Let’s hope Kevin Aronin, founder and CEO of PlasmaNet Inc., handed out Prozac before giving a keynote speech at Direct Media Client Conference & Co-op. If he didn’t, his speech whirled a roomful of conference attendees from the depths of economic despair to the heights of opportunistic grandeur.
According to his prepared remarks, Aronin started with a litany of U.S. economic woes familiar to anyone who has read a business section during the last few months. Oil prices are high and going higher. Real household income hasn’t grown since 1967 for the bottom 80% of the population, according to the Bureau of Labor Statistics. Consumer sentiment is at its lowest point since the early 1980s. Home equity no longer serves as the backing for credit it did.
Depressed yet? Don’t be. According to Aronin, relief for marketers lies just over the horizon – literally. “Across the borders and across the oceans live 95% of the world’s population – over 6 billion people with newly minted wealth, credit cards and a cheap way to reach them – the Internet!”
Aronin outlined the advantages international consumers offer, including:
* China currently has 714 million credit/debit and ATM cards in circulation
* Real income in Shanghai increased 75% between 1997 and 2000
* The dollar is at an all-time low against most other currencies – meaning that prices for American goods represent bargains to most of the world
What American firms have, which puts them in good stead within the global community, is superior marketing.
“Soap is just soap, a burger is merely food, coffee is coffee and the primary differentiator is marketing,” according to Aronin. “That McDonald’s can sell burgers in Lyon – the culinary capital of the world, or Starbucks can sell coffee in Rome — where espresso is religion, underscored the undeniable fact that the U.S. has but one export product in the final analysis – marketing know-how!”
In exploring international markets for his company’s FreeLotto.com operations, Aronin tracked a variety of metrics – acquisition costs, conversion to paid subscriptions, retention rates and chargebacks. It wasn’t always smooth sailing: The company fell victim to the “Indian dilemma,” for instance.
“The customer acquisition costs were favorable, the conversion rates were excellent but the chargeback rates were untenable,” according to Aronin. “As we investigated this we found that India has, on average, 32% interest rates on credit cards, $150 late fees and the highest rate of credit card charge-offs by banks in the world. These charge offs come back to the merchant as charge-backs.”
Chargebacks are among the areas marketers need to monitor when going global. “Because of distance between buyer and seller, foreign banks may be more likely to charge a transaction back than to advise their customer to work it out with the merchant. Some countries and some banks within countries are far more problematic than others. Get a signed order and return receipt for large sales. Address verification in the credit card processing stream is not available outside the US, Canada and the UK.”
Anything else? “In our experience avoid most of the African continent. Nigeria and Ghana seem to be teaching fraud in the schools.”
But even legit customers offer their own cornucopia of headaches. Marketers that make offers in the local language should be prepared to offer local-language customer support. As international returns are expensive, marketers should avoid offering items that create the highest returns – and with apparel, including size conversion charts is a must. And as some marketers may have no reputation whatsoever, “100% satisfaction guarantees, brand names, testimonials and a worldwide toll-free customer service line all line help.”
What other tactics does he recommend? Translate messages. From an initial test of five languages, his communications now go out in 18 different tongues. “Localizing to the native language has brought us a 30% lift over English only,” according to Aronin.
Know that many of the freight carriers offer consulting services that allow marketers to navigate trade restrictions, calculate duties and VAT and get the product to the customer in the most cost and time efficient manner.
“Our research indicates that after adding duty, VAT and shipping costs; most products will still be 30-40% less expensive from the US than in local markets,” Aronin claimed. “A good rule of thumb is that if the product lands at the consumer’s home for 70% of the cost in their local market, they will buy.” But bear in mind that these are brand- and fashion-conscious consumers – last year’s merchandise won’t cut it, especially when it is easily identified as such through the same sales channel that brought it to them – the Internet.
Is it all worth it? Aronin noted that 95% of his company’s $12 million annual online advertising budget is spent on foreign markets (a figure in line with world population figures), and the return on investment from international efforts has been higher than that from North American markets.
“At a time when the US is spending $13 million an hour on foreign oil and China has become history’s greatest example of vendor financing this is an opportunity to balance the trade deficit,” Aronin evangelicalizes. “Of greater importance, at a time when the US consumer is forced to reduce consumer purchases it is an opportunity to replace those overspent American customers with a fresh supply of consumers ready willing and able to buy.”
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