A couple of weeks ago, the dollar-pound exchange rate breached the psychological $2 barrier and I had to revisit my thinking on whether to continue pricing my products in the US dollar or to move to another currency, namely the euro.

Meanwhile, some people did move – Martin Pilkington of M Cubed Software announced their move to the euro straight away, closely followed by Rory Prior of Think Mac and a debate ignited on the MacSB mailing list that I’m not sure reached any definite conclusions and left me none the wiser.

I stayed out of that debate but was later asked my opinion on the #macsb IRC channel. I gave a few reasons why I remained undecided, but here is the now fully-developed version of my answer that omits the one that went “it means I actually have to do something, which is never a good start”.

The aim of moving to the euro would be to achieve price stability for myself and not to be tied to a currency that will continue to nosedive in value. The trouble, from my perspective, is that the move is difficult to sell, if not to my customers then to myself.

Consider the following:

• Most people in the US prefer to pay in dollars. They know exactly what it’s worth without doing any mental arithmetic, or to be told down the line that €25 is actually $34 (the price today) and probably worse given PayPal’s conversation rates.
• Most people outside the US know the dollar is at a real low point, so they’re getting a bargain. Even I get disappointed when I see something priced in euros because I know I might actually cost me money.
• Most people outside of Europe don’t know the rough value of the euro at any given time, so while they may be more accustomed to currency conversion, it’s not something they’re likely to do on the spot. It has the potential to confuse and infuriate.
• Moving to the euro would effectively create a price increase for US customers (and others) if the value of the dollar continues to plummet while the euro remains strong.
• Competing products are most often priced in dollars, although whether price is a consideration in that way is another matter.

So, already it’s not looking too great for the euro, but the situation is certainly better than using Sterling which would confuse almost everyone and there doesn’t seem to have been any fuss over the change for Martin or Rory.

My other concern with the euro is the way it works. In case you don’t know, the European Central Bank sets a single interest rate for all Eurozone countries. That’s one interest rate, but numerous different economies all ticking over independently. This has created, for example, a crazy house price boom in the Republic of Ireland because the interest rate is considered too low, while Germany struggled to get its economy moving with rates that are too high.

Maybe this will all work out, but it makes me wonder whether I’m jumping from one sinking ship to another that’s permanently negotiating icebergs.

Other than that, I think the euro is great. As travel money, it’s so handy to be able to use the same currency in three different countries in one day (as often happens when you’re travelling around Europe) all with the same exchange rate – hence the appeal.

So: what to do? With the amount I’m earning decreasing and my cost of living increasing, the situation is clearly unsustainable.

Another option is simply to raise prices. It wasn’t my intention to do that either, although a change in currency could bring that about for many people if the value of the dollar continues to decline (i.e. the whole point of this exercise).

However, I have been working on future plans lately and realised something blindingly obvious. I had already intended to raise prices on the next versions of my products because, without that rise, they would be considerably lower priced than many of their competitors, yet equal if not better on features, etc.

So, prices for the current versions of my products will remain unchanged and I will continue to price in US Dollars, but future versions of my products will be priced to match their improved capabilities, while remaining competitive. The plan may yet change, but for now I think that is the answer to my personal conundrum and one that I think is fair for everybody.

This entry was posted on Monday, April 30th, 2007 at 9:24 pm by Steve Harris and is filed under Indie Mac Development. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.