8 Pricing Strategies for International Markets
Rana Hazem
1/6/20254 min read
One thing about freelancing is that it’s not for “free”. But one of the trickiest parts about it is figuring out how to price your services or products for international markets, especially when you’re just starting out. And that’s what this blog post is for. By the end of this blog post you’ll know:
The 7Cs of International Markets
It doesn’t matter in which part of the world you are, the internet has made the world smaller, allowing you and I to work with clients from every corner of the globe. If you’ve honed your skills enough to provide an impeccable service, or you’ve created a product you’re proud of, going international is easier than ever.
What’s also easy is making the mistake of thinking that your pricing should stay the same across all markets. But pricing isn’t one-size-fits-all. To price effectively, you need to consider the context, and that starts with the 7Cs of International Pricing:
Cost:
Your service or product did not come to life with a snap of a finger. It took you effort, time and resources to create. To put a fair price on it, you need to factor in the cost of: development, production, advertising, and taxes, and in the case of a physical product: storage and transportation, etc.Competitors:
Competitor analysis is an integral part of any strategy. Consider your competitors’ market positioning, as well as their pricing strategies.Customers:
Your target audience is the driving force. It’s important to know and consider their purchasing power, price sensitivity, value perception and buying behavior.Cultural Differences:
What works in one country might flop in another. For example, the number “4” is considered unlucky in Chinese culture, so a price ending in “4” might hurt your sales in China, while it can work well in other countries.Channels of Distribution:
The more hands your service or product passes through, the more costs escalate.Currency Rates:
Exchange rate fluctuations and conversion fees can eat into your profits, so always account for them.Control by Government:
Different countries have different regulations. Be aware of governmental controls, taxes, and trade laws that could affect your pricing.
These 7Cs give you a framework to start pricing for international markets, but your research is not done just yet. Next, you’ll need to choose the right pricing strategy (or strategies) to match your goals.
8 Pricing Strategies to Consider
1. Competition-based Pricing
This strategy uses your competitors’ prices as a benchmark. You can:
Price below competitors to attract budget-conscious clients (but be careful, it could hurt your profit margins).
Match competitors’ prices and stand out through branding or marketing.
Price above competitors by offering premium features or benefits that justify the higher cost.
Competitor-based pricing is relatively easy to execute, it grows with your business and can be easily combined with other pricing strategies. But, it’s not ideal if you’re just starting out. It can quickly cut into your profit margin and hurt you more than benefit you.
2. Cost-plus Pricing
Unlike the competition-based pricing, which focuses on external factors, cost-plus pricing focuses on internal factors: the costs per unit plus a fixed percentage.
It’s simple, and provides a consistent rate of return, but there’s no guarantee that all costs will be covered.
3. Value-based Pricing
With value-based pricing, your price reflects the perceived value of your service or product. Customers pay for what they believe it’s worth, whether it enhances their self-image or facilitates a life experience.
This strategy increases your brand image, and allows you to charge a higher price point. But, it can drive some customers away, and customer perception of value may change over time.
4. Penetration Pricing
This strategy means entering the market with a very low price to attract customers, then gradually raise it.
Penetration pricing will get you a LOT of customers, but not all of them are guaranteed to become loyal customers when prices increase.
5. Tiered Pricing
Tiered pricing is offering different packages or versions of your service or product at various price points. This appeals to a broader audience, because it gives customers options based on their needs and budget.
6. Psychological Pricing
Psychological tactics can influence purchasing decisions. Two popular strategies are:
Charm Pricing:
Using “$19.95” instead of “$20” is done for a reason. Because our minds are funny that way. The difference is barely noticeable, but in our minds, it still translates as cheaper.Price Anchoring:
Price anchoring is setting a high initial price (“the anchor”) then offering a discounted price. But it can be perceived as manipulative, so you have to factor in the anchor price, the perceived value of the product, and the decision-making process of your audience.
7. Optional Pricing
It’s selling a base product or service at a low price, then offering optional add-ons for an extra cost.
It’s great for upselling, but requires careful planning to ensure the add-ons are valuable and necessary.
8. Bundle Pricing
This is grouping multiple services or products into a bundle with one price. It’s easy to market and simplifies decision-making for customers. But it may lack personalization, and customers might feel they’re paying for items they don’t need.
These 8 pricing strategies can work for both international and national markets. You can stick to one or combine several, depending on your offerings and target audience.
Pricing for international markets may seem like a lot, but with the right research and strategy, it can open up incredible opportunities. If you’re looking for a creative content creator who can help you craft a full marketing strategy, feel free to reach out to me!