Why You Have to Target Non-US Markets For Higher Profits

Currently, the United States is the world’s largest national economy. Its GDP for 2016 is $18,56 trillion, hosts the majority of the biggest companies in the universe (that we know of), and is notoriously known as the “land of unlimited possibilities.”

GDP for the US over the years – source

It’s only natural to target the US market when selling services, or products, and aim for a higher percentage of visitors, users, and customers living in the States. It’s the goal of many entrepreneurs and a target for their marketing teams.

A study quoted by Reference.com for 2014 states that an average person spends $3,735 per month in the US. That equates to about $45K every year and shows the purchase habits of US citizens and their ability to spend money on different activities and products.

However, the US market also comes at a price. It’s oversaturated, with tons of offerings on the market. Rents are high, and so are the salaries for local staff. Finding talent is close to impossible for professional jobs given the number of BigCorp entities offering incredible company packages and added benefits. Positioning yourself high and getting a piece of the pie may be far more complicated and expensive that you may expect at first.

For many businesses, selling outside of the US may yield higher margins and lower costs – even for US-based businesses. Here are some of the main reasons why targeting other markets could be preferable for your business.

1. Competition in the US is Enormous

Whatever you’re selling, it’s unlikely that it’s unique and revolutionary when pitching the US market. Most ideas have already been implemented. You are either competing in a developed category with intense competition or trying to invent a new category, which requires endless education and PR stunts to pull it off correctly.

Targeting a local market will position you in the sweet spot of selling an already known type of product that hasn’t been developed in that area. You can take advantage of local events and meet people who don’t get a chance to interact with your competitors. Or advertise as the one and only product in the space on a local level.

2. Possible Revenue Increase

Being the only service provider in the area can allow you to sell at a higher cost than your initial estimate while reducing your costs by tackling international markets.

It’s a combined benefit of lower competition, lower marketing costs, potential outsourcing in a market with lower salaries, and selling to several different countries with a combined higher GDP than the US.

Even if the spending power of US consumers is high, that doesn’t mean that the sale is easier. Buyers are educated and look for the best opportunities on the market. Some enterprises even launch free products that you can never compete with or can generate losses when entering a competitive market in order to bankrupt a competitor. That’s also true for start-ups that have received funding and are expected to run at a negative profit for a while until they position their brand or generate enough user base.

3. Easier to Prove Value and Expertise

Building brand reputation would be easier since you’re no longer a small fish in a big pond. Your previous knowledge is likely more valuable in certain markets worldwide, and you can leverage it for media exposure, building trust, and brand awareness.

Additionally, your prior expertise can be instrumental to partner businesses who can cross-promote your products or feature you in webinars, local training activities, university events and more.

4. Cost per Click For US is Times Higher

Stats by https://adespresso.com/

Paying for advertising in the US is 5-10 times higher for the same keyword as compared to other countries. Added to the fact that US buyers are “spoiled” regarding opportunities and available opportunities, your actual customer acquisition cost may be 20 times higher than an alternative market.

That’s valid for Google Adwords, Facebook Ads, LinkedIn and other networks that have been widely used across the world.

5. Pitching in English vs. Multilingual

If you live in the US or another country with English as a primary language, selling in the US means that you’re competing with everyone out there who has learned English. English is an official language in various countries and a mandatory second language in the majority of the schools across the world.

When targeting a foreign market, you can partner up with a local business who can lead the negotiations and translation for you, or directly hire a local who would deal with business development. Later on, you can open a local office or hire several people, but for starters even sending a translated presentation or a script for a radio commercial would do miracles – as long as your product is brought in that language and can be used by the locals.

Despite the broad understanding of English worldwide, many people can’t communicate freely, or simply prefer using localized software and services. Offering a localized solution when your competitors focus only on the US audience could be amazing for your business growth.

6. Certain Niche Markets are Strong Elsewhere

Many industries are well developed outside of the US.

Take the oil industry as an example. The United States ranks as number 10 in the list of countries by proven oil reserves. Venezuela, Saudi Aramco, Canada, Iran, Iraq head the top 5. Saudi Aramco – based in Saudi Arabia, is the world’s most valuable company with an estimated value of up to $10,000,000,000,000 (correct, that’s ten trillion dollars).

Working with a leading vendor based outside of the US in a niche market, in their own language, understanding their culture can be more rewarding for you in the long run.

7. Local Opportunities in Certain Areas

There are plenty of possibilities for business problems that have been solved in the US long ago or are simply not a problem there. Some are related to the economic development, lack of good Internet or telephony coverage, climate specifics, architectural decisions.

An overview by The Energy Collective summarized the costs of electricity by country:

The higher the costs, the more likely it is for a country to invest in renewable energy or alternative sources that would bring the costs down.

For example, solar energy in Africa could be used as the primary electricity generator since some parts of Africa report over 300 days of sunlight. Building sun-charging power banks or cheap smartphones recharging with solar energy could be an opportunity that simply isn’t relevant in the US.

Speaking of smartphones, Africa is the second largest market for selling smartphones. As a comparison, 77% of Americans now own a smartphone.

Those unique local opportunities can be leveraged if you are the first vendor in that niche and bring along the existing expertise of innovators who have experimented in that space.

8. Local Culture Fit is Indispensable

Looking for the best “culture fit” when hiring in the US is extremely common since any deviations can impact the business success or the calibration of an existing team.

It’s even more widespread when working with different markets. You’ve probably seen Japanese ads on YouTube or a TV show aired in France, India, or Russia. If it appears to be funny or odd for you, it may be perceived as normal in the local region.

Many US companies who try to expand globally don’t take local culture into account. They try to apply the same process internationally, but results are usually not as promising. You can study a domestic market and partner up with someone who can guide you through the market specifics. At the end of the day, you’ll target a localized experience that is natural to your audience.

9. Gradual Market Expansion

Aiming for the US market alone could lead to lost opportunities when working with different markets. Lack of translations for your product or user guides, no “right-to-left” font alignment options, no support for additional currencies, sticking to local holidays may reduce the feature set of your product when going internationally.

When you start with a localized market, expansion is part of the long-term plan. Therefore, you should be prepared for local-specific changes which would allow you to grow internationally and scale quickly.

10. Global Networking

Providing solutions in several countries can grow your network, and introduce you to entrepreneurs or professionals with diverse expertise. This could be invaluable at some point for building partnerships, hiring locally, receiving media exposure, organizing events, or connecting with other peers.

According to a research study, over 40% of the Fortune 500 companies were founded by immigrants or their children. Geniuses and smart business owners can be found everywhere, and your reputation in a local market could increase your chances of meeting these who haven’t received the right appraisal yet.

11. International Growth at Lower Costs

Growing your business when working with international markets would detach you from the corporate culture of hiring on-site people working in the same environment. When competing for talent working inside of great metropolitan cities, your business is compared to tech and finance giants, cool startups, or established corporations that could hire everyone in the area.

Here is how Economics Online defines the supply curve of labour in competitive markets:

In a perfectly competitive labour market, where the wage rate is determined in the industry, rather than by the individual firm, each firm is a wage taker. This means that the actual equilibrium wage will be set in the market, and the supply of labour to the individual firm is perfectly elastic at the market rate.

Equilibrium wage in the labour market, and supply for the individual firm.

Working internationally allows you to focus on a distributed culture, and find the best talent across the globe. Additionally, hiring in different countries would enrich your company culture, the number of languages your team speaks, and the abilities to target new markets.

Office costs and other operative expenses in the US are also a tradeoff if you try to hire local people and find a large office downtown in a top city. Its benefits may not be justified if your product costs are too high and margins are close to zero.

12. Economic Risk Dispersion

Globalization, political uncertainty, and economic fluctuations have endangered businesses over the years.

In 2015, the European Union announced VAT MOSS and required companies registered in EU countries to collect VAT for digital products based on the place of purchase instead of the place of supply (the origins of the site). Collecting VAT for 28 separate EU members with a total of 75 VAT rates let to closing hundreds of small eCommerce businesses in the United Kingdom alone within a week of the official announcement.

Similar drastic changes have affected other businesses in numerous countries, and relying on a single market is simply a liability.

International growth on various markets would reduce the risks of jeopardizing the future of your business by targeting a particular market. The economic bubble in the start-up industry, recent political changes and distributed workforce around the world may affect some of your target customers, so profile your audience wisely.

13. Head Start When Targeting the US

If you start internationally and develop several locations successfully, focusing on the US next would be easier.

Your product won’t be a brand new solution with no user base. Your portfolio will include successful businesses, case studies, reviews, and testimonials from people who are already acquainted with your business. Your initial launch would be more tempting to investors, partners, new customers.

As compared to a new product with no adoption, you would already be a stable operation with recurring revenue and real customer feedback.

14. Take Advantage of Local Funding Opportunities

What was the initial investment for known brands? By http://fundersandfounders.com/

While Silicon Valley provides opportunities for investments, every start-up tries to move there and attract VCs and angel investors. At the same time, there are other possibilities in less developed markets with emerging entrepreneurial communities.

Africa, Eastern Europe, South America and slower economies around the world want to develop their own entrepreneurial ecosystem, start new incubators and reinvest in local products. This is a terrific chance for receiving funding and building something for a domestic market that can be exported worldwide later.

15. More Wow, Less Pressure

Targeting markets with fewer opportunities and low competition is less stressful, and more rewarding as a result.

Think about starting an engineering company in a small town as compared to San Francisco or New York. The local town probably has only 1 or 2 competitors who run slowly, and don’t implement the best industry practices. Local talent has nowhere else to work at, and appreciates the opportunity to work in the same town without relocating or commuting for 3-4 hours every single day.

Local politicians and foundations are willing to feature companies that provide incredible opportunities, give away rewards, and help out with PR. Given the lower competition, you won’t need to work 24/7 in order to innovate and provide unique opportunities in order to keep your talent happy. Job-hopping in metropolitan cities is quite common (with rates averaging 1.5 years of employment in each company), but loyalty and commitment in less entrepreneurial markets allow you to focus on work-life balance and great company culture (instead of squeezing 80-hour work weeks from your staff).

And Yet, Don’t Forget the US

Having said that, the US market is still a great one that provides incredible opportunities for growth, creativity, innovation and business success. When building your plan of activities, don’t discard any country or market as a potential one, and define your success metrics based on a detailed statistical research.

You can focus on the US directly and try to compete with the big players with a unique proposition, or start small with less pressure in other profitable places that would boost your presence and customer base. An alternative option is positioning you for US customers while building localized versions for a couple of external markets.

Validate your concept by contacting prospects in all areas, and run small ads focused on each region. Measure customer engagement and costs per click (and acquisition of a client), and iterate from there.

 

 

 

5 thoughts on “Why You Have to Target Non-US Markets For Higher Profits

  1. Hi Mario,

    I totally agreed to your point.I am targeting non-us markets i.e Australia, Saudi Arabia and the Europe, the results are awesome. The competition is less and there are only handful of companies that offer quality web development services in those countries.
    Although companies from India, Pakistan and Bangladesh can give you competition but still you can bet on non US markets.

    -Tauseef

    1. Hi Tauseef,

      Those are certainly some great markets to target. We’ve also worked with clients in Australia, Europe, Saudi Arabia, Qatar, UAE, even parts of South Africa and South America, and the were able to find some incredible opportunities as we go.

  2. Awesome comprehensive article Mario. I second that, we definitely need to target non US markets more often. I got by best paying client from Denmark. Also, in terms of money I had some good clients from UK, Taiwan, Singapore and Malaysia.

Your thoughts?