There are numerous benefits of localization. But you still have to determine the impact of localization to your business to get the project approval from the various stakeholders.
In this article, we’ll cover how to estimate and measure the Return on Investment (ROI) of a localization project.
The challenges of measuring localization ROI
Return on investment, or ROI, is a performance measure used to evaluate the efficiency of an investment.
ROI = (Current added value of localization – Cost of localization) / Cost of localization
In the case of localization, you’re more likely to be able to define and measure short-term aspects, like direct (or incremental) revenue from the sales of localized services and products.
For example, imagine the company ABC was selling to the French market using only the English language. After launching in French, the incremental revenue can be linked to the localization efforts.
You’d also need to invest in advertising and marketing to support your internationalization plans and build an advantage over competitors who are not targeting the local audiences.
The ROI of localization projects varies significantly depending on the type of your company, as well as the project – whether it’s software, mobile app, game, or any other kind of content.
There are certain aspects you should focus on when calculating the ROI of localization.
1. Creating Key Performance Indicators (KPIs) to analyze data
You want to measure the results of a localization project. In order to do so, create a set of measurable and comparable success metrics – Key Performance Indicators (KPIs).
A Key Performance Indicator (KPI) is a metric that signals how well a project or company are achieving their business objectives.
Why would you need KPIs?
KPIs will help to measure the progress, calculate ROI, make adjustments in future projects and identify new opportunities of localization. You should involve the various parties (project management, product marketing, and language service providers – LSP ) in the definition of KPIs.
Here are several KPIs regarding localization that you can measure:
- Incremental sales in the locations covered by the new languages.
- SEO keyword ranking.
- Market share. Is it increasing as a result of the localization?
- Cost of translations.
- Page views. Compare page views of the website before and after localization. As a result of good localization, you’ll start seeing an increase in the number of visitors from the target market. Depending on the form of the content you localized, it can also be video views, article reads, etc.
- Conversion rates. See how many people who visited your site purchased the product or service prior to localization and after it.
- Social media engagement. Measure engagement and keep track of content shares, as well as mentions of your brand on social media in the targeted market.
- Customer support cases. When you localize your product for a specific location and publish knowledge base articles in that language, you’re very likely to notice a decrease in the number of support cases from those languages.
Figure out which metrics are more relevant for your business and start by tracking those.
2. Properly understanding the costs of localization
As noted before, the ROI of localization significantly depends on the revenue and the localization costs of the project.
If you’re working with a translation service providers, localization agency or freelance translators, you’d usually be billed by words translated. But keep in mind that:
- Localization costs don’t just include translation work. They also include project management, marketing, customer support and engineering costs, which may be difficult to estimate.
- Localization companies charge for their services differently. Gather various proposals and clarify any questions you may have.
The cost of localization also differs whether you are using a machine translation or a professional translator who has expertise in the specific area (for example, medicine or law). Depending on that, translation costs per word could range from $0.05 to 0.80.
Costs may vary depending on the supply vs. demand aspect of the language. For example, the localization cost for the Icelandic market would be higher than the Spanish.
3. Tracking the revenue of localized projects
Before the localization project starts, use estimations to predict expected revenue, basing them on:
- Sales forecast and growth predictions after localization
- Marketing activities
After the localization is implemented, start tracking revenue and market data, and compare with the projections.
As an example, marketing and sales software HubSpot localized a single form of content which cost them around $1500. That investment led to about $144,000 in annual recurring revenue.
Lokalise customers have repeatedly achieved ROI from 140% to 3000%. A successful example is Bending Spoons. With the help of Lokalise, they’ve translated their 20+ mobile apps into 11 languages. The result – nearly 200+ million downloads.
Your company can be the next one to achieve remarkable user growth.
Investing in localization helps to reach new customers, gain global market share and as a consequence increase companies’ valuation.
Measuring the Return on Investment (ROI) is an essential step in your localization efforts.
If you have any questions, reach out to us today!