Localization and Return on Investment (ROI)

“Those who do not take risks, do not get to drink champagne,” insists a Russian saying.

“No risk, no rewards,” echoes an American sentiment, adding “No pain, no gain.”

There is no need to suffer through the localization process. It is possible to experience positive gains and receive concrete rewards with a properly planned and executed localization approach. Localization benefits include better brand awareness, greater market share, increased web traffic, improved conversion rates, and decreased bounce rates from non-English speakers.

As with any investment, proper preparation is vital to ensure localization success. In business, the measure of success for any undertaking is often represented by the returns an investment brings. ROI (Return on Investment) measures an investment’s worth and profitability. Let’s look at the impact localization can have on ROI.

What are we measuring, exactly?

There are several methods used to determine ROI. The most common one, expressed in percentage points, is to divide net profit by total assets. For instance, if your net profit is $50,000, and your total assets are $200,000, your ROI would be 25 percent. A company’s performance over time is evaluated along a set of Key Performance Indicators (KPIs). These indicators present an overview of a company’s progress towards its goals as well as a comparison against other businesses within the same industry.

Yet companies vary in what they measure and when. Some evaluate return on a single marketing tactic or sales of a specific product; others consider the entire marketing budget and survey overall company revenue. Timeline matters as well – are measurements taken weekly, monthly, quarterly, etc.?

When thinking of localization, it is important to come up with measurable and trackable components. The right metrics and tangible numbers are vital to gaining support for localization strategy decisions. For example, prior to plunging into a localization project, note the current market statistics, sales history, and product reviews as a base line to measure localization ROI in the future.

Localization-Associated Returns

The metrics listed below should already figure into tracking the performance of an online service or product. These same metrics are then tracked for a localized version of that product or service. Comparing the two can demonstrate the differences between localized and non-localized components, as well as track the success of localization efforts.

• Page Views: These should be tracked already for any website – this information gives insight into content relevance, who views it and how. If the entire website is localized, compare these views before and after localization of the site. If parts of the site were localized, look at the traffic patterns to both localized and non-localized components, as well as the original and localized pages.
• App Downloads: Keeping track of app downloads yields important insights into user reaction to the app. It is beneficial to compare the number of app downloads from a specific local market before and after creating a localized app.
• Conversion Rates: How many page views result in user action? What percentage of visitors chooses to buy something from the site after visiting it? Directly tied to concrete sales numbers, this indicator can be a solid ROI indicator.
• Customer Base: While it is great to gain new clients, especially if localization had something to do with it, it is also important to track customer loyalty. Returning business is as valuable as new business; both are crucial in achieving long-term success.
• Early Adoption: There are savings to leverage by implementing localization early in the process. Internationalization does not cost much if product is designed with global markets in mind. Using Computer-Assisted Translation (CAT) Tools with translation memory capabilities can cut localization costs by 10 – 15 percent over subsequent releases of a product.

Localization-Associated Costs:

Localization efforts cost money. Before returns can be seen, an investment must be made. Based on a survey by SimulTrans of its customers and other companies with significant localization budgets, localization spending averages 20 percent of localized product revenue or 2 percent of annual revenue.

Where do these costs come from and what do they cover?

• Project Scope. Deciding what should be localized determines the overall scope of a localization project. Will some website pages be adapted, or will the whole website undergo localization? Does it make the most sense to localize existing products or only new ones?
• Target Audience. Which target market, language, country, or locale would require localization efforts? This governs the number of languages (and dialects) required for translation, keeping in mind that a single language, such as Spanish, may require two or more versions (such as Castilian Spanish for Spain and Latin American Spanish for Central and South America)
• Translation Costs. Quality translation is the one that accounts for product marketing standards, linguistic nuances, and local customs. Quality translation costs money. The number of languages, language selection, and the scope of content to be translated establish the financial implications and parameters of translation, which typically reveal about 80 percent of total localization project costs. Volume translation and use of CAT tools can help leverage potential discounts and mitigate future costs of the initial investment.
• SEO Localization and Social Media Marketing. Ensuring Search Engine Optimization (SEO) is not left untouched is a must – keywords and search phrases need to be localized and/or generated from within the nuances of a target culture. Social Media efforts must consider venues most relevant to the target audience (search engines, social media channels, etc.), and oftentimes must involve separate analysis and study in each targeted region and market.

Localization Value is Only As Good As Its Parts

Language is Big Business. The Translation and Localization industry has been growing exponentially and is here to stay. GALA (Globalization and Localization Association) reports the following industry numbers:

• The worldwide language services market annual growth rate is 5.52 percent;
• Localization and translation is the 4th fastest-growing industry in the United States, and the language industry is listed as one of the top industries for starting a business;
• Diverse and technology-driven, the industry carries an increasing impact on both global and regional economies.

The last point is particularly interesting for businesses. The growing demand for language services indicates changes in the marketplace that should not be ignored. Still, localization must prove its worth time and time again, even when examples of successful, profitable localization abound. Coca-Cola made an ingenious move with their “Share a Coke” campaign, designed to be direct and informal, when faced with the challenges of a more formal and conservative Chinese culture. Instead of using personal names, as they did in other countries, like Ireland, Australia, or the United States (“Share a Coke with Tom”), the company decided to modify the campaign slogan to include close friend or classmate to convey connection with the brand. The result? Sales growth for the first time in a decade. KFC was able to bounce back from a localization fiasco (translating “Finger-Licking Good” to “Eat Your Fingers Off” for its Chinese audience) by tailoring its menu to local tastes. After introducing Chinese porridge and a variety of rice-based dishes alongside its traditional fried chicken meal options, KFC broke through the cultural barrier and was rewarded with acceptance into the Chinese culture.

In order to achieve such levels of acceptance in a foreign market, it is best to include a fully integrated localization strategy at the start. Many times, goals are set, decisions are made, and timelines are approved before carrying out localization-specific research, understanding the current markets, or discussing the need of going global with localization managers. Confusion between translation and localization, compounded with the lack of deeper knowledge of both, is a familiar reality for both LSPs (Language Service Providers) and internal marketing and localization managers alike.

Localization as Part of Sales Strategy

Sales people understand the necessity of learning about customers’ needs. Localization professionals should be plugged in to the process as early as possible, because they are essential to determining and implementing the most appropriate sales approach in each respective foreign market. They are the ones who can align top company goals with the industry’s best practices and cultural nuances of a locale. To succeed, localization needs to be aware of the real needs, not just the stated needs, of its customers.

When discussing localization with a customer, asking for a full list of products is a good place to start. A discussion of which countries matter most to a company and overview of key products for specific key countries should follow. Identify value proposition that matters to a customer – is it increasing international revenue, not missing out on opportunities, making the product better, increasing brand awareness, etc.?

Financial vs Non-Financial KPIs of Localization

It is important to keep in mind that while some KPIs (Key Performance Indicators) are financial, others cannot be directly tied to a company’s cash flow. The success of a business is more than a balance of incoming and outgoing cash. Foot traffic, customer and employee relations, reputation, and brand awareness all play a key role. Localization does have a direct impact on the success of a business, yet not always in a way that can be clearly expressed in numbers alone. While not directly measured by any specific metrics, there are additional benefits that localization can bring:

1. A better product – more efficient and better built;
2. Increased customer satisfaction;
3. An increase in sales;
4. The company’s foreign partners representing its products on the ground gain confidence that their best interests are at heart;
5. Validates products and sales strategies;
6. Brings partnership and collaboration both within the company and across continents.

Reviewing the existing metrics and outlining current KPIs directly affects how localization can be presented as an asset rather than pure cost. Don’t get boxed in by ROI calculations to push for a low-cost solution that compromises quality and undermines localization efforts from the start. Poorly done, haphazard localization can hurt even some of the most established brands, as it once did with Pepsi, Electrolux, and KFC (the good news, they learned their lessons and recovered quite nicely).

Localization strategy needs transparency to succeed. Ultimately, the whole company needs to be on board with the localization strategy, from C-level employees to the sales force, programmers, designers, and content managers; they are all partners on the localization roadmap to success. Knowing who in the company needs to be convinced by quantifying localization efforts and working closely with those responsible for deriving value through ROI calculations is important to gain support for a localization strategy. Equipped with such knowledge and connections, localization is more targeted, focused on those elements that will bring maximum returns on investment.