Finally, proof of the connection between language and revenue

For the past several years, I have been talking about the connection between international trade and translation. I have also characterized language as an enabler and a multiplier for business. An enabler because it allows more consumers to learn about products, and a multiplier because companies that start localizing to sell abroad tend to grow faster and never go back to selling in one language only. I have been saying this based on empirical information, logic, and common sense; as I never had the time to make a more detailed study of data.

However, I was recently referred by my former colleague Anne-Marie Colliander Lind to the work of Professor Ingela Bel Habib, a Swedish PhD and Independent Researcher who published a fascinating paper called "The effects of linguistic skills on the export performance of French, German and Swedish SMEs."

Her study demonstrates that multilingualism and economic competitiveness are closely linked. Swedish, French and German SMEs all use multilingualism as a strategy for exports to varying degrees. Only 27% of Swedish SMEs have a multilingual export strategy, compared to 68% of Danish SMEs, 63% of German SMEs and 40% of French SMEs. The study shows that there is a correlation between language and export performance.

Another conclusion from the study is that, contrary to popular belief, English does not suffice in economic relations as many tenders are lost through lack of skills in local languages. In fact, the percentage of companies that declare they have missed out on export contracts due to a language barrier were much higher in Sweden (20%) than in Denmark (4%), Germany (8%) and France (13%).

This study is relevant on multiple levels. First, because Sweden, Denmark, Germany and France have a similar industrial structure and compete for the same international markets. Second and most importantly, because the study is based on economic data, which provides a better platform for the continuous quest by the language industry to establish the Return on Investment (ROI) of translation.

I found this information to be so important and unique to the sales and marketing efforts of LSPs that I invited Professor Bel Habib to speak at ELIA's upcoming Networking Days in Stockholm in May 2011. Don't miss it.

Almost 50% of Sales of S&P Companies Come from Outside the U.S.

For many years, I have tried to find a way to extract information about international sales from the financial reports of public companies in the United States, what Common Sense Advisory calls xenorevenue. In addition to my personal research, I have talked to data service companies to find a way to automatically extract this information from their databases, to no avail.

Today, the Investing Insights blog in Bloomberg BusinessWeek, shares my frustration by stating that "While globalization is apparent in almost all company reports, exact sales and export levels are difficult to obtain. Many companies tend to categorize sales by regions or markets, while others segregate government sales. Additionally, intra-company sales, and hence profits, are sometimes structured to take advantage of trade, tax and regulatory polices. The resulting reported data available for shareholders is therefore significantly less than the desired level for analysis."

However, their analyst was able to look at data from half of the S&P 500 companies, which gives us a good indication of the level of international activity of large American corporations and helps us build a business case for translation expenditures.

While Howard Silverblatt, the author of the posting, focuses on comparing international sales with previous years (they have declined!), I was more interested at the actual volumes of international sales, which are higher than I would have guessed. According to the report, of the reporting 250 companies, 46.6% of all sales were produced and sold outside of the United States, compared to 47.9% in 2008, 45.8% in 2007, and 43.6% in 2006.

But what is no surprise to Localization veterans, is that Information Technology continued to be the dominating sector with over 56% of its declared sales being foreign in nature. The IT sector represents 20.4% of all U.S. foreign sales.

The full report with more detailed data, including some geographic breakdown, is available in PDF format here.

I will analyze this data more thoroughly and write a follow-up post.

Need proof that localization pays off?

I am often asked how a company can justify localizing a product for a certain market. My standard answer is "Just do it!" as I believe that the best way to sell a product in a market is by providing it in the language of the local consumers. However, I understand when companies want to build a business case before they take the risk.

Today, the Brazilian newspaper "O Globo" had a story about how video-games are gaining ground in the country because they are localized into Portuguese (click here for a pretty readable Google Translation of the story). The starting point of the story is the fact that people noticed that video-games were now advertised in Portuguese on network television in prime time. The journalist also states that Xbox 360 offers games in Brazilian Portuguese, while Sony's Playstation only offers games in European Portuguese.

Julio Vieitez, director of LUG, a game distributor in Brazil, states that "When comparing the revenues of a good game in Portuguese and in English, the former is 15 times higher than the latter. Localizing is important because people want to play with their friends." Let me repeat that: The revenue of the localized version is 15 times higher than the English version! How about that for ROI?

In the interviews that I have done over the years in the localization market, there are a few things that I have learned:

• Once a company starts localizing into a foreign language, it seldom goes back.
• Some localization is better than no localization.
• People prefer products in their own language, even if they know English (my Facebook interface is in Portuguese, by the way).
• Support and after-sales in local language are key for product success.

I co-authored a study when I was at Common Sense Advisory called "Can't Read, Won't Buy" that is available for free from the Lionbridge website. Oh! They are my competitors, now :) In any case, it is a good read on the topic.