If you are a business owner, marketing or biz dev executive you’ve probably been thinking about expanding into different countries or picking the right market to kickstart your new product.
Penetrating into a new market can often be hard and challenging, but if it’s done properly, it will reward your business with additional volume and revenue.
The first step to entering a new market is to actually decide which market will carry the biggest opportunity for your business. Very common classification of markets is based on tiers — considering the financial and overall development of the country, cost of advertising and the current political situation.
Since there is no unified marketing theory on this topic, you might stumble upon studies which will indicate that there are 3 tiers, 4 tiers or even 5 tiers of countries.
Each tier will carry a certain type of opportunities and of course, its own set of problems, which we’ll describe & tackle in the upcoming paragraphs.
Based on the factors above and experience which we have in running global marketing campaigns, we’ve classified countries/markets into 4 tiers.
Let’s dive into it…
We modelled a formula taking into consideration the Human Development Index (HDI) and Gross Domestic Product (GDP) per Capita. Results are corresponding with what we expected, and these findings can be applied to any marketing model.
When planning your campaign there are plenty of other factors to take into consideration. Cost of advertising will be directly linked to the market size, development of the society and market opportunities based on the GDP.
Tier 1 of Media Buying
Most expensive and the most challenging one. But also the biggest market with a wide variety of traffic sources. Majority of the market speaks English.
When meeting our criteria, in this Tier we can find the following countries: Norway, Switzerland, United States, Germany, Australia, Luxembourg, Ireland, Iceland, Sweden, Canada, Netherlands, United Kingdom, Singapore, Japan, Hong Kong, Denmark, France & China.
There are many challenges in Tier 1, this market is strictly regulated, and the breaches of data protection can be legally pursued. General Data Protection Regulation, more commonly known as GDPR regulated how data should be handled and brought a whole different set of rules to anyone working with personal data.
Traffic in these countries will be very expensive — 2x, 3x or even more expensive than countries in Tier 2. You should have in mind that your ad is competing with much more ads on the same market.
Average CPC (Cost-Per-Click) has more than doubled in the last five years. In this market, there will be a lot of competition, with experts working in this field for years. The competitive market also means that customers are fed up with different offers — you’ll need to step up your game with attractive offers and creatives.
But if your organization manages to overcome the initial challenge, the reward is going to be quite lucrative, as the customers in Tier 1 markers have deeper pockets than the rest of the world. Plus, they’re not afraid to spend or adopt a new technology if they like what your organization is offering.
China is an exception in our classification because China doesn’t meet our criteria of GDP and HDI, but we can definitely put China in Tier 1 because of the market size and regulatory challenges that we need to meet before starting on such a disperse market.
Key characteristics of Tier 1 markets:
– Highly-developed spending habits
– High buying power
– High technology adoption rates
– High media buying costs (CPM)
Tier 2 of Media Buying
In some locations, there will be fewer regulations than in the first tier, and the cost of advertising will be lower, but the prices can vary across the Tier 2 because of the broadness of the market.
Some countries in Tier 2 can give your business a nice boost in volume and revenues, but only in rare scenarios, they will provide opportunities and scale which are characteristic to Tier 1 countries.
In Tier 2 we can find the following countries: Qatar, Korea, Austria, Belgium, Italy, Finland, Spain, New Zeland, Israel, United Arab Emirates, Saudi Arabia, Czech Republic, Poland, Greece, Slovenia, Russian Federation, Portugal, Argentina… To be more exact, we have 39 countries in this Tier.
However, this market is dispersed, in terms of culture and language, so there is a need for localization and customization of landing pages, creative visuals, translations etc…
In Tier 2 we are going to find a wide range of countries around the globe, with lower rates of GDP and HDI, but still a potential target markets when our marketing strategies meet the predispositions of the market with thoughtful planning.
Key characteristics of Tier 2 markets:
– Average buying power
– Moderate technology adoption rates
– Medium media buying costs (CPM)
Tier 3 of Media Buying
Consisting of the majority of third-world countries, Tier 3 is almost not regulated by the authorities and traffic will be very cheap and not highly competitive since the majority of advertisers don’t find it attractive.
Tier 3 will need even more geolocalization and taking into consideration a whole set of cultural and religious values. Conversion rates will be low — resulting in low payouts.
Countries in Tier 3 have very low GDP — automatically resulting with lower HDI. The population of this countries is not that significant, penetration of the market is difficult and it needs careful planning.
Here we can find countries like Jamaica, Dominica, Vietnam, Angola, Bolivia, Namibia, Nigeria, Samoa, Pakistan, Kenya, Sudan, Ghana, Bhutan, Cameroon, Nepal, Zimbabwe, Ethiopia, Uganda…
Key characteristics of Tier 3 markets:
– Lower buying power
– Low technology adoption rates
– Low competition
– Law regulations can vary from country to country
– Low media buying costs (CPM)
Tier 4 of Media Buying
A market that’s almost unpenetrable because of the lack of channels and political confinement — there will be almost no channels to communicate with your audience, media channels are usually almost-to-none existent or highly politically regulated. Countries in Tier 4 are riddled with wars and conflicts.
Here we can find countries like the Syrian Arab Republic or North Korea. For these countries, there is no data from The World Bank. In Tier 4 we’ve also placed any country with GDP per Capita lower than 1000 USD — countries like Burkina Faso, Malawi, Togo, Chad, Niger, Haiti, Mali…
Key characteristics of Tier 4 markets:
– Inferior buying power
– Underdeveloped or no media infrastructure
– Unstable political circumstances
– Impossible to penetrate without a physical presence
– No legal regulations
– No data for media buying costs (CPM)
Categorization on 4 Tiers using Gross Domestic Product (GDP) data from The World Bank and Human Development Index (HDI) for 2017 from United Nations Development Programme. We’ve also taken into consideration years of experience working in these markets. Cost of advertising in this categorization is directly connected with the human development of the nations (HDI), market size and overall population size. Exceptions may apply.
1) Human Development Index — United Nations: http://hdr.undp.org/en/2018-update
2) GDP per Capita, The World Bank: https://data.worldbank.org/indicator/NY.GDP.PCAP.CD
3) Online advertising costs: https://www.wordstream.com/blog/ws/2017/07/05/online-advertising-costs
Our data model you can find HERE!
Udonis is based out of Croatia. A small country in Europe, best-known for its natural wonders, beautiful seaside, good food, sports and media buying.
Even though Croatia falls into Tier 2, the majority (over 80%) of the media buys we place for our clients will go to Tier 1 markets.
We are an award-winning marketing agency specialized in mobile apps & games. We help scale products that people love, keeping the attention on data and results. Have questions, need help? 🤗 Email us at firstname.lastname@example.org!