As a former analyst, one of the highlights of traveling and interacting with our partners is that I get to listen to a lot of stories about the realities of the varied markets in which we operate. Talking about our recent events in Lisbon and Madrid, SugarCRM co-founder Clint Oram made an interesting discovery about international pricing of one of our competitors.
When discussing pricing for comparable CRM products, a partner made us wise to the fact that Salesforce.com is actually priced higher in Europe than it is in the US. This is not a currency conversion issue, the product is simply listed as higher ($125 per user vs. 135 Euros for their Enterprise edition for example).
Of course, my mind started racing after hearing this (but honestly I was more annoyed at my own laziness for not knowing this already – some competitive intelligence guy I am right?). Why would a company with so much perceived market visibility have such a higher price point in an emerging market? Why not come in lower, to completely shut out local or at least localized competition? After all, a lot of the EU is not doing so hot economically – yet Salesforce.com sees fit to overcharge potential EU customers. That is, charge them EVEN MORE than what I believe is an already too high price in dollars.
But, this inflation in price makes sense considering Salesforce.com’s model. As a primarily direct sales organization, Salesforce.com has a much higher cost of sales when it comes to going global: around product localization, hiring and maintaining a sales force, marketing etc. Thus, that high expense is being passed on to the customer. Bummer.
This is in sharp contrast to a model like SugarCRM – where we have great partners who take the product to the streets with localized product, domain expertise, etc. This enables SugarCRM as a product to enter more markets with less friction. And this lower cost model means that the end user organization pays less, and gets more.
And that is definitely not a bummer.