Setting the right price for a product or service can mean the difference between success and failure in competitive markets. In fact, when we talk about emerging markets like Southeast Asia or the Indo-Pacific, pricing positioning becomes one of the most strategic decisions for any company.

In our experience, pricing strategies for new products require an especially careful approach. Developing pricing strategies for emerging markets not only influences consumer perception but also directly affects our profitability and market share.

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Step 1: Analyze your target market

Market analysis is the cornerstone of any successful pricing strategy, especially in volatile economic environments. In emerging markets, this initial step becomes even more relevant due to the particular dynamics that characterize them.

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Identify customer segments

To develop effective pricing strategies, we first need to understand who we are selling to. Market segmentation allows us to divide consumers into homogeneous groups with similar characteristics, needs, and purchasing behaviors.

Cultural adaptation and understanding the purchasing power of these segments are fundamental to setting appropriate prices. A meticulous study will allow us to identify what these consumers are really looking for and how they respond to various products and services.

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Evaluate local competition

In emerging markets, competition is often more intense than many expect.

To effectively evaluate local competition, we must:

- Conduct a SWOT analysis that identifies strengths, weaknesses, threats, and opportunities for both ourselves and our competitors

- Study what products they offer and how they target the audience

- Analyze their pricing strategy and market positioning

A fundamental tool is macroeconomic analysis, evaluating political stability, inflation, and GDP growth. Likewise, using digital platforms like SEMRush or Ahrefs can provide us with valuable information about competitors' online strategies.

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Study price sensitivity

Price sensitivity represents how the cost of a product affects consumers' purchasing decisions, also known as price elasticity of demand. Understanding this factor is crucial for determining the optimal price range in emerging markets.

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Several elements influence price sensitivity:

- Economic factors: In many emerging markets, the proportion of energy in the shopping basket is high (14% in Thailand, 11% in Brazil, 9% in Chile and India), which directly affects purchasing power.

- Unique value perception: When our product offers distinctive features, consumers are usually less sensitive to price.

- Urgency of need: In situations where there is an immediate need, the price factor takes a back seat.

- Ease of comparison: Consumers are more sensitive to price when they can easily compare alternatives.

Currency risks: Countries with large current account deficits and high dependence on oil, such as the Philippines and India, are particularly vulnerable to inflation and currency fluctuations.

To measure price sensitivity, we can calculate the percentage change in demand divided by the percentage change in price. For example, if prices increase by 60% and purchases fall by 25%, the sensitivity would be -0.42.

Before moving on to defining our value proposition, we must complete thorough research that includes the political, geographical, and economic situation of the target market, as well as assess the strengths and weaknesses of our own company. This analysis phase establishes the foundation on which we will build our pricing strategy.

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Step 2: Define your value proposition

After thoroughly understanding our target market, the next crucial step is to define a value proposition that resonates with customers and justifies our pricing strategy. A solid value proposition is not simply an attractive slogan, but the heart of our business strategy in emerging markets.

What makes you different

In highly competitive environments like emerging markets, differentiation is not an optional advantage but a necessity for survival and growth. According to Theodore Levitt, "there is no such thing as a commodity." The absence of differentiation makes consumers unwilling to pay more, because with equal attributes, they will inevitably seek the lowest price.

To effectively stand out, we can focus on seven key elements:

Compelling value proposition: Like Tesla's commitment to sustainable energy, which has cultivated a loyal customer base.

Strong brand identity: Similar to Apple's design spirit that combines aesthetics with functionality.

Exceptional customer experience: Zappos revolutionized online shopping with policies like free returns and 365-day guarantees.

Continuous innovation: Keeps our products relevant, like Google with its search algorithm.

Personalization: Allows tailoring products to specific needs, generating additional value.

Pricing strategy: Dollar Shave Club changed the market with its subscription model and affordable prices.

Distribution channels: Warby Parker's direct-to-consumer model avoids intermediaries and reduces costs.

However, of all the characteristics a differentiating attribute should have, two are essential: that they are relevant to the consumer and different from those of the competition.

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How your customers perceive value

The value perceived by customers has evolved considerably. Currently, consumers are more demanding and better informed, considering factors beyond price. Product quality, customer experience, brand ethics, and sustainability play a crucial role in this perception.

The customer experience has become a fundamental component for value perception. Consumers seek memorable interactions at every point of contact with the brand. Therefore, factors such as personalization, fast and efficient customer service, and intuitive design are decisive in enhancing this perception.

Furthermore, emotions significantly influence how customers value our offerings. Brands must create emotional connections through authentic stories and service that demonstrates genuine concern for customer well-being.

Warren Buffett sums it up perfectly: "Price is what you pay; value is what you get." Value is, therefore, a concept inherent to the customer and their personal assessment of how much benefit they perceive in relation to the price paid.

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Align value with price

To develop an effective value proposition, it is essential to identify and understand the key problems our customers face. We can achieve this through analysis of consumer behavior, gathering direct feedback, surveys, and interviews.

Once the problems are identified, we must also consider the "value destroyers" – those elements that generate effort or friction and reduce the perceived value of our proposition. Price, by definition, is an effort that the customer must assume. The higher it is, the lower the perceived value, unless it is justified by equivalent or greater benefits.

In emerging markets, the alignment between price and value takes on special relevance. Pricing positioning is determined according to the value perception of target customers, assessed through voice of the customer studies. This approach allows identifying the affordability threshold and working backwards to adjust margins and costs.

For example, if the market accepts a certain price, we must consider margins for distribution, logistics, and tariffs, determining a selling cost aligned with customer expectations. Although it might imply lower margins than the cost-plus margin strategy, this approach prioritizes sustained profitability and customer satisfaction.

The success of a pricing strategy in emerging markets fundamentally depends on a clear value proposition, data-based planning, and a deep knowledge of the target markets.

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Step 3: Choose the right pricing strategy

Selecting the right pricing strategy requires a meticulous approach, especially in emerging markets where economic conditions and value perception can differ significantly from developed markets. A well-chosen strategy will not only optimize our revenue but also our competitive position.

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Pricing strategies for new products

When launching products in emerging markets, we can opt for various strategies, each with specific advantages depending on our objectives:

Penetration pricing: Involves launching the product with artificially low prices to penetrate the market widely and then gradually increasing the rates. This strategy is effective for quickly gaining market share, particularly useful for startups looking to test their product's market fit.

Price skimming strategy: We start with high prices aimed at consumers less sensitive to price, then gradually reduce them to reach broader segments. This tactic works best when our company is already established and has a steady user base.

Value-based pricing: We set the price based on what the product is worth to the customer, not based on its manufacturing cost. This strategy is particularly effective when our product generates a measurable ROI, brings innovation, or when the perception of value varies by segment.

Cost-plus pricing: We add up what it costs to manufacture the product and add a fixed margin. It works well when cost structures are well-defined or when selling to B2B purchasing teams that require cost justification.

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Tiered vs. freemium models

The freemium model offers a basic version of the product for free while charging for additional features. Its main benefit is attracting a large number of users and generating brand recognition. However, the challenge lies in converting enough free users into paying customers. Examples of companies that have successfully implemented this model are Spotify, Dropbox, and Zoom.

In contrast, tiered models carefully design different price levels that provide a natural progression as customers become more engaged with the product. These structures can include:

Per-user pricing: Ideal when the product expands within organizational teams

Usage-based pricing: Effective for products where spending naturally increases with use

Feature-based tiers: Keeps the basic product accessible while monetizing power users

Although the freemium model may seem attractive, it is important to consider that typically only a small percentage of users convert to paying customers, therefore it works best for companies with a wide base of potential customers.

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Value-based pricing vs. cost-based pricing

The value-based pricing strategy determines the price based on the customer's perception and willingness to pay. In emerging markets, this approach allows identifying the affordability threshold and working backwards to adjust margins and costs. It works optimally when:

Our product solves a major problem or generates significant value

Customers value unique or exclusive features

We have different segments with different value perceptions

On the other hand, cost-based pricing starts from production and distribution expenses, adding a fixed margin to generate profits. This strategy, also known as "cost-plus pricing," is simpler to implement but has the disadvantage of not considering consumer expectations.

The difference can be substantial: if it costs us 10 dollars to deliver a product and we add a 50% margin, the price would be 15 dollars. However, if that product saves the customer 1,000 dollars monthly, they might gladly pay 100 dollars or more, as the price would reflect their real benefit.

In emerging markets, where economic conditions can be volatile, it is often more effective to combine both approaches: using cost-based pricing as a lower limit and value-based pricing as an upper limit.

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Step 4: Adjust your strategy to the emerging context

Adapting pricing strategies to emerging markets requires understanding that each one represents a unique ecosystem with particular dynamics. Pricing positioning becomes a decisive factor that can determine our success or failure in these regions.

Consider economic and cultural factors

Emerging markets are far from homogeneous. For example, although Singapore and Malaysia share geographical proximity and trade links, their social, legal, economic, and technological contexts present marked differences. This diversity demands customized strategies for each market.

Among the fundamental elements to consider are:

Accelerated economic growth: These economies often experience rapid development, generating an increase in the population's purchasing power.

Consumer in transition: Buyers are adopting new habits, but still value traditions and affordable prices.

Uneven infrastructure: Differences in infrastructure directly affect product distribution and availability.

Furthermore, customizing our strategies to resonate with local values and customs is essential. From packaging to advertising campaigns, every element must be adapted to the specific cultural context.

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Adapt prices to distribution channels

In emerging markets, traditional formats (markets, corner stores) coexist with modern channels (supermarkets, convenience stores). This reality forces us to design specific strategies for each type of channel.

When considering the distribution structure, we must evaluate:

- Route to customers: The path our product will follow to reach the end consumer.

- Layers of distribution: Whether we operate on a wholesale, retail, or mixed scheme.

- Business model: B2B, B2C, or B2B2C.

Consequently, if our model involves a distribution network (B2B2C), we must consider that it will reach broader segments but also imply higher final costs for the consumer due to the additional layers.

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Evaluate inflation and exchange rate risks

Currency fluctuations represent one of the biggest challenges in emerging markets. These variations can significantly reduce expected returns and even result in losses. Therefore, effective exchange rate risk management is crucial.

It is worth noting that emerging market currencies have fallen approximately 4% against the US dollar on average, with Latin American currencies falling up to 5%. These depreciations directly affect our pricing strategy.

Inflation constitutes another persistent problem that can lead to a devaluation of the local currency. Countries with large current account deficits and high dependence on oil, such as the Philippines and India, are particularly vulnerable.

Faced with these risks, we can implement several measures:

- Constantly monitor local economic indicators

- Plan scenarios for possible fluctuations

- Consider currency hedging instruments

- Periodically review our pricing policy

- The success of our strategy will depend on data-based planning, a deep knowledge of the market, and constant evaluation of the competition.

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Step 5: Test, measure, and adjust your prices

Implementing a pricing strategy does not mark the end of the process, but the beginning of a critical optimization phase. No plan survives intact upon contact with the real market, so we need a methodical and constant approach to refine our prices.

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Conduct A/B tests

A/B tests allow us to compare two versions of a pricing strategy to determine which one generates better results. This scientific method eliminates guesswork and provides us with concrete data on market response.

When implementing A/B tests for prices, it is essential to follow these ethical principles:

The ethical approach: Offer different products or plans at different prices. This is the most appropriate way to conduct price tests.

The inappropriate approach: Present the same product with different prices to different customers, a practice that can generate legal problems.

Platforms like Stripe facilitate this process by allowing us to test different pricing models without the need for complex technical revisions. When running these tests, we must measure total revenue, not just the conversion rate, as higher prices can generate greater profitability even if sales are lower.

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Monitor key metrics

To evaluate the effectiveness of our pricing strategies, we need to establish key performance indicators (KPIs) that provide us with valuable and quantifiable information:

Customer Acquisition Cost (CAC): Measures the investment required to acquire a new customer, allowing us to evaluate the effectiveness of our marketing campaigns.

Customer Lifetime Value (LTV): Predicts the total revenue a customer will generate throughout their relationship with us, fundamental for determining long-term profitability.

Price elasticity of demand: Measures how sensitive demand is to changes in price, helping to identify the optimal pricing strategy.

Retention rate: Indicates whether customers return after implementing new prices, suggesting that the strategy benefits the customer experience.

Satisfaction surveys: Allow us to understand customers' perception of the fairness of our prices.

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Iterate based on results

Price optimization requires a flexible approach that allows us to continuously adapt to changing market conditions:

Periodically review data to identify trends and adjust prices as necessary.

Compare results between periods before and after implemented changes, looking for patterns of sustained growth.

Identify peaks and valleys in performance to understand the effectiveness of our strategies in different scenarios.

Gather feedback from customers and prospects to understand their preferences and willingness to pay.

Stay alert to external factors such as market demand, competitor actions, or regulatory changes.

If we follow these recommendations, we can use pricing metrics as powerful tools to make data-driven decisions and scale our business sustainably.

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Step 6: Scale your strategy sustainably

Scaling our pricing strategies not only implies growth, but doing so efficiently and sustainably. To achieve this goal, technology becomes our main ally.

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Automate pricing processes

Price automation uses advanced technology to set rates considering variables such as demand, costs, and consumer preferences. These systems process large volumes of data to adjust prices effectively without intensive manual review, ensuring that they reflect the latest market conditions.

Furthermore, this automation allows tracking purchasing trends and adjusting prices according to seasons or special events, facilitating the implementation of dynamic strategies that respond in real-time to market conditions.

Create pricing tiers for different users

To develop effective tiers, it is fundamental to identify your segments and analyze purchasing patterns. The ideal is to establish between three and four tiers, providing enough variety without confusing the customer.

Each tier should offer clear and incremental value compared to the lower ones, balancing the real cost of providing additional features with the value perceived by the customer.

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Leverage tools like Stripe or ProfitWell

Platforms like Stripe allow creating dynamic billing structures without major engineering efforts. These tools facilitate:

Experimentation with different pricing models

Real-time cost calculation

Automated payment management

Expansion into new markets with support for multiple currencies

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Conclusion

Developing profitable pricing strategies in emerging markets undoubtedly represents a complex but enormously rewarding challenge. The six steps we have analyzed form a comprehensive guide to navigating this challenging terrain with greater confidence and precision.

Our success in emerging markets will depend mainly on our ability to deeply understand each specific context. Therefore, detailed analysis of the target market, clear definition of our value proposition, and careful choice of the appropriate pricing strategy constitute fundamental elements.

Furthermore, adaptation to the particular emerging context, with its unique economic and cultural factors, will allow us to position ourselves effectively against local and global competitors. This adaptation does not happen just once, but requires constant testing, precise measurements, and timely adjustments.

Throughout this process, technology becomes our indispensable ally. Automation tools, data analysis systems, and specialized platforms will allow us to scale our strategies sustainably and efficiently.

Certainly, emerging markets present particular risks such as inflation and currency fluctuations. However, these challenges also bring exceptional growth opportunities for those who know how to strategically leverage them.

Pricing is not simply a number; it is a strategic statement about the value we offer and our positioning in the market. Companies that master this discipline can experience significant growth in their revenue and expand their global presence sustainably.

Are you prepared to transform your pricing approach and conquer new emerging markets? The opportunity is there for those who dare to implement innovative, data-based pricing strategies adapted to the local context.

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