to a global market. Price localization has to exist in two main categories – local currency and local value of the product. There is a very obvious difference between the two, but the latter is often overlooked by globalization phenomenon newcomers.
Understanding both types of price localization can vastly increase a product’s sales while also establishing a business in a new market. We will look at both types of price localization in more detail and understand the why and how of each so that you too can have a better idea of what needs to be done when expanding to different markets across the globe.
The abandonment rate is the percentage of customers who decide to not proceed with a purchase right at the billing stage. A study found that 13% of the abandonment rate was due to a product not being in the local currency. There are several reasons for this happening. It has been found that most people prefer to make purchases in their own currency. At the very least people want to know how much a product or a service will cost them in a value that they understand.
If the consumer is in the UK and the product is in USD, there is a high possibility that the price will first be converted to pound sterling before the purchase goes through. But this, of course, is an additional step which means that if there is a website that has pricing of the same product in the local currency, that website could earn preference.
Another factor that crops up when prices are not marked in a local currency is the exchange rate. While a product might remain at 100 USD, changes in the exchange rate might actually cause the price to go up in another country. Most consumers are not happy about having to pay more for the same product they bought perhaps just a few days earlier.
For this reason, it makes much more sense to find the pricing equivalent of a product or service in the local currency of the new market and fix the price at that. This could be as simple as converting the value as per the exchange rate on that given day, or it could go a step further. Here is where local value of the product comes into play.
Local Value of a Product
The local value of the product depends on how the consumers in that market may perceive your product or service. In some countries, the cost of clothing might be relatively low, and consumers get used to paying a certain amount for a teeshirt. When you bring your brand to their market and you do a direct conversion as per the currency exchange rate, the price of your product could be much higher than what the locals are used to.
It is at a point like this when you need to take a call of whether you will keep the product at the same price or make an adjustment to better suit the newmarket. In many cases, making the price adjustment will actually help increase sales because your rates become more competitive. The reverse can also be true, and you could choose to price your product or service a little higher to be on an even playing field with other local brands selling the same product.
When both factors are considered when localizing a price, the brand stands a better chance of performing in the new market.
Several factors come into play when expanding into a new market, and pricing is one of them. At Localize, we provide an easy to use translation management software that helps you take into account consumers perceptions across global markets. Contact us and join the 500 plus companies that are already using Localize to expand their international reach.