Aral Balkan: Historical Archive — Can geographical pricing survive the information age?

Can geographical pricing survive the information age?

You thought Apple was ripping you off with the price of iTunes songs in the UK? You should see what Sony is doing!

There was heated furor over Apple charging different prices in the UK than elsewhere which got somewhat resolved recently when Apple standardized its iTunes prices across the EU.

The whole deal there was because people in the UK were paying at most 13p per song more than their European counterparts. But, because there was a considerable price difference between EU countries, the EU got involved. Unfortunately, no such action will be taken against Sony, who, as we say in the UK, is really taking the piss with their pricing because the EU has no jurisdiction over pricing differences between non-EU and EU countries.

So we're used to paying more for stuff in the UK but when does the price difference become ridiculous?

Is paying 50% more for something acceptable? OK, how about 100% more?

Hmm, how about more than 100% more for the same thing?

Case in point: I was browsing the online Playstation store on my PS3 and I thought I'd download Piyotama. At £3.49, you can't go wrong, right? Well something told me to read a review before buying it. I found a couple from US web sites but one thing struck me immediately. They all listed the game as being available in the US for $2.99.

Why's this strange?

Because with an almost 2:1 exchange rate, we're not used to seeing the actual price of an item be higher in the UK than in the US.

So Sony is selling Piyotama for $2.99 in the US and approximately $6.91 here in the UK. That's more than double the price!

For every one copy here, you could buy two copies of it in the US and still have enough left over to buy a double cheese burger at Burger King (though why you would willingly subject yourself to such abuse is beyond me!) :)

To cut a long story short, I know it's ridiculous but now I can't bring myself to spending a meager £3.49 on a game because I feel like I'm getting ripped off. How crazy is that?

Geographical pricing works as evidenced by the fact that I was going to buy the game without another thought. But then I found out how much it costs in the US and my opinion was radically altered.

To be effective, geographical pricing requires us to be in the dark about how much things cost elsewhere. Otherwise, it can very easily lead to feelings of resentment. No one likes to feel like they're getting ripped off.

What will be the long term effect of this resentment on a company's image? How will it affect customer loyalty when a competitor springs up that doesn't employ geographical pricing?

What do you think? Can geographical pricing survive the information age? Or is this walled-garden approach eventually doomed to extinction thanks to the Internet?

Comments

As Pete points out, it isn't just Apple and Sony. Apple are actually quite good and only rip the British off a little bit. Microsoft charge Americans $400 for Vista Ultimate and charge the British $740 for the same product. Adobe charge $1800 for Creative Suite 3 Design Premium for US citizens and $3300 for the British. Adobe laughably try to justify this rip-off price hike by claiming that selling into Europe costs more because of translation costs. The products don't use "colour" for example in my British copy of Flash, thus their claim is utter shite and they are simply ripping us off. Geographical control doesn't just end with pricing either. Amazon stores across Europe preventing the Brits buying Wii's from other European countries despite excess stock in those countries show how even within the EU companies are allowed to impose unfair trade restrictions. Another example is region-specific DVDs. You may have baulked at buying a rip-off Sony game, but what about the Adobe software you own? The DVDs you own? The CDs you own? Regional pricing will survive the information age for we consumers only have two choices: pay the asking price or do without.
by David Arno on 2008-01-25 22:50:12
Even more ridiculous when you consider that the ps3 software is exactly the same. It's fairly easy to set-up a US store account and get more choice for less cash. I'm not so fussed about localisation of color to colour to pay double....
by Alan Wallace on 2008-01-25 22:37:14
Good at least you can buy. We can't even buy online either Adobe or Apple softwares from India? iTunes store doesn't work for us (Indians)... We are member/citizens of so-called internet-world, however, we are asked for our location (country/city)? Web-apps need to be smarter and we need one currency for internet :-) -abdul
by Abdul Qabiz on 2008-01-26 21:08:31
it's a very interesting subject :) yes, as internet users, breathing it every day making the comparison of prices on the geographical level really does not match our culture of having similar things accessible anywhere and anyhow you connect. that's sad to say but that non-geographical "software" (web application, RIA, etc.) we take for granted on the internet, when put within country boundaries just fall into goods and products law of that same country; different taxes, different legal laws, etc. Except educating government of those countries about those differences (or simply kicking them in the arse real hard), very few can be done for the actual situation, internet is global and immaterial, not goods and products as defined by the law of each countries. And really, how much I understand how this can apply to a boxed product you could get in a shop, as soon as the material boxing vanish to be a series of bits, I just can not wrap my head around the difference of prices for those same identical bits. And to those who would tell me that a software you can download is just a convenience so you can get the application right way instead of waiting that shipping box, I would answer what about software which have no boxes, which will always be an immaterial download over the internet ? sorry for the long post, but it bring me to that point, and an important one imho ok, for now we're stuck, Photoshop cost more in the UK than in the US, or PS3 mini-games to stay on topic, ok fine, but what about the slimed down version of Photoshop working as a RIA that you could only use/rent/buy online and would never be able to buy as a box in a store ? I'm really curious how this gonna evolve with time, for small stuff you can live without as a minigame or find workaround to obtain a fair price, sure the problem is not that big, but for application you can not really download and can only use over the internet, if the same logic is applied the rip off will be really much much more painfull :(.
by zwetan on 2008-01-27 12:58:53
@Olly, Wii points are valued at 1 point = 1 US cent in the USA and 1 point = 1 Yen in Japan. Here in Britain we pay around 75% more per point that Japan does. I'm sure Nintendo, just like so many other countries, can offer an explanation for this, but that explanation will always be an anagram of "We can rip you off; so we do". If you do have a Wii, it is worth noting that you can switch the country before buying points and you'll be charged at that country's price. You can then switch back to British without losing the points. Sadly though, a PAL Wii can only be set to PAL countries (which excludes Japan and the USA of course). Since Britain is one of the most expensive, switching to just about any other country will save you money though.
by David Arno on 2008-01-28 15:06:59
Yeah, I get my Wii points at £7 per 1000, as you all do, which doesn't work out astronomically more than the US, which, if my calculations are correct, should be $10 per 1000 ;-) Tbh, though, £7 for Mario Kart 64 or Lylat Wars is still a bargain!
by Lee McColl Sylvester on 2008-01-28 16:08:39
IMHO, regional pricing is the ultimate sin for companies, it's geographic discrimination. When pricing differences are relatively small, or, there's a tax involved, people understand and tolerate it. When you can take a plane to the US and get back with the 'product' and some money left in your pocket, that's totally unacceptable. Regional pricing must end, it's not fair, it should be considered fraud, or maybe even crime against humanity!
by Burak KALAYCI on 2008-01-26 02:34:57
Don't let this sound like I'm defending greedy companies, but there is more to it than what's been stated above. Though, some of the reasons are lame too... but... for example, if I'm going to take on (and effectively pay with my commitment) becoming the official (and exclusive) distributor in a particular country I'm going to want a bit of protection and a piece of every sale that country. Maybe those involved to speak more to this because the more I think about it the more I think it's just pure greed. I think ultimately, you all have to refuse to give in or they'll be justified by the fact they can get away with it. Either it's worth it to you or it isn't... and feeling like a chump (paying double what we pay) is a legit reason to say it isn't worth it. Having said all this... I wonder where those in the US get ripped off. Naturally, it's difficult to visit the UK because stuff is so expensive and the exchange rate is so high. What kind of exported products do you all have that I buy? Just curious.
by Phillip Kerman on 2008-01-25 23:43:02
It's not just Sony & Apple. Have you seen the pricing for the news Adobe media servers? Whoever priced those up, pretty much just substituted the $ for the £ sign... and there's absolutely no justifying it. We in the UK can download it, and it costs Adobe nothing.
by Pete Shaw on 2008-01-25 21:47:43
Interesting. I wonder how adobe could handle it. To me it would seem like a pain in the ass to price the product live with exchange rates. At the same time they need to consider what will happen to that rate over the 18 month life cycle of the product. If they don't price it correctly they could be taking a bath on it as the currency shifts. As someone pointed out the company does have to go through all the legal stuff to sell in each country, meet their legal requirements, the staff is paid in that currency. I assume adobe has no interest in losing on the bottom line because our President has devalued the us dollar over the past 6 years to try and improve our competitiveness. Just curious if you guys have opinions on how companies should price things when they sell across the globe, whose currency should they use as their baseline?
by ethan on 2008-01-26 20:40:47
@Ethan: wouldn't the company have to convert to US currency, anyway? Why not only state the value in dollars, and then have whomever is paying but the product in dollars? Banks and credit companies manage currency conversion the world over, anyway, so no-one will feel ripped off!
by Lee McColl Sylvester on 2008-01-27 09:50:15
I was only talking to a US buddy of mine recently about acquiring some Adobe products for me from the US, as it's almost half price there (well, they're not getting discount, but we're certainly getting stung). I don't know how that works license wise, but I am gonna use the software for a US contract, so surely there's a loophole there. And, if Mike is right and US licenses get blocked here in the states, well, I shall just have to disconnect my development machine from the net, and have a dedicated web research machine. When will this madness end, huh? I tell you what, though. When my current personal project matures, I'm gonna be charging the states more than 100% more for copies of it ;-)
by Lee McColl Sylvester on 2008-01-27 09:47:31
@Lee, yeah i guess if the credit card companies will do it then adobe does not incur more costs. I'm not an adobe fan-boy but i do think we do not take into account the behind the scenes legal/financial stuff that companies have to go through to sell their products in the different countries. IE: norway and itunes fairplay issues. If there is a physical box or not it's still a product being sold etc. I wonder if there is a higher cost due to your purchases having to support fully the adobe infrastructure that is in that country(fewer units sold equals higher price for each unit). Those people's salaries and benefits do not adjust based on the conversion rate. If the euro goes up it's more expensive for adobe corporate.
by ethan on 2008-01-27 20:57:06
How do you dare to demand the same rights for yourself as companies? Haven't you read the small print on the globalisation package? "Only for big players". How else could that system work if customers could just buy anywhere they wanted? Hell - in the end somebody would have that crazy idea and buy everything directly in China where anything seems to get manufactured today anyway.
by Mario Klingemann on 2008-01-26 12:36:31
I was going to upgrade my Adobe Studio 8 to CS3 at the end of last year, but realised that the UK price was three times the US price given the exchange rate. I couldn't buy a US copy on-line as Adobe blocks this. My better half was just about to visit the States so I asked her to buy a copy in a store and bring it back. Fortunately, before she did this I found out that Adobe has also blocked this route - UK licence keys won't work with US bought products. In the end I bought a new licence for Photoshop Elements. Adobe loose out on my goodwill; a few hundred dollars of revenue; and I tell this story to everyone I meet. Mike
by Mike on 2008-01-27 08:55:35
Okay, look at this. Currently, Flex 2 with charting, bought in the States, is $699, while in the UK, it's £410. This means, we're paying the equivelent of $811.17. If you live in New Zealand, though, which is where I'm hoping to emigrate thanks to my wife's family coming from that neck of the woods, they pay $699, too. However, while the US dollar is 1.98 to the pound, the New Zealand dollar is 2.57 to the pound, so by buying it there, you're only paying $538.47 US or £272.12 sterling. I wonder which country works out the cheapest? By default, I automatically assumed it would be the States.
by Lee McColl Sylvester on 2008-01-28 08:44:38
It's not just our friends at the big software comapnies - Brighton's own Ben Sherman charges more for its shirts in the UK than it does in its New York store! What I think we need is an EU-US trade agreement, like we have within the EU, to stop this price-gouging. How about a law that stops companies blocking international online sales? By the way, will Amazon.com ship a US copy of Flash to Europe?
by Iain on 2008-01-28 10:23:09
It's interesting seeing Adobe pop up over and over again in the comments. I think competition is one way to force them to re-evaluate their pricing, which is why I've been so interested to see the new generation of image editors (i.e. Pixelmator, Acorn, etc) entering the Mac market. Obviously they can't do everything PS can (yet), but you could buy ten copies for the same price as Photoshop. I'm assuming the PS3 online shop is a walled garden though (i.e. Sony are the only game in town)? I've no real idea of pricing differences on Wii - you download games using pre-paid "points", which effectively hides any differences from the user.
by Olly on 2008-01-28 12:27:22
The fact that consumers are being charged different prices around the world is dependent on FOB origin pricing and delivery costs. While it does seem unfair most companies have the consumer absorb some of the costs of transportation. While you are absorbing some costs the company is also paying extra to reach a geographic audience. A variety of companies use these Fine Tuning of Base Price Tactics to expand globally without creating extreme costs for themselves. It is also more common for technical products to have a larger increases.
by Jess on 2011-11-16 04:09:35