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Estd 4.22.2023
Based on the principles outlined in our pricing strategy book, Price to Scale, it’s advisable to adjust your pricing display to meet the expectations of your target market. In regions like the EU—where customers expect to see VAT included—displaying tax-inclusive pricing can help reduce friction and make it easier for prospects to understand the full cost upfront.
Here are the key considerations:
• Customer Expectations: When local customers are accustomed to seeing tax-inclusive prices, displaying the VAT as part of the price can enhance transparency and trust. This alignment with local norms can also reduce cognitive friction during the purchasing process.
• Pricing Calculator Integration: As discussed in our book, developing a pricing calculator (see the chapter on creating dynamic pricing tools) is essential. Incorporate regional tax differences into this tool so that your displayed prices immediately reflect local taxes, while your internal calculations remain agile enough to accommodate changes in tax regulations.
• Consistency Across Markets: While tax-inclusive pricing works well for consumer-facing markets (like in the EU), you might want to maintain a flexible pricing strategy for other regions. Handling taxes in your pricing model dynamically—by adjusting the pricing display based on the user’s location—ensures that you meet diverse market expectations without compromising on pricing accuracy.
In summary, for regions such as the EU where VAT-inclusive pricing is the norm, you should indeed display tax-inclusive pricing. At the same time, build pricing models and tools that allow for regional variation in tax treatment. This approach not only creates a smoother buying experience but also aligns with the overall emphasis in Price to Scale on clarity and market-specific pricing agility.