Ask HN: How to make international app pricing fair?
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 ↗
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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 ↗
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.)
ParityBar is one solution for this (https://paritybar.com ↗)