While selling products online can significantly increase your base of potential customers, it also comes with an added challenge. Online shoppers can be anywhere in the world and successfully converting them often requires localizing your shopping and checkout experience to their local preferences. A major part of localization is optimizing your price for different markets.
Failing to Localize Your Price Can Increase Cart Abandonment
According to a study by WorldPay, price is the most cited reason shoppers abandon a purchase. From being presented with unexpected costs (56%) to the overall price was too expensive (32%) to prices being presented in a foreign currency (13%), getting your price right in different global markets is one of the most critical components for avoiding cart abandonment and ensuring your ecommerce company’s international success.
The consequences of correctly or incorrectly localizing your price can be significant. Price Intelligently analyzed 50 SaaS companies and found companies that focused on price localization were regularly exceeding the growth of those that didn’t by as much as 30% or higher.
While localization starts with shopping experiences that appear native to international shoppers in terms of language, designand payment methods, adjusting your price for different international markets is also essential.
Don’t Just Convert Your Established Price into a Local Currency
Adding foreign currencies to your checkout price is a great first step towards localizing your shopping experience and avoiding preventable cart abandonment. But if you are only carrying over the price for your own market and converting it into a new currency, you may be mispricing your product in a number of markets resulting in significant lost revenue.
The perceived value of your product and your prospective buyers’ price sensitivity can differ drasitically between different regions depending on a number of factors.
For example, features that may be highly valued in one market may be differently valued in others. Similarly, the amount customers are able to pay (or their purchasing power parity (PPP)) can vary between countries. One index that attempts to measure this is the Big Mac Index, published yearly by the Economist. If a market has less purchasing power, their willingness to pay for your product will likely be lower as well.
But while this index can give some indication on how you may have to adjust your price to a specific market, it is also critical to consider the competaitve landscape. Is it already saturated with a lot of native competitors or is it still relatively untapped? All of these factors will influence your prospective customers’ price sensitiveity for your unique product and the optimial price for it in each market.
Understand Your Customers’ Price Sensitivity
To understand the price-sensitivity of the buyers within a market, you can use several price sensitivity survey techniques to determine what price points are most likely to work best for a certain market.
However, while research on what price might be best is good, you will only know what will actually work when you test with real-world customers. When you do localize a price in a localized cart, track how well your sales are doing and be willing to test new prices and adjust.
Extend Your Global Reach
Localizing your pricing strategy is no longer an option for businesses looking to grow sales internationally. Tracking market conditions and testing different price points are critical to finding the right price for each unique global market.
