Large, global firms, always take advantage of local market conditions to maximize their revenues. This means pricing high in markets that can bear the weight, and low in markets that cannot.

Just because your firm may not be challenging for the mantle of World's Largest does not mean that you can't leverage the same market-based approach. In fact, by failing to do so, you may be losing out on sales volume (in markets where price sensitivity is high) and on revenues (in markets where price sensitivity is low).

The Plimus system allows you to make the most of the options, and in this article we'll be introducing you to how you can implement a global pricing strategy to maximize your e-business results.

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Markets & Price Sensitivity

You probably don't shop in multiple countries and multiple currencies - but if you did, you'd notice something peculiar: the cost of products shifts dramatically from one country to the next.

Take Adobe Creative Suite 3 Master Collection, a leading graphics package. If you choose to buy it in dollars and for use in the United States, you'll pay about $2,500. But if you buy it in British Pounds for use in the United Kingdom, you'll pay around GBP2,300 - nearly twice as much, if you convert the currencies in either direction. The same is true, incidentally, if you choose to buy in Euros for use in Germany.

How can this be? As Plimus vendors, we've become accustomed to simply setting a price and allowing the system to convert that price into local currencies. The vast majority of Plimus products would cost the same wherever the shopper wanted to use them, and whichever currency they chose to use to buy them.

As it turns out, different markets can bear different pricing models. Sometimes, firms will charge more in a country because it genuinely costs more to do business there - but generally speaking, prices are set by the ability to deliver sales volume, rather than by what is a 'fair' asking price.

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Local Versus Global Pricing Strategies

Now, there's nothing inherently wrong with simply setting a price and simply converting it for the shopper's local currency. We'll call this a local pricing strategy: the expectation is that one unit of product will deliver a consistent amount of revenue. It is certainly the simplest approach, and eliminates any question of whether the shopper is receiving your best price.

However, executing a global pricing strategy - in which the locale of the buyer is taken into account when quoting a price - has the potential to increase sales, and to increase the invoice size of many of your orders, assuming you sell outside your home geography.

That's not to say setting prices within a global pricing strategy is an easy business. Tempting as it may be, simply doubling up the USD price for British shoppers, for instance, may result in some uncomfortable correspondence with your customers - unless you're ready for the conversation.

The key element in deciding to move from a local to a global pricing strategy, however, is simply this: what is your volume of non-local sales. If you see a statistically-significant volume of international sales (let's say a minimum of 10%), then it makes sense to at least consider going global.

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Fundamental Fairness: What Can We Justify and Why

Whenever this conversation crops up, a discussion inevitably ensues over the fundamental fairness of charging different shoppers different prices. It's a sticky topic, and one that we'll not spend too much time on here, as it could easily seed a solid PhD thesis!

However, we can certainly consider the following elements that make it reasonable to charge more outside a firm's natural geographical sphere of influence:

      * Currency Fluctuations: Any time you do business outside your own currency,
       you are, to some degree or other, vulnerable to changes in currency rates.
       It makes sense, therefore, to hedge against this
    * Local Taxes & Fees: There may well be additional governmental fees to be
       paid. For instance, although software sold and delivered online rarely bears
       a tax burden in the United States, it is liable for Value Added Tax in Europe -
       and this has to be paid by someone
    * Localization Costs: In order to serve foreign shoppers appropriately, you
       have to add marketing dollars to break into the market; translation services
       to correctly adjust both marketing and, potentially, product; and localization
       capabilities for your product may need to be developed. All of these add cost
       to your process - and, again, need to be paid for by someone.
    * Support Costs: As you go global, you may very well have to invest in
       another shift's worth of support staff, and even hire foreign-language
       speakers.
    * Basic Cost of Operations: As you expand beyond your own border, it can
       cost more to manage the operation.  

Does this justify a huge mark-up? Only you can decide the answer to that question. However, even if you see your firm being impacted by only one or two of these issues, it certainly makes sense to add some premium.

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How Do We Execute on This?

Assuming you decide to at least explore the global pricing strategy, you should at the least consider having separate prices for the three main currencies we see in use at Plimus (USD, GBP and EUR), and adding any others that make up a significant portion of your business.

Research your market space: look at other, similar, products and establish whether you are in the right ballpark, price-wise, in your home currency. Then compare outside your geography - if you're substantially more expensive, consider a price reduction; and if you're substantially cheaper, consider a price increase.

To add these prices, the basic steps are:

   * Open a Contract
   * Next to the 'USD Price' field, click the 'More Currencies' button
   * From the dropdown labeled 'Select currency to set price for', choose the       appropriate currency, set a price, then scroll down to click the 'Submit' button
   * When the page reloads, scroll back to your new price, and check the 'Force       Currency' box; then scroll down and Submit again
   * Return to the 'General' page of your contract, select the URL for the BuyNow
      page, paste it into a new window and open the page (NOTE: use the live
      page to be absolutely sure you are comfortable with what your live shoppers
      will see)
    * Switch currencies, and you will see the price properly reflected

It's really that simple.

The key here, though, is to set a number of forced currencies. Simply changing your base currency does not represent a global pricing strategy - it simply represents a shifting in the single price upon which you are basing a local pricing strategy.

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A Note About Currency Switching & Local Currency Bank Transfers

It's important to note that if your shopper is using a standard payment method, such as a credit card, they will always have the option of switching out to a lower-cost currency (unless you code your website to avoid offering them this option).

However, shoppers using local currency bank transfers must pay in their local currency. This will mean that they will be forced to pay at the rate set for that currency. This may impact how you build your strategy: for instance, if you have a lot of sales volume in Germany, where bank transfers are particularly popular, your Euro price will get a lot of play.

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Conclusion

A global pricing strategy can quickly help you raise your sales volume in markets where price sensitivity is high; and raise your revenues in markets where price sensitivity is low. Charging a different rate in different countries not only reflects your business' increased costs for working globally, it is also accepted and normal practice in the marketplace. Setting it up need take you only minutes - and can very quickly and fundamentally change the growth rate of your E-Business.