Should SAAS have tiered pricing for different countries?


13

For a start-up providing a web-app to customers on a subscription basis, do you think that the benefits of different geographic pricing outweigh the downside?

My rationale is that while North America is the largest individual technology market, other countries in aggregate are pretty sizeable, yet due to different income levels and currency exchange rates North American/European subscription prices may be too expensive for these markets. My thought would be to provide different pricing (expressed in local currencies, eg. US$1 = AU$1 = EU1 per user) depending on the originating country IP address and have this then associated with that user's account. This would only occur for very specific markets (eg. North America, South America, Europe, Oceania, etc.)

Market segmentation and tiered pricing is often spoken about in regard to product classes, but at least for saas, not in terms of customer geography. What do people think of this approach? Does anyone have any experience with this?

(Note that I'm not suggesting trying to exploit higher income markets, but rather provide more affordable subscriptions in countries with a lesser-valued currency/lower incomes. Clearly, this could quickly become very messy!)

Pricing Subscriptions Saas

asked Nov 1 '09 at 18:56
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User1084
363 points
  • I think it's better to be consistent otherwise the market will have a bad perception about your company. – Jpartogi 10 years ago
  • +1, excellent question ! – Olivier Lalonde 10 years ago

9 Answers


7

I would like to keep it simple. One pricing. But I may consider other pricing "weapons" to target international users.

Like

  • Offer a discount coupon code for international users that does both, attracts them and subsidizes their payments.
  • May be I'll come up with a pricing figure that serves all markets equally well.
  • Let them use it free but ask them to publicize it.

Anyway unequal pricing simply means many people will find a way to make payments from International IPs and hurt your image/sales at the end. It always happens with electronic items and other stuff.

answered Nov 1 '09 at 21:13
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Arpit Tambi
1,050 points
  • If you are offering a SAAS you need to have different pricing for different countries, or decide not to support them at all. In my products I block customers from China, India, Pakistan, Mexico, etc, because they simply cannot afford $30 usd per month. We block visits from those countries, in case later down the line we have a $1.00 plan for India. The reason for blocking the traffic is because its a huge waste of bandwidth. – Frank 9 years ago

4

Develop the system and go live with the core features before adding bells and whistles. After the product is out there you can get a sense if tiered pricing would work for your marketing and tax plans. Most of the time you are going to want to quote one or a few prices in your ads or brochures. Taxes would be more complicated with tiered pricing. You would need a fairly sophisticated system to figure all of this out at the time of payment. What about situations where someone's company is in Ohio, but they sign up for your service while waiting in an airport in the UK or Hong Kong? Or if someone in the Sydney office sent a link to the VP in New York, and both see different prices when they look at the site? Business is international and the dollar is something most companies are used to dealing with. You may want to allow them to pay in their own currency, yet still quote the price in dollars and then let your e-commerce system perform the exchange rate translation.

answered Nov 2 '09 at 01:21
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Mike
219 points

1

We run training in different countries and lower the prices where people either earn less or don't have habits of paying for training as Americans do. Recently, we were not been able to sell training in one developing country, and the only reason was the price.

In you case, I like the idea offered by Arpit - the price of the product stays the same, but each country has discount coupons making it affordable.

answered Nov 2 '09 at 04:07
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Yakov Fain
221 points

1

It depends on your market, and perhaps on your business ethics.

Third world income disparity is a huge problem, and if your product is going to be sold or marketed in places where the disparity is high then you would likely do better to reduce your pricing for that market.

If your product or service is something that could improve people's lives, then it becomes a matter of ethics.

answered Nov 3 '09 at 07:31
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Gabriel Hurley
785 points
  • Great point Gabriel - you turn the issue on it's head: ie. there may well be an ethical issue if the product _isn't_ priced so that it can be afforded where there is need. – User1084 10 years ago

1

I recommend adapting to local major markets. You'd be amazed how many people in the US for instance have no clue how much a euro is worth. If you only use one currency, the US dollar is the one that everyone more or less understands, of course. But if I'm in Europe, I feel much better about buying something in €, that's just a fact. Then, how much money you make (or lose) on the exchange rate is not so relevant as long as it's reasonable.

As you know, credit card companies may have different fees when buying with foreign currency, so again, users prefer to pay in their local currency if they can.

answered Dec 3 '10 at 09:37
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Alain Raynaud
10,927 points

0

The pricing has to differ for developing countries. There is an income disparity and hence developing countries may not want to buy your service/product because of high cost.
What Arpit says makes sense but how do you do that ? Where do you publish coupons or discounts ?
Some sites show different versions of sites based on your IP. Each version has a price specific to that country.

answered Dec 19 '09 at 06:59
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Skillguru
344 points

0

I had this same thought for the service I am developing. However my analytics data so far is showing that the vast majority of visitors to my site are from the USA and Australia, with UK and Canada next.

I still want to cater for developing markets though and am considering offering a cut down version for free and charging for the full product.

So my point is, see where your users are coming from and then the question may answer itself.

answered Dec 3 '10 at 09:45
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Susan Jones
4,128 points

0

How many people are successful at world wide software distribution? Not many. Very few products fit into all the cultures properly. The one that could be considered most successful is the MS operating system. In the US and EU they sell the fancy new one. In the third world they sell it at a discount. Even still the majority of their software is pirated in the third world. Their cash cow MS office in pirate form is a fraction of the price of the real thing. Why because the market will not support the higher price. People want the real thing but the economics of it don't fit. I do not know one SAS company that can sell to the third world and the first world.

My advice is this. Pick your target country. Market there. If you are doing well, you can then consider market research and product development for the third world or an open source for them.

But open source is the major competition in the third world.

answered Dec 3 '10 at 11:40
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Rp Joe
149 points

0

I concur with Arpit's post above, my only qualifier is that there's a difference between pricing strategies for startups and for larger, more established organizations.

As a startup, your key driver is going to be "how do I get to $ the fastest?" and in this race, simplicity is key.

As your company grows (and you have more staff + resources) you can then consider more regionally-targetted go-to-market strategies, at which point price segmentation may apply.

For now, though, stick with 1 price.

answered Dec 22 '09 at 03:13
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Joseph Fung
1,542 points

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Pricing Subscriptions Saas