Terrance Barkan, CAE, is chief strategist and business architect with GlobalStrat, providing professional advisory services for the not-for-profit community. Connect with him on LinkedIn or on Twitter at @TBarkan.

One of the most difficult issues for trade and professional associations operating internationally is how to price membership, services and products in different international markets.

Most organizations follow one or both of the following approaches to pricing:

a.)    Pricing is adjusted based on the GDP of the target country. In most cases the countries are put into tiers (most developed, developing and least developed nations) and a price discount is applied. Often the discounted prices are substantial and cause the association to “subsidize” these members or customers.

b.)    An alternative is to assign a percentage reduction to the normal price based on a perceived lower value to non-U.S. based members. This is especially applies to membership, where there are often far fewer networking opportunities and content is mostly U.S. centric.

Because the cost of delivery to International members is often higher than domestic members, the economics of discounting usually involve making a loss for each additional member or customer.

One alternative that is rarely used but that should be considered is “local value based pricing.”  The concept is to identify what benefits are of greatest value in the target country and to assign a comparative value in local currency.

For example, it can be that a credential that is “priced” at $200 in the U.S. has a perceived local value in Europe of EUR 300 — which translates into approximately $400. It is dangerous to assume that the price charged in the U.S. must always be higher than prices anywhere else in the world or that members and customers value what the association has to offer in the same way (positively or negatively).

Another option that more associations should be considering is to shift the risk and the burden of pricing to a local partner. An effective way to achieve this is through franchising and licensing. In his excellent book on this subject, Andrew J. Sherman of the law firm Jones Day LLP, details how this approach can be applied to grow an organization’s business.

When an association in effect licenses its products, services or content to a local partner, the business risk, including local pricing decisions, shifts to the local partner and provides the association with a more secure expectation of revenue.

The local partner by definition should be in a better position not only to know what the market will bear in terms of pricing, but also has a cost basis in the local economy making it possible for the partner to be profitable, even when the products, services and membership are priced at a discount.

Pricing is a critical component of international business strategy.

For more ideas on how to structure your international operations, download your free PDF version of: “Global Growth Strategies – The International Association” at http://budurl.com/GlobalGrowth

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