The International Mobile Market: Pricing Segmentation

If you intend to market globally, it helps to understand it is comprised of many different markets and almost every one of them is different. Applying dynamics specific to the North American Market won’t work very well in Southeast Asia or South America. Localization covers a lot of the topics inherent to international marketing. Localized pricing is the focal point of this article.

The cost of tailoring an app to a specific market usually runs a fraction of the overall cost of producing an app.

In the North American and European markets, average income is dramatically higher than many developing markets – Southeast Asia, Eastern Europe, South America, the Middle East and North Africa. Overall population by mobile device and platform, income distribution and local market nuances all play a role in finding optimal pricing.

Pricing Segmentation is an approach to customize the price of a product to a specific market for maximum gain. What is affordable in one country may not be affordable in another. The Big Mac Index is a really good example of price segmentation. In 2012, the price of a Big Mac in Norway was $9.63, but only $2.44 in China. Profit margins on each product vary from store to store.

Electronic downloads largely bypass costs of packaging, storage, shipping and more. The cost of development and production of software, including mobile apps, does not radically differ whether you produce just one copy or millions of copies (vs. physical production).

Another factor that must be considered is the relative ease of doing business in the mobile app market. Getting your product on the shelf is far less of an issue in mobile than in a software store or supermarket. As a developer, you can add your product to Opera Mobile Store in a matter of minutes.

Of course, for an app to be profitable requires recovering all of the costs involved with its initial research, design, development, testing, and other overhead. There is also a development and marketing cost for each localization effort. Finally, there is the cost of distribution via different advertising models. Each of these expenses needs defined so that you know your breakeven point for the main product, each localization effort and per install within each market segment.

These points considered, localized marketing efforts need to recover the cost of your localization work and advertising costs per install.

One point frequently heard is that the profit margin in developing markets is lower. Yes, that is usually true – but your ROI per market is tied more to the cost per localization than the overall app. More importantly is whether you see your app as an end unto itself or as the means to further ends?  Are you mainly trying to sell apps or win customers?

Cost and effectiveness of advertising varies by ad network, by region and by app genre. It is a mistake to ignore developing markets just as it is to enter a market without researching it. Every app is not going to fit every market equally. Some may not fit at all.

There is ample guidance available simply by looking at where and how “big companies” do business in countries you might ordinarily dismiss.

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Project Manager at the Opera Mobile Store providing Sales-Marketing support. Content development and research.

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Comments ( 4 )

  • Determining Mobile Market Reach | Opera Mobile Store Blog says:

    […] Purchasing power parity equates those US Dollars to what people can buy locally. A good point of reference for this is the Big Mac Index – measuring the cost of a Big Mac in different countries around the world. In Norway, a Big Mac is over $9.00, but in China might be less than $2.50. In essence, the app you are trying to sell to the North American Market for $3.00 won’t make headway in most other markets at the same price. This gets into market and price segmentation. […]

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