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Estd 4.22.2023
Below is a concise answer based on the insights from our saas pricing book, Price to Scale:
• Yes, several companies have experimented with differential pricing across regions to gauge price elasticity. In practice, tests where prices vary by market (for example, higher in the US and lower in Asia) are one way to assess how sensitive different segments are to pricing changes.
• Our book emphasizes that while the core principles of testing pricing—such as determining the Optimal Price Point (OPP) and understanding elasticity—are central to a sound pricing strategy, it’s important to design any market-based experiment carefully. When you vary prices by region, you’re effectively testing a direct form of price sensitivity against local market conditions, which is in line with the broader concept of measuring elasticity.
• On the ethical side, this approach can be ethically acceptable if it’s implemented transparently and is justified by cost structures or market conditions that legitimately differ across regions. However, there is a risk if customers find out that pricing differences are perceived as arbitrary, which might harm brand trust. It’s essential to ensure that regional pricing differences are clearly linked to factors such as variations in local purchasing power, competition, and costs.
• Practically, if you plan to run such tests, consider:
- Clearly segmenting the markets so customers aren’t directly comparing prices across regions.
- Communicating—in a general sense—the rationale for differing prices (for example, local economic conditions) to help mitigate potential negative perceptions.
- Monitoring feedback and adjusting the strategy if significant negative sentiment arises.
In summary, our pricing strategy book, Price to Scale, supports the notion that testing for price elasticity (including regional experiments) can provide valuable insights, as long as you balance strategic benefits with ethical considerations and clear communication.