How to Determine Product Market Fit by Country

Product-market fit is something that’s discussed pretty often at tech companies, especially early-stage. It’s that point in a product’s lifecycle when you start really accelerating, addressing most of your customers’ core needs, and also when you usually start to see sales volumes go up. What’s interesting for companies expanding internationally is that you have to go through basically the same exercise of achieving good product-market fit, one country at a time.

Country-Specific Product-Market Fit and Why It Matters

Most of the time, companies don’t truly realize how important product-market fit is at the country level until later on in their international journey. Usually, this is due to early adopters who tend to fool them into thinking their product is a perfect fit in most markets. Later, when they hit the mainstream, it feels painful and difficult, almost like crossing the chasm all over again!

International expansion decisions can be tricky. You have a limited pool of resources to invest. You can’t cross every single chasm, all at once. So which markets do you direct those resources toward?

You want to ideally choose markets where you’ll have a high degree of success. This means you want countries where you can achieve product-market fit — but ideally, without having to make too many significant adjustments to your product or your go-to-market strategy.

Often, leaders at companies believe that they can simply add languages in order to expand into the countries that speak those languages. But that ignores the fact that each country is different. The value proposition for customers in each country will often be different. The sales channels and preferred marketing techniques may vary, your company’s brand awareness will differ in each market, and so on.

In other words, product-market fit can only be achieved one country at a time. So, how do you know when you have achieved product-market fit, and how do you identify markets that offer you the maximum bang for your buck?

How to Find the Best Markets

Here are some tips on identifying markets with a high likelihood of product-market fit:

  1. Know which countries matter most for your overall tech category. Understanding the percentage of the market that is using products in your category in each country can be helpful so you can determine if there is wide acceptance of the need for similar technologies to yours. If penetration of your entire product category is low compared to the size of the economy and the population of target customers, it might be a sign that you should wait until the market is better developed to invest in expanding there.
  2. Understand the vertical market opportunities in candidate countries. If you sell software for financial institutions, you’ll need to understand whether similar markets of customers exist in each country, and how big those are. Often, vertical market knowledge can help quickly surface to you which countries will be easiest to target. Remember, you should go after companies in verticals where you see high average selling price (ASP), high close rates, and shorter sales cycle durations, whenever possible.
  3. Determine the top countries of your competitors. This is one of the fastest ways to understand if there is product-market fit in certain countries. Are your competitors in the same category having any success there? If you’re not the market leader, look at your competitors and their revenue breakdown by country. Which countries do they have a presence in that you don’t? If someone has already paved the way with market development, lucky you! Developing a new market is hard work, and it’s much easier to follow suit after some other company has already paved the way to figure the local landscape out. It’s easier to take market share than to create market share.
  4. Look at countries that speak the same language. It’s less expensive and easier to target countries that speak the same language, without needing to worry as much about localization. Markets that speak the same language usually have other ties as well. They often are trading partners. Their economies are often tied together. The network effect is faster across markets that speak the same language, because communication between them is easier and faster. For example, don’t make the very common mistake of overlooking Canada and the Nordic markets which are highly proficient in English.
  5. Prioritize markets that are economically similar to your home market. There’s a reason why many start-ups from emerging markets grow quickly not only in their home country but in other emerging markets too. They simply understand those markets better, and develop better pricing models for them. It’s easier for them to “get” the exchange of value right. Purchasing power parity is a good indicator of economic similarities. Economically similar markets tend to prove better for early international expansion success than markets that don’t share the same type of economy. Many people will cite “cultural differences” as something to pay attention to, but I believe economic differences are even more important when it comes to product-market fit. After all, most companies don’t change their pricing and packaging for local markets until much later on in their international journeys.
  6. Discuss TAM as a separate topic. It’s amazing how many companies look at total addressable market (TAM) as their top priority metric for expansion, even though it’s really unrelated to product-market fit. Resist the temptation to center the discussion around TAM alone. Yes, China is a big market, but do you think it’s going to be easy to penetrate if you have limited experience, no local partners, no currency support, no local pricing, and no understanding of local requirements? This is why you really need to consider market complexity, which really is just another way of saying “product-market fit.”
  7. Look closely at the deals you lose, and why. Too often, companies focus on their “success metrics” by country and fail to look at the “lost deals.” But the deals you lose are the ones that offer the most valuable lessons about why you are losing them. Just because you see a strong close rate in a given country for example, does not mean that it couldn’t be even higher if you simply sought to understand why you’re losing deals. Often, companies are surprised when they see in certain markets, their ASP and close rates are higher than in their home market. But if you carry this thread through, you’ll see that it’s very likely that you should be winning in some countries more than you are, and you are neglecting to learn simple things that can help you improve your win rate.
  8. Don’t assume hitting your targets means product-market fit. A very common mistake companies make is that they see a certain internal metric that looks good and think they have achieved product-market fit in that market. But often, those successes are simply the result of past investments that you’ve made, and a local team’s commitment to hitting the target. For example, perhaps you had a great year in France thanks to some really great sales hires and an outsized marketing budget compared to what you spent in other countries. This doesn’t mean you have product-market fit. It simply means that you spent more on marketing there than in other places. This is why success metrics can be very misleading with regard to product-market fit. If everyone on your team is aligned on hitting them, a lack of product-market fit can easily hide on you. Don’t let success in a market make you overconfident! Most likely the market still has a lot of lessons for you to learn before you can truly address it properly.
  9. Pay really, really, really close attention to what people in the market tell you. By this, I mean you’re better off taking their local word as gospel than making the mistake of so most US companies and wandering in thinking you know exactly what the customer wants, just because you know what your American customers want. Don’t make assumptions! It sounds simple, but all you have to do is really listen. Ask your local market employees, customers, and partners to tell you how to win. Really listen when they talk about what you’re doing wrong and what you should do differently. Yes, it’s hard to hear, but yes, you still have to hear it if you want to truly understand and achieve local success. And if the scope of what you’re hearing sounds like too much to do, then chances are you are a long way from achieving product-market fit. But you do have to approach each market with a beginner’s mind — after all, your brand, your company, your product, is truly starting from scratch in most countries it will enter. And the more economically and culturally different, the harder it will be!

In summary, finding product-market fit in each new country will take patience, attention to detail, and probably a lot more research than you assumed you would ever need to do. It’s true that you can achieve scale by leveraging what you’ve learned in your home market, but don’t forget that at the heart of it all, you have to establish trust and credibility with people who make decisions about your product.

You don’t just walk into a new room and assume you’re already trusted. It takes time to build those new relationships and work the room. The same applies for international expansion, because you’re walking into new markets! Common sense rules here too. Do what you would do when building relationships with any new group of people. First, seek to listen and understand. Then, once you understand their needs and how they think, they will trust you. Only then can you get your own message across, and much faster than if you try to do things the hard way.

Nataly Kelly

Nataly leads localization at HubSpot and has previously held diverse roles in marketing, international operations and strategy, research, product development, and localization. She writes for Harvard Business Review on topics of international marketing and business. Nataly grew up in rural Illinois, lived in Ecuador, and resides in Boston (for now).


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