[Survey] How do you feel regarding regional pricing (multi-currency)

[melancholy]

Hello entrepreneurs,

Title says it all. Regional pricing is a scary topic because of the headache of multiple-currencies, yet a powerful way to increase sales in foreign countries. If you can spare 2min, I'm running a survey on that topic. Results and insights will be shared with respondents. Thanks!

https://docs.google.com/forms/d/1Tl06Swg_7kZ-mBjvZOyWEsOoqn39UQzL-3BFscq7dz8/edit

 

[chamberlain94]

@melancholy I find it interesting you don’t have an option like “I think it’s a bad business practice” or “our market wouldn’t tolerate it” in your reasoning options.

Regional pricing is not a scary topic because of multiple currencies, it’s a short sighted business practice unless there are strong regional factors for your own cost basis. I run a SaaS business so I’d consider it a poor business practice to implement. If I had a sandwich shop that only sold locally sourced ingredients it’d be a different story.

 

[melancholy]

@chamberlain94 Hello Mephistophyles, thanks for taking the survey. Indeed, I didn't think of this possibility. Following your advice, I just added the option to the survey.

Why do you consider multiple currencies short sighted or a poor business practice?

 

[chamberlain94]

@melancholy Hi Jules,

Appreciate your listening. I apologize since I used all my priors in coming to my answer but didn't write them out, so I can see why I got such negative response.

Let me share my reasoning here, so you, /@emoore80 and /@proverbs31an can understand where I'm coming from.

There's two different aspects of regional pricing being discussed. There's accepting multiple currencies as a form of payment (let's call that regional currency) and selling your goods or services at a different price based on location (let's call that regional weighting). I won't talk about small variations in pricing based on local taxes (since that's something you must do).

My examples and reasoning are from the perspective of a SaaS business.

1. If I accept regional currency, it becomes my responsibility to make sure that those prices are equivalent to my costs and profit margins. I would also need to make sure my payment provider not just works in those currencies and locales but also that I have some means to accept that foreign currency. So now I have an account with $, another with Euros, maybe a third in Yen, etc. My accounting gets more complicated because I'd have to consider how to homogenize them, do I convert them all to dollars at the exchange rate at the moment of purchase? Or do I hold to maybe invest locally? My entire cost structure is based on a single currency, so I can't use any foreign currencies until they've been converted (which is a cost for me now).
   
   The solution would be to find a payment provider that allows customers to pay in their own currency but converts it to dollars at the point and time of sale. All major credit cards allow this. Now the exchange rate cost is passed on to my customer and I don't have any extra administrative overhead. My COGS is the same and so is my cash on hand. I'm not saying you should make it impossible for your customers to pay in another currency, by all means if they want to pay me I should enable that, but that's an outsourced functionality that's integrated in my payment provider so I don't see the difference.
2. Regional weighting is what /@emoore80 ranted about. While I don't disagree there is a huge difference in purchasing power across the world, that doesn't change the fact that my costs are set and my desired profit margin is set too. That's my price. I won't offer a discount unless there's a good business reason to do so (for example I'm happy to offer a discount if someone pays for a year or 2 in advance instead of monthly). Treating customers in different areas differently is not good for my bottom line and frankly a disservice to my other customers.
   
   Like I said though, local prices for local services are a thing. That's a business opportunity for local entrepreneurs potentially. For services where you are trading your time and expertise for money, you may have different rates for different countries depending on your goal. That's not an area I can speak to, for a SaaS it is a bad business practice. I have customers in over 100 countries, so this really isn't as exclusive as you make it out to be.
   
   I'm not sure the PR effect you speak of is very pronounced, and
3. I'm eager to see /@proverbs31an's examples. I work in the Atlassian ecosystem, does Atlassian's pricing differ in the US vs Brazil? We're a Google shop, is the Google Workspace priced differently in each country? How about AWS hosting costs, are they different per region? Those are meant to be rhetorical, but I am open to seeing examples of it being done differently, I just can't see the benefit.

 

[melancholy]

@chamberlain94 Hello Mephistophyles and thanks for such a detailed answer. Getting your detailed opinion on the topic helped A LOT.

On item #1. I totally get your point: Having to create bank accounts for each supported currencies is a pain for most SaaS. Stripe actually does exactly what you describe: Automatically convert foreign currencies to your bank account's currency for a .5% fee.

You finish your point by saying basically "If I don't see the difference, why not": Would you need amounts on your account to be clean "$99.-", or would you be OK with "$99.04" one day and "$99.07" the next day, since conversion rate change all the time ? I guess my point is: Does having a variety of slightly different amounts counts as "extra administrative overhead" or "a difference in COGS" for you?

Regarding item #2. You say you don't disagree there's huge purchasing power difference between countries, yet that you want to treat customers equally. I could argue you're contradicting yourself since foreign customers have to A. pay conversion fees to pay in USD, and B. pay extra because of their lower purchasing power.

It's awesome that you have customers from 100 countries. But doesn't that mean that you could have had *even more* with adapted prices, doesn't it?

What's something that would change your mind? I'm not trying to force my views on you, what I mean is: From a commercial stand-point, what arguments would you be sensitive to to consider offering regional prices (assuming item #1 was checked) ?

Item #3. I tried to see price differences on 4 big SaaS services between US and Brazil:

• Atlassian. US: USD12 Brazil: USD12
• Google Workspace. US: USD6 Brazil: BRL24.30 (Price displayed in local currency. Roughly equivalent to USD4.75)
• Amazon S3. US: USD0.0023 Brazil: USD0.0023
• Slack. US: USD6.67 Brazil: US4 (Displayed in USD as a promotional offer for "Brazilian team")

In other words:

• 2 companies don't offer regional pricing. But 2 do.
• 1 offers cosmetic pricing (displays local currency). The other doesn't.
• Both adapt to local purchasing power in a significant manner (25% price difference!)
• One uses it as a PR/marketing element (Slack), the other doesn't.

I don't know the reasoning behind each company's pricing but I'd be very very interested in knowing why. Actually I might just do that and go interview each person in charge of pricing.

Again, thanks for taking the time to write a detailed answer last week. Not trying to push my views on you, but rather to candidly understand how other people think about it!

PS: To check for international prices I used multiple strategies: VPN, residential proxy, browser header in private mode, and changing localized URLs in private mode. None worked on Atlassian and Amazon so I assumed they really don't offer regional pricing. For Google and Slack, using a VPN and/or modifying the URL did the trick. In other words, protection against cheating seemed minimal. Perhaps more security check when inputting credit card.

 

[proverbs31an]

@chamberlain94 Hey, Great response. I only skimmed tbh. I work in finance with retailers and software companies across emea and latam. Retailers will 100% charge based on location if they can (market allows for it). Software, tries to think in relative terms not absolute like retail products. That is difficult in some places. I specifically know some well known global software companies that offer pricing differently in Brazil vs Mexico, and both still in usd which makes it unattractive regardless of the cost differential than if it was same price across the regions. I have not bought this software myself but this is what they tell us and logically makes sense as we back out pricing in the financials

 

[proverbs31an]

@chamberlain94 Every global business does regional pricing. I’m not saying they do it well but you can’t buy products, even software, at the same cost in the US vs Brazil vs China.