Have you ever asked yourself, should I adjust prices for different geographies?
Certainly if you’re doing business internationally you’ve most definitely asked yourself that questions.
And you’re not alone in that. Over the years many people have asked me the question. Well, to be precise they’ve asked me “How should I adjust prices?” People almost always assume that just because they’re selling to another country then have to adjust their prices, but as you’ll learn in this episode, it isn’t always necessary.
It’s also interesting, people are rarely worried about raising prices for countries with a higher willingness to pay, they are always concerned about being over priced. In fact they are making assumptions about what other people can or cannot afford. As I’ve mentioned before we do have to be careful about having our minds “in other people’s pockets”. Make sure you look at this question through a few different perspectives before making a decision.
In This Episode
I share with you what to consider so you can decide if such adjustments are needed for your business.
As you know by now in pricing there are no “one size fits all” answers – it depends. And in this case we need to first take a look at the customer to find the answers. You’ll also learn about a couple of resources you can use to help you in deciding what changes to make. And then I share tips and strategies to decide if there are better alternatives to just simply selling the same things at different prices.
With a few questions, a little research and some creative thinking you can come up with the best options for your business. Enjoy the episode!
Podcast Episode Highlights
- 0:00 Intro
- 2:07 Should you adjust?
- 4:05 Try having different offers
- 5:51 Consider the cost to serve
- 6:52 A few things to think about
- 8:23 Try these indexes
- 12:28 Wrap Up
“…look at who are you targeting. What’s the ability to pay and the willingness to pay. And last how your cost to serve the different geography or target group is affected.” Janene
“Just because cost of living is different by 10% doesn’t necessarily mean that your offer should be adjusted by 10%. But it is a piece of information you want to include in your thought process.” Janene
“Remember. The prices you choose you need to believe in. You have to feel confident about. If you don’t your customers won’t either.” Janene
Big Mac Index: https://wisevoter.com/country-rankings/big-mac-index-by-country/
Consumer Price Index: https://www.theglobaleconomy.com/rankings/cpi/
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Hello and welcome to Live with the Pricing Lady. I am Janene Liston, your hostess. This show is all about helping you build a more sustainably profitable business because you understand how to set your prices, how to build that pricing strategy, and you feel confident about what you charge, allow you to be there for the long term to serve your clients.
One of the questions that I get asked by people all the time is, how do I adjust my prices when I sell to different geographies? This is a great question. One thing I find very interesting when people ask me this question is they always assume they should be making adjustment. So why don’t we start this conversation there?
Should you always make an adjustment if you’re selling in different geographies? The answer to that is no. It really depends on the situation and who you’re targeting. Let’s break that down a little bit.
Should You Adjust?
The first thing to think about is who you’re targeting. If you follow me and you watch this show or listen to it all the time, then you’ll know exactly what I’m talking about because pricing is always rooted in an understanding of the customer.
Now if you’re selling, for example, a luxury brand, you will probably notice that across the globe luxury brands tend to have very similar prices, and there’s a reason for that. People who buy luxury brands tend to have a very similar pricing power, if you will, across the globe. So that is why. If you’re selling, let’s say you’re a coach and you’re selling services to expats primarily, then you may not need to make adjustments because across the globe, expats have a certain level of income and certain level of disposable income.
To give to things like pricing that’s relatively similar. You need to understand who you’re targeting and how that relates to what their ability to pay is. Now, if your offer is, let’s say you have a product that’s more of a consumer good, then you may need to adjust the prices that you have when you sell to different geographies.
Now, does that mean if you sell into 36 countries you need 36 different prices? Probably not. There’s a good reason for that because that’s a lot of work to manage. The first thing you really think about here is who are you targeting and what is their ability to pay? How might that differ for different geographies?
You might find that you can group all the places you sell to into basically three categories. In theory, you could have three different prices for that.
Try Having Different Offers
Now, one thing that people ask me when we have this conversation is, well, can I charge different prices for the same thing?
And this is also a really great question because depending on the laws and in the countries that you’re dealing with, you may find that you can do more or less of that.
But here is where I find this strategy can really help you. If you want to charge different prices, then you wanna think about can I create different offers? Do customers in these different geographies actually have different needs, which means that I offer something slightly different and therefore adjusting the price is well, somewhat natural, right?
Because you might be working in a different way, let’s say in your home country, you might work face-to-face with people, whereas when you’re working in other countries, you might be working online and maybe there are different costs associated with that, or you have to work in a different way and then your prices would say naturally need to be adjusted for that.
Another thing to consider is, can you have slightly different offers? Would that make sense? Is there a good reason based on the slightly different offers to charge people something different? Along with ability to pay, you also wanna think about willingness to pay. Just because coaching is really big in your country, maybe it’s not as common in these other geographies that you’re looking at.
So people’s willingness to pay for it in the other geography, might be vastly different than in the geography that you’re used to working in. So think about not just ability to pay, but also willingness to pay, because that will tell you what sort of adjustments might be necessary.
Consider the Cost to Serve
Now, I alluded to this a moment ago, but you also wanna take a look at and consider, you know, what is my cost to serve people in different geographies? So, as I alluded to before, um, but let’s dig into that a little deeper. You know, it could, if you, let’s say you’re a product-based business and you always include shipping when you ship locally, but when you ship globally, you’re probably gonna wanna do that a little bit different.
Maybe then your prices are adjusted for that. Or maybe in order to do international shipping, you need to have a warehouse and someone who actually does the shipping and freight forwarding and whatever for you. So then those are additional costs that you have and additional services that you provide for those customers.
So again, here it would be a case where your prices naturally end up being adjusted. Because of the circumstances around the cost to serve different customers.
A Few Things to Think About
These are a few things that you’re going to think about when you’re asking yourself this question around, should I adjust my prices based on geography?
Let me recap that. It’s not necessarily true. Think about who you’re targeting, their ability to pay, their willingness to pay, and your cost to serve them. I said this before, but at Bears repeating, I like when you have, let’s say, a similar offer, an offer that you’d like to sell to different target groups.
I’m a big fan of creating slightly different offers or slightly different products. For that, you wanna be careful that you don’t have so many offers and so many products that you can’t manage it. But when you do this, you naturally make it easier for yourself. To charge different prices, and I find that as a very effective way to work in the marketplace.
So let’s say, for some customers who have a higher willingness and ability to pay, you may do, let’s say, one to one, work with them if you are a coaching or a service-based business, but then people with a lower ability to pay, you might steer them towards something that is a group program or there’s a hybrid group plus some additional, you know, one-to-one work with you.
You can create slightly different packages that meet different people’s needs.
If you do get to the point where you realize, okay, I do need to make some adjustments. One of the things you’re going to wanna look at is that cost to serve. How do serving different geographies impact your costs? Because that’s the one way that it may impact your pricing, right? If your costs are changing, then of course you may need to make an adjustment in your prices.
Try these Indexes
But another good tool to use is to check out two things. One is called the Big Mac index, and the other is called the Cost of Living index. These are two indices that are published regularly online as well. You can just Google them and what these will help you do is understand the pricing power when it comes to consumer goods.
I have to be very clear that this is really. Based on consumer gains, but it gives you an indication of what the pricing power difference is. For example, excuse me. For example, let’s say you are here in Switzerland and you have an offer and somebody in Africa comes to you and wants to work with you, how much you adjust that offer.
If you looked at the Big Mac Index for example, you would see that the price difference between Switzerland and some parts of Africa is up to a hundred percent different. It’s double the price in Switzerland, that it is in some of those countries. Now, does that mean you should cut your price in half if you’re selling there?
Not necessarily. Again, we wanna go back and look at who are you targeting, what is the ability and willingness to pay, and how is your cost to serve these different target groups affected. But if you decide that you need to make an adjustment, then this can give you some guidance. Now, that is an extreme example in terms of the price differences, let’s say between Switzerland and the Netherlands, or between the UK and the US, you’ll find there are still differences.
Switzerland is always an extreme example because prices here are very high compared to almost everywhere. We usually top the list at that, but you know, if you’re, say between the UK and the US, you’ll find there are differences, but maybe the differences aren’t extreme as extreme as you thought. Now the Big Mac Industry Index is just based on the price of a Big Mac in different countries, right?
Where the Cost of Living Index can help is they break it down into different things that consumers buy. It can be based. It’s based on a conglomerate of things, but then they also itemize some other things. Let’s say, like rent or food or healthcare for example, they will actually show some detail behind the price differences for different things that the typical household purchases.
And this can be very interesting because if you’re lucky, it may fall into the category of what you’re offering. But if you’re not, then it gives you an idea of how different categories of purchases are influenced by the difference in geography. Again, I really cautioned you at taking this as a one-to-one difference.
Right. If it says it’s a 10% difference, doesn’t necessarily mean that your offer should be adjusted by 10%, but it is a piece of information to put into that thought process.
Again, I’ll repeat it one last time. Look at who you’re targeting, what their willingness and ability to pay our and the adjustments to your cost to serve. Combined with this understanding about purchasing power between different geographies, those things should give you a better idea if you need to adjust your prices and how to go about doing it.
But once again, and I’ll repeat this as well because it’s so important. Think about can you create slightly different offers, either products or services or bundles thereof that are more suitable to each of those geographies because then you don’t run the risk of having to have different prices for the same offer because you’ve got offers specific for those different target groups.
That’s what I wanted to share with you today. This is such a wonderful topic and I love getting this question with people, for people because I find it so fascinating, and once again, it shows how there’s not a one size fits all answer to these things. It’s really about you going through a thought process, understanding the steps and then making the decision that you feel is right for your business.
Because remember, the prices you choose you need to believe in. You have to feel confident about, otherwise your customers won’t either. I wish you all the best. Have a great day. Until next time, enjoy pricing!