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Estd 4.22.2023
Based on our book, Price to Scale, the answer is yes—but with important caveats. While localizing pricing based solely on purchasing power parity (PPP) might seem intuitive, our pricing strategy book emphasizes that adjustments should be more holistic and rooted in how customers perceive value and exhibit price elasticity.
Key points from Price to Scale include:
• Value and Price Elasticity: Rather than simply adjusting prices based on PPP, it’s essential to understand local customers’ willingness to pay and the value they derive from the product. This is why our approach goes beyond a bare-bones PPP calculation to incorporate local price elasticity as a key factor in setting pricing.
• Segmented Discounting Frameworks: In our book, we outline discounting ranges for different customer segments (e.g., commercial, mid-sized, enterprise) which, although not based solely on PPP, indirectly capture local market conditions. This structured approach shows that pricing adjustments should reflect both the underlying economic realities and the customer’s perceived value.
• Practical Application: When considering local market conditions, start by analyzing the local customer segments, competitive landscape, and value perception. Then, adjust pricing using our frameworks (for example, using discount ranges or good–better–best packaging) instead of relying on raw PPP conversion. This ensures that pricing remains strategically aligned with both market's affordability and product value.
In summary, while purchasing power parity can serve as a helpful indicator in the early stages of market analysis, our book advises a broader framework—one that integrates local price sensitivity, competitive factors, and customer segmentation—to truly optimize pricing on a global scale.