I believe that pricing models work differently in Latam compared to the US and other markets. The reasons are:
- People react differently to models. Ex: There is still fear in Latam user to input credit card details in apps. This means true subscription models are harder to grow and you have to generate recurrent revenue in other ways.
- People are a lot more skeptical of new products. They always need to try a cheap, lack of risk version of your product before buying the whole thing. One year payments, very common for SaaS, cause fear even in digital/tech companies in Latam.
- Word of mouth is incredibly powerful here. Unless recommended by someone they trust, it is hard for them to buy your product. In the U.S people are not afraid to spend some money to try stuff they see online, on TV, etc. This is why representative models such as Avon, Yambal, etc are so successful. They are based on trust at a local, small scale.
- Most people do not know, understand or apply the concept of opportunity cost. This means people rather build a very complex, hard solution by themselves rather than paying someone else to do it.
- They rather spend time than money, which is dumb. You can always get more money, but your time is always going down.
- Banks in Latam are not your friends, therefore, you want to interact them as little as possible. This means people are less interested in buying high risk items, specially if it means having a long term commitment with banks. Companies here need to build their own credit programs so that people buy their products. This is starting to change with some banks that are reinventing their customer value proposition and services and also thanks to Neobanks based on tech such as TPaga, Nequi, Daviplata in Colombia and Nubank in Brazil.
- If you are working with big companies, they are accustomed to pay their bills after 30, 60 and even 90 days. This means is really hard for providers to maintain a healthy cash flow!
For now, these are some of the reasons. If you happen to know more, contact me at @damaderu in Twitter. Happy Saturday!