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3 Key Elements of Successful International Expansion Decisions

We know you’ve daydreamed about it — your product in the hands of people all over the world, bringing tremendous value to the globe. But international expansion takes more than just imagination; it requires a real strategy.

Adding new geography is inherently complex and risky, especially for a product that was not built with internationalization in mind.

“Just because there is a signal to expand internationally doesn’t mean you should do it. You have to think about interest to expand, capacity to expand.”

—Kristina Gibson, Chief Product Officer at Dott

To expand internationally into any one area, three elements need to come together:

  1. Traction, or signal of market potential
  2. Feasible profitability or interest
  3. The ability to invest in the right level of localization

Sounds simple, but each component is riddled with room for error, mistakes lurking at every checkpoint. Tanya learned this firsthand when expanding PandaDoc, an e-signature company, into Europe.

Signals seemed excellent on the surface, but as she dug deeper, she found that the signals were reflective only of a subpopulation of the customer segment. Even though Europe as a whole sounded appealing, the national nuances of e-signatures meant they needed to consider each individual country as a unique market. In other words, the level of investment for localization was more than they could have anticipated.

“We didn’t think it would be that hard. Many products launch in Europe. We didn’t think through all the limitations Europe as a whole had for a business like ours.”

— Tanya Aulachynskaya, VP of Product at PandaDoc

In this article, Kristina and Tanya will share their frameworks for how to approach each of the three steps and what pitfalls to watch out for.

Meet The Contributors

Kristina Gibson

Kristina Gibson

Kristina is a driven product leader who is passionate about building products that solve real problems for people worldwide. She specializes in managing growth expansion for early-stage technology products. Currently, as Chief Product Officer at Dott, she leads teams that design the future of transit in cities.

Tatiana Aulachynskaya

Tatiana Aulachynskaya

As a VP of Product, Growth & Incubation at PandaDoc, Tatiana Aulachynskaya builds product and growth strategies and leads the team executing those. Tatiana helped to scale PandaDoc from a small startup to reaching unicorn status. Tatiana is also an active startup mentor and advisor and public speaker.

International Expansion Element 1: Natural Traction

Many companies begin to think about international expansion either because the product teams and go-to-market teams begin to notice organic interest from a new geography, or because leadership chooses a geography to target.

Regardless of how the idea to expand formulates, it’s important to identify if the geography shows signs of traction through the quantity, strength, and accuracy of international signals.

Kristina and Tanya developed the International Signal Strength Spectrum to help measure that traction, allowing product managers to figure out what signals to look for and how much weight to consider for each signal. Once an area shows strong signs of traction, it’s time to roll out in-market user research. In other words, it’s time to talk to the people of that market before entering.

“The biggest mistake I see companies make is launching without talking to users in the new country.”

— Kristina Gibson, Chief Product Officer at Dott

This International Signal Strength Spectrum can help you understand how much in-market research is needed and how to make it most effective.

There are two types of traction signals product managers should be paying attention to:

  1. Customer signals
  2. Market signals

Customer signals

Customer signals are signals that come directly from your customer base or product that indicate various levels of intent to purchase. Lighter signals are demonstrated when customers show interest in the product and stronger signals are demonstrated by conversion, or customers purchasing the product.

Common Pitfalls

There are two things to watch out for with customer signals:

1. Always be aware of the size of your data pool. Customer signals are often loud but usually represent a very small number of customers. Every customer signal should be a point for investigation, rather than a decision-making data point.

“Customer signals are a launch pad to inform where to spend time looking for additional signals.”

— Kristina Gibson, Chief Product Officer at Dott

2. Even strong customer signals do not always represent the target segment that would need to be acquired upon international expansion. It’s important to understand what type of customers are creating the strong signal and how closely they resemble your target segment.

Let’s circle back to PandaDoc to show you what we mean. PandaDoc used its current European customers as one reason to expand into the region. The customers who were organically attracted to PandaDoc, however, were those comfortable using e-signatures that were valid in the United States. Many of those customers were signing and exchanging documents with their counterparts in the United States.

To be successful in Europe, PandaDoc was going to need to attract enterprise customers and small and medium businesses operating exclusively in Europe. Ultimately, attracting those customers posed bigger regulatory challenges. The signal of customers using PandaDoc from Europe was a bit misleading.

Market signals

Market signals are competitive activities that demonstrate the market potential for your product.

There are two primary types of market signals a product manager can look for:

  1. Competitors with the same product in the market
  2. Organic search for the product in the geography

When you’re looking at a competitor company with a local version of the product, you need to investigate how established it is. Is this a competitor just trying to see if they can find product-market fit, or is this a competitor that shows you there is a real market for this product?

In some countries, you can figure out if the company is funded. In other cases, you can investigate the product yourself. For example, when working for Eventbrite, Kristina tested out a competitor’s product in a different country that was generating invoices.

To Kristina’s advantage, the competitor’s product made the mistake of using a sequence for the invoicing numbers, so she was able to determine how many invoices the company had created. The number was in the 100s, indicating there wasn’t a competitor who had found product/market fit in that country yet.

The other market signal you can consider is organic search traffic. Organic search traffic can help you get a sense of how normalized the product idea is in a market.

“Look at a set of keywords in a specific language and company, and see if there’s an opportunity there. It can be a starting point for your high-end estimate. If you acquire everyone in the market looking for the product, it would be X number of people.”

— Tatiana Aulachynskaya, VP of Product at PandaDoc

When do signals equal traction?

Traction can’t be based on one signal. A set of signals becomes traction based on quantity, strength, and accuracy. Ideally, you have a variety of strong signals that have been validated to show there is proven interest from the target segments that will enable a strong business case.

Once an area shows strong signs of traction, it’s time to roll out in-market user research. In other words, it’s time to talk to the people of that market before entering. For example, you can conduct local research to validate target segment interest or develop an understanding of the cultural and geographic nuances.

“The biggest mistake I see companies make is launching without talking to users in the new country.”

— Kristina Gibson, Chief Product Officer at Dott

When signals for market potential are not strong, but ultimately the company decides to target that geography for other business reasons, you will need to invest heavily in local user research to understand if there is any interest from potential users and how to make sure the localization is done well.

Again, these signals help determine upfront traction, indicate how much in-market research is needed, and how to make that research most effective.

International Expansion Element 2: Feasible Profitability

Traction is just one piece of the puzzle. You may find traction with users in many markets, but ultimately, expanding internationally has to generate business value to be worth pursuing.

There are four dimensions you can leverage to estimate if the new geography you are looking to enter could become profitable for you:

  1. Willingness to pay
  2. Size of demand
  3. Maturity of customer base
  4. Ease of doing business

For each geography, product managers can conduct market research to plot each dimension on a “less” to “more” feasible scale. This scale helps prioritize markets and can initiate a real conversation about risks and opportunities.

1. Willingness to pay

The first dimension to consider if a market is worth pursuing is a customer’s willingness to pay. Potential users need to be able and willing to spend enough money on what you have to offer.

Willingness to pay is highly correlated with the size of a geography’s economy. In some instances, you might be able to group countries together to expand their economic value.

For example, a lifestyle business might be able to consider Spanish-speaking South American countries as one market. But other times, regions need to be evaluated on a country-by-country basis. For example, there are many language, cultural, and regulatory differences across each country in Asia, which usually means each country in Asia should be evaluated independently.

There are three different ways to consider willingness to pay.

  1. The first is a willingness to pay based on the current price of your product; this is the simplest and most limited way.
  2. The second is a willingness to pay based on a localized price point. For this, it is important to identify what price makes sense at the unit economics level.
  3. The third way is by the expected willingness to pay over time. This is an investment in the future willingness to pay for a specific geography. If a company expects the willingness to pay for their product will grow meaningfully over time, investing now could provide a leg up over future competitors.

2. Size of demand

The second dimension to consider is the size of demand. Often, the size of demand is a function of the country or region’s population. The type of business will impact what geographic level you can consider for the size of demand and how much demand you need for the economics to make sense.

For example, in Europe, some products might be able to consider the entire European Union as a geography and look at the population or number of companies to approximate demand. However, highly regulated products might have to break down the demand for each country within Europe, potentially changing the calculations on whether or not there is enough demand.

How much demand a company is looking for is often based on the margin of the product. Low-margin products need higher demand, and high-margin products need lower demand. Considering demand together with a willingness to pay can help establish a hypothesis on if there is a profitable market for the product.

3. Maturity of the customer base

The third dimension to consider if a geography is worth pursuing is the maturity of the customer base in your industry. Digital products, for example, need to consider different levels of technology penetration in different countries. An e-signature company like PandaDoc is not going to be an obvious solution for companies in countries where operations are dominated by physical pen and paper.

However, do not mistake a no-technology arena for being the hardest entry point. It’s the old technology industries that you need to be wary of. It can be more difficult to disrupt an already existing technology or process than it would be to introduce a new technology where there wasn’t one before.

Consider innovations in mobile payments, for instance. While the United States might seem to have a mature customer base, Venmo and Zelle have a fraction of the services that M-PESA offers across seven unique markets in Africa.

4. Ease of doing business

The final dimension to consider is the ease of doing business. This dimension focuses on the fundamental aspects of running a business in a new geography.

If it is hard to do these things, it is a signal that investment in this market will need to be high in order to succeed. Usually, there are a set of required non-negotiables.

Consider the answers to these three questions:

  1. How flexible is the legislation? Conforming to local regulations can be more expensive and longer than other types of localization. If it is required for your business, it is important to consider it as table stakes. For example, at PandaDoc, they discovered some companies will only work with them if data residency for European customers was physically in Europe. They also had to develop cookie policies, terms of use, and data processing agreements.
  2. How localized is the market? Some geographies have more tolerance for foreign companies than others. Markets with low tolerance to foreign countries require unique solutions, such as acquisitions or joint ventures, or very high levels of localization investment.With PandaDoc, they figured out that certain e-signature certificate providers had different reputations, and picking the right one was a non-negotiable for major potential customers.
  3. How easy is it to set up a business? Different countries have different levels of complexity and regulation around setting up a bank account, reporting on taxes, incorporating as a business, and hiring policies. In the first stages of international expansion, it can be better for the company to pick a country that has a high likelihood of success in order to build positive momentum. In most instances, you want to move forward where the geography is worth pursuing on most, if not all, dimensions and you already have demonstrated traction.
“As much as possible, set yourself up for success on the first expansion. Invest the time to learn how to expand. Then, after you have a few under your belt, you’ll have a much better understanding of what new challenges you will run into and what resourcing and capacity needs it takes for each new country.”

Kristina Gibson

Once you determine a geography is worth pursuing for international expansion and confirm that you have traction, you can then move on to discussing if the company is willing to invest in the base level of localization required to be successful.

International Expansion Element 3: Localization Requirements

The question around localization is not whether you should expand, but rather, how much do you expand internationally? The best localization decisions are made with a deep understanding of your product and a nuanced understanding of the new international market you are expanding into.

“You’re always going to do better if the product is designed locally with local people in mind.”

— Kristina Gibson

Lack of localization can lead to failed or challenging international expansion stories. Hailo, for example, a taxi-app from London, entered New York after seeing market signals from Uber and Lyft, but failed to be seen as local and empowering to its target customers: cab drivers. It exited North America completely as a result.

To help mitigate a failed international expansion, product managers need to consider non-product elements to localization and unique product details that might get missed on the first pass.

Non-product elements of localization include all operational touch points of delivering a product. For example, an e-commerce business would need shipping, logistics, and potentially localized payment options. A ride-share company would need the ability to do driver's license checks, local legal counsel, and in-country operational support. Many companies complying with GDPR in Europe might need to build data centers within the European Union.

Go-to-market functions are also critical to consider: can you use the same marketing channels? What materials and branding will or will not resonate? Tatiana suggests prioritizing a local salesperson whenever possible.

“Relying on self-service makes it hard to understand what’s not working in a specific market. The person who is selling is also providing product feedback. If you’re trying to find a new market, you need to talk to customers. And if you don't have a sales function, that is harder to do.”

— Tatiana Aulachynskaya

Product managers can and should work with different business stakeholders to ensure they have a robust understanding of localization needs.

From a product-only perspective, there are still numerous considerations. To illustrate the complexity, we’ll look at a common localization area: translation. This list is just a subset of the questions that Kristina has helped companies think through when deciding to expand internationally.

  • Can you translate and have your product work in right-to-left languages?
  • Can you translate into different types of alphabets?
  • How will you handle date formats? (Month/Day/Year compared to Day/Month/Year)
  • How will you handle numbers? (10,000 in the United States is 10.000 in other countries)
  • How will you handle different address formats?
  • Will you translate greetings directly or adapt to different levels of expected formality?
  • What “you” will your product use in languages that have a formal and informal version of “you”?
  • If the colors you use to signify something, do they translate directly or do you need to change them? (For example, in stock markets in China, red means up/increase, and green means down/decrease)

International expansion should not be underestimated; it is critical as a product manager to be thorough in your assessment of how much localization is required. Underestimation can really hinder your chances of success.

“It’s really important to understand how much you will have to change in order to go international. You’re lucky if you don’t need a lot of things to change inside a product.”

— Tatiana Aulachynskaya

With the baseline of localization required, you can have a real conversation market by market on the likelihood of adoption, the potential upside, and the initial known investment.

Successful International Expansion Decisions Are Strategic & Nuanced

International expansion is very exciting but very complex. The nuances of moving into new geographies can easily be overshadowed by an eagerness for growth. But before rushing into a new geography, it is important to evaluate all aspects of the decision:

  • Traction: Is there a market ready for my product?
  • Geographic interest: Is there a business case to be made for this country or region?
  • Localization: Can we afford the investment right now to increase our chances of success?

An open and honest discussion informed by these three elements can help your company determine if it’s the right time to move forward. Or, just as importantly, it can help your company realize what might have seemed like an exciting opportunity is a cost they just can’t afford right now.

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Kristina GibsonTatiana Aulachynskaya