Don't Leave Money on the Table: Localize SaaS Pricing Internationally

What is the most impactful yet underutilized growth lever for SaaS companies?

Pricing. 

Research shows that every 1% increase in monetization effectiveness yields a 15-16% revenue lift compared to just 3-4% for acquiring new customers. Despite this, pricing remains the ‘black sheep’ of the growth family, receiving far less attention and resources than sales. In our recent webinar, we discussed one of the most critical elements of a SaaS pricing strategy: price localization.

Cosmetic vs Market-Based

Price localization adapts your pricing strategy to local markets outside of the United States. PI’s research found SaaS adoption is growing rapidly in international markets, by almost 50% in Western Europe, compared to just 17% in the US. Price localization is now essential to maximizing customer acquisition and revenue in international markets.

To take advantage of international SaaS growth, there are two main types of localization: cosmetic and market-based.

Cosmetic Localization

For early-stage companies, cosmetic changes are a quick fix that boost international sales.

• Language: 40% of consumers won't buy from a website in a foreign language. Adapting the language of customer-facing content ensures international customers understand your key features and product value. 
• Currency: Whether it's Euros in France, Krone in Denmark, or Pesos in Mexico, switching your prices to local currencies makes it easier to understand and reduces friction from the purchasing process. 

Market Based Localization 

For growth-stage companies, setting prices based on each local market’s economic conditions and your target buyer’s willingness to pay ensures you don’t miss out on customer growth or leave money on the table.

• Market Conditions: The local market saturation and competitive landscape should impact how you price your product. For example, if there is no local competition and a particular industry needs your solution, you can charge more.
• Willingness to Pay: Not all countries have the same purchasing power. If you charge the same price without adjusting for willingness to pay (WTP), you will miss out on customers where the WTP is lower (i.e. Southeast Asia) and miss out on revenue where WTP is higher (i.e. Nordic countries). For example, Netflix charges $15.49 per month in the US, but charges $2.82 per month in Pakistan and $21.48 per month in Switzerland for the same product. 
  

Payment Localization 

After localizing price, you also need to localize payment methods. In the US, for example, Apple Pay and PayPal are extremely popular, especially for B2C customers. If these forms of payment are not being offered at checkout, you’ll lose out on customers. 

The same is true in international markets. With the rise of digital wallets, credit cards or even cash-based payment methods, offering your target customers their preferred payment method increases conversion by 30%. For example: 

• Alipay (China). With 640 million active monthly users, Alipay is the leading online payment method in China, accounting for 63% of transactions. 
• Pix (Brazil). Pix is an instant payment program, which is used by over 70% of the Brazilian population and is more popular than credit cards or digital wallets. 
• OXXO Pay (Mexico). With over $6 billion of transactions 2024, OXXO Pay is Mexico’s leading cash-digital service, enabling people to pay in cash in 20,000+ local convenience stores for digital services like Spotify or Netflix.

How and When to Implement Price Localization 

50% of SaaS companies fail to localize their pricing strategy - providing a great opportunity for SaaS companies that do. 

Due to the time and resources required for market-based localization, how and when you localize is typically related to your level of growth. 

• Early stage: Cosmetic
• Growth stage: Market-based 
• Late stage: Continuously refining localization based on changing market conditions

Here’s how you can get started at each stage. 

Cosmetic 

• Identify your buyer personas and willingness to pay in your home market.
• Translate your website and pricing page into international buyers’ language.
• Adjust your pricing to display in your buyers’ local currency.
• Add preferred payment methods for each local market. 

Market-based

• Identify region-specific buyer personas, including company size, willingness to pay, value proposition and pain points. For example: a cybersecurity company might sell to a CISO in the US, but a Director of IT in Brazil. 
• Perform market-based research on the purchasing power, competitor landscape, and contract preferences (i.e. flexible vs annual contracts, monthly or quarterly billing). 

Continuous Refinement

• Conduct ongoing price sensitivity research every six months to account for currency fluctuations, changing economic conditions and new players joining the market (all of which affect willingness to pay). 
• Consider setting a pricing floor and ceiling to avoid drastic pricing shifts in markets with volatile conditions. For example: if you operate in countries prone to hyperinflation, such as Argentina, you may even decide to offer your prices in USD for stability. 

Adjust Your Pricing Regularly 

Pricing is not a set-and-forget strategy. SaaS companies that change their pricing every quarter are generating 4x more ARPU growth over five years than companies changing pricing once per year. It pays to take your pricing strategy seriously. 

For more advice on implementing a price localization strategy, watch the webinar, Mastering Price Localization: Strategies to Win in International Markets.