What Is Geographical Pricing and How Can It Increase Profit?

In order to maximize profit, businesses often adopt different pricing models, and depending on a business's offered products and services, these pricing models will work better in some circumstances than others.

This post will look at geographical pricing strategies and how this pricing model may be what your business needs to find success.

Geographical Pricing Strategy Basics

Geographical or localized pricing is a strategy to increase profits by charging a different price in different areas where the economic conditions may be different. This pricing strategy will charge a higher price for the same product in an area with higher average incomes and lower prices in an area with lower average incomes.

The cost of geographical pricing may also be based on shipping costs, import costs, and local taxes. This tactic allows for higher margins on high-demand items, which can lead to increased profitability for retailers.

Advantages and Disadvantages of Geographical Pricing

Advantages of Geographical Pricing

• Increases profits by charging customers from different regions suitable prices
• Allows you to increase the price of a product for high-demand items
• Allows expansion into new markets
• Increase volume of orders from a customer at a lower cost

Disadvantages of Geographical Pricing

• Increases administrative burden
• Might negatively affect customer loyalty
• May increase customer acquisition costs
• Geographical pricing has come under fire in the past because it can be seen as discriminatory - something known as geographical discrimination

Is Geographical Pricing Right for You?

For businesses conducting internationally, international pricing makes sense. If your products are sold to customers on a global scale, you may want to consider using a global pricing structure.

On the other hand, it doesn't always make as much sense for local businesses conducting localized operations to adopt a geographical pricing model. Deciding on the right pricing model can be challenging. Thankfully, there are apps like OriginalPO that are more than happy to help out.