Why PPC is the perfect way to expand into new markets

- Luke Metcalfe

Launching a new international market is a challenge every growing company will face sooner or later. Knowing where, when and how to launch are all keys to making sure your international growth is a success.

Marketing has a key role to play when entering new markets. It’s their responsibility to gather market intelligence and devise an operational strategy for gaining new customers.

We’ve worked with a number of companies on new market launches, and in our experience, paid advertising provides the perfect medium to both explore and enter into a new market. Here’s an example of how we helped a major luxury retailer expand their online presence.

Country selection

Selecting which countries to venture into is the single biggest task in any internationalization project. Interestingly, lack of data is rarely the issue with internationalization research.

Good sources to draw data from include:

  • Search data – ratio of brand and non-brand searches, search volumes
  • Internal company data – past performance and forecasts of international organic business
  • Primary market research data – brand awareness, brand recognition
  • Secondary socio-demographic research – population, income distribution, average income
  • Industry reports – supplier landscape, international e-commerce and luxury forecasts, ad spend
  • Country reports – technical reach of internet technologies, mobile share, English proficiency

We like to keep things simple, so we bucket data into three dimensions – potential, conversion opportunity, and per capita value – which can be handily multiplied into a rank table. The model looks simple on the surface, but what goes into the three buckets can be quite complex once you take into account validity across countries and harmonization of different data sources.

Potential: How many potential customers are there?

Measuring a country or region’s potential is about the size of the target market. This does not mean the total population of that country – unless you have a very generic product – as not everyone will find your offering relevant. Total population figures are not a good choice of metric when it comes to the potential for most brands.

For example, if you’re a high-end fashion company – while everyone will buy some clothing from time to time – luxury fashion brands hardly address a country’s total population. Instead, they concentrate on the upper end of the market and leave the majority of customers to others.

For our client, we approximated their target segment as anyone with a “personal annual income of more than $50k”. We then sourced an authoritative study comparing the size of this segment across countries. The resulting target segment size gave us a far more valid impression of each country’s potential to order from a luxury retailer than the top line population figures could.

Conversion Opportunity: How easy can we convert those potential customers?

While potential target size is certainly important, you also need to analyze the likelihood of converting that potential on the macro level.

Think: how accessible is the market?

This dimension will likely hold the most indicators within the country selection model – simply because of the number of obstacles you can think of in successfully bringing a product to a foreign market: Be it language barriers, entrenched competitors, differences in supplier landscape and in demand structure or even the gut feeling of the more senior business development managers.

For our client, we analyzed a plethora of data points from the sources listed above. From this data, we identified the five variables most closely correlated with business performance across countries and subsequently developed an algorithm to normalize and aggregate data from different sources, keeping the logic flexible at the same time. The model was flexible enough for client stakeholders to introduce their first-hand view of the business and re-weight the different variables of the index.

Per Capita Value: How much is each potential customer worth?

Once you’ve found out how many potential customers there are in each country and how difficult they are to get at, the missing link is to measure the revenue per capita you can expect.

An example here would be the ARPU (Average Revenue per User), a measure widely used in telecommunications. Alternative approaches might draw on the average basket value per country – often you can find existing business data or get competitive intelligence sourced from consultancies or even assess investor relations filings of the publicly traded companies amongst the competition.

Output – Choosing a market

Once you’ve researched reliable and comparable data for all countries on the longlist, calculating the total size of the opportunity is simply a question of multiplication. The hard, but crucial, work is in data collection and blending different data points into index values in order to produce a summary value for each country on each dimension. Here’s what that analysis looks like for our client (who is based in the UK).

This table of overall potential shows that the Americas have the greatest potential for our client, with the EMEA region runners-up and Asia Pacific finishing third.

Looking at the dimensions plot clarifies that although APAC had the highest per capita income (bubble size), our research and experts on the client side judged it to be less accessible than the other regions. The prime reason for finishing third though is the limited target size. This also is what sets up the Americas as the top-grossing region, trumping better accessibility and higher per capita customer value in Europe and the Middle East.

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We then worked through the rankings on the more granular country level and, together with the client, suggested a final list of countries to tackle.

Entering the market

Once you’ve chosen your markets for expansion, your next task is figuring out how to tackle said market efficiently. Different media channels have different strengths and weaknesses, including the channels’ carrier medium, the environment it operates in or the audience it attracts.

Again, we think paid advertising should be your initial go-to medium. It has little upfront costs, can be scaled quickly, continuously optimized and offers granular cost control mechanisms and impromptu results as well as the ability to act on those results. It’s the ideal tool to use when entering a new market:

Ramp up time and scalability

When expanding internationally, you want a solution that allows you to be agile. Internationalization strategies should favor channels that involve no or little upfront production/adoption cost, are quick to setup and easy to scale once they prove their value.

PPC is a featherweight in setup cost since ad copy is cost-effective to produce. Google Shopping is even easier – all you need is a Product Feed in the right language. Also, a sufficient share of voice can be reached in many countries through just one big provider of search services, doing away with variations in format and inflated transaction cost.

Related: Go global and break into new markets with Google’s new PLA features

On the billing side of things, pay per click and daily budget caps allow for the required flexibility to start fast and scale sustainably.

Intelligence gathering

Especially when venturing into uncharted territory, you want your chosen channel to produce intelligence on the go rather than require copious intelligence to get started. Instead of putting a lot of upfront work into pinning down targeting criteria, you want a campaign that can be continuously optimized.

PPC records a high volume of interactions, which lets advertisers confidently optimize on the fly and gives them tremendous insight into what makes people tick in each market. With so much data being collected instantaneously, you can quickly spot trends and react to specific market challenges.

Related: How to squeeze every last drop of performance from your paid campaigns

Accountability

Internationalization projects typically work across departments and have a high strategic importance to the company – which means a high degree of visibility. Experienced international expansion teams, therefore prefer media channels that offer granular cost control mechanisms and impromptu results as well as the ability to act on those results.

Firstly, PPC produces fast results, so that project leaders will have something to report on almost immediately. Secondly, looking at the customer journey, PPC interactions are very close to the transaction that produces tangible results for a company (ie sales) – so project leaders will be able to report on KPIs that are highly meaningful to the business. After all, in PPC, advertisers only pay if people were interested enough in an offering to click on it.

Related: Why Lifetime ROI is the only metric that (really) matters in search marketing

Conclusion

When it comes time to expand your brand internationally, it’s easy to overlook medium sized opportunities that would be more receptive to you product because other countries impress by sheer scale or have high net worth per capita. Which is why it’s essential that you do your homework.

PPC presents the perfect medium to both explore the potential of new markets and begin your entry strategy. It’s a lightweight advertising platform that provides the needed flexibility and reporting capabilities to sustainably catapult your business into a new country.

ABOUT THE AUTHOR


Luke is a Content Marketer at Crealytics

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