Why GDP Isn't a Metric that Matters in International Expansion

Conventional marketing wisdom says you should pick the biggest country for your international expansion. We challenge the method and metric used by many marketers.

For most founders & executives, selecting a target market for international expansion means starting with Google. They look for the Gross Domestic Product of a handful of countries, designate the one with the biggest GDP as their best candidate, and deem their research finished.

But the country with the biggest GDP isn't always the best. That's because GDP is misunderstood and misapplied by many.

Here's a short explainer:

Gross Domestic Product is a measure of all that an economy produces. It has been shown to have many limitations, one of the main being it is centered on manufacturing.

If you're a business like AirBnb or Uber, you manufacture nothing. You're a service. And accounting for services within GDP is a tricky business, especially as innovation has changed the way products and services are produced and supplied.

"It is not just that many new services are now given away free; so are some that used to be paid for, such as long-distance phone calls. Some physical products have become digital services, the value of which is harder to track. It seems likely, for instance, that more recorded music is being listened to than ever before, but music-industry revenue has shrunk by a third from its peak. Consumers once bought newspapers and maps. They paid middlemen to book them holidays. Now they do much more themselves, an effort which doesn’t show up in GDP. As commerce goes online, less is spent on bricks-and-mortar shops, which again means less GDP. ("The trouble with GDP", The Economist April 2016 Edition)

Using a data-driven approach is commendable. The mistake is made when founders & executives move away from data linked to the people who will be paying for your product. Instead, relying on a meta-number used to evaluate the production value within a country.

At OnGlobal we remind our users that "metrics are people, too". (Eric Ries, The Lean Startup). Start with metrics that reflect the consumption of your product and services within your country.

Don't just pick the country with the biggest GDP.

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