Salaries in New York are double that in El Paso, Texas.
Data from Robert Half, a recruiting firm, shows that a Digital Strategist makes $89,250 in the United States. In New York, however, they make 41% more than the national average, or $125,936. In El Paso, Texas, they make 28% less, or $64,260. Those employed in New York make twice as much as those in El Paso ($126K vs. $64K).
Should we sell at a lower price in El Paso?
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Would you sell at a higher price in New York? Increase prices 4% or fire one-half of the team?
No we should not. For high value cosmetics, people are willing to either smuggle to a higher price market or even just travel to the lower price country, which will only do damage in a larger scope. It will also jeopardize the pricing system we have.
However, that is just for conventional ” product”. If it is more leaning to service like McDonalds serving food or medical service. Then yes we do need to have a different regional pricing. As those service are exclusive to local market and will not draw back the profit.
It depends. On the price strategy, the type of product we are talking about (is it a luxury item, or a tier 3 product) our competitors, and the mission of the company. One key factor is also the ability to produce locally. Take into consideration Netflix India, they entered the market with their regular pricing which was 20% of the minimum wage in a country where 98 people carry the wealth of over 500M. They had to compete with extremely cheap pay-tv, subsequently, they lowered their prices in some cases over 60%.
Yes, I would sell at a higher price in New York and lower price in EI Paso. The main reason is that salaries in New York are double than EI Paso. The higher salary level decides that the average consumption level in New York is higher than EI Paso. People in New York have higher income and purchasing power. More people can afford to buy the high price product. Also, the higher salary level means the labor cost and operational cost in New York is higher than EI Paso. If it sells at a higher price in New York, it can bring more profit to the business.
In EI Paso, the lower salary level decides that if it prices the product at a higher level, more consumers are unaffordable to the product. Also, as the labor cost in EI Paso is lower than New York, so the production cost in EI Paso is lower than New York. Therefore, in New York, the higher price means more profits. In EI Paso, the higher price may make the business lose the market. So I would sell at a higher price in New York, but a lower price in EI Paso.
The price strategy is influenced by many factors, wages may represent the price level and spending power as one of the considerations. However, many other factors, including local competition, also affect supply and demand and thus prices. For example, if the brand has no rival products in Texas and is in a monopoly position, and the local demand is large, it is likely to sell at a higher price than in New York, where rival products are everywhere.
This case is confined to the United States alone. Internationally, however, currency exchange rates can also be important. In addition, local brands always charge lower prices no matter how wages are, such as iPhone, a typical example.
I think it depends on various factors including the cost of products in local factories, shipping fee, brand image. For example, a luxury brand like Chanel, they sell their bags about the same price all over the world. The brand image is luxurious and non affordable for most people, so there is no need to lower the price at low income cities. For some brands, they are willing to adjust their prices according to the cost of local factories and the shipping fee. The lower income city might have cheaper labors, and the brand concept is to be affordable to middle and lower classes customers, then, it is reasonable for a brand to adjust price according to the location.
I think it’s reasonable to sell at a lower price in El Paso. Because New York and El Paso use the same currency–US dollar, the currency purchasing power is same too. In that case, people who earned less in El Paso can’t afford the high price products which is bad for the brand in the long term.
I would sell at a lower price in El Paso and a higher price in New York. However, determining the cost of the product would depend on the kind of product e.g., necessities like food, medication, and healthcare I would sell at only a marginally different price versus luxury products like skincare would have a larger difference in price
I would say that searching costs for consumers play an important role. If it is easy for consumers to find a product with a lower price, e.g. through the internet, the price of this product should be the same for El Paso and New York. However, if the searching cost is high, consumers would more likely to buy the product that is accessible rather than spend time and effort looking for a lower price.
Depending on what kind of items I sell, I will lower my price if it is lower priced drinks, food, flowers, etc. But after all, expensive luxury, skin care products I will try to keep the same price. Because few people go to other cities to buy hamburger pizza. But luxury goods will have a large number of people who go to places with low prices to stock up and sell them elsewhere. Especially now that mailing is a very simple matter. It will be difficult to sell my product in such a high-priced area.
I wouldn’t charge different prices for items that are easy to store and transport. Because if the same good is priced differently in different markets, it leads to an arbitrage problem. Some people will choose to buy goods where the market price is low and resell them to where the market price is high to make a profit. This will lead to market pricing confusion and have a negative impact on corporate interests.
I think it depends on what product is being sold. Suppose it is a non-immediate demand product such as luxury goods or skin care products. In that case, it may be better to have uniform global pricing to maintain the positioning and brand image of the product. If it is a necessary product, then it may be easier to gain local market by appropriately lowering the price in areas where the average wage is lower. Of course, even for some brands, their prices are still properly lower when local, not only because of international tariffs and shipping costs.
I think pricing should be adjusted based on local wage levels, and the overall local prices, production costs, living standards, and taxes should also be considered before making a decision. If the pricing stays the same for all regions, it will raise the risk of widening the gap between rich and poor, and will also significantly affect the living standards of people in low-income areas.