How does a branding agency change in a market that has become a “the niche of a niche”?
27 mai 2010
When branding is no longer a medicine for more acute customer problems, branding consultants team up with experts in finance, accounting and marketing to change their businesses from the root.
“As a branding agency, it’s hard to change your business model.”
Bogdan Brînzaș, the founder of the brand and design consulting agency Branzas Design, says that 2009 was the most active in the last five years. He received requests almost every day. “It was probably the first thing that companies thought they had to do something in order to sell their products: let’s do something regarding the brand. The phone rang every day” he says. He made business proposals for those who wanted to, but none of them materialized. Customers demanded prices 50-80% lower than in previous years, a level that Branzas did not want to accept. So he made projects for traditional clients, with whom he has been collaborating for many years, and went through a year of “survival”.
But, in 2009, he began to advise his traditional customers to rethink their entire business process. Even if they were profitable companies, with businesses of tens of millions of lei, which decreased significantly in 2009, their market had changed.
“The market is being restructured. If, for example, they went to a certain area of customers, those customers do not have that much money. Consumption habits are being restructured. Which prompts the customer/company to move to another area to sell. This is a commercial approach and a business strategy “, explains Brînzaș.
When a branding agency’s market changes, as it did last year, rethinking the business is difficult. The branding market, says Brînzaș, is at the top of the economy and is almost instantly experiencing its increases and decreases.
“We can’t change the business model because it’s simple here: we have consultants, designers, implementation people, each in several areas of expertise. A company that has complete services in the area of brand and design consulting can only do that”, he explains. As a business model, a branding agency may choose not to get involved in project implementation and reduce the team of implementers or perhaps the team of designers, if it notices a lower demand in this area, and possibly keep its consultants. “This is the only thing we can do. We can’t jump into another business.”
The variant that Brînzaș chose last year was to gather around him experts from the financial, commercial and marketing fields, together with whom to form a team capable of changing the client’s business. The group is informal and it has no legal structure. The head of Branzas Design does not nominate these people but says that they have 10-15 years of experience in their fields and have held management positions in large companies.
Change in product, price, distribution
In the last year, almost all the markets have been restructured because the consumption habits of Romanians have changed, explains Brînzaș. But most companies are slow to make substantial changes to their business approach, limiting themselves to “cosmetic measures”: streamlining employees’ coffee and water costs, possibly also their salaries, printing fewer brochures or giving up advertising on a particular channel.
“What gives them a false impression is that they still issue invoices, but do not collect money. This phenomenon gives them hope that it is a cash flow problem – everyone has cash flow problems; we will receive the money in three or six months. It is a false problem and an umbrella that covers their belief that nothing has changed in the market “, says Brînzaș. “But the fact that there are these major cash flow problems indicates that the target groups they were targeting up until this point have big problems.”
Companies should make changes at the level of the portfolio, the product, the price, the form of distribution, the customer groups to which they are addressed. Brînzaș gives the example of one of his clients, to whom he suggested to reduce the proportion of business-to-business sales and to increase the business-to-consumer one. “They can’t believe it because it means restructuring their production and their sales system – they usually talk to 20 customer companies, versus 200 or 2,000 customers. Because you see that the corporate ones haven’t paid for 6-9 months “.
As good examples of companies that quickly reoriented themselves according to the market change, Brînzaș reminds Danone, which launched the Casa Bună low-cost product range. “Danone cut to the chase, assumed that all Activia, Cremosos will no longer sell like that and said, sir, Danone even if it’s a premium company must be profitable: Casa Bună. Very simple”.
A negative example in the dairy industry is a company that Brînzaș does not name but describes it: a multinational that bought a well-known player on the local market and then launched two of its international brands, which did not catch the public’s attention, but they have grabbed most of the marketing efforts at the expense of the local brand, which was neglected. Later, they launched a successful brand on the Hungarian market, which did not perform as well in Romania. According to the consultant, the company should give up the three foreign brands and it should promote more the local one, the only profitable one. The description could make you think of Friesland, the manufacturer of Napolact.
“Perhaps a lot of companies that are still profitable, will soon encounter problems. Because they don’t want to make a change. An ordinary one – price, product, market “, says Brînzaș.
3 out of 4 consumers have changed their habits in the recession.
A global study by the media agency Initiative shows that 75% of consumers changed their consumption habits during the recession. Re-evaluate any purchase and place it in one of the “need” or “desire” categories. They think more deeply about products than ever before.
“For the last 10-20 years, we’ve thought that consumers are generally slow in terms of behaviour change, but the study shows that when the crisis hits, people get rid of their previous habits very quickly,” says Nicki Boswell, Head of Research Worldwide, Initiative.
In the short term, brands can have an advantage if they offer promotions. But in the long run, they need to change the way they address consumers, to have a more authentic approach.
Brands should show consumers that they are on their side, that they are not just trying to sell them something, but that they are trying to help them. Boswell gives the example of a bread producer who put a product on the market in smaller quantities so that it fits into the family’s weekly budget. Hyundai has also launched an offer in the United States that promises that if you buy a car and lose your job in the next 12 months, it will return all your money.
Moreover, 70% of those surveyed said they would maintain their current consumption habits even after the crisis ended. “People will buy luxury goods again once they feel more financially secure, but it is clear that they have learned to appreciate the value of money, and consumption in the future will be more cautious,” concludes Boswell.