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Adobe explains why their pricing is different in various countries

March 22, 2012

Further to my blog posts about Adobe’s pricing for their products in various markets around the world (see https://cybertext.wordpress.com/2012/01/20/adobe-pricing-sucks/ and https://cybertext.wordpress.com/2008/07/12/how-do-they-get-away-with-it/, and some recent Twitter activity on this issue, I was contacted by someone from Adobe for my email address. She sent me this response (below); after you’ve read it, I offer my own opinion on many of her points. Bottom line: It’s all BS!

The following points may help explain why there are price differences across different regions:

We establish our prices for Creative Suite products in U.S. dollars, Euros, Yen, British Pound and Australian dollars on a regional basis using a consistent methodology. Local market conditions significantly influence our pricing – these include the costs of doing business in different regions and customer research that assesses the value of the product in the local market.

We conduct the majority of our business through our retail and licensing channels. We depend on our retail partners in local markets to help us reach as many customers as possible, support those customers, and much more. Resellers are free to decide at which price they sell Adobe products. Adobe decides the price at which it sells its product on the Adobe Store.

The cost of doing business in the rest of the world is higher than in North America. That higher cost is reflected in some of our pricing and would remain no matter how customers chose to purchase. For example, customers will still read about our products through local press to whom we reach out; they will meet local Adobe sales people who conduct seminars, participate in user groups, and visit large customers; and they will rely on support resources that Adobe makes available in these markets. All of these efforts impact the business costs of securing the sale, whether that sale is delivered online or in a box.

I’ve now had three explanations for the price differences from three different Adobe people — one was ‘different taxes’, the other at the WritersUA conference last week was ‘localization costs’ (for which there’s NO justification for such unfair price differences for an English language product being sold into an English language market!), and now it’s this ‘cost of business’ argument.

I’ll address her points as I see them and as a customer who feels they are being ripped off by Adobe:

We establish our prices … on a regional basis using a consistent methodology.

But she doesn’t explain what this ‘consistent methodology’ is, nor why it results in such inequitable pricing. Surely a consistent methodology should result in consistent pricing.

Local market conditions significantly influence our pricing – these include the costs of doing business in different regions and customer research that assesses the value of the product in the local market.

Last I saw, the Australian and US dollars were on about par, unlike just a few years ago when the Aussie dollar was running at less than 50c in the US dollar. What does ‘local market conditions’ actually mean? And if local market conditions ‘influence our pricing’, that’s almost counter to her argument of a ‘consistent methodology’ used in ‘establishing our pricing’. But the best has to be that their ‘customer research assesses the value of the product in the local market’! What the…? They obviously don’t read the Australian computing magazines that slam companies like Adobe for their inequitable pricing, nor do they take notice of politicians asking for parliamentary inquiries into inequitable IT pricing and calling out companies like Adobe for their unfair pricing. As an Adobe customer of many years, I’ve NEVER been asked by Adobe for my opinion on anything, let alone ‘the value of the product in the local market’.

We conduct the majority of our business through our retail and licensing channels.

Really? I would’ve thought they’d have got a lot of business from their own website too. As far as local channels are concerned, if you look up the Australian White Pages, there’s only ONE listing for Adobe in the entire country (22+ million people!), and I bet it’s not a retail outlet. It’s in Sydney, about a 4-hour flight from where I live so it’s pretty useless for me to do business with them. While this center may deal with Australian retailers and licensing issues, I suspect that an ordinary customer who wanted to buy a single copy of one of their products would be sent on their way or referred to the Adobe website or a retailer; I suspect that this single office in Sydney deals only with the large corporate clients.

We depend on our retail partners in local markets to help us reach as many customers as possible, support those customers, and much more.

That’s a joke, right? If they’re referring to retail outlets like OfficeWorks, Harvey Norman, Harris Technology, Dick Smith, etc. and the online software stores in Australia, there’s NO support whatsoever, and it’s almost impossible to buy an upgrade from them to an Adobe product you already own. Sure, you can buy a shiny new one, but when you want an upgrade, you are forced to pay the inflated price, forced to go to the Adobe website (for an equally inflated price), or to a US retailer like Amazon thus sending the Australian dollars overseas. And ‘reach as many customers as possible’? How? Checking these retail outlets for software and upgrade pricing is like pulling teeth — many of them seem to be avoiding selling software altogether, unless it’s the lucrative volume licensing model. You typically can’t buy specialist software in a bricks and mortar retailer like those listed above — you have to buy it online. And don’t ask in store for help (at least in Western Australia) — most of the staff at those retailers haven’t got a CLUE about the products they sell, let alone about specialist software.

Resellers are free to decide at which price they sell Adobe products. Adobe decides the price at which it sells its product on the Adobe Store.

But aren’t there laws about that? I was under the impression that a ‘recommended retail price’ in Australia couldn’t be exceeded, but could be discounted. According to this statement, retailers can set whatever price they like, despite what Adobe says the price is or sells the product for. That means that a retailer in Australia is under no obligation to sell the product at the price Adobe has on their own store. Which means that there should be competition in the marketplace where we see retailers undercutting Adobe’s own highly inflated prices — I’d like to see that! Assuming I could buy an upgrade from a retail outlet, my guess is that it would cost at least as much as Adobe sell it for from their Australian online store, or be comparable. I suspect Adobe pressures retailers into selling at a price that’s comparable to their own highly inflated price.

The cost of doing business in the rest of the world is higher than in North America.

Really??? This is like saying that North American wages are cheaper than anywhere else in the world, that the North American cost of living is cheaper than anywhere else, etc. I’ve just come back from the US, and while they’ve collectively suffered with the global financial crisis more than most Australians have, I doubt that the cost of living or the cost of doing business is much different — at least not substantially different. Not 80+% different, which is the price differential for the products I analyzed back in 2008 and in January 2012. The ‘cost of doing business’ would include things like rents, wages, taxes etc. But Adobe only has one location in Australia, so I suspect it doesn’t employ many people here, and the retail outlets sell all sorts of products, not just Adobe ones, so I can’t see how the ‘cost of business is higher elsewhere’ holds up to scrutiny.

That higher cost is reflected in some of our pricing and would remain no matter how customers chose to purchase.

So if an Australian chooses to buy from Adobe or Amazon direct and not via an Australian retail outlet, we are somehow penalized for the ‘higher cost’ or doing business in Australia even though we’ve purchased from a US location (for example)? I just don’t understand her argument here.

For example, customers will still read about our products through local press to whom we reach out; they will meet local Adobe sales people who conduct seminars, participate in user groups, and visit large customers; and they will rely on support resources that Adobe makes available in these markets. All of these efforts impact the business costs of securing the sale, whether that sale is delivered online or in a box.

Now that’s just plain BS!!!

  • Meet local Adobe sales people? Ha! Not in Australia you won’t, unless perhaps you live in Sydney and pop into the office address they have listed in the White Pages.
  • Conduct seminars? Where? Not in Western Australia they don’t, or if they do, I haven’t been notified of them.
  • Participate in user groups? Nope. I’ve been on the Adobe forums and user groups, and they are populated in the main with people who are in terrible trouble with their software pleading for help and those very kind souls who give freely of their time to help them out. Rarely is an official Adobe employee to be seen on these forums. Besides, even if they did participate, it wouldn’t be the ‘local’ (Australian) Adobe employees — it would be those based in North America or India, most likely.
  • Visit large customers? Possibly, if you’re large enough. Is ‘large’ taken on number of employees, dollar value of potential or actual sales from that customer, annual turnover of the business?
  • Support resources that Adobe makes available in these market? That’s the biggest BS of all! I’ve had to deal with Adobe phone support a few times and I can tell you that I didn’t deal with a local (Australian) person or even someone based in North America. While the support person was able to answer my questions and help me out in each case, they weren’t based in my country at all. And yes, I asked them where they lived.

Finally:

All of these efforts impact the business costs of securing the sale, whether that sale is delivered online or in a box.

Securing the sale? I don’t need my sale secured! I know what I want and I’m prepared to buy it, but I’m not going to pay overly inflated prices for something I can get for much less if I lived in the US or had a US credit card. I don’t want a box and fancy packaging. It’s software for goodness sake — I just want to be able to download it and start using it… but at a FAIR price.

Sorry Adobe. Your European representative who sent me this email is trying to use a heap of jargon and wishy washy statements, put together with marketing spin, to justify why there’s such a price differential. And I don’t believe a word of it.

Update 13 February 2013: ‘Adobe cuts Australian prices after inquiry summons’ (http://www.afr.com/p/technology/adobe_cuts_australian_prices_after_BgBXyFaCrXRGNIrS1M2fNN). Ah, the headline that promised so much but delivered so little. Adobe is cutting its subscription pricing for ONE product suite for Australians. Not its boxed products, nor its download products, nor ALL its inflated prices for its other products. And it took a summons from the Australian federal government to do that, though I’m sure it will deny that was the impetus for the change of heart.

And another news report chimes in stating that it’s cheaper to fly to the US to buy some Adobe products than buy them in Australia! http://www.news.com.au/technology/biztech/it-is-cheaper-to-fly-to-us-than-buy-adobe-software-in-australia/story-fn5lic6c-1226576920561

Update 22 March 2013: Adobe, Apple and Microsoft to explain to parliamentary committee why they charge Australians more (good infographic of geoblocking too!): http://www.news.com.au/technology/biztech/watchdog-choice-has-tough-questions-for-apple-microsoft-and-adobe/story-fn5lic6c-1226602766888

Does Adobe think we’re stupid with this response to the parliamentary committee, quoted from that page: ‘Adobe defended charging Australians more than $1000 extra for its publishing software by claiming that Australians were receiving a “personalised” service on its local website.’

GIVE. ME. A. BREAK.

14 comments

  1. The problem is, we still buy it. Or maybe no more…


  2. Ha. I’ve worked in the software industry most of my working life, and the prices that are set per region are simply what the sales people think the customers are prepared to pay. It has nothing to do with cost.


  3. You might be able to excuse some price discrepancy in products in different markets. But an information-based product primarily sold on the internet? Come on!

    Their products are consistently a higher price in AUD than US prices – that is the ‘consistency model’ they refer to.

    Who is my local Adobe reseller? I have never seen an ad or mention of them. Who would I possibly ‘reach out’ to. Like all software, I ‘reach out’ to this new technology we have called ‘the internet’.

    Cost of doing business is higher in Australia than North America? You might have been able to argue that with a low AUD in the old days. But doesn’t a higher AUD mean greater profits for Adobe when they convert back to USD? Also, I am pretty sure ‘the cost of doing business’ in Malaysia is less than in the US, but they still charge about USD35 *more* from their Malaysian online store than the US store (for Adobe Standard X using today’s rates from xe.com).

    I think the only nugget of truth in the response is that they use ‘customer research that assesses the value of the product in the local market’. As Joseph said, it is what they think we are prepared to pay. In other words, what they think they can get away with.


  4. Whatever the reason is for the price differential, as long as we pay the price, it will remain. We may not like the additional cost, but we pay it because we have to.


  5. Hi Rhonda,
    Are you sending this back to the European representative?
    You should, and also copy the most senior Adobe person in the US that you can. Get it from the horse’s mouth.
    By the way, I agree with everything you have said.
    Regards


  6. Hi Rhonda,

    Thanks for sharing – it’s a great story and you have to admire Adobe for trying to keep a straight face while they’ve got their hands rummaging around in our pockets. As others have said, Adobe charge what they want because they can. I’ve been shopping on the Adobe website and watched as my US$299 purchase jumped to AU$500+ when it realised I was a foreigner.

    I can understand local retailers charging more when they carry product, employ staff and manage ForEx risk, but when you’re charged twice as much for the same stream of ones and zeros from the same server, they really are taking the piss.

    Now, I have met some of the Australian Adobe representatives at a tradeshow. They had a big, flash, empty booth in an event outside their market, and a team of disinterested sales people lounging on the leather chairs and reading email. When I asked why they were attending the show the answer was ‘we had to clear our marketing budget before the end of the year’.

    And leather chairs don’t come cheap.

    Matt


  7. This ridiculous non-answer also doesn’t explain why there’s a 26% disparity between the US & AU pricing for Creative cloud, but a 67% disparity between the US & AU upgrade pricing for CS6 suite. If it was just the cost of doing business, why isn’t the percentage consistent?


  8. What a load of bull$hit. And this is coming from someone who now lives in Australia due to husbands job. I was told if I could get a US based credit card, I could order from the US store. I did the next best thing. Waited until there was a boxed upgrade, ordered it from Amazon and used a US drop address. Guess what? Software and rego worked without a problem.


  9. Totally true what you say!


  10. And it’s not only Adobe… VMware workstation DOWNLOAD is 50% more expensive in Australia too and obviously we can’t buy it from the US website.


  11. Hi Rhonda. Do you have an update on how the Australian inquiry on software pricing is progressing? I know the wheels of government worldwide turn slowly but would be interested if there is any update.


  12. The info is here: http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=ic/itpricing/index.htm

    The report will be made available once it has been tabled in Parliament (no idea when that will be). Meantime, there are links to all the submissions and media releases (last in October 2012) from the page I’ve linked to above.

    –Rhonda


  13. I’ve been complaining to the media about Adobe and other US companies software prices for about 10 years and they have totally ignored the issue. There is supposed to be a way of circumventing the Adobe country shop, which is where you end up as soon as you click on Buy, but I’ve not been able to find any information on how to do this. Anybody have any links?


  14. This pricing strategy is called PRICE DISCRIMINATION



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