Focusing or spreading out? Each strategy holds its own advantages and the ability to characterize the target audience for the product as well as the market is extremely important in the planning stage. Before booking a flight, you have to make important decisions in the boardroom.
One of the challenging topics of international marketing is choosing the initial penetration territory for selling the products. This issue becomes especially challenging for B2B software companies, whose product usually comes in a digital form and sometimes even as a cloud-based service in a SaaS (Software as a Service) model, which can be used anywhere in the world without the need in shipment and logistics.
We introduced an organized methodology for choosing target territories in the Guide for Selecting a Marketing Territory in B2B Software Companies.
But is it in fact smart to focus on a single country or territory, or is it better to spread the penetration efforts on several different territories?
The main advantage in focusing on a single territory is the possibility of concentrating all meaningful efforts in one place, standing out in the market and making the overall marketing process more efficient. That way a specified budget can be used to concentrate and study in depth only one market, as well as focusing the flights on one destination and operating in a wide variety of local marketing channels that synergize and feed off of each other.
In this manner, choosing a single territory can effectively and thoroughly assist in:
- Studying local competitors
- Participating in local events
- Setting up meetings with the target country’s clients
- Advertising in a professional local channel
All of the activities mentioned above will be more effective once put together in one country rather than conducting each over several countries at the same time – thus wearing off the effect.
Nevertheless, if we look at it from another perspective, addressing a large number of territories will supposedly help us benefit from a larger market as well as more potential, which could in turn result in higher absolute revenues compared to the single territory approach. In addition, choosing a number of territories spreads out the risk of choosing an unfit market (a conclusion which might take time to figure out) and helps to avoid spending valuable time and money in the process.
What’s the recommendation?
The issue of focusing on one territory as opposed to spreading out over several territories in international marketing is a bit more complicated.
Our experience indicates that in international marketing in general and in B2B in particular there is a bigger advantage and higher success rates when opting for the focused geography approach. Our experience tells us that as a general rule, a focus strategy works better: focus on a certain product, a certain type of customer and in terms of territory – especially for companies with a smaller marketing budget. The premise behind this take is that international markets are getting more and more competitive and penetration to those markets is very hard, meaning efforts must be concentrated together in order for the sales and marketing actions to be effective.
It is also important to remember that in B2B, references are the key to success. You need to have as quickly as possible at least one client who uses your product, is satisfied with it and willing to recommend you to other potential clients. Your potential clients will rather consider a client’s recommendation if he is from their own country. Accordingly, if you are in the midst of a sales operation in England and you have a reference client in Portugal, it will usually make a lesser impact than if you already had that same client in England!
Confused? This is how it is in marketing in general and in international marketing in particular – not everything is black and white, and the decisions can potentially range from a complete focus in a single country to deciding on choosing a larger number of territories.
How can you make up your mind?
There are several parameters, which will help you make an intelligent decision for choosing which cases are best for the single geographic focus and which are better suited for an approach leaning towards a geographical spread out:
- The geographical distribution of global demand – if the demand and usage of the product from your category is relevant and concentrated in specific territories, it is clear that we would rather focus our efforts on a small number of markets, as each of those markets will be meaningful enough to justify a concentrated investment. For instance, if you are developing a software for learning ice hockey, there are countries (northern and/or mostly English speaking) where it is a popular sport and it might not be wise to spread out over too many territories so it will be likely that the relatively focused approach would work better.
- Number of potential clients per country – if every country or territory has a small number of potential clients (niche), it is likely we will operate in various different territories while focusing on the industry specific clients. For example, if your target audience is national historical archives, usually country only has one, so focusing on one country might be too narrow and risky, in a sense of “putting all of your eggs in one basket”. Since the field is a niche it is reasonable to assume that there are worldwide forums and channels dedicated to the field in which we can operate and focus on, while releasing ourselves from the constraints of the singular territory.
- Resources and a marketing budget – as long as they are low, we would rather focus the small amount we have on one territory, in order to concentrate meaningful and effective efforts instead of scattering them over a large number of countries.
- Competition level – the more competitors you have in your field, the smarter it will be to focus on a small amount of territories since otherwise you will have a hard time standing out in each given market.
- The need to adapt the product for each market – So long as there is a requirement for more adjustments of the product for every given market, there will be a higher need to concentrate specific efforts on a smaller territory scale. Adjusting the products can be translating the user interface, translating the product documentation, adjusting to local regulations and sometimes even packaging. It is difficult performing those activities in various different countries. This matter also relates to the chosen industry and business culture in the target country. There are industries or countries where you can easily operate in a generic language such as English whereas in some cases the sensitivity and the demand for the use of a local language is much wider. For example, one can only assume that marketing a cyber security software that has an English interface will be easily accepted in a country like the Netherlands, whereas marketing a software for small accountants in Germany will require the interface to be in the German language.
- Marketing channels – If the relevant existing marketing channels for your field have a local character and distribution, that means operating in those channels would require focusing on a limited amount of territories. For instance, if the field or industry you chose has a local magazine, advertising in it will require focusing the activities. However, if you are in more of a niche business and your industry’s exhibition is global and there are no local events, acting in this channel (exhibitions) means addressing target customers over a large number of countries.
- Digital sales and marketing as opposed to a local sales infrastructure – generally speaking, the more the marketing in your field is done over digital channels and even allows for online purchasing, the possibility of expanding over a large number of territories is more likely to exist. That way for example, if you invest in SEO for your English website you are likely to get large volumes of traffic from many English-speaking countries and even some other countries. If you know how to convert these visitors into clients using automation, there is no reason for this mechanism to not be able convert clients from many countries, especially since in the B2B software products field, a large portion of the customer base feels confident with purchasing in the English language. That being said, if your product requires creating a local sales infrastructure (a local office or distributers/resellers) there is a lot more work required in order to establish it per territory, even in terms of travelling to those market destinations, and of course making it more difficult to perform the process over many different territories.
- The duration and complexity of the sales cycle – this is in fact a mirror image of the previous point. If your sales are enterprise sales, characterized with longer and more complex sales cycles, many flights and meetings with clients in the target country and interaction with a number of decision makers – this obviously sets you up for a more focused and local activity. For instance, selling a banking software for switch payments involving a large volume of money, will require a larger scale of local activity versus online selling of an antivirus software, which is characterized by relatively shorter sales cycles and low prices.
- Logistics investment – the more your product combines hardware, the more it requires dealing with logistics, shipping, customs, spare parts etc. and in accordance much more investing and involvement in the territory level – which might make managing those processes over a large number of countries more difficult.
- Synergy between territories – the more the territories resemble and synergize with each other, the more we can adopt a larger spreading out approach. For instance, a marketing activity in Germany allows for activity in Austria with much more simplicity – since the language is the same and there is a big market influence between the two. It will still remain a focused approach, there’s no question about that, but despite having language and geographic similarities, it will be liberated from the one country restricting definition. However, the decision to operate in Hungary along with the Czech Republic is not a good example of the implementation of this approach.