Why would anyone buy from your company over the next localization service provider? In this three-part series on LSP differentiation, we will look at how to establish whether your company stands apart from the rest (or not) and what you can do about it once you know.

Such is today’s business environment that we spend most of our time conducting business and very little time considering the strategic direction of the business.  At GALA we’ve become familiar with the client’s refrain of “you all look the same, and you all say the same things.”  Also the informal  vendor ‘Differentiation Survey’ survey conducted by Serge Gladkoff earlier this year clearly showed that many vendors thought they had the ”best translators, quality and service.”

We cannot all be equal. Certainly we are not all perceived as being equal by clients, seeing as the reasons given for the award of business vary from client to client and from bid to bid.  Rarely is the difference only one of price.  So how can we do better at focusing our business where our skills and experience are valued by our current and potential clients while standing out from the legion of other LSPs? My aim in this short series of articles is to help you answer this question for yourself.

The marketer’s folly: a few graphs and a box grid?

Figure 1: Tool or snake oil?

There is a view, in some parts, that marketers and their wares are indistinguishable from the apocryphal snake-oil salesman.  This is a bit harsh, but then some marketing consultants seem to put more effort into promoting their latest tool or their next book rather than the application of valid techniques to live market situations for the benefit of the client’s business.

Indeed, marketing tools are like any other tool – the results depend on both how the tool is used, and how well the insights gained are applied.  The Boston Box, the SWOT analysis, etc.  are just useful tools to focus analysis on an aspect of your business activity that could benefit from some disciplined scrutiny.  Actually doing something with the output is what takes real discipline, and what will inevitably provide real results.

As Sun Tzu wrote, “The enlightened ruler lays his plans well ahead; the good general cultivates his resources.” Or to put this into modern terms, any business leader would do well to understand the terrain, the culture and geography of their business environment before any sudden new incursion.  The most successful will also exploit any and all resources and techniques they can lay their hands on.

I hope that the simple techniques used in these articles (and also discussed previously at the GALA 2010 conference in Prague) will help you analyze your own business terrain and situation; what you do with the result is down to you.

On a personal note, I fully accept that I am neither Richard Branson nor David Ogilvy, but these techniques have proved very useful to both many of my clients and my own business over the years.  One thing is for sure: the results never fail to keep you humble.

Tool number one: the product lifecycle
All products and services tend to follow a predictable lifecycle curve.  The value of the market and the length of cycle will vary from market to market.  As a general rule, significant investment is required when the market is young to bring a product to market and create any sort of traction.  Being first and being early is no guarantee of success.  Until recently, companies like Sun and Compaq were major players in the computer hardware market, but who now remembers DEC, ICL, and Unisys?

Whether it is the motor car, the mobile phone or translation, a market generally starts small and at some point takes off, expanding from a niche market (brick sized mobile phones and city traders) to a mass market where product volumes grow rapidly, unit costs start to fall while  barriers to entry drop. 

Once a market matures and the product or service becomes widely available from a variety of suppliers, buyers start to view the product as a commodity and prices drop rapidly, as do vendor margins.  Competition increases dramatically as supply starts to match demand and the market starts to segment, since not everyone can maintain the pace and investment.  At this point, a few companies start to dominate, using financial muscle and/or by developing international reach, while others focus on a particular market specialty such as medical translation or software localization. 

Figure 2: Not an option!

What is clear is that – with finite resources – not every company can compete at every level across the whole market.  Sooner or later some stark choices have to be made.  This applies whether you are Henry Ford or Joe Smith.

How does knowing that all markets follow the same lifecycle help? It can help you to anticipate the market direction and plan for the inevitable margin reductions and dilution of any product advantages you once had in the early stages of your particular market.  For example, I remember back in the mid to late 90s there was really only one Arabic and one Chinese localization supplier in London that could handle any regular demand.  In both cases the service was poor and expensive.  Needless to say, these suppliers were swamped with demand and therefore were very dismissive of our frequent pleas for service improvement.  The result, as you might guess, was that we were highly motivated to find internal and external alternatives.  Compare that to the Arabic and Chinese supply situation that we experience today.

You don’t have to be Albert Einstein to work out what happened to the revenue and margin of the two suppliers I referred to.  One is defunct and the other struggles on as far as I know, but without the benefit of our business.  The market for Arabic and Chinese is now very different in terms of both supply and demand.  The market has evolved in line with the lifecycle curve.

Figure 3: Translation is a widely available commodity from a myriad of suppliers, and barriers to entry are low.  MT is currently seen as a specialist service, available from limited sources, and the costs of market entry are high.

When assessing your company’s position relative to the maturity of your market, a useful exercise is to look at the products and services you offer and try to position them on the red curve.  When doing this, ask yourself the following questions:

1. How many of my competitors can offer this service?
2. How price sensitive is the demand?
3. How big a margin do I make and how much pressure is it under?
4. How easy is it to offer the service?

If your answers are along the lines of the following:

1. Many or all
2. Very
3. Getting smaller and under pressure
4. Very or quite

… then you are operating in a maturing market.

If your answers are:

5. Only a few or none
6. I can charge what I like
7. Getting better all the time
8. Not easy, skilled and specialist resource required

…then lucky you. Make hay while you can but start reducing your costs and sharpening your act as competition is on the way, and not necessarily from the usual suspects.

It makes good sense to try to identify new market opportunities for growth where competition – and hence supply – are low or the market is not well-served, while diverting cash from your services to mature markets to fund development and promotion of a more attractive offer. 

Both Apple and Dyson are brands that have been particularly effective in this pursuit.  Using revenue from Mac sales, Apple has applied its superior design skills and deep understanding of human psychology to develop first the iPod and then the iPhone. 

Now, at first glance, many observers would say that the portable music-player and cellular phone markets were already well–served by large and active brands such as Sony, Microsoft and Nokia to name but a few.  However, Apple could see that both these markets were global, growing and potentially huge.  One of the things they spotted that the others didn’t was that both these devices were potentially mass-market, lifestyle accessories rather than ever more complicated technical, feature-filled gadgets just for the techno-literate business person in the phone market and grungy youth in the mp3 market.  Indeed in many ways they saw these two sectors as one and the same market.

Whatever business you are in and regardless of the stage of evolution, your market will follow this curve.  Plan for the obvious challenges and be on the look out to exploit the weakness or complacency of others.

Of course many other unpredictable forces, apart from the competition, act to affect any market.  These forces drive change, and change always creates opportunities for the quick and the brave.

In Part Two of this series we will take a deeper look at analyzing these forces using another tool; the Market Audit or SWOT.  Like the mythical Janus it requires us to look two ways at once.  Firstly to look outwards and establish what is going on in our target market; what forces are at work and how they are likely to distort our world.  Secondly, to look inwards to establish how well we are prepared to either exploit emerging market opportunities or counter rising threats. 

A final word from Sun Tzu, “...what enables the wise sovereign and the good general to strike and conquer, and achieve things beyond the reach of ordinary men is foreknowledge.”

Gordon is an Anglo-Scot, living in London and Spain. He has more than 27 years of experience in successful international sales and marketing, consulting and business management, having worked for corporations such as BAe, EMI, GEC and Digital Equipment in Europe and the US.  Gordon has been actively involved in the communications localization business since 1995 and regularly publishes papers on international marketing and global communication.  He is an active member of GALA and was closely involved in driving the development of a marketing and marcom plan for GALA.  He is presently a partner, board member and Vice-president of Sales and Marketing at communications and advertising localization specialist Wordbank, based in London and Denver.

Source: http://www.gala-global.org/node/61657