Setting Pricing in Multiple Currencies

October 19th, 2008 Amir Posted in Marketing |

When you sell in different countries, people expect to pay in their currency. How do you determine pricing in multiple currencies?

Recent financial market storms are affecting currency exchange rates. Within days, exchange rate changed by as much as 30% between major currencies.

How do you cope with these changes? Should your product pricing change on a daily basis to maintain ‘fair’ pricing?

Ways to achieve automatic currency updates

If you need to charge the same amount in different currencies, you can use online currency conversion services. These will make it extra easy for you to determine pricing in multiple currencies and charge the right amount from your customers.

This is useful if your customers are likely to compare the cost in different currencies and want to know you’re charging the same amount, regardless of the currency they pay in. For example, if your shopping cart allows currency selection, this might be an important feature.

Services like xe.com include various options and allow your server to interface and update using different communication protocols.

If you’re feeling hackish, you could even use Google. Try this in your browser:

http://www.google.com/search?q=20+USD+in+Euro (search Google for “20 USD in Euro”)

You can run this as a cron job and easily parse the resulting HTML for the conversion rate.

Be warned: parsing HTML and doing similar hacks needs constant maintenance as output format tends to change.

Setting a fixed price in different currencies

Before calculating dynamic pricing, ask yourself if that’s really what you need to do. Your product, costing 19.95 USD, may appear as 14.35 Euro one day and 16.33 Euro the other. This can be the source for trouble:

• Pricing looks odd. People are used to near round figures, like 14.95, 19.95, etc. Then may not understand what’s going on and attribute your pricing to an error.
• Pricing changes frequently. Someone buys your program for 16.33 Euro and tomorrow sees it only costs 14.35 Euro. You can explain why that happened, but it’s not helping build confidence.
• You can make more money charging more from strong economies. When the Euro is very high, it means EU economy is typically stronger. People may just be willing to pay more, why not ask for it?

So, if people are not very likely to compare pricing in different currencies, why not just set fixed pricing and that’s it? Sometimes you’ll make more no Euro sales, some times on USD and some time on Japanese Yen. You can’t eat the cake and keep it whole, can you?

Example - our software division pricing in multiple currencies

We’ve been selling software for about 6 years now. Our digital photography programs are selling in six languages, all over the world.

Here’s our pricing table:

It’s been working out great for us. in September, our USD sales peak and in November and May, we get a lot of Euro business. The rest of the time, it’s pretty evenly spread.