The Importance of Properly Localizing Price
While selling a product or service on the Internet can significantly boost your base of potential customers, there is an added challenge. Because online consumers are scattered across the globe, successfully converting them to shoppers means you have to properly localize the checkout experience to their local preferences. A key part of this localization process is optimizing the product's price for different foreign audiences.
Not Localizing Price Increases Purchase Abandonment
A study conducted by WorldPay found that price is the main reason shoppers typically abandon a purchase. Customers abandon the purchase when the price includes unexpected costs (56% abandonment rate), when the price is too expensive (32% abandonment rate), and if it is being shown in a foreign currency (13% abandonment rate). It follows then that finding the right price to pitch to all your international markets is a critical aspect to avoiding order abandonment and finding sales success.
Price localization has a tremendous impact on your bottom-line. Price Intelligently evaluated 50 SaaS companies and found that those that localized price constantly outgrew those that didn't by as much as 30% or more. Clearly, localizing price is vital.
Adjusting the price for different foreign markets, however, should be just one aspect of localizing your website. Wholly localizing the shopping experience so that international shoppers can feel comfortable with the process in terms of design, language and payment methods should be your ultimate goal.
Don't Just Convert Price into a Local Currency
Having your checkout price be shown in different foreign currencies is a solid first step towards localizing the process and preventing order abandonment. Consumers prefer to buy in their local currency and it encourages trust. But just in case, you should always give them the option to change the price's currency in the event they don't reside in the region the website is localized for.
Localizing your price depends on a number of factors. Your foreign customers perceive the value of your product differently and exhibit a different price sensitivity depending on the region they are from. One foreign market may value certain features of your product while another market values a completely different set of features.
At the same time, the purchasing power of a foreign audience can vary between countries. One index that measures purchasing power parity (PPP) is the Big Max Index which is released annually by the Economist. If the consumers of a market all have low purchasing power, their willingness to pay for your product or service will likely be lower as well.
While the Big Mac Index can help guide you as to how best to pick a localized price, it is also important to take into account the level of competition you have in each market. Is the market saturated with a lot of competitors or is it relatively free of competition? This factor affects your customers' price sensitivity for your product as well as the optimal price for it. These are all factors to consider when settling on a specific price for all your markets.
While you have to factor in price sensitivities from each market, be sure to charge only one fixed price for all your markets. You may be tempted to charge a different price per market to maximize revenue, but such a policy can ruin consumer trust in your company and can even be illegal.
Research Your Customers’ Price Sensitivity
To find out how price sensitive consumers are in all your markets, use multiple price sensitivity survey tests to determine what price points will appeal to consumers the most.
While researching which price points are best is always a good idea, the best tactic to learning about a market's price sensitivity is to test with real-world consumers. Tracking your sales results, testing new prices and changing your price points is part of the trial-and-error process of discovering the best localized price for your product. Make sure the localization services firm you hire to localize your website provides this service.
Expand Your Global Reach
Businesses who are looking to grow sales internationally, and the language partners working with them, should take care to properly localize price. This is one of the smartest moves you can take. Testing different price points and tracking sales is key to you finding the right price for all your international markets.