The pillars of a localized pricing strategy

A price internationalization strategy is the way to define the prices of products and services for each market in which you wish to operate. This is not a novelty in electronic commerce, a sector in which it operates beyond geographical borders. However, the way to define prices to reach the whole world has two very different states. A first more superficial state, in which prices are adapted, and a second state with really localized prices for each market.

The first state of adapted prices is usually the first phase and is actually a 'translation' of the price strategy. It is based on adapting the visible parameters of the strategy: prices, currency and language.

The first thing an online store does in this regard is:

· Establish an exchange rate system to convert the price to the equivalent in local currency and thus present the price in the currency of use of regular customers.

· Translate the complete ecommerce site, so that potential customers can understand in detail from the product catalogue to the ecommerce operation.

These tasks do not really form a location strategy. They are the starting point to have a localized offer and so potential customers can understand in detail all the operation of electronic commerce. A true localization strategy must investigate the interests of potential customers and the situation of each local market to establish its strategy.

1.- The interests of potential clients

The interests and needs of consumers can vary greatly depending on the market, from the perception of the value of the entire offer to the details of the product characteristics.

The fashion giant Zara analyses the behaviour of its consumers both online and off line and the conclusions in terms of product interests are that they are very similar in all markets. The main variation between markets is climate. That is to say that in winter in the northern hemisphere, the fashion interests of Poland or the United Kingdom are similar, which allows them to offer practically the same the products.

However, the perception of fashion and the perception of the brand in each market (among other variables) means that the prices of the product are not the same in each market.

A very valuable technique to understand the interests of potential customers in each market is that of the buyer person. This technique goes far beyond a simple segmentation and, through the use of tools such as empathy maps, proposes to inquire about the perception of the consumer considering four dimensions: what he feels or thinks, what he sees, what he hears and what it says.

A good example of how to use this technique is Stella MacCartney, who used empathy maps to boost their internationalization strategy.

2.- The competitive situation in each market

The way of functioning of each market obviously influences the pricing strategy. The presence of local players can be decisive for the definition of prices and even for the entire market strategy.

Another Inditex brand, Pull & Bear, sells part of its catalogue through Asos in the United Kingdom. Companies with digital products, such as Netflix, Dropbox, Evernote or Spotify, have a price model for practically every country in which they operate (especially in Asia, where the competitive situation differs substantially by location).

One of the keys to understanding this competitive situation is to monitor the competition using price intelligence technologies. The monitoring tools allow you to track the prices of the competition, to analyze their movements, draw conclusions about their strategies and make decisions.

This type of price analysis is a permanent practice to understand market price movements, rather than an initial analysis. All the participants are incorporating products into their catalogue and improving their offer, so, beyond technology, the monitoring of prices of the competition is a way of understanding the dynamics of each market to define the correct pricing strategy in each moment.