The Solution For Pricing Products In A Global Marketplace
One of the most complex and challenging tasks for a company is defining the prices for their products and services across a range of different countries.
Despite the intricacy, many businesses neglect to consider a pricing structure. As long as the strategy works and the product is selling, they often don’t question pricing. Yet, those who do can improve their sales and margins, which can help the company’s bottom line.
Even a slight change in price can have a huge positive influence on an organization’s financial performance and health. When it comes to a global pricing strategy, vast research and analysis is required to deliver the correct number in such a diverse and competitive environment.
Why is this important to a business?
The pricing strategy can be a long process and the outcome has a direct impact on a company’s profitability, market share, market positioning and brand. Higher prices usually mean higher margins on a single unit but could translate to fewer sales and a lower overall profit.
The product’s price can also set different customer expectations. High prices lead to greater expectations, while lower-priced products usually have softer assumptions. So, how does a business manage those expectations when setting its prices?
This is crucial to answer if a company wants to maintain a long-term presence in the market.
The pricing strategy is dictated by internal factors, such as costs and capacity, as well as external influences, like global currency exchange rates, taxes and fees. Yet, the most important factor is the value created and perceived by the customers. The client or consumer is the market and will ultimately determine whether your products and services are worth the price you are seeking.
A step by step approach to global pricing
By following a few guidelines, any company can establish the basis for pricing its products appropriately.
It’s essential to analyze the market to understand its dynamics. Focus on where the market wants to go and not where it currently is. This may lead to rethinking the strategic direction but understanding this will allow the company to see whether the market has the instruments to get there.
The key to creating value is to offer consumers and clients the instruments to get to where they need to be.
A global service that offers one price adds greater complexity. We tend to focus on the differences when analyzing diverse environments, rather than focusing on what they have in common.
Working for the world’s leading Employer of Record has helped me find that focus and deliver the appropriate global strategy — one price that fits all our customers globally.
Organizations use our services to expand globally, and in essence, they are buying back their “time”. Our solution not only solves a problem, but it also hands backs time to our customers.
We all have a finite amount of time and every single business worldwide wants to buy one thing — time.
Regardless of the industry, size or cultural background, all businesses want to expand more rapidly than their competitors and they want to do this while saving money. So “time” is where the value and the cliché, time is money, has never been truer.
The so-called opportunity cost saved when using an Employer of Record when expanding their business is significant. There are more months available to operate versus the time spent in bureaucratic processes. There’s also cost saved by avoiding the creation of a legal entity. When combined, these two factors lead to quicker and greater Return on Investment when expanding.
Takeaways
Unfortunately, this isn’t Back to the Future and we don’t sell time-traveling DeLorean. But jokes aside, the following steps are a useful template for getting the basics of a global pricing strategy correct.
- Analyze the market environment
- Shift the focus towards what the customers have in common
- Find the value in that area of overlap
- Offer that value to the market
