Any insights or personal experiences with “purchasing power parity” for SaaS?
Purchasing power parity (PPP) is an economic theory that compares different countries' currencies through a "basket of goods" approach. According to this concept, two currencies are in equilibrium or at par when a basket of goods (taking into account the exchange rate) is priced the same in both countries. (source)
Some companies price their products differently based on the customer's expected purchasing power. For example Wes Bos offers his coding courses at a discount to customers of countries where the average salary is significantly lower.
I'm curious to learn more about this approach. Both from a technical, practical, and moral perspective.
I think pricing by region is a very archaic concept and exactly the thing we should be fighting. Just like we all dislike region-based DRM, differing video standards like NTSC/PAL and websites that change their language based on where you are geographically at any point.
In a future where we all move around the world more, which is a future that's current, that only creates confusion. It's also very easily abused by just going through VPNs etc.
There has to be other ways to make people with weaker purchasing power to participate than pricing by geo location of a user's IP address, which is just too limited.
For sure. Figuring out what pricing to use for which user is complicated. People travel, it’s hard to determine affluency on a country basis (I got offered a 30% discount for being in Korea???), location can be spoofed, etc.
I don’t think there’s a perfect approach, just like charging everyone the same absolute price isn’t necessarily perfect either (depending on your goals).
So I guess the question becomes what the least bad option is.
Ultimately it might come down to trust. For example with WIP I don’t see many affluent people abuse the system as it would look very bad on them if they get caught.
Hey Pieter, isn't PPP one of the core foundations of UBI? One of the few things you've been advocating about lately?
I mean, you can't just give north American wage to a zimbabwe unemployed person... he would become the richest guy in their state! And the other way around wouldn't work either..
So you need PPP for UBI, and apply that for digital products seems really reasonable.
Just imagine how impeditive is a recurring U$20,00 for an average Pakistani guy.
I mean, not saying you should stick to that for NomadList though, that's totally your call.. I'm just saying that Startups should indeed discuss it more, at least.
IMO, it would be as much beneficial as the open startup initiative - another thing you've been rightly aknowledged for.
Congrats for that btw :)
I've been playing around with Paddle (since we don't have Stripe in SA), and they have a built in feature with their JS plugin that detects the user's location and give localised pricing if it's set like that. So it's definitely something businesses are experimenting with.
When you say localized pricing does that include discounting the price based on purchasing power? Or just a currency exchange?
Like you can set a price for each currency. In this example it would be 119 ZAR (± $10) for SA based users and the rest of the world would see 14.99 USD.
I see. That’s handy!
Also services like Spotify localise their pricing for exactly the same service.. Like in the US it's $10, 10 pounds in the UK and 10 EUR in Europe.. And then, R60 (±4 Euros) in SA and I think in SE Asia like Thailand and the Philippines it's even cheaper.