Why does localization matter more than ever before?

In 2016, there will be less new people coming online than in 2015 or in the years before that. Almost everyone in Europe and North America is already online and there’s simply not much room to grow.

For digital service companies that’s bad news. Getting attention is becoming more expensive as there are less new users to acquire and everyone else is targeting them as well. According to VentureBeat user acquisition costs jumped from $2 in December 2014 to $4 in December 2015. In a shrinking mobile economy, growing your audience is difficult. But fortunately, the economy is not shrinking everywhere.

India’s internet adoption is accelerating. Last year it was 40%, compared to the global average of 10%. India and other emerging markets still have room to grow. Smartphone penetration in countries like India, Nigeria and Russia is around 30% today. According to GSMA Intelligence, that number will grow to 70% by 2020. China and India are already ahead of the US by the number of smartphone owners.

Growth in these markets is beginning to ramp up because people’s income is low and smartphones have been expensive. But cheap smartphones are changing this. Globally, the price of an iPhone is around $700 while the price of an Android phone is around $200. There are even cheaper phones available at sub $100 prices and these will be driving growth of the mobile ecosystem in the few next years.

If you need proof on the importance of emerging markets, take a look at what companies like Apple, Facebook, Google, Spotify, Netflix and Uber have been doing recently. Entering emerging markets should be a key priority for all digital content merchants.

If you don’t launch early enough, someone else will. Facebook initially focused on growth in Western markets and in the meantime VK became dominant in the Russian market. Similar examples are found in several other industry segments. Netflix competes with iFlix in Asia, Spotify has local competitors in China (QQ Music), Japan and Taiwan (KKBox). Uber is facing competition in China (Didi Kuaidi), India (Ola), and South-East Asia (GrabTaxi).

When entering emerging markets, localization should be a key priority. The same strategies that have been in use for Western audiences will most likely not work there. Facebook was available in Russia from the beginning but VK knew the local users better and won the market. So what are aspects of your service that you should localize?

Language

Most people in the world don’t speak English. There are 230 languages in Europe but more than 2200 in Asia. A majority of consumers will not understand a digital service that is only available in English. The cost of translating a few pages into another language is only a few hundred dollars while being the most efficient marketing initiative out there.

Spotify has understood this and translated their Indonesian homepage into the local language. This makes sense, because only 15% of people in the country speak English. Another example is Netflix in Japan. If you look at their local landing page, you will see content translated into Japanese. This gives audience the understanding that they don’t need to speak English to enjoy shows and movies:

How 5 top digital merchants use localized pricing to boost revenue

Even a slight touch of localization on the landing page will help make a better connection with the local audience. If your service is built on content aggregation and you are able to deliver local content, that’s even better.

Pricing

The Big Mac Index is published by The Economist as a method of measuring purchasing power parity between two currencies. By looking at how much burgers cost in different countries, we can evaluate how big are the users’ spending capabilities. Burgers are cheaper in India than in the US because in India people’s income is significantly smaller. If a burger costs a different price globally, does it make sense to have blanket pricing for digital content?

Avast is one of the biggest anti-virus providers globally. Their local pricing (the same products are 2x cheaper in India compared to Europe) is due to an understanding that optimized pricing for emerging markets helps sell more products. A lower price helps you sell more because more people are willing to buy from you as the price they are paying is similar to what they are paying for other things online.

In addition to pricing services differently, differences in user’s purchasing behavior can be accounted for as well. Fortumo’s internal payments data shows that even if users end up spending the same amount of money during a month, the average transaction size can vary 2-3x times between countries.

This means that pricing for each transaction can be localized as well. In some markets you might see that users are not willing to pay at all, so an ad-based revenue strategy would the best way to go. In another market, it might make sense to offer a subscription service. In a third market, you may have to add a free trial to get users to pay. Measuring and analyzing payment data, keeping in mind that people’s spending habits are different and tweaking pricing helps make more money.

People also have different access to payment methods. In Western Europe and North America, almost everyone has a bank card; most people also have a credit card. But not all of them want to pay online. The fear of getting your credit data stolen online in the US is bigger than the fear of getting mugged on the street. In emerging markets, most people don’t have the luxury of having such a fear as they don’t own a credit card.

There is a stronger tendency towards informal, cash-based economies and people do not need bank cards to live their everyday lives. Since income is lower, banks cannot issue cards to people and the banking infrastructure in these countries is lagging behind compared to the growth of the internet ecosystem. So what are the alternative options for people in case they do not have or do not want to pay with a credit card?

Fortunately there is a vast amount of alternative payment methods out there.  Riot Games develops a game called League of Legends. League of Legends is the #1 grossing F2P MMO across the world so they are pretty certain to know what they are doing in terms of local payment methods:

league of legends payment methods fortumo

The list of local payment methods is entirely dependent on the country that is being targeted but as we can see, for Brazil and Turkey several local payment methods are present alongside bank-based payments.

Social networks

Not everyone in the world has a Facebook account. The Chinese social network Qzone has almost 600 million users; the Russian social network VK has almost 400 million accounts. While these social networks are smaller than Facebook with 1.6 billion monthly active users, they are dominant in their respective regions. Many other regional social networks exist as well, for example Renren, Mixi and WeChat.

When entering emerging markets, being present in these social networks and running ads there instead of Facebook is key to growing your community. In China, Facebook is banned and can only be accessed through VPN. Fan pages and advertising can be done on alternative networks instead.

Device capability

Not everyone has the latest, greatest smartphone. While the average price of an iPhone is around $700, an Android phone costs on average $200. Android has globally 80% market share and $200 devices will have less technical capability. For emerging markets, digital service providers should consider the following:

  • Is there enough room on smartphones to install their app?
  • Is the phone powerful enough to display high-quality graphics?
  • On smaller resolutions and screen sizes, is the service still usable?
  • Can the service support older versions of operating systems?

Beside lower technological capability of cheaper phones, mobile data is not as widespread as it is for someone in Europe or the US. In India only 15% and in Nigeria 24% of people have mobile broadband access. People in these countries turn off mobile data and use Wi-Fi whenever possible. That means that if possible, services should also be accessible when users are offline.

Timing of promotional campaigns

From the marketing side, every online merchant wants to run their campaigns when people are already more likely to be seeking for things to buy. Generally, this happens around major holidays. Major holidays do not take place at the same time everywhere and we recently published a blog post highlighting the key differences geographically.

What next?

The best place to start when starting localization is by looking at your existing traffic. What markets are your users coming from? How well do people in those countries speak English? Can you localize your service, digital assets and campaigns for those countries?

The second step is to take a look at pricing. The simplest approach to pricing localization is to divide the items you sell into various tiers, e.g. one for high-income, one for mid-income and one for low-income economies. For each country based on its purchasing power, display the appropriate pricing tier.

With 10 times more languages being spoken in Asia than Europe, with a 25x income gap between US and India, with 9x less credit cards in India than China, using the same strategy for emerging markets as for Western markets is ineffective. Local customer research and understanding payment behavior significantly increases likelihood of success in emerging markets.