//Localization: Profit Generator or Cost Element?

Is localization considered a money eater or a money gainer? Where does localization reside in the profit and loss (income) statement? Is there a return on localization investment? How effective can an international business be without globalization?

We have seen localization as a part of marketingsalesproduct developmentcustomer service, or all of them together. In all cases localization is considered a cost element recorded in the expenses part of the P&L statement. The question we are about to answer is whether it should be represented in the revenues section or not? But before reaching an answer we better list the localization where it is considered as a cost element.

It is essential to include localization in marketing campaigns to create awareness about new products in an existing market or when entering new markets, hence localization is budgeted as a marketing cost. But how successful could this marketing activity be if it was conducted in a non-local language, even if this language is English? Yes, some people may understand English, but what about the majority?

56.2% of consumers said that the ability to obtain information in their own language is more important than price*.

If you talk to a man in a language he understands, that goes to his head. If you talk to him in his language, that goes to his heart.Nelson Mandela

In order to make international sales more effective you may need to create localized website, demos, presentations, proposals, collaterals, and videos. That is quite an investment, but can you do international business without them? Some may say yes. Those who do need to compare yourself to competitors and locals providing similar or alternative products like yours in local languages.

72.4% of consumers said they would be more likely to buy a product with information in their own language*.

Everyone hears only what he understands.” Goethe

Is the market ready for our product? A basic question asked to marketing research. Based on market research it is definite when a market is hungry and “ready” for your product. A twin question has to be answered, is the product “ready” for that market? Was the product culturally assessed and adapted? Are the product, related documentation, and packaging properly localized for this specific market?

Product globalization, including cultural assessment and localization, are counted as the third cost element related to localization in the P&L statement; and it could be the highest cost amongst globalization and localization cost elements.

The last globalization/localization cost element is customer service, where in many cases servicing customers in their own language is required either in a written or a verbal format. Providing this kind of service could be subject to local legal regulations, or part of your market research and customer satisfaction. What could be the cost of not providing this service? Or not providing it in a local language?

Well, after generally describing localization related cost elements that will obviously appear in the expenses part of the P&L statement, now the question is whether localization should be represented in the revenues part? Do globalization and localization generate profits? We believe the answer is affirmative.

Localization is similar to any other investment, when you invest in localization then a return on investment is expected. The localization return can be quantified, qualified, and justified in different ways:

  1. Revenues achieved by localized marketing, sales, and products in different countries
  2. Market share on both long and short terms
  3. Market knowledge and presence
  4. Globalization knowledge acquisition as a competitive advantage
  5. The cost of improper localization or no localization
  6. The future cost of entering a market that is dominated by localized competing products and/or local products

References: * https://hbr.org/2012/08/speak-to-global-customers-in-t/