Place Marketing: Attracting Investors

Attracting investors to one's territory is one of the basic tasks of marketing in the system of state and municipal government.

Place marketing is a very interesting and promising area of marketing, which currently has not received proper development in the Russian Federation.

Objectively, technologies and tools in the field of management are generated and actively developed in the business environment and only then are transferred to the public sector of the economy and the system of public administration (there are exceptions). Russian marketing (to a lesser extent promotion, perhaps) lags significantly behind the best world standards, so often it has especially nothing to offer for the management of territorial entities (municipalities, subjects of the Russian Federation, etc.). There are very few specialists who have experience in both state (municipal) administration and commercial marketing, especially in managerial positions. However, the demand for place marketing is gradually forming, even in the absence of a quality supply. We will talk about this below.

Main types of place marketing

Many scientific and educational publications have been written about place marketing, not to mention periodicals. In Russia, both translated sources on place marketing and books by domestic authors are available. In our short note, it is important to note those main consumers of the territorial marketing product who determine its content and specifics, forming different types of place marketing. There are quite a few of them, but we will single out three key ones, not related to the subject of management (as is often the case in public administration, partially the subject and object of management coincide, conditionally, the head of the investment attraction department of the local administration is simultaneously a resident of the territory).

First, these are individuals who are current or prospective residents of the territory. They view the territory as a place that satisfies their needs for permanent residence, work, raising children, receiving municipal and state services, and so on.

Secondly, these are individuals who come to the territory temporarily, mainly as tourists. Here, place marketing can be considered as the marketing of a tourist product, which this territory acts as. It is evaluated in its aspects – transport accessibility, quality of hospitality services, availability of unique tourist offers (attractions, stay programs, etc.) and so on.

Thirdly, these are legal entities that are current or potential investors in this territory. Roughly speaking, this is a business that wants to work here, not only selling but also producing its product on the territory. They are interested in the potential of the territory from the point of view of the comfort of doing business – the availability and cost of production resources, measures of administrative regulation of business, special regimes for investors, and so on. Given the high level of competition for investors between the subjects of the Russian Federation and municipalities, when almost every subject has several special territories for economic activity (special economic zones, TORs, technoparks, etc.), the question arises of their competent marketing to ensure a good result in this race "for the investor". And given the predicted dynamics of economic development in the medium term, the struggle for the investor will be acute.

At the same time, place marketing to attract an investor is not only promotion (advertising). So far, this understanding of place marketing is only being formed, as can be seen from the orders exclusively for advertising support of the activities of "zones" with a special investment regime, placed in the public procurement system. At the same time, promotion (part of which is advertising) is only the fourth element of the marketing mix, and it is necessary to deal with the entire marketing mix (to begin with, in the basic configuration of 4P).

Territory as a product from the perspective of a potential investor

To consider the first element of the territorial marketing mix, it is necessary to recall the fact that currently almost any region in the Russian Federation offers itself to investors through the so-called territories with a special investment regime. Thus, the task of forming the product "territory for an investor" includes two main components: the territory as a whole and territories with special regimes (there can be quite a lot of them within one subject of the Russian Federation – up to 10 or even more). The issue of building the right ratios between these two types of products is far from trivial, since, in the language of commercial marketing, the wider the "product line" (the number of such special territories), the more difficult it is for the consumer to make the right choice, and the higher the likelihood of cannibalization.

In addition, the very creation of various "zones" is not sufficiently justified by market considerations; the administrations and governments of cities and regions have extremely limited experience in conducting marketing research of their competitive environment. A new opportunity appears (a regulatory legal act is issued that allows obtaining funding from above or promoting oneself as an advanced territory) – work begins on submitting applications to get into the pool of regions with a new type of territory for investors. However, the lack of an analytical base and a system for working with "products for investors" negatively affects their quality and demand.

And, which both top managers in business are guilty of, measures are launched to compensate for the generic problems of the product through advertising activity that will force the buyer to choose us. Almost always, such decisions are doomed to failure. This scheme can still be used, poorly or well, in B2C markets (especially for goods of situational demand, etc.), but already in B2B markets, advertising cannot solve product problems. For an investor, choosing a territory is an important and long-term task, so if the product is not adequate to the market, not "packaged" properly, then the chances of attracting a responsible and large investor are sharply reduced.

As a result, ensuring the filling of "zones" occurs at the expense of micro-businesses (whose investment projects are characterized by low returns) and "pulling" promising projects of local large businesses to the territory, regardless of the economic feasibility of such a decision; sometimes there are also obvious falsifications and simulations of indicators.

In addition, inefficient work with the territorial product strongly affects the quality of the filling of the "zones", the absence of real "anchors" in them. The reduction of entry barriers (low level of competition between applications) leads to a drop in the quality of investment projects that receive support. "Obviously problematic" residents appear, who have low chances of bringing the project to the launch stage, which means a high probability of difficulties for the responsible authorities with reporting and the "picture", while the "zones" themselves are poorly filled and do not achieve the goal of their creation.

All this is a question of product policy – how to correctly build the line, what qualities to endow products with to make them attractive and avoid cannibalization, how to "build away" your territorial product for an investor from competitors. It is difficult to find a qualified marketer in administrations, and in consulting there is no understanding of how the system of state management of investment activities functions. As a result, a good product is rarely obtained and only due to the objective advantages of certain territories (in developed leading regions, transit hubs, border areas).

The greatest concern in this regard is the fact that, being carried away by the promotion of territories with special regimes (going into project management), the understanding of a unified strategy for forming the territory's product as such (process management) is lost. This can lead to negative scenarios for the development of investment activities.

Therefore, as in business, marketing should start with the product: regularly monitor the market, form and test hypotheses, build a "product line", develop useful (and not only prescribed by regulations) qualities of products. Then, perhaps, the investor will buy the territorial product – conditionally "build a plant" exactly with you, but only if the price suits him.

Pricing of the territorial product

Pricing of the territorial product is an issue that in domestic management has not been resolved even at the theoretical level, not to mention the practical one. It is quite difficult to calculate all the costs that the "buyer of the territory" will incur, especially when it comes to an investor. But it is important to do this, otherwise how to set a competitive price? It clearly should be profitable, both in absolute terms (comparison of expenses and income) and relative (in comparison with similar offers).

In order to competently conduct pricing, it is necessary to be well versed in the justification of investment projects and to know up-to-date information about the market (offers of other territories of the Russian Federation, and sometimes neighboring foreign states, which is especially important in the conditions of the Single Economic Space of five countries).

Authorized bodies and specialists usually cope with the first task in general well and professionally (although there are many examples when obviously unreliable calculations of companies' investment projects are accepted), but the second one almost always falls out of the sphere of attention. Any marketer will say that in a highly competitive market, knowing the prices (and preferably the pricing system) of players is a necessary condition for effective work. At the same time, there are many articles – both journalistic and scientific – that compare the conditions for the functioning of "territories for investors" and from which one can draw information about the state of the market.

The use of this information in the calculation of tax benefits and economic preferences, taking into account the qualitative parameters of the product itself (and any territorial product is highly differentiated) is the highest piloting, which has not yet been observed in domestic practice.

All this leads to the fact that the region (municipality) cannot clearly explain – why the investor should "buy" exactly its offer according to the price criterion – to convince that the price-quality ratio is optimal, or that the product may not be great, but it's cheaper you won't find it (and here the "economy segment" also works). Therefore, the investor calculates himself, consequently, the party selling the territorial product loses the initiative in the negotiations.

The base price is only the beginning of working with pricing. Then - more. This includes flexible pricing, discounts for specific situations and types of clients, and even a bonus system. All this is realizable with a territorial product, and the buyer (investor) will appreciate it. We need to work with this. Having the competences for this or buying them.

Investor's assessment of the territory's location

What in the marketing mix concept is called "Place" - location or placement - is the most complex and difficult to define in territorial marketing.

Without going deep into theory, we note that if we understand the territory as a subject of the Russian Federation or a municipality, then the governing body does not choose its physical location (this is not a business question – where to place a shopping center or warehouse). In this sense, it is impossible to manage the placement of the territory (although there are examples of this type, for example, the expansion of Moscow as a subject of the Russian Federation), but it is possible to manage the flows of resources passing through the territory, forming points of attraction. This is important for the investment sphere and in this sense, the task of territorial marketing is to create conditions for increasing the attractiveness of the territory not as a place of its physical location, but as a place of attraction for resource flows that are necessary for economic activity.

If we are talking about local territories – places of formation of "zones with a special investment regime", then here the task is quite specific and not as "tricky" for understanding as above. It is necessary to justify – where within the subject of the Russian Federation to launch this "zone" to achieve the maximum effect. There is something from the task of placing a store here, but, looking at the problem from different positions, we understand that we are no longer talking about a simple economic optimum. We must look for the extremum of the optimal location according to many parameters, including social ones (for example, ensuring employment of less developed territories within the subject of the Russian Federation).

However, they can also be collected, digitized and applied mathematical apparatus similar to that used when placing retail points. For example, cellular automata theory or something simpler.

Unfortunately, in Russian practice, work with this element of the marketing mix in the area we are considering has not yet been systematically built. This is also a consequence of the imperfection of product policy.

The last important point – "Place" also includes the aspect of product distribution. That is – how the channels of its sale are organized. In the case of sales of territory for investments, this is a very non-trivial question.

So far, regions and municipalities are engaged in the "sale" of the offer quite conservatively – conditionally direct sales mainly in their region, work at profile events, including business missions, this is probably the entire standard set. There is little activity and creativity, especially in terms of working with the "cold base". In conditions of a large volume of offers, this is not enough. Sales to foreign investors suffer especially strongly, which, however, is also characteristic of Russian business, which works much worse with export directions than in the domestic market.

Promotion of the territory as a product for a potential investor

In terms of promotion, the situation is quite good, especially in comparison with the previous blocks.

Now almost all regions and municipalities with a high level of socio-economic development have quality websites promoting their investment potential, have a basic set of advertising products, and good printing. Exhibition activities are also implemented at a high level, if we talk about its promotional aspect.

Leading regions make effective promotion through publicity, publications in specialized publications, primarily central ones. Many develop a pool of journalists who saturate the market with "necessary" information with a professional level of presentation.

Work on promoting territories as an object of investment in social networks is gradually improving, in some places they are already connecting bloggers, although the practice of "working for the process" is still common – inflating various types that should show the allegedly existing interest in the product.

Of course, in business, promotion and advertising activities are technologically ahead of the public sector, but this is natural. There cannot be a big gap here, since it is easier for public authorities or local self-government bodies to attract a profile from the advertising market than a marketer working in the strategic block. Firstly, there are more resume offers and choice options. Secondly, it is easier for a promotion specialist to rebuild, since advertising technologies are more universal and do not require such immersion in specific processes as working with a territorial product or pricing it.

However, if everything is more or less good with private practices and techniques, then more conceptual issues of promotion hang significantly. Let's consider such a vivid example as territorial branding.

In the Russian Federation, well-known specialists who work with territorial brands can be counted on the fingers of one hand. If we talk about the brand not of local territories (cities), but of those extended in space (subjects of the Russian Federation, large municipal districts) and the development of the brand in the aspect of attracting investors (since orientation towards the population or tourists is still achieved easier), then finding a qualified team becomes an extremely difficult task.

At the same time, most likely, this team will have to work with very weak material, since from the point of view of business attractiveness, Russian regions, with rare exceptions, do not have a good base for individualization and "building away". This problem is familiar to all specialists in strategic planning of territories – reading the results of top-level goal setting (the same missions) sometimes without a direct indication it is difficult to understand which particular subject of the Russian Federation we are talking about – they are so similar (to the point of confusion). But at least different ideas of the uniqueness of the territory can be put into the mission, while the investment brand is a much more specific construction, appealing more to the rational aspects of thinking.

At the same time, the brand is extremely important – in a large flow of information, a good brand is the most powerful magnet for customers. Given that territories promote themselves as a place for investments in general and their individual special "zones", there is a need to build an umbrella brand. Even world-famous corporations broke their teeth on this task. Therefore, solving it without professionals is a risky path. But in any case, it is better than not dealing with the brand of the territorial product at all, reducing the development potential of the region or municipality.

As in business, in the management of a territorial product, all available means should be used, even if it is a small budget for advertising and a couple of exhibition events per year. However, marketing of a territorial product, especially in terms of attracting investors, is a complex task, the effective solution of which is carried out in a comprehensive and consistent manner. Such systematicity is set by the marketing mix.