Multi-currency pricing is the method by which international companies set and update their pricing strategy in local currencies in all the markets where they sell their goods or services.
The importance of FX pricing
Pricing is a major factor for export companies and local pricing is a crucial element to maximise sales potential. This involves the challenge of offering the customer an attractive price in his or her local currency while protecting profit margins in the company’s functional currency.
We can easily illustrate this with the example of a Eurozone travel company selling holiday packages in the UK, US and Scandinavian countries. In order to optimise sales potential, the company has to sell its packages in local currencies (US dollar, pound and Swedish krona). With an efficient pricing strategy, they might leverage FX volatility and convert it into a competitive advantage.
Efficiency, in this case, requires being able to react to market movements in a timely manner, cutting prices to be more competitive when the exchange rate goes in your favour and hiking them to protect margins otherwise.
For companies selling in different foreign currencies, this cannot be done manually. These businesses need dynamic pricing software solutions to continuously monitor the currency market and update their rates as soon as the FX market moves.