Impact on Competitiveness and Profitability

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Setting the right price for your product or service in different regions of the world is a key factor for success in the global market. This manual offers practical steps and best global practices to help you determine the optimal pricing strategy for various regions.

Step 1: Market Research

Actions:

• Collect market data: Study the economic situation, level of competition, and consumer preferences in each region.
• Define your target audience: Understand who your potential customers are and what their needs are.
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Tips:

• Use reports from analytical companies (Gartner, McKinsey).
• Conduct surveys or focus groups in target regions.

Step 2: Cost Analysis

Actions:

• Calculate the cost price: Consider production expenses, logistics, taxes, and fees for each region.
• Determine your margin: Decide how much profit you want to make from each unit of the product or service.
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Tips:

• Don't forget hidden costs (e.g., customs duties, local fees).
• Use software tools for cost accounting (e.g., Excel, specialized ERP systems).

Step 3: Understanding Customers' Purchasing Power

Actions:

• Study income levels: Assess the average income of your target audience in the region.
• Evaluate customers' willingness to pay: Determine how much customers are willing to spend on your product or service.
• Adapt your prices: Set prices that align with the financial capabilities of local consumers.
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Tips:

• Use purchasing power parity indices (PPP).
• Consider the level of inflation and economic stability in the region.
• Conduct surveys or interviews with potential customers to understand their willingness to pay.

Step 4: Competitor Analysis

Actions:

• Study competitors' prices: Determine the price range for similar products or services.
• Identify your unique selling proposition: Understand how you can stand out (quality, service, brand).
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Tips:

• Visit competitors' websites, use their products or services.
• Read customer reviews about competitors.

Step 5: Choosing a Pricing Strategy

Actions:

• Explore various pricing strategies:
  • Premium pricing: High prices for high-quality products or unique offers.
  • Penetration pricing: Low prices for rapid market share acquisition.
  • Competitive pricing: Setting prices at or below competitors'.
  • Cost-plus pricing: Prices based on production cost plus desired margin.
  • Dynamic pricing: Prices that change depending on demand and supply.
  • Subscription model: Regular payments for access to a product or service (relevant for SaaS).
• Select an appropriate strategy for each region: Consider market conditions and consumer behaviour.
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Tips:

• Combine strategies: It's possible to use different strategies in different regions or market segments.
• Test strategies: Start with one and switch if necessary.

Step 6: Pricing for SaaS and Online Products

Actions:

• Define your monetization model:
  • Subscription: Monthly or annual payment for access to the service.
  • Freemium: Free basic version with the option to upgrade to paid features.
  • Pay-per-use: Payment for actual usage of the service.
  • Licensing: One-time payment for the right to use the product.
• Set pricing tiers:
  • Basic: Minimum set of features at a low price or free.
  • Standard: Extended functionality at a medium price.
  • Premium: Full set of features at a high price.
• Consider online market features:
  • Global availability: Ability for customers from different countries to purchase your product.
  • Currencies and payment methods: Support for various currencies and payment systems.
  • High competition: A large number of alternative solutions in the digital space.
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Tips:

• Use psychological pricing: For example, $9.99 instead of $10.
• Offer a free trial period: This will attract new users.
• Utilize analytics: Track user behaviour to optimize prices.

Step 7: Currency and Exchange Rates

Actions:

• Decide on the currency: Set prices in the local currency or internationally recognized currencies (USD, EUR).
• Consider currency risks: Fluctuations in exchange rates can affect profitability.
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Tips:

• Use payment systems that support multiple currencies (PayPal, Stripe).
• Regularly update prices in line with exchange rate changes.

Step 8: Legal and Tax Aspects

Actions:

• Study local legislation: Pricing restrictions, price controls, anti-dumping laws.
• Account for taxes and fees: VAT, excises, customs duties.
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Tips:

• Consult with local lawyers or tax consultants.
• Consider tax treaties between countries.

Step 9: Testing and Adjusting Prices

Actions:

• Conduct A/B testing: Offer different prices to different segments and assess the reaction.
• Gather feedback: Learn customers' opinions about the price.
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Tips:

• Use online analytics tools (Google Analytics, Amplitude).
• Be prepared to promptly adjust prices based on results.

Step 10: Continuous Monitoring and Adaptation

Actions:

• Track key indicators: Revenue, sales volume, customer churn.
• Adapt your pricing strategy: Depending on market changes and customer behaviour.
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Tips:

• Regularly analyze data and make decisions based on it.
• Stay flexible and open to changes.
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Pricing for Products Without Analogs

Recommendations for Setting Prices on Unique Products

When your product or service is unique and has no direct analogs in the market, it's important to create a pricing strategy based on the value your product provides to customers.

Step 1: Determining Value for the Customer

• Identify key product advantages: What problems does your product solve?
• Assess the economic benefit for the customer: How much time, money, or resources does your product save?

Step 2: Researching Perceived Value

• Study willingness to pay: How much are customers ready to pay for your product?
• Analyze customer needs and pain points: How acute is the problem your product solves?

Step 3: Choosing a Pricing Strategy

• Value-Based Pricing: Setting a price that reflects the product's value to the customer.
• Skimming Pricing Strategy: Starting with a high price and gradually lowering it over time.

Step 4: Testing the Price

• Experiment with pricing: A/B testing with different price points.
• Collect feedback: Customers' reactions to the proposed price.

Step 5: Considering Psychological Factors

• Psychological pricing: Using price points perceived as more attractive.
• Creating a sense of exclusivity: Limited editions or personalization.

Step 6: Considering Alternatives and Substitutes

• Analyze indirect competitors: What alternatives are customers using?
• Evaluate the cost of alternatives: Compare with the costs of alternative solutions.

Step 7: Formulating a Value Proposition

• Develop a clear value proposition: Why is your product worth its price?
• Communicate the value: Ensure customers understand the benefits and uniqueness of the product.

Step 8: Building Trust and Reputation

• Establish market authority: Publish expert materials, participate in industry events.
• Obtain third-party endorsements: Certificates, awards, expert reviews.

Step 9: Being Prepared to Change the Price

• Monitor the market and feedback: Watch customer reactions and demand changes.
• Flexibility: Be ready to adjust the price or add additional value.

Conclusion

Setting prices for products or services in different regions is a complex but manageable process. By following these steps and applying best global practices, you can determine optimal prices that ensure competitiveness and profitability for your business in the global market.

Key Principles:

• Flexibility: Adapt prices depending on market changes.
• Transparency: Ensure prices are clear to consumers.
• Value-Based Approach: The price should reflect the customer's perceived value.
• Customer Orientation: Consider customers' purchasing power and expectations.
• Utilizing Various Pricing Strategies: Choose the appropriate strategy for your product and market.

Additional Recommendations:

• Research local consumption habits: In some cultures, discounts and promotions are expected.
• Consider digital taxes: Some countries impose special taxes on digital services.
• Pay attention to customer reviews: They can indicate whether the price is adequate relative to the product's value.

By following this manual and considering the specifics of your product and target markets, you can effectively set prices that contribute to the growth and success of your business on a global level.

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