While selling products online can significantly increase your base of potential customers, it also comes with an added challenge.
Online shoppers can be located anywhere in the world. A checkout experience optimized to fit their expectations and preferences in terms of pricing, language, currency and payment methods is required to convert them.
Failing to Localize Your Price Can Increase Cart Abandonment
According to a study by WorldPay, price is the most cited reason shoppers abandon a purchase.
- 56% abandon when presented with unexpected costs
- 32% when the overall price was too expensive
- 13% when prices are presented in a foreign currency
Getting your price right in different global markets is one of the most critical components for avoiding cart abandonment and ensuring your ecommerce company’s international success.
The consequences of correctly or incorrectly localizing your price can be significant.
- According to study of 50 SaaS companies, those that focused on price localization exceeded the growth of those that didn’t by as much as 30%.
While localization starts with shopping experiences that appear native to international shoppers in terms of language, design and payment methods, adjusting your price for different international markets is also essential.
Don’t Just Convert Your Established Price into a Local Currency
Adding foreign currencies to your checkout price is a great first step towards localizing your shopping experience and avoiding preventable cart abandonment. But if you are only carrying over the price for your own market and converting it into a new currency, you may be mispricing your product in a number of markets resulting in significant lost revenue.
The perceived value of your product and your prospective buyers’ price sensitivity can differ drastically between different regions depending on a number of factors.
For example, features that may be highly valued in one market may be differently valued in others. Similarly, the amount customers are able to pay (or their purchasing power parity (PPP)) can vary between countries. One index that attempts to measure this is the Big Mac Index, published yearly by the Economist. If a market has less purchasing power, their willingness to pay for your product will likely be lower as well.
But while this index can give some indication of how you may have to adjust your price to a specific market, it is also critical to consider the competitive landscape. Is it already saturated with a lot of native competitors or is it still relatively untapped? All of these factors will influence your prospective customers’ price sensitivity for your unique product and the optimal price for it in each market.
Understand Your Customers’ Price Sensitivity
To understand the price-sensitivity of the buyers within a market, you can use several price sensitivity survey techniques to determine what price points are most likely to work best for a certain market.
However, while research on what price might be best is good, you will only know what will actually work when you test with real-world customers. When you do localize a price in a localized cart, track how well your sales are doing and be willing to test new prices and adjust.
Extend Your Global Reach
Localizing your pricing strategy is no longer an option for businesses looking to grow sales internationally. Tracking market conditions and testing different price points are critical to finding the right price for each unique global market.