How to prioritize markets for your expansion in Europe?
This article is focused mainly on the tech companies selling online (not physical) products, but the majority of principles mentioned here are quiet universal.
What I suggest is developing a simple scoring model with a following steps:
- Define your markets
Do you want to prioritize countries, group of countries (e.g. German-speaking countries, Nordics, etc.), special sub-regions (e.g. mountain ranges), cities (e.g. all cities with a population of over 3 million) or something else? Let’s say you choose to prioritize separate countries which often makes the most sense.
2. Define your scoring factors
There are some general and special scoring factors you can use. The general scoring factors are for example a market size (DDP), population size, purchasing power (GDP per capita), ease of doing business index, etc. The special scoring factors depend more on your product. If you are selling for example a mediation app then cultural acceptance of meditation, costs of localization, how much meditation is common in the respective market, compliance costs, availability of personal connections, etc. will play a role. I suggest using maximum 5 criteria in order your scoring model is workable and practical. Let’s say you choose population size, GDP per capita, and costs of localization as your 3 main scoring factors.
Regarding population size and GDP per capita, it is easy to get this data for each of European countries, while costs of localization would require making some assumptions. It can be even the subjective classification to high, middle, and low level of localization costs. Apparently, for a US-based company it will be low in the UK. For popular languages as French, German, Spanish and Italian it can be middle. And for specific languages like Albanian it can be high. There can be certainly many nuances. Maybe Nordic countries can accept an app in English, since the percentage of citizens that understands this language well is pretty high. It is also possible to find such stats. But, let us keep it simple in our example.
3. Prepare scoring factors for your model
So you have data for each country in the following form:
- Germany: 84 mln population, 60K GDP per capita, and middle level of localization costs
- UK: 68 mln population, 47K GDP per capita, and low level of localization costs
Now provide points for each factor. For example, each 1 mln of population earns 1 point, and each 1000 USD of GDP per capita earns 1 point. High level of localization means the deduction of 20 points, middle level of localization implies no change in the point amount, while low level of localization gives 40 points.
So how do you know how many points to provide to each scoring factor? It is all about your intuition and business experience. You might also re-visit this step after getting the first results.
4. Run the calculation in the table
So you have now for each countries a final score, e.g.:
- Germany: 84 points + 60 points + 0 points = 144 points
- UK: 68 points + 47 points + 40 points = 155 points
In the table it is normally easy to sort all countries by this score, so you get a prio list you were looking for.
5. Play with a scoring model
Now, it is an important to fine-tune your scoring model, especially if some of the results are not plausible. Maybe you should decrease the importance of costs of localization or increase the importance of GDP per capita? Maybe you will see that it is better to change the definition of a market from country to group of countries, etc.
By playing with a model, you will certainly understand better how to prioritize your markets in Europe.
And remember: models are just simplification of reality with a goal to be able to take decision. They should not undermine the value of your intuition and critical thinking.
PS. For business development support in Europe for tech companies please check the website of my business development agency www.scaleuphero.com.