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How to Make SaaS Price Localization Decisions?

It’ll be hard to sell your service worldwide if you follow the same pricing strategy for every country. This is where price localization and market research come in.

Prithvi Manjunatha
Price Localization Decision-making Guide

If you’re planning to go global with your SaaS, one of the things to keep in mind is price localization. It’ll be hard to sell your service worldwide if you follow the same pricing strategy for every country. This is where price localization and market research come in.

Price localization is the process of setting prices for a specific geographic area. This can be done on a cosmetic level by displaying prices in the appropriate currency for the local market. At a higher level, price localization can involve creating separate SaaS pricing models in each country to best suit each local market.

Cosmetic localization is the price changes to be compatible with the local market. The key elements here are setting prices in local currency and translating your website into the local language. Start by targeting your largest local market and add more markets as you expand.

Market localization is a deeper dip and requires not only a change in currency but the price itself to better adapt to local conditions. By looking at your local markets, you can see where you have relatively little or no competition, which affects the price of your product everywhere. A great way is to use price sensitivity studies to determine if local buyers in each market are willing to pay.

Advantages of Price Localization

Greater personalization

Local pricing not only takes into account pricing but also product pages, shopping cart contents, payment options, and even small details such as timestamps and customer demographics.

Improving the customer experience

Who doesn't want great customer service? That is exactly what price localization offers. Show your customers that your company is ready to expand globally to reach an international audience and serve people from every nation.

Less shopping cart abandonment

Higher shopping experience = less shopping cart abandonment. Price localization streamlines the payment process and eliminates friction losses with your global customers.

Simplified Forex Trading

Global Sale means you’ll encounter local currency. Exchange rate management is built-in with a powerful e-commerce platform so you can sell worldwide with no extra steps. Don't fight digital taxes and VAT with good management.

More price data

Price localization provides your company with more local purchasing data and an insight into the markets in that region. For your SaaS business, you can track your sales and order history by country of origin and further price it more appropriately.

Longer Lifetime Value

Price localization can help you keep track of buyer behavior and determine their LTV. By applying local prices, you can better understand the fastest-growing top countries and rapidly developing countries.

Localization of Price at Various Stages:

Seed stage

So you've just started. You start and discover the basics. This is the time to do your research. When discovering your ideal customer profile and your buyer personality, look at your prices, figure out how potential buyers and customers are reacting to them, find out what they are willing to pay, where they live, what they do, and so on. In this way, you come closer to the fit of the product in the market.

Setup phase

You are now in the early stages of your business and you are still trying to find the right market. Does that mean you shouldn't worry about price localization? No, you want to start small now. Focus on cosmetics, choose some places to do your business before branching out. The trick is to look for markets with similar buying behaviors so that you can use what you have learned to make it easier to develop.

Growth phase

Congratulations, your business is growing fast! By now you should have discovered the localization of prices. Now is the time to introduce real localization. When this happens, your business needs to focus on making money and having a strong pricing strategy. This is especially true for SaaS companies. As your business grows, you need to assess its lifetime value (LTV). Experiment, listen to buyers and adjust your prices frequently to get exactly what you need in these large global markets.

Mature phase

If you haven't focused on price localization already, you may be missing out on great sales growth opportunities. At this stage, you should be careful about your prices and have a good understanding of your global markets and the buying power of the buyer. If you're reading this and haven't started yet, the longer you wait, the more likely you are to lose international momentum. 

What to Keep in Mind while Localizing SaaS Pricing?

The release rate is the percentage of customers who choose not to track the purchase directly. A study found that 13% of customers contributed to the release rate due to the lack of local currency products. There are several reasons why this happens. It has been shown that most people prefer to buy with their own currency. In any case, people want to know how valuable a product or service is to them. 

If the consumer is a UK resident and the product is listed in US dollars, the price will likely be converted to Pound Sterling before the purchase is completed. But of course, this is an additional step, which means that if there is a website that shows the prices of the same product in local currency, that website can be preferred.

Another factor that occurs when prices are not quoted in local currency is the exchange rate. While the product can stay at $100, exchange rate fluctuations can even drive prices up in another country. Most consumers are unhappy that they have to pay more for the same product that they might have bought just a few days ago.

For this reason, it makes more sense to determine an equivalent price for a product or service in the local market currency and the price based on it. It can simply convert the value based on the day's exchange rate or go a step further. This is where the local value of the product comes into play.

An example of price localization in play is Spotify Premium. In a developing country like India,  it costs $1.39 per month and it’s the cheapest anywhere in the world. Whereas in the U.S. it’s gonna cut you back about $9.99 per month. In countries with higher purchasing power like Denmark $14.50.

To wrap it up…

Price localization can be a strong tool to capture a new untapped market or to bring about fresh competitive prices in a monopolistic saturated market. If implemented the right way, localization can be even more effective than traditional advertising, playing to the strength of word-of-mouth advertising.

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