This article discusses the return on investment (ROI) of localisation (translation) from Korean to English and from English to Korean, which we define as the process of adapting and including translation of software, products, documentation, or Web sites to Korean or English speaking market needs. The efforts of localisation into Korean cost a small fraction of the international revenue they generate. Nonetheless, most firms in the United States underfund their localisation budgets.
In this article we recount focused research into the localisation practices of 50 U.S. companies. We introduce a step-by-step process for measuring and ensuring the ROI of Korean localisation projects, considering a wide range of standard business paybacks and offer formulas for calculating returns. Practitioners can draw on the experiences of others and on these metrics to demonstrate shareholder value to corporate budgeters mindful of post-Enron accounting scrutiny. We define return on investment as follows:
ROI is a multi-variable, time-variant calculation that will be made by many participants in a value chain. A comprehensive view of ROI should capture the broader range of economic benefits that companies expect from their international investments – including increases in sales and market share, goodwill from better localized branding, lower support costs due to in-language information, and increased customer service and loyalty.
Korean localisation advocates and practitioners should internalise three bits of data:
- Disproportionate profits derive from international markets. Business originating outside domestic markets comprises 40 percent of assets at large companies, but accounts for 45 percent of corporate profits.
This favourable ratio should factor into either-or decisions as companies decide where to invest limited corporate resources.
- Big international payouts require competitive offerings. Revenue generated outside the country accounts for 20 to more than 50 percent of the total revenue in many market segments in which Fortune 500 American companies compete. Fortune 100 firms derive on average 28 percent of corporate revenue from non-U.S. business. In each market, these firms do battle with local, regional, and multinational rivals that offer local variants of their goods and services.
- Localisation expenditures exert great leverage. Our research has shown that small expenditures of 2.5 percent and less of international revenues in research and development, documentation, marketing, and Web development enable companies to adapt products and services for six to ten international markets. This small outlay pales in comparison to the more than US$90 million Procter & Gamble spent merely advertising its Crest Whitestrips in the U.S. market in 2002.
To understand how companies with ambitions beyond their own markets think about and measure localisation efforts, in the fall of 2002 we conducted detailed interviews with 50 managers responsible for setting or implementing localisation strategy at U.S.-based organizations.
This group represented a healthy distribution of vertical markets including automotive, chemical, technology, pharmaceutical, publishing, hospitality, and retail. Since that time we have periodically plumbed the user community, through both surveys and consulting engagements, to understand whether their situation had changed.
We found that it had not. The economic slowdown from 2001 to 2003 caused a hiccup in website translation efforts at many companies, thus extending the usefulness of data obtained from this focus group well beyond the one-year window we typically expect. In our discussion of this sample, we note differences between this 2002 sample and subsequent interviews across these markets.
In 2002 we had heard enough dismal tales from translation agencies to wonder aloud whether comprehensive localisation was an issue — or last year’s news. But instead of hearing about huge budget cuts and much diminished website translation activity, we were heartened to learn that practitioners accelerated their work to localise products, services, documentation, call centres, and Web sites.
In the 2002 sample, 57 percent of interviewees said that they were spending more in 2002 than in 2001; another 19 percent told us that their spending held its ground from the previous year.
By autumn 2003, the pendulum had swung again, with spending plans somewhat down. By mid-year 2004, our conversations with buyers and vendors pointed to another upswing that continued through 2005.
We believe that the 2002 increase was due to postponed investment in localisation, while 2003 reflected a period of project review and development. While it is too early to predict its longevity, we think the uptick that began in mid-2004 resulted from an improvement in general business conditions and an increasing realization of the strategic importance of creating a more global product line. In fact, we often hear statements along the following lines.
“We increased spending 60 percent over last year, mostly due to a push to localize more products. We have to translate more documentation and user interfaces to get deeper into current customers’ organizations and to penetrate smaller firms.” [Equipment Manufacturer]
“There’s been a dramatic increase in spending over the last year; at least 20 to 25 percent. I can attribute part of the increase to greater global need for localized products and a raised executive awareness.” [Consumer Products (Durables)]
At almost all companies with active localisation and translation teams including both Korean to English and English to Korean, we found that whether spending was up, down, or flat, every firm had a mandate to do more work. Our respondents pointed to many reasons for this change, including increased executive attention to global competition, international marketing, ramping up global customer relationship management, internal reorganizations, and product or company acquisitions.
“While we’re spending less money on localisation, we’re spending a lot more time on it. We have been expanding internationally also in Korea at a much-accelerated rate and have found a lot of competition. Our competitors are pushing us toward more localised product.” [Food & Beverage Services]