Read the full script of Module 6, Episode 3 of the Global Growth Master Class below. Want to get certified on global expansion? Simply click here to access the complete course today.

It is difficult to add structure around the localization process because it is multifaceted and complex and requires an understanding of all aspects of how your business operates. Because of this, it is likely that important necessary changes are overlooked if the right people aren’t involved and if structure isn’t built into the process. To help with this, we’ve developed a concept we call Localization Premium.

What is Localization Premium?

The concept of localization premium incorporates the fundamental understanding that adapting your business in various ways is essential for successfully entering a new market. The term "premium" represents both the advantage gained by the company from making the necessary changes (such as gaining traction in the new market) and the additional costs involved (such as time, financial expenses, or human resources efforts) in the process.

The benefit is accompanied by a burden. Localization Premium is a representation of both the extent of required changes of a certain aspect of the business to successfully operate in a new market, as well as the amount of complexity that implementing these localizations would incur. Ultimately Localization Premium puts structure in place to help you answer the question, What aspects of your business should you consider localizing?

Localization does not mean language translation. In reality, it goes well beyond language translation to include all aspects of your business. In this video and the next we will outline 6 different categories of localization. Language translation, in fact, isn’t one of the 6 categories; it is a sub-category. 

If a company opts for a solution that is quicker and easier to implement, rather than investing more time and effort into creating a better solution, there may be additional costs or time investments down the line

There is a trade-off between speed and scalability, as well as the long-term effectiveness of the solution. Moreover, if a company fails to address the accumulated localization premium issues, they may become more severe over time and require even more resources to fix.

The operational and go-to-market modifications that need to be made in order to localize a business can vary in size and scope. For instance, allowing each team in a new country to use its own customer relationship management (CRM) technology, payroll systems, proposal building, and pricing tools, as well as enact different intellectual property strategies and maintain different legal entity structures, may seem like a quick and easy solution, but it would create an unmanageable global footprint with overwhelming integration efforts.

A Localization Premium Analysis, which is described in more detail later in this module, can aid in achieving company-market fit (which is not only finding product-market fit, but involves finding the right operational and cultural modules to scale in an international market), and accelerating growth in a new market. 

It guides businesses toward the necessary modifications required to thrive in new markets and facilitates the expansion of these changes across multiple local markets. Thus, the Localization Premium Analysis can act as a driver for discovering company-market fit on a global scale. 

Now don’t just think about Localization Premium as a purely negative thing. Each localization, and its corresponding cost, should be thought of as an investment to unlock opportunity in an international market. 

The objective of this module is to enhance your understanding of localization premium and assist you in optimizing it from the outset. This is accomplished by increasing your awareness of it and providing you with constructs and insights to better manage it. The aim is to instill a set of beliefs in your team and implement processes that streamline complexities instead of relying on makeshift solutions. 

Establishing these structures and promoting clear communication channels can provide local market teams with valuable insights into how other regions are structured and have tackled similar challenges.

As highlighted to us by Paul Williamson, Fmr Head of Revenue at Plaid, localization premium can be compared to the statistical concept of standard deviations. Making changes to the way you conduct your business can take you further away from your core focus, similar to how standard deviations measure distance from the average. 

Adding complexities and multiple ways of operating can distract you from solving core problems. By measuring proposed changes in the context of standard deviations, business leaders can establish boundaries around the decision-making process and recognize the potentially negative impacts even small changes may have. 

Without consideration for localization premium, a business can end up "Frankensteining" its product, becoming a non-specialist to everyone and losing its value proposition. This was the A-HA moment in our research that led us to develop the framework to map and build strategies around localizations. 

For leaders like Paul and others, localization premium can be a conversation starter and a common language framework, allowing you to quantify often amoebic elements. The Localization Premium Analysis framework explained in this module will help you balance revenue potential and necessary changes (which require resources). 

It allows for comparison between multiple elements of your business. More than anything, it is a helpful heuristic for navigating international scaling and prioritizing the right markets.

Structurally, The Localization Premiums Tool is divided into two categories

• Go-to-Market Premiums (Sales, Product, and Marketing)

• Operational Model Premiums (Administrative, Infrastructure, and Organizational)

The former refers to the visible elements of a company's business model that may need to be adjusted to achieve success in a local market. 

Culture differences primarily drive these premiums, although government regulation can also play a role. The latter category, on the other hand, pertains to the less visible back-end elements of a business that require localization for successful operations in a new market. 

These premiums can be harder to identify during the localization discovery process and are more often driven by government regulation (Admin and Infrastructure Premiums), with the Organizational Premium being the exception, which is influenced by cultural differences as well.

As you’ve heard us make reference to, the analogy of an iceberg applies to these localizations where Go-to-Market Premiums that are more visible and customer facing, tend to get more focus, while the equally as important Operational Premiums, the part of the iceberg under the surface of the water are more often overlooked. All of them are crucial, and we will spend time detailing each.

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It’s also worth noting that company leaders should think about Localization Premium in the context of their own organizational readiness, as we don’t recommend companies take on extreme changes (higher Localization Premium) without having solid organizational readiness, as evaluated through the Global Readiness Score Assessment. 

Grow your expansion muscle over time instead of attempting to take on too much before you have developed the right muscles, and institutional knowledge, to support an international footprint. 
 

First, let’s investigate the Go-to-Market premiums, the tip of the iceberg, which include Marketing, Sales, and Product Premiums. As mentioned, these are the typical focus of localization efforts, but by no means should be simplified. Each is multi-faceted and requires a specific focus to find solid traction in international markets.

Marketing Premium

The Marketing Premium includes differences in the target audience, alterations to value proposition, modifications to use cases, segmentation of the market, shifts in the competitive landscape, differences in demand generators, changes in the brand, differences in customer purchasing criteria, modifications to marketing strategies and advertising channels (including user acquisition, retention, and growth), as well as alterations to public relations and branding, and language translation. LinkedIn, for example, had to modify its core value proposition to attain success in Germany given differences in the local business culture and how there is more loyalty/longer tenure at companies than the US, moving from positioning as a platform for career advancement and connecting job seekers with recruiters to a place for exploring intellectual interests and getting resources to help you do your current job better.

Several companies we researched had to consider branding changes. While branding changes do contribute to Marketing Premium, it's important to avoid brand names that sound like inappropriate or offensive words in the local language, such as the case of South Korean company Kakao whose name, when translated into other languages, sounded like slang words for “poop.” This hindered customers from connecting with the brand, creating a disadvantage compared to competitors like Line and WeChat. Additionally, when launching in new markets, it's essential to consider market segmentation and repositioning your brand. For example, Budweiser positions itself as a mass-market mid-tier brand in the US, while in China and other markets, it positions itself as a premium brand and charges higher prices, which is a common strategy in the beverage industry.

Sales Premium

Next, let’s look at Sales Premium. Sales Premium refers to the adjustments that companies need to make to effectively sell, distribute, and provide customer support for their products. It involves modifying channel distribution (such as using local retailers or value-added resellers), revenue models, sales models, sales and support teams, and customer service. For example, Workday had the chance to secure a deal with Samsung corporate in South Korea, but they needed to establish a new sales and support team composed of native South Koreans. Additionally, they had to add a separate services team that solely catered to the Samsung account.

In Japanese business culture, leaders believe products with high initial costs are deemed superior, and they are reluctant to pay for additional features or add-ons. They are willing to pay a premium price for a product or service, provided that it comes with things like twenty-four-hour support and warranties. Global Class Companies are mindful of the differences in competition, predicted competitor response, and the need to adjust to stand out.

Customer service means something very different in Asian countries, compared to in America, for example. In America, many companies can get away with having an online/self-serve customer service strategy. In Asia, on the other hand, having a call center where customers can speak to a person live, is often essential for success.

From a sales channel perspective, at times, entering new markets will require a new strategy. Let’s investigate how Docusign leveraged a recognition of this to succeed in the German market. 

Germans are used to high-quality domestic brands and therefore prefer to buy from local companies (as illustrated by the story of Walmart’s failure to gain traction in the market). This makes getting Germans to adopt a new product or service from an international company difficult.

DocuSign was undeterred by this challenge. Understanding the local culture, they saw the need to secure a go-to-market partnership with a well-known German enterprise with a vast reach across the market. The team targeted inking a deal with SAP, Allianz, Deutsche Telekom, and others. In the end, Deutsche Telekom (which we will refer to as DT) seemed like the best fit, with its ten-thousand-person salesforce, an amazing distribution channel to tap into. DT also sought technology integrations so that DT mobile devices would have DocuSign signature capabilities as well as customer data storage with DT data center, given that German customer data needed to be stored in-country.

To show commitment to the market, DocuSign crafted a comprehensive partnership proposal that included the partner investing in the next round of DocuSign’s fundraising, a resale partnership, tech integration (such as mobile device signature for DT), and a mutual customer relationship where employees of each company used the partner company’s solutions. This four-pronged approach of distribution, mutual customers, investment, and tech integration would be a big win for DocuSign, but also an opportunity for DT to improve customer experience, gain revenue for its cloud business, and benefit from an investment in the rapidly rising value of DocuSign for helping grow the business in Germany.

As partnership conversations with many large organizations tend to do, talks progressed slowly. In June of that year, DocuSign’s then-CEO, Keith Krach, found out that DT’s CEO, Tim Hodges, and about fifty of his top executives were going to be taking some executive education courses at Stanford University, near DocuSign’s headquarters in San Francisco. With the Fourth of July holiday approaching, Keith invited all the DT executives to his home along the California coast near Santa Cruz (which he referred to as his “beach shack”) to celebrate. The DT executives attended, exchanging formal business wear for shorts and short-sleeved shirts. The group enjoyed some BBQ (which should have been hot dogs but were bratwursts, comically enough) and fireworks. Because of the relationships built at the gathering, the partnership agreement was finalized shortly thereafter. 

The partnership was incredibly successful. Not only did DT benefit from the profitable investment in DocuSign, but they also were able to include DocuSign as a value-added service on top of its network solutions. Within a two-year period, DocuSign started to hire a direct sales team in Germany to support the additional customer base and new market opportunities that the partnership laid a foundation for. The game plan was a winner because the entire strategy was built on an understanding and adoption of German cultural practices.

Product Premium

Finally, let’s take a closer look at Product Premium. Product Premium refers to the changes that must be made to a product or service to fit cultural differences or adapt to new markets. This can involve adding or removing features, bundling or integrating with other solutions, or product localization. These changes can be minor or significant, requiring an entire product overhaul.

For instance, LinkedIn had to make significant changes to its product to accommodate the slower mobile networks in India. The graphic and image-heavy content on LinkedIn's mobile app took too long to load, leading to a poor user experience. To address this, the LinkedIn team developed a new version of the app, internally called "LinkedIn Lite," which provided a text-heavy experience that loaded faster and met the constraints of the local mobile networks.

Product Premium is an essential consideration when expanding to new markets, as it ensures that the product or service meets the needs and expectations of local customers. Companies must take into account cultural differences and customer preferences when making these changes, ensuring that the product remains competitive and relevant in the new market.

Product Premium also applies to localizations of physical products. Let’s use bottles of ketchup as an example. In Brazil, people eat hamburgers differently than in the US. In the US, people open the bun and using a ketchup squeeze bottle, will squeeze a big glob of ketchup on top of the hamburger.

In Brazil, on the other hand, people like to squeeze a tiny bit of ketchup on the edge of the hamburger to enjoy with a specific bite, squeezing a tiny bit more on for each following bite. The US bottle cap doesn’t work for this Brazilian use case. Understanding this, Heinz localized the nozzle and bottle cap so that (a) only a little bit comes out when you squeeze it, compared to a big gob of it in the US, and (b) a top that could be stood up on the table when open. 

The US version wouldn’t stand up cap side down because the nozzle sticks out, making it hard for Brazilians to use since they would constantly need to pick up/put down and close/open the ketchup with each bite. Instead, the nozzle is more indented so the bottom can be stood up cap side down with the top open, for easy access to grab and squeeze more ketchup on with one hand.

NOTE: Don't miss out on the next episode! If you want to continue learning about global expansion strategies and dive deeper into the course material, simply click here to access Module 6, Episode 4 of the Global Growth Master Class.