Which currency to bill customers in
CEO & Founder of Server Density.
Published on the 17th April, 2010.
As a UK company, we bill all our customers in British Pounds Sterling (GBP). At the time we bill the card, it is converted into the customer’s local currency – we get the expected, fixed amount in GBP. But does this cause a problem for customers abroad?
I don’t think so – it depends where the majority of your customers are. We display our pricing on our website in both GBP and United States Dollars (USD) because the majority of our customers are from the US or the UK. Although we have customers from Europe (Euro EUR) and elsewhere, USD is generally considered to be a universal currency, the value of which is understood around the world. This is not to devalue the importance of local currencies where it is appropriate, but it is impractical to display pricing in every currency!
In my previous company, we originally priced and charged exclusively in USD. However, we moved to charging exclusively in GBP and didn’t see any drop in sales – indeed, sales continued to increase. Without any substantive testing, it is impossible to say what the effects of using difference currencies are but charging in our local currency simplifies accounting and makes us immune to exchange rate fluctuations. At small volumes these are irrelevant but as income grows, a drop in the value of a foreign currency can negatively affect your revenue.
I think it also helps that we are suppling B2B. I suspect (but can’t confirm) that consumers will be more sensitive to pricing in their local currency. I also always refer to our pricing in USD if I’m in the US, or talking to US investors – it just makes it easier for everyone to understand (just as you’d prefer everything to be discussed in your own local currency).
Either way, I think a good strategy is to use the currency the majority of your customers use, or at least split the display to show the rates in several currencies based on your customer demographics.