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The BLUF (Bottom Line Up Front)

1. Internationalize your pricing in 4 steps: decide what currencies to accept —> adjust price levels —> measure willingness-to-pay —> consider dynamic packaging

2. The biggest bang for your buck² will come from step 3 - measuring WTP by geo

3. Dynamic packaging is the cutting edge of pricing. Use a tool like Stigg to help out.

The Problem with International Pricing

International pricing is one of those topics that Crescendo rarely deals with, not because it isn’t important, but because the cost-benefit analysis of localizing prices often isn’t worth it. Rather than deal with the problem during research, we often give recommendations during our 4-week coaching phase.

Let’s dive in.

Selling a “Royale with Cheese”

International pricing is hard for a few reasons:

1. Customers prefer to pay in their own currency, but accepting all currencies is operationally taxing.

2. Currency exchange rates fluctuate far more than your prices ever will, meaning that on any given day, your price may be off by 5% to 10%.

3. Willingness-to-pay differs in different geographies, even when you control for currency rates.

4. Packaging preferences can often differ by geography → something that international pricing has yet to solve.

Luckily for you, that list roughly maps out the different “effort” levels you can

Level 1: Do you accept Bitcoin?

The easiest and first move you should make to internationalize your prices is to begin accepting foreign currencies. In fact, if you aren’t accepting foreign currencies, most of the other recommendations on this page won’t matter much (other than maybe level 3).

The problem with foreign currencies is that they place a very real operational burden on your team.

• You need to update your billing system to accept the currency

• You likely (though don’t have to) maintain multiple price books

• Your accounting team is going to hate you, because closing the books is harder when you have to translate to USD over time

The benefit is twofold: first, customers prefer to pay in their own currency, so you should see conversion rates go up (in a PLG-style business). Second, purchasing anything in a foreign currency always comes with some sort of tax - by localizing the currency you have more control over that tax and can price your products more accurately.

Because it can take a few sprints for your engineering team and because there is an ongoing cost for each new currency, I usually only recommend localizing a currency when you have a critical mass of users - something like 10%.

Level 2: $10 vs. £8.02867

After you’ve decided to accept payments in non-freedom units, you’ll need to adjust those price points to align with cultural and psychological norms. For example:

• Rounding prices to the nearest 5 or 10

• Charging even prices in Europe while keeping .99 in America because of included vs. excluded tax

• Dipping USD in maple syrup to turn them into CAD

You get the point. Just be aware that you may need to update prices more frequently than you’re used to. As an example, the USD to GBP exchange rate fluctuated 9% over the past year. For many companies, a 9% price increase would be a very serious increase; you should treat currency fluctuations just as seriously.

Level 3: Differentiate prices

If you’re serious about localizing prices, this is usually where I direct people. The reality is that even when you adjust for currency differences, the willingness-to-pay for any product is going to differ around the world.

Back when I was at Evernote, we had 3 price points:

1. List price: for the Anglophonic world and the “DACH” region (technically German speaking Europe, but functionally we used Western Europe)

2. 2/3 price: for Japan and the rest of EMEA

3. Half price: the rest of the world, most importantly China and LatAm

This wasn’t done by guess work. When we measured willingness-to-pay in different regions, we would frequently see geo as a strong predictor. How did we measure willingness-to-pay?

• Van Westendorp and Conjoint studies with current users and prospects

• User activity (a strong predictor of conversion)

• Conversion rate, which we expected to be constant by geo

Qualitatively, willingness-to-pay differed for a few reasons, but the main ones were competition and use case. In China, Evernote had unique competitors that it didn’t have in other countries. In fact, the willingness-to-pay in Taiwan vs. China was fascinating: in China (where Evernote had more competitors), willingness-to-pay dropped, while Taiwan looked more like Japan.

It was also important to look at use case by geo. PCs and tablets are rare in LatAm - most of our LatAm users were Android-only users. That meant that certain high value use cases were unavailable, like drafting complex notes or using hotkeys.¹

Just make sure that you watch out for fraud. We also saw users using VPNs to show Mexican IP addresses. That way they could take advantage of our 50% prices but still pay in USD (the peso wasn’t supported).

Level 4: Dynamic packaging

This level is, at the time of writing, impossible. Or at least not in any practical way. My partner Patrick likes to tell a story about his time at Loom.

In South East Asia, Loom power users were unprofitable at their willingness-to-pay. Loom’s annual price ranged from 5% to 50% of median income, depending on the country. The problem was that Loom couldn’t just lower prices; the product would be unprofitable at much lower rates. Instead, what they needed to do was remove some expensive (and lower value) features only in the Southern APAC region, like 4k videos and transcripts.

That product logic is very hard to do today without using truly cutting edge billing and feature provisioning systems like Stigg. For most companies, managing a 3-tiered SaaS app is hard enough; imagine managing 3 tiers for each global region!

Get in touch

Crescendo works with medium-sized software companies to improve their pricing, packaging, and promotion strategies. If you’d like to book a quick consult, reach out at [email protected] or schedule time via the button below.

1  The only reason I buy Excel

2  Get it…a currency joke