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International expansion: Key lessons

When expanding internationally, there are three steps you have to consider: 

  1. Define your goals—for example, is your main objective to increase revenue, add more users or improve the product?
  2. Determine which markets you want to prioritize. During this stage, you’ll identify the markets that represent the largest opportunities, but you’ll also assess the required resources for expansion and whether it’s the right timing to launch your product. 
  3. Build a strategy. At this stage, you’ll need to decide which teams will be responsible for the expansion (local or headquarters?), which key features to include in the minimum viable product and what your marketing strategy will be.

We’ll delve into these steps later in this series.

For now, I want to share some lessons learned on international expansion. These lessons mainly relate to the tech industry, but most could apply to any type of company, no matter the size or the industry. I hope you find them useful. 

Lessons learned on international expansion

1. Approach international expansion in different stages.

If you are deciding where to expand, it’s a good idea to first target the regions where you have commonalities, such as language, culture or a similar technology adoption. In other words, target first the low-hanging fruit. After that, prioritize the regions from highest to lowest potential, based on the goal that you are pursuing. 

For example, let’s assume you sell accounting software to small- and medium-sized businesses in Canada and you want to increase revenue. If you are about to expand, first zero in on countries with similar accounting rules and language(s). Then, group the countries in tiers, depending on their revenue potential and tackle opportunities in different waves (i.e., first target the countries where you can maximize revenue without investing significant resources). A good example of this strategy can be seen in how Netflix expanded to 190 countries in seven years

2. Paid acquisition can scale fast, but scaling without original content is expensive.

With so much competition on platforms such as AdWords, Facebook and Instagram, it’s likely that if you only do paid marketing you’ll grow, but not for long and in an unsustainable way. Therefore, to expand internationally with limited resources, it’s wise to create content that speaks to a specific audience. 

For example, if you are trying to scale adoption of a food delivery app across different countries, the easy path would be to target desired queries through AdWords and demographics similar to your current customers through Facebook. However, it’s likely that the acquisition cost per customer will be higher than the customer lifetime value. Therefore, a better approach would be to develop content that targets a specific audience, incentivize word-of-mouth marketing, and then use paid channels to accelerate growth. In the food delivery example, you could partner with local foodies and influencers to create videos or content about food. By creating local content that’s likely to be shared, you’ll decrease the cost of finding new customers. One company that excels at this is Airbnb. Take a look at its YouTube channel and you’ll find content that speaks to very specific travellers. 

3. Differentiate what’s scalable versus what’s specific to each country or region.

Identify which product features, content, and marketing channels are scalable for different regions and which need to be customized. For example, Shopify works with entrepreneurs around the world. These entrepreneurs have common steps on their customer journey. They all go through a consideration phase when they decide if it’s worth opening a business, and they need to enable payment methods and attract more customers. However, some factors that are specific to each region. For example, payment methods vary significantly. In North America, credit cards are the default payment method, whereas in Latin American or certain European countries, cash is preferred. Therefore, a good strategy would be to replicate content that addresses the common needs, and to customize other content for the specifics of different regions or countries. 

4. Context changes, but people behave as people everywhere.

Although every culture is different, certain principles remain universal. For example, free products are attractive everywhere, we are all wired to compare, and, to paraphrase Dan Ariely, we are all “predictably irrational.” But why is this important for international expansion? Because it’s common to attribute behaviours to culture and many times they are a consequence of context, rather than culture. 

The following graph shows the consent rates for organ donation across different countries. It’s used as an example by Dan Ariely to illustrate how environment plays a big role in our decisions. Notice that Denmark and Sweden, countries that are in many ways similar, have a vastly different donation rate. Why? You might conclude that this is related to culture, but you would be wrong. The main difference is that the rules in Sweden require people to opt out of organ donation, whereas in Denmark people opt in. In other words, in Sweden you are automatically enrolled for organ donation, and in Denmark you are automatically excluded. Therefore, while the cultures might be similar, context carries a lot of weight.

Source: Eric J. Johnson & Daniel G. Goldstein, Defaults and Donation (2009, Jan). Quoted in: Dan Ariely, 3 main lessons of Psychology (2008, May 5).

By the way, I encourage you to read Dan Ariely’s book Predictably Irrational. I think it’s one of the best books for marketers. It’s full of practical insights about how us human beings behave. 

5. Price matters more than you think.

We all know price is one of the key factors in play when we decide whether or not to purchase a product. However, it’s important to keep in mind that the right price on its own might just be enough. It’s likely that even if a price is good, we’ll compare the product to the competition or even against other things we could purchase instead. After comparing, we then decide if it’s worth it to purchase the product. And why is this relevant for international expansion? Because purchasing power changes significantly across regions.

For example, US$10 in Mexico buys you two cinema tickets and a bag of popcorn, whereas in Canada, it buys you just buy one cinema ticket. Now, let’s assume that you are selling a subscription to an entertainment app for US$10 per month. Users in Canada might have to decide if they would rather purchase your product or go to the movies on their own. However, users in Mexico might have to decide between buying your product or going to the movies with someone else and having some popcorn. In this scenario, your product might be less attractive for Mexican users. While it might sound obvious, it’s common to forget how big a role context and culture play. Pricing differently across different regions can add some hurdles, but it’s likely you’ll optimize sales. It’s up to you to decide if you want to maximize revenue, at the expense of more complexity. 

6. Timing matters.

In certain industries, seasonality has a large bearing. If that’s the case for your business, identify the dates that are important for your target country. For example, if as a retailer, you want to sell in the US, Black Friday is a crucial date. Have you identified the key seasons in your prospective customer’s journey? Let’s suppose you have an app that helps people find jobs. If you were launching in Spain, it might not be a good idea to launch during April (see how queries to “find a job” decrease around these dates, according to Google Trends).

Screen capture of "find a job" Google queries in Spain, from period of September 2018 to August 2019. The numbers are low in April.

7. Expand to regions where you start gaining traction.

Be open to opportunities that arise. If you start gaining traction in a specific region or country, without investing resources, it might be worth it to prioritize this region. Constantly look at your data to track if you are receiving traffic from an unexpected region, country or audience. A great example of this is how Wattpad, a Canadian technology platform that connects readers and writers, incentivized growth in the Philippines after noticing strong demand there for their product. (Read more about Wattpad and their growth in the Asian market.)