Ask HN: How to make international app pricing fair?

5 points by eyeswideopen 4 years ago | 7 comments

TL;DR Is pricing my app (iOS/Android) based on PPP (purchasing power parity)[0] or the Big-Mac-Index[1] a good idea to mitigate the overpricing in poorer countries resulting from Apples/Googles currency based conversion?

Background: Hey, I'm Maximilian, the solo founder of boost (shameless plug: https://boost.fit). Even though my app is currently completely free to use i investigated how to size my pricing tiers in the future. In the process i came across a number of app ratings of competitor apps coming from poorer countries saying the respective app is nice but way too expensive for a local.

Problem: That got me thinking - Apple, as well as google are currently loosely converting each pricing tier based on currency and taxes. This makes apps overpriced per default when e.g. my yearly subscription of $89,99 in the US is ₹6,000 in India ($80.46 converted)

Question(s): To price my app fair and in a way that it's perceived cost is equal in regards to local purchasing power i thought about factoring in PPP (Purchasing Power Parity index) or the Big-Mac-Index[1]. Has anyone experience with adjusting prices of a digital product to local purchasing power in general? Is the fear of arbitrage or people from richer countries buying products in foreign App-Stores the reason this is not done?

[0]Purchasing Power Parity: https://en.wikipedia.org/wiki/Purchasing_power_parity [1]Big Max Index: https://en.wikipedia.org/wiki/Big_Mac_Index [2]My app: https://boost.fit

troydavis 4 years ago |

> Is the fear of arbitrage or people from richer countries buying products in foreign App-Stores the reason this is not done?

No. This isn’t common because most entrepreneurs don’t consider fairness to buyers (by any definition) to be their primary pricing goal. Most price based on value delivered to the buyer (how much better is your app than the buyer’s alternative?), the seller’s costs, or a combination.

Pricing based on perceived fairness to buyers has some practical challenges for sellers, like that the seller’s expenses - particularly team compensation - are not adjusted based on buyers’ locations.

Also, the alternative choices (in economic terms, “substitute products”) are often different across markets - not just different available apps, but completely different ways to accomplish the same task or spend time. There’s no reason to think that buyers in two markets receive the same amount of value from your product.

(Of course, there’s an argument that pricing something differently in certain markets might lead to more total revenue from that market, but that’s that’s optimizing for total revenue, not fairness.)

eyeswideopen 4 years ago | |

Good points! But all in all if a value based pricing approach is taken accepting the default conversions will result in overpriced products, that only fit to the value provided in the baseline country (US).

> Also, the alternative choices (in economic terms, “substitute products”) are often different across markets - not just different available apps, but completely different ways to accomplish the same task or spend time. There’s no reason to think that buyers in two markets receive the same amount of value from your product.

I agree! But is this not the case for an even more fine grained per country pricing than the PPP adjusted one including market/competitor research etc.?

> Pricing based on perceived fairness to buyers has some practical challenges for sellers, like that the seller’s expenses - particularly team compensation - are not adjusted based on buyers’ locations.

If we stick to the example of a digital product in the app-stores the overhead could be considered negligible if no country specific marketing, i18n, etc. is done, right?

All in all i agree, that it poses additional challenges but i still struggle to see, the advantages of the default pricing imposed by the app-stores. Even when optimizing for fairness becomes optimizing for revenue my gut would tell me that the best performing price/value-added from the US would perform better PPP-adjusted than the overpriced alternative. But that is where real world experience from someone around here would be perfect!

davetron5000 4 years ago |

I have had several readers over the last year reach out to ask about this. I ended up adjusting the pricing in Amazon per region (print copies) and creating discount codes for people to use on my site based on the honor system[1]. For books I sell through Pragmatic Programmers, they did not have a way to adjust the pricing per region.

For me, the goal is reach and not profitability. The reality of selling technical books is that you can’t make a living on it, so it's really a "loss leader" on my employability.

In the past six months:

• 390 total orders

• 116 used one of my PPP discount codes

• Mexico's code is the most used, followed by India, then Europe. Mexico and India offer the steepest discount, though Europe's is not particularly steep, so I don't think anyone is gaming the system. Note that the amount of discount is not published until you apply the code at checkout.

For pricing an app or other thing where economics were more important, I might still do it, and factor it into the business model, basically eating some AOV to get growth/TAM.

[1]: https://naildrivin5.com/books/index.html#pricing

eyeswideopen 4 years ago | |

Great to hear someone with real world experience on this! Do you happen to have data to compare against? Most interesting of course would be orders from your PPP adjusted countries before and after the introduction of your honor system. This would help to see if there really is a reduction in revenue for theses countries since the alternative is no revenue due to overpriced products.

> "Mexico's code is the most used, followed by India, then Europe. Mexico and India offer the steepest discount, though Europe's is not particularly steep, so I don't think anyone is gaming the system."

That is good to hear. Even more so since in your case gaming the system would be even easier than switching app stores etc. (AND your audience is tech savvy)

davetron5000 4 years ago | | |

Unfortunately, I don't have any demographics on who orders from me. I only ask for an email address. Mostly have just tried to minimize access to personal information.

alexobenauer 4 years ago |

ParityBar is one solution for this (https://paritybar.com)

eyeswideopen 4 years ago | |

That's nice! Maybe i'll hack together a simple(r) price calculator to just spit out the adjusted prices for all App-Store regions based on the US price (for my use case). But for self hosted websites this is sweet! Thanks