Psychological pricing research suggests that product prices should be rounded to odd numbers (9, 5 or 0) in order to decrease ecommerce friction. A Marketing Bulletin study from 1997 found that 97 percent of all product prices ended in one of those three numbers. Considering the global reach of digital product ecommerce, pricing your product in local currencies is also important to prevent lost sales.
Most people go about their day-to-day lives carrying around one currency in their pocket. They are familiar with how much things cost or are able to make a value judgment at a store as to whether they can afford (or are willing to pay) the advertised price marked on a product.
In the online world, it’s very likely that people will shop outside their region without even knowing, because there are few borders for international selling. With this in mind, what does someone, who is used to seeing one currency, do when confronted with an unfamiliar currency? Most users at least pause, if not abandon, because a product’s price is not shown in their familiar currency.
The vast majority of U.S. customers are unfamiliar with spending money in any currency other than the U.S. Dollar. Seeing a Canadian Dollar, Euro or British Pound price will surely cause at least the 72 percent of Americans without passports to struggle to calculate what the cost is in U.S. Dollars, facilitating cart abandonment.
Similarly, the 75 percent of Japanese who don’t own a passport would also pause when presented with a U.S. Dollar, Euro or British Pound product price. Furthermore, the German population with 71 percent not owning a passport will probably be pretty unhappy about paying in British Pound, U.S. Dollar or Japanese Yen.
On the other hand, 76 percent of the UK population didn’t have passports in 1984 compared to just 20 percent not holding a passport today. So, are British citizens less sensitive to prices set in currencies other than the British Pound?
During the first wave of ecommerce, selling globally in a single currency was accepted. Companies required customers pay in the currency from where the company was based. The obvious drawback is customers’ unfamiliarity with the real cost of the “foreign currency.”
The second wave of ecommerce resulted in many companies using a floating exchange rate to automatically calculate the price of a product based upon that day’s exchange rate. This practice addressed the issue of customers knowing how much a product costs but results in unfriendly “crooked” prices (see image below). Depending on how you manage product marketing pages, this practice becomes a management challenge because the prices may or may not be pulled from the same place in your system, resulting in duplicate work.
Your customers should see product prices in clean, rounded numbers to further simplify the purchase decision-making process. If you show a European Union customer a product priced at €23,81 rather than a more customer friendly price of €25,00, you are increasing ecommerce friction unnecessarily and making them aware of the fact that your company is obviously not located in their home country.
Once you decide to price your products in clean, round numbers, the next thing to consider is pricing your product not only based upon the exchange rate of that local currency, but also based upon what the local market will bear for your product.
Decrease ecommerce friction and cart abandonment by setting prices in clean, round numbers in every local currency, and don’t forget to price your products appropriately for the market.