Why should I use local currencies?
This is a question we receive a lot at Paddle, so we decided to write a guide about it as it’s a topic which is misunderstood and can significantly affect your conversion rates. A common reason we hear from customers about not enabling more currencies is that they don’t want to deal with the perceived extra work in handling them. This is the first myth we would like to dispel: enabling extra local currencies on your products does not mean you need to handle those currencies, that is what Paddle is here for.
When you enable a local currency, this means that your customer can pay for your product using their own currency, we process this for you, and add it to your account balance ( we don’t charge any commission for this and the payment is converted using the live exchange rate at the time). There is no extra steps or requirements on your side and you’ve made it 100% easier for your customers to understand what they are paying, this leads to a higher conversion rate!
Let’s take an example from Brazil, with local currencies disabled, when your customer goes to pay, rather than seeing Brazilian Reals, they will see your default currency ( US Dollars, Euros etc ). This makes it difficult for them to understand the “real” cost they are paying and is a big factor in them abandoning their checkout.
Enabling local currencies lets your customers pay using their own money, stop refusing their money.
The process to enable currencies is straightforward, head over to Paddle Dashboard and click on Check out -> Products -> and select the product you want to enable more currencies on -> Set Prices
We would highly recommend you enable all the currencies we support, these prices will be displayed to your customers in their own currency when they attempt to check out. Our Paddle checkout will automatically detect the users prefered language and standard currency.
Let’s start by what we mean by Buying Power.. Let’s take the Big Mac price index as an example of this.
Basically it looks at the cost of buying a Big Mac from Mcdonalds from many cities around the world. This is a good indication about the relative “buying power” of consumers in these different countries, Mcdonalds changes the prices based on how easily consumers from these different countries can afford to pay. It’s a fair bet that if Mcdonald’s has to half the cost of a Big Mac in India to sell it, that the effective buying power of consumers in India is half that of the US.
What we can take from this is that you need to consider if your product is overpriced if you sell it in India vs the US for the same relative price. Now obviously if you have other costs to consider, such as supporting your customers, you might not want to directly reflect market buying power, however if you want your product to sell well in other markets, this is an area you need to consider carefully.
We like to think about it using simple math..
Let’s assume you’re selling your software for $40 to US customers, and you enable Indian Rupees and use the same relative cost in INR ( 2715 )
The minimum wage in the US is $7.25 per hour. That means a US consumer would have to work just over 5 hours to earn enough money to buy your product.
So how does that compare to our India price?
Although it is slightly harder to calculate, a good average for the hourly pay in India is 300 Rupees per hour. That means someone in India would have to work for just over 9 hours to earn enough money to buy your product… ouch!
The Big Mac index we referred to above suggests that the buyer power difference is some 46% less, which means we should alter our product price to something more sensible (1466.14 rupees, which if calculated, would take an Indian approx just under 5 hours to earn enough to buy it )
One last thing to think about
The last stage you need to consider when setting a price is to ensure the price is “nice to the eyes” on the checkout, for example, you would not want your checkout to display 1466.14 Rupees above, we’d highly recommend using something like 1450. This entices shoppers to checkout and increases your conversion rate.
However be aware that this does not hold true for all currencies and countries, for example, you want want to set the price using .99 in some countries and not in others. In some countries it is considered bad luck to contain specific numbers. It might seem crazy but these little tweaks can have a huge impact on your conversion rate and help sell your product around the world.
If you’re not sure about the best prices to set, you can contact our Seller Success Team at Paddle and we can help advise you on what you should charge for each currency. At Paddle we have an unfair advantage, we have 1000’s of software products being sold every day, so we have a wealth of information to understand what prices work best for each industry, which will let you maximise your revenue.
The short answer is yes! However currently due to the nature of subscriptions, you’re not able to edit these prices yourself after your subscription plan is live, but drop our Seller Success Team a request and we’ll get you sorted.