Last month Netflix said it’s trying localized pricing in Asia to attract more users. Netflix has set its sights on expanding in this region but its current price level is not affordable considering the local income levels. With digital streaming giants like Amazon or YouTube also tackling emerging markets, it’s crucial for Netflix to find the sweet spot of price range for local conditions.
Emerging markets are the largest tech device growth markets. Digital merchants who want to sustain their user base and revenue growth need to focus on these countries. This includes a customized, localized approach to user acquisition, monetization and retention.
Charging all the customers the same price is neither fair nor effective. A customer in India does not have the same purchasing power as a customer in the UK. By charging them a flat price, you will end up overpricing some customers, underpricing others.
When entering emerging markets, localization is crucial for targeting and acquiring new clients. Fortumo has emphasized the importance of price localization for years now. This is a hot topic for merchants of all shapes and sizes – either you’re Netflix or a small scale digital service.
How you choose to localize your price will depend largely on your customer base, your product and brand positioning, and what markets you want to tap for future growth. Even though there is no universal way to do it, thankfully there is a variety of methods to choose from. Testing your heart out is the key to finding the best solution for you.
Netflix also revealed they’re experimenting with their pricing to find the appealing fit for local customers. This might mean a totally different fourth tier of pricing options or even an alternative version of the service.
Some points to consider for price localization:
- Purchasing-power parity – compare the comparable by finding indicative data that better resonates with the purchasing power of the potential customers of your service. For example use the Big Mac Index.
- Check out the competition – if any of your competitors are operating on the same market, it’s possible that they have already done the pricing research on your behalf. For example Southeast Asian video-streaming service iflix offers its users free video streaming that will be supported by advertising. Spotify has localized their Premium prices around the world – it costs around $10 in the US, $17 in Norway and $3 in the Philippines.
- Ask the payment providers – payment processing companies usually know the user payment behaviour for each market very well. For example Fortumo’s data map gives a good overview of carrier billing trends.
- Painted door A/B test – display your current pricing to 50% of users in a country, and localised pricing (for example in the context of a “discount campaign”) to the other half. If users do click on the local pricing, you can have a note saying “sorry, this package is not available yet”.
- Sell smaller pieces – instead of local pricing you can break your service into smaller parts – for example daily package instead of a monthly subscription priced accordingly. Getting a taste of the service will become more affordable to the customer while the total cost remains the same.