Pricing will always be an important consideration when a company goes international or is operating internationally already! Of course a company wants to achieve company goals with:
- Satisfactory ROI
- Market Share
- Specified Product Goal
Beyond this, company costs are also important including:
- Company Costs
- Cost-Plus Pricing
- Dynamic Incremental Pricing
- Incremental Costs
Because of this, depending on customer demand, competition (cross-border price differentials and nonprice competition), distribution channels and government policies, there could be a necessity to change pricing strategy to meet company goals.
One company that has been impacted with pricing strategies is Netflix. In researching, it was really interesting to see just how much prices differ amongst countries. Back in 2016, the company noted that based on various governmental laws in different companies, there would be a need to change prices. For example, in Brazil, they mentioned there would likely be “an inflation adjustment” on an annual basis.The company further indicated that considering the increasing competition in international markets, it was more focused on offering existing Netflix subscribers good content and more value at that price point. Netflix also stated that in some international territories, where countries change their VAT (value-added tax) or GST (goods and services tax), the company may pass the change on to consumers in the form of changed prices for its plans, (Pelts, 2016). They found a lot of success at this point in offering their content in pricing tiers, which allowed them to capture more of the market.
In 2018 Netflix released the following data showing the pricing differences amongst countries.
Netflix shocked many consumers by asking Indians to pay two and a half times as much as they would for the average pay TV subscription. At the other end of the scale, Australians would be forgiven for thinking that Netflix is cheap as its fees represent only 9% of the pay TV ARPU.
More recently, the company was criticized for raising its prices in 2020 during the pandemic in the US when many Americans were suffering to get by and job loss was rampant. They announced they would raise their pricing by $1-2 for US customers. According to their CEO Reed Hastings, this was because “Netflix has reached a mature phase of its business, prompting CEO Reed Hastings to shift the company’s focus from revenue to profit,” (Phan, 2020).