ROI: In Search of the Holy Grail of Localization Metrics


Nimdzi Co-Founder Tucker Johnson interviewed Miguel Sepulveda, Globalization Manager at King, author of the blog @Yolocalizo and researcher at Nimdzi Insights, on the topic of localization ROI. As a closing question for the episode, Tucker asked:

Is Localization ROI the Holy Grail of our industry? Have we chosen wisely?

The agreement is that calculating localization ROI is not simple or easy, but that doesn’t mean it’s not important. We need to understand our impact as an industry, but we shouldn’t oversimplify it with a formula.

What is ROI?

According to Investopedia:

Return on investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost.

To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.

The formula goes like this:

​ROI = Current Value of Investment−Cost of Investment / Cost of Investment

Localization ROI is a topic that has been widely discussed over the years, but there isn’t a one-size-fits-all approach or a standard formula that can be used in every situation. We can’t trick ourselves into thinking that we can measure the benefit of localization with a formula, it creates false expectations and it doesn’t add any value to our industry. There are many factors that contribute to the success of a product in a given market and it can’t only be attributed to localization itself.

Localization alone doesn’t mean growth. But a company that doesn’t invest in localization will not see international growth either. — Miguel Sepulveda, Globalization Manager at King.

Localization should be considered a revenue enabler but not a revenue driver. If you have a product localized into a language but users don’t know that the product exists, how are they going to buy it? You need a marketing team making sure that the product is visible in that market too, for instance.

How to build a business case to prove the value of localization?

If we don’t have a simple formula to show the value of localization, then, how can we convince internal stakeholders that they should keep investing in localization? According to Miguel, one of the best ways of showing the impact of localization on end users is A/B testing. 

According to Wikipedia, A/B testing is a user experience research methodology that consists of a randomized experiment with two variants, A and B. A/B testing is a way to compare two versions of a single variable, typically by testing a subject's response to variant A against variant B, and determining which of the two variants is more effective.

In Miguel’s example, they tested a Danish version of a game against a non-localized English version of a game to prove that localizing into Danish was important, even if Danes have a pretty high level of English. Results showed that the engagement metrics of gamers who played the localized build was much better. At the same time, customer support received messages from players playing the non-localized version asking what happened to the game, why Danish wasn’t there anymore, as they thought this was an error in the game. Miguel could put together a business case that combined different metrics that spoke better to other stakeholders:

  • Localization cost metrics
  • Engagement metrics
  • Customer experience metrics

In my career, every time I’ve done A/B testing the localized version ALWAYS, ALWAYS, ALWAYS outperforms the English version. —Miguel Sepulveda, Globalization Manager at King 

What metrics should we measure to prove the impact of localization?

According to Miguel, we should measure localization metrics that influence decisions such as whether we should keep localizing games into Danish. Traditional localization metrics such as number of localized words per language, number of grammar mistakes per language, on-time delivery, and so on, don't justify the investment in localization. These metrics aren’t meaningful for the product’s success or show impact. These metrics are only relevant for the localization team to measure efficiency but not for other stakeholders.

Strategic metrics that influence decisions; that’s how we can show the impact of localization. —Miguel Sepulveda, Globalization Manager at King

So we need to find those metrics that are relevant to other internal stakeholders and help build a business case in favor of localization. Those strategic metrics will vary depending on the company and the type of product, among other factors. That’s why it’s not possible, and also not advisable, to come up with a formula for measuring localization ROI.

Strategic localization metrics are, most of the time, related to customer satisfaction and customer engagement. If a company wants to be really customer-centric, they can’t skip one of the most human things that a customer has, their native language.

Main takeaways

What did we learn from Nimdzi Live’s episode on Localization ROI?

  1. Calculating costs of localization to come up with a formula to calculate ROI is meaningless.
  2. Translation enables revenue but does not cause it alone, only combined with other factors (marketing, a good product, etc.).
  3. We need to define metrics that influence a company's strategic decisions.

Or listen to the podcast: Measuring ROI - Return on Localization Investment - Nimdzi LIVE! feat. Miguel Sepulveda

I want to set up my localization metrics program to explain localization impact to the C-suite. Where do I start?
18 November 2021

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