ROI on localization is one of the more challenging metrics to define. Still, as the world becomes more globalized and businesses must reach their customers in their native languages at scale, the return on investment (ROI) from localization sooner or later must be answered.
Marketers know well that a multilingual digital presence in a globalized world can be a massive revenue booster. And yet, one of the challenges they face is determining the true impact of localization to ascertain its actual value and, if necessary, secure budget approval from stakeholders.
Where to start?
As ROI is all about numbers, the well-defined set of measures for localization success is one of the most critical business tools when going global.
To gauge that success, you may want to track the following metrics for each of your local markets:
- Revenue and profit growth
- Uplift in conversion rates
- Increase in the website traffic
- Increase in customer engagement
- Increase in brand awareness
What part is an ‘investment’ in the localization’s budget?
Equally important is the proper allocation of costs to your ROI on localization. When certain expenses are easy to allocate, some need to be clarified. For instance, how should you consider expenses related to the internalization of your software code? Which part, if any, should be assigned to your French localization budget, for instance?
A good rule of thumb is to consider three types of costs when planning your localization budget:
Direct costs are the costs that are directly related to the localization process, such as translation, localization engineering, and project management.
Indirect costs are the costs that are not directly related to the localization process but are necessary for the successful launch of your localized product or service. They can include market research, cultural consultancy, and user testing.
Opportunity costs are the costs associated with the opportunity you are missing out on by not localizing your product or service. They can include lost revenue, lost customers, and damaged brand reputation.
Which metrics to use?
Let’s dive deeper and zoom in on the best metrics for measuring the impact of localization.
We suggest considering the following:
- Revenue generated from foreign markets and a gross margin of foreign sales compared to the home market.
- Increase in the number of new & active users or downloads in foreign markets.
- Satisfaction ratings from users in foreign markets.
ROI from a revenue and profit perspective. How much revenue does localization enable?
This metric treats localization as an investment into an increase in general revenue. Of course, localization alone isn’t responsible for that increase because other resources are involved, too, but the extra revenue wouldn’t happen without localization.
How much does localization weigh on the cost of acquiring a customer?
Your localization costs can be easily calculated as a percentage of your total CAC for each market. Of course, in CAC calculation, you must include the product localization cost and the relevant localization expenses in marketing and sales.
Should you measure localization costs as a per cent of the R&D budget?
This measure is simple but does not help if you try to answer what return the business is getting on the localization initiatives. However, if you use it to track your expenses for keeping the code internationalized, it will serve the purpose very well.
The real localization ROI is localization’s impact on end users, loyalty, and engagement.
It can be a very clever idea to use metrics that most SaaS companies are constantly observing:
- Engagement (customer lifetime value, engagement rate, customer satisfaction)
- Revenue (monthly recurring revenue, lifetime value, conversion rate, customer acquisition costs)
- Efficiency (customer support costs, time to market)
- Churn (monthly recurring revenue churn)
Establishing a baseline is essential to accurately measure localization’s impact on these metrics.
This can be done by measuring the metrics before localization is implemented and then comparing the results after localization is rolled out. It is crucial to track the metrics for each market and language to see which markets and languages are getting the highest ROIs from localization.
ROI on localization and relevant KPIs should be about the customer experience.
Every localization professional—or anyone in the translation industry, for that matter—should see customer experience as the critical area and gain clarity on how it is impacted by localization.
If you can demonstrate how localization improves customer satisfaction metrics, you’ll make a strong case for the impact of localization on the business as a whole. That’s how you can gain a seat at the table by speaking the language of other stakeholders within the company.
And it would be best if you talked to more than the traditionally essential localization metrics, such as translation quality or time to market. They are not helpful because, for example, if you’re asked to make the website in Japanese, they will not demonstrate how many Japanese speakers visited the site because of the localization.
You have to speak the language of other stakeholders within the company, such as the marketing or customer support team. In the example of the translation of the website into Japanese, it is far better to point out the increase in the conversion rate or the number of leads generated by the localized website.
Unfortunately, localization teams are often seen as a cost centre, and they’re only sometimes able to get the budget or resources they need to be successful. For this reason, well-defined KPIs by a localization leader are the first priority for any localization team.
If you want to share what localization KPIs your company uses and how it calculates return on investment in localization, reach out to me at servus(at)textunited.com, and I will be happy to add your input to this blog entry.