by Finn Helmo Hansen, Founder & CEO, Stratinis
1. Having different prices in different markets based on willingness-to-pay is solid pricing strategy, just like customer or product segmentation based on willingness-to-pay in a single country.
2. One single global price is leaving money on the table, except for very special cases where only selling to truly global clients.
3. Build a set of parameters to evaluate your pricing power and potential in each market. This can be market position, maturity, customers’ switching costs, levels of perceived competition, nature of customers (many/few vs local/global). Set international pricing guidelines based on these parameters.
4. Use a pricing corridor framework, with a floor price and a ceiling price, to guide local teams on minimum and maximum prices. This gives global control over price levels but allows markets to adapt to local practices as long as they stay within the corridor. Allow local pricing freedom and let local teams exploit pricing potential in their markets. Most pricing opportunity insights come from local teams, if provided with the amount of freedom to price.
5. Build a database with your price waterfalls around the world, in order to establish internal understanding of differences and opportunities. Make sure your database can reflect differences in local prices rather than using the database project to harmonize prices/discounts/rebates/terms.
6. Competitor-benchmarking is a local exercise. Talking from experience, most competitors are not consistent in their global pricing, so do not tie your global pricing approach to them. However, do consider competitor pricing locally, where relevant.
7. Value-pricing is theoretically superior to cost-based pricing, but remember that customers’ willingness-to-pay varies from country to country, so make sure to look at differentiating value drivers too.
8. If you are dealing with cross-border customers who buy your products or services in several countries then make a strategy for how to make price differentiation stick with them too. Some elements of the price waterfall can/should be adjusted to local specifics and thus resulting in a differentiated pocket price.
9. Parallel trade can be annoying but normally it makes up a small percentage of total sales. Financial benefits of a properly executed pricing strategy with higher prices in certain markets will outweigh the downsides. Parallel trade should never be a reason for harmonizing all prices around the globe.
10. Always stay within the law. Typical topics to consider in international pricing practices are around not blocking free trade such as in the European Union or general pricing law.
To learn how Stratinis can help you manage pricing challenges like these, visit us at www.stratinis.com