Selling the Business Location: Place Marketing in the context of the Rhine-Main Region

Contents

List of Figures

List of Tables

List of Abbreviations

1 Introduction
1.1 Place Marketing Phenomenon
1.2 Definitions and Terminology
1.2.1 Region vs. Place
1.2.2 Place Marketing
1.3 From Marketing to Place Marketing
1.4 Aims and Objectives

2 Selling the Business Location
2.1 Objectives
2.2 Elements in a Place Marketing Process
2.3 Levels of Place Marketing
2.4 Who are the Main Targets of Place Marketers?
2.5 Major Actors in Place Marketing
2.6 The Place Marketing Process
2.7 Designing the Place’s Image
2.7.1 Image Marketing
2.7.2 Branding
2.7.3 Distributing the Place’s Image and Messages
2.8 Services in Attracting, Retaining and Expanding Businesses
2.9 Essentials to Successful Place Marketing
2.10 Problems

3 How Investors make their Choices
3.1 General Framework
3.2 Steps and Factors Influencing the Buying Process
3.3 Soft vs. Hard Facts
3.4 Influence of Place-Rating Information
3.5 Importance of Cluster

4 Place Marketing in the Rhine Main Region
4.1 Facts and Figures
4.2 Sectors of Industry
4.3 SWOT Analysis on the Frankfurt Rhine Main Region
4.4 Locational Advantages
4.5 Attracting, Retaining and Expanding Businesses
4.6 Designing the Image
4.7 Distributing the Place’s Image and Messages
4.8 Opportunities and Problems

5 The Rhine Main Region in an International Context
5.1 Hong Kong
5.2 Los Angeles
5.3 Country Comparison

6 Conclusion

List of References

Appendix

List of Figures

Figure 1-1: Consumer vs. Place Marketing

Figure 2-1: Elements in a Place Marketing Process

Figure 2-2: Levels of Place Marketing

Figure 2-3: Phases of Marketing

Figure 2-4: The 4 P’s in Place Marketing

Figure 2-5: Brand Identity, Brand Positioning and Brand Image

Figure 2-6: Success Factors in Place Marketing

Figure 3-1: Successive Sets Involved in Buyer Decision Making

Figure 3-2: Temporal Course of Locational Decision Making

Figure 3-3: Sources of Locational Competitive Advantage

Figure 4-1: Map of Rhine Main Region

Figure 4-2: Hesse Slogan

Figure 4-3: FrankfurtRheinMain GmbH Slogan

Figure X-1: City Growth/Decay Dynamics

Figure X-2: 2009 Tax Misery & Reform Index

List of Tables

Table 2-1: The Four Main Target Markets

Table 2-2: Major Actors in Place Marketing

Table 3-1: Five Stages in Choosing a Place

Table 3-2: Essential Factors for Locating a Business

Table 4-1: The Frankfurt Rhine Main Region in Figures

Table 5-1: 10 Reasons to Invest in Hong Kong

Table 5-2: Reasons to Do Business in Los Angeles

Table 5-3: The Global Competitiveness Index 2009–2010 Rankings (Overview)

Table 5-4: The Global Competitiveness Index in Detail

Table 5-5: 2010 Index of Economic Freedom

Table 5-6: Opacity Index 2009

Table 5-7: Economy Rankings 2008-2009

Table X-1: Differences in Marketing Companies and Regions

Table X-2: Stages of the Strategic Market Planning Process

Table X-3: List of Agencies and Services

Table X-4: Starting a Business in Germany

Table X-5: Starting a Business in Hong Kong (China)

Table X-6: Starting a Business in the United States

List of Abbreviations

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1 Introduction

1.1 Place Marketing Phenomenon

If you enter the phrase “marketing of regions” in Google, you get about 575,000 hits (last checked March 19, 2010). Although a great amount of those are unusable, there are still thousands of hits that direct you to the websites of cities and regions all over the world and provide an amazing amount of information on their marketing efforts. This shows how important regional marketing has become in today's economy. There is hardly one town or region without a special slogan or logo advertising its attractions (Mayer 1999, p. 1). What used to be a mainly tourism related field of studies has now shifted to business and marketing. Recent research reveals that the number of studies within the discipline of branding and business are double those in tourism (Hanna and Rowley 2008, p. 67). But what is the reason for this new interest in place marketing?

Place marketing as such is not a new phenomenon, and like many marketing ideas has its origins in the U.S. From almost the first stages of the colonization of the North American continent, there were conscious measures taken to attract settlers (Ward 1998, p. 10). Nowadays international business places increasingly compete with each other for different reasons (Mayer 1999, p. 2).

One reason is rooted in increasing global competition and competition between business locations, as well as dismantling trade barriers, sinking carriage costs, flexible forms of organization and the exchangeability between locations, which have given distance a whole new meaning (Gubler and Möller 2006, p. 25). Transportation and communication have grown speedier, easier and cheaper so that distance no longer is relevant (Avraham and Ketter 2008, p. 3). The same applies to the factors people, goods and capital, which have become mobile and therefore can easily be moved to different places (Gubler and Möller 2006, p. 18).

Another reason for this new interest in place marketing is that the competitive advantages places pursue change over time and due to circumstances such as jobs, plants, investment, tourists, specific industries, and better quality of life (Haider 1992, p. 127). New place attributes and fresh definitions of the accessibility of places have thrust cities and regions into new relationships with their external and internal markets which present both threats and opportunities (Ashworth and Voogd 1994, p. 40).

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Especially economic weak regions face an enormous pressure to take promotional measures to attract people and investment (Mayer 1999, p. 2). Therefore business locations must develop strategies and bundle their competencies to continuously attract taxpayers and ensure long-term workplaces (Gubler and Möller 2006, p. 25). The criteria for successful places are now characteristics such as environmental quality or, more broadly, the way in which cities are valued as places in which to live, work, enjoy leisure or invest (Ashworth and Voogd 1994, p. 40).

“In this competition, marketing is emerging as the driving force in how places position themselves in the marketplace as sellers of products to serve customer's (buyers') needs and wants" (Haider 1992, p. 127).

1.2 Definitions and Terminology

1.2.1 Region vs. Place

A review of the current literature on this topic clearly points out that there is no coherent definition of the term ‘region’. The range of usage goes from European region, metropolitan region to city region (Melzer 2007, p. 19). Besides, the words place and region are constantly equated. As Hanna and Rowley put it, “there seems to be a recognizable gap in the literature regarding the application of the term ‘place’ and its associated vocabulary: location, country, nation, city and region” (Hanna and Rowley 2008, p. 61).

Kotler agrees and contributes an even broader definition: “A place is a nation-state, a geopolitical physical space; a region or state; a cultural, historical or ethic bounded location; a central city and its surrounding populations; a market with various definable attributes; an industry´s home base and a clustering of like-industries and their supplier; a psychological attribute of relations between people internally and their external view of those outside” (Kotler et al. 2002, p. 4).

In branding and business ‘place’ and ‘location’ are the most dominant terms used, whereas there seems to be consensus that ‘destinations’ indicate tourism only (Hanna and Rowley 2008, pp. 61,69).

According to the literature I researched, the terms ‘region’ and ‘place’ are used interchangeably in this thesis.

1.2.2 Place Marketing

Many definitions of place marketing can be found, as the subject has generated a massive literature lately (Barke 1999, p. 486). However, most of them share the idea that localities must try to make themselves more attractive than others to key economic decision makers in order to stimulate local economic development (Carter and Turnock 2005, p. 104). According to Kotler “place marketing means designing a place to satisfy the needs of its target markets. It succeeds when citizens and businesses are pleased with their communities, and meet the expectations of visitors and investors” (Kotler et al. 1993, p. 99).

Ashworth and Voogd represent a similar point of view: “Place marketing can be defined as a process whereby local activities are related as closely as possible to the demands of targeted customers. The intention is to maximize the efficient social and economic functioning of the area concerned, in accordance with whatever wider goals have been established” (Ashworth and Voogd 1994, p. 41).

“Place marketing is a mix of: changes in the form and function of localities (the ‘place product’); the use of financial incentives; the promotion of a new image of place; and changes in the way that places are governed” (Carter and Turnock 2005, p. 104).

1.3 From Marketing to Place Marketing

Due to increasing competition and globalization and the battle for inward investment, visitors and jobs, countries, regions and cities began applying to their ‘product’ certain marketing techniques previously developed for consumer goods (Caldwell and Freire 2004, p. 50). “Place marketing has become a commonplace activity of cities, regions and countries. However, very few marketing specialists have given much thought to its application to places, treated as products, and, if they do, they too easily assume that places are just spatially extended products that require little special attention as a consequence of their spatiality” (Kavaratzis and Ashworth 2005, p. 507). Ashworth and Voogd argue against such behavior. To them a city, region or country is essentially different from the simple archetypal commercial market transaction where a product or service is exchanged for a price since it does not usually involve either the exchange between seller and buyer of ownership over physical entity, nor even purchase or hire of any exclusive rights over urban services (Ashworth and Voogd 1990, p. 65).

The specialty of place marketing lies in the complexity of the object. Places are territorial but also social entities. Places are homes, workplaces, resorts or business locations. Based on these social aspects, a place is less alterable than a consumer good (Gubler and Möller 2006, p. 33). Unlike purely business or commercial product marketing, in place marketing the competencies are not combined in one person, but several policy-makers. Decisions require the active support of public and private agencies, interest groups, and citizens. See figure 1-1 (Kotler et al. 1993, p. 20).

Figure 1-1: Consumer vs. Place Marketing

(adapted from Gubler and Möller 2006, p. 34)

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Another immediate problem in the range of place marketing is that it is not readily apparent what the product actually is, nor how the consumption of place occurs. “Though marketing practices make places into commodities they are in reality complex packages of goods, services and experiences that are consumed in many different ways” (Gold and Ward 1994, p. 9).

Also, the measurement of effectiveness outcomes may be that much more difficult. While the success through a targeted marketing strategy may be quantifiable the effects of an image-raising campaign on firm and job attraction is less easily specified (Paddison 1993, p. 341). Typically only a small amount of returns on marketing effort – the ‘sales’ – accrue directly to the promotional agency (Gold and Ward 1994, p. 9).

For an overview of the differences in marketing companies and regions, please also see appendix Table X-1: Differences in Marketing Companies and Regions.

1.4 Aims and Objectives

This thesis intends to investigate the current literature in order to understand the importance of place marketing in general and marketing of the Rhine Main Region, as Germany´s most cosmopolitan region, in particular. To point out the competitiveness of the Rhine Main Region in an international context, I use Los Angeles and Hong Kong as exemplary competitors. Los Angeles being one of the U.S. most powerful cities and Hong Kong representing the gateway to China. However, the focus of my investigation is on the Rhine Main Region.

Due to the length limitation in this thesis and the fact that the attraction of new factories and business investments is one of the most interesting facets of place marketing (as these are expected to create new jobs and economic growth, with an overall benefit on the country’s economy), I concentrate on B2B marketing and leave out the tourism sector (Kotler and Gertner 2002, p. 257).

Chapter 2 and 3 form the theoretical foundation of this thesis. In chapter 2 I deal with the basics of place marketing and develop a theoretical framework for the central success factors of place marketing practices. Chapter 3 focuses on the investor’s perspective. It includes information on the decision making process and the influence of ratings.

In chapter 4 I put the whole set into practice with help of the Rhine Main Region. Chapter 5 uses Los Angeles and Hong Kong as international competitors of the Rhine Main Region from the western and eastern hemisphere. Chapter 6 serves as a conclusion and assessment of the place marketing activities of the aforementioned competitors

2 Selling the Business Location

2.1 Objectives

“There are more than 300 cities in the world with over a million inhabitants, and all those cities want to be the most attractive. In Europe there are more than 500 regions and 100,000 different kinds of communities competing individually for the same jobs, investments, and talented experts” (Moilanen and Rainisto 2009, p. 3). This is why regional marketing has become more important in today's economy (Mayer 1999, p. 1).

Zentes (1996, p. 203) differentiates between internal and external objectives in marketing regions. The internal objective is to achieve the identification of people with the region, the external objective is to promote the regional image and attain an increase in attractiveness. It is important to create a regional identity to be able to believably use external marketing (Melzer 2007, p. 22). Since location decisions are always voluntary, communal business development agencies cannot plan new business setups, but only create an attractive image for potential investors (Pieper 1994, p. 215).

Meyer defines the objectives of place marketing a bit different. From his point of view place marketing should be used to combine forces and integrate different interests and opinions of the region into one concept (e.g. protection of the environment vs. interest in new investor with environmentally harmful products). Besides, it should push activities, measures and ideas in the region and implement suggestions of the target group. Coordinating actions to avoid redundancies and providing and processing information regarding target group, competitors and region are also part of the idea (Meyer 1999, pp. 28-29).

2.2 Elements in a Place Marketing Process

“The main elements contained in any marketing process can be summarized as in figure 2-1. Hereby populations and resources are ultimately brought together so that the needs of the former are satisfied by the products derived from the latter. The conjunction is achieved within the market by means of various sorts of marketing measures” (Ashworth and Voogd 1990, p. 29).

Figure 2-1: Elements in a Place Marketing Process

(adapted from Ashworth and Voogd 1994, p. 43)

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2.3 Levels of Place Marketing

The different levels of place marketing are best described by Kotler, see figure 2-2. According to his definition, the process is made up of planning group, marketing factors and target markets. The planning group comprises citizens, business people, and local and regional government officials. The planning group is responsible for the planning and control process of place marketing. It defines and diagnoses the community’s condition, its major problems, and their causes; develops a vision of the long-term solution to the community’s problems based on a realistic assessment of the community’s values, resources, and opportunities and develops a long-term plan of action involving several intermediate stages of investment and transformation (Kotler et al. 1993, p. 18). It is essential that government and planning group work hand in hand. The success of a region depends on the interaction of politics and planning group (Gubler and Möller, 2006, p. 28).

The four marketing factors of a place, people, image and quality of life, attractions and infrastructure are key elements in the long term planning developed by the planning group. The Place must generate support from its people (citizens, leaders and current institutions), communicate its improved features and life quality through a vigorous image and communication program, ensure that basic services are provided (infrastructure) and provide new attractions to improve quality of life, attract new businesses, or people.

These four marketing factors affect the place’s success in attracting and satisfying its five potential target markets: goods and services producers, corporate headquarters and regional offices, outside investment and export markets, tourism and hospitality business and new residents (Kotler et al. 1993, pp. 19-20).

Figure 2-2: Levels of Place Marketing

(adapted from Kotler et al. 1993, p. 19)

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2.4Who are the Main Targets of Place Marketers?

Places have many target audiences, such as present and future residents, investors, both home and from abroad, skilled workers, students, retirees tourists, both home and from abroad as well as local daytrippers, media and opinion formers, travel companies/travel agents/airlines/transport companies, service industries, foreign governments and foreign investment/economic development bodies and export purchasers (Gilmore 2002, p. 288). An overview is displayed in table 2-1.

However, the focus of this study is on institutional investors in a B2B marketing process as the main objective in place marketing is to get foreign companies to invest in the region. Companies represent one of the most important target groups in place marketing. Especially internationally active companies should have priority in the marketing process as they are more likely to move their business location (Schnurrenberger 2000, p. 57).

Table 2-1: The Four Main Target Markets

(adapted from Kotler et al. 1993, p. 24)

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2.5 Major Actors in Place Marketing

The place marketing activities in the aforementioned target markets are carried out by legions of individuals and organizations. They are found at the local level, regional level, national level, and international level. See table 2-2 (Kotler et al. 1993, p. 34).

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Table 2-2: Major Actors in Place Marketing

(adapted from Kotler et al. 1993, p. 34)

2.6 The Place Marketing Process

The design of the place marketing process is not much different from conventional marketing. The marketer should start with an analysis of the situation, decide on the goals and objectives, to then implement the choices and control them. The simplified illustration of this process is displayed in figure 2-3.

Figure 2-3: Phases of Marketing

(adapted from Gubler and Möller 2006, p. 33)

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Start-up and Organization

Moilanen and Rainisto state that is essential to include a start-up phase before the actual place marketing process begins. The aim is to get organized, secure the commitment of the highest management (political and business life) and create visibility for the process (2009, p. 148).

Situation Analysis/Research Stage

The objective of this stage is to collect basic information for decision-making. The tool for doing this is called place audit (Kotler et al. 1993, p. 81). Auditing helps obtain an impression of the various qualities of the place in relation to its market and results in a better insight into the possible targets, measures and goals (Ashworth and Voogd 1990, p. 32). Important questions in this context are: What are the place’s economic and demographic characteristics? How is the place conceived in the home country and in foreign target audiences? Who are the main competitors? What are the place’s strengths and weaknesses and opportunities and threats? (Moilanen and Rainisto 2009, p. 149).

Another very effective tool to assess how well a site is performing and to create recommendations is a SWOT analysis. In either case the strategic analysis of the place should contain the mission and visions, the core clusters together with the place identity and the focused segments and their positioning are then designed (Moilanen and Rainisto 2009, p. 23). However, it is important to realize that a place does not have to correct all its weaknesses nor push all its strengths. Some attributes are simply unimportant (Kotler et al. 1993, p. 86). The analysis and interpretation of the results builds the foundation of the following steps.

Visions and Goals

The objective of this stage is to draw conclusions from research results, choose elements for brand identity and decide what the community (region) should become (Moilanen and Rainisto 2009, p. 149). Concrete targets and measures are necessary because the place will only achieve what it follows and measures (ibid., p. 23).

Strategic Market Planning

"Once places have a sense of where they want to go, or what they want to become (goals), strategy helps answer how they get there" (Haider 1992, p. 128). The strategic planning process supports a place decide which industries, services, and markets should be encouraged; which should be maintained; and which should be deemphasized or even abandoned (Kotler et al. 1993, p. 80). Strategic place marketing concerns the enhancement of a country’s position in the global market-place. Interesting aspects that may affect marketability can be the size of the domestic market, access to regional trade areas, education of the population, tax incentives, skilled labor, cost of labor, security and other factors (Kotler and Gertner, p. 253).

One important step in designing a country’s marketing strategy is assessing the brand’s image and how it compares to its competitors’ images (ibid., p. 254). However, I will go into further detail about branding in chapter 2.7.2.

Implementation

In order to successfully apply a marketing strategy to a product, the four essential categories of marketing must be looked at: Price, Product, Place, Promotion (the 4 P’s), as displayed in figure 2-4 (Gubler and Möller 2006, p. 95). In place marketing price corresponds to the cost to the investor of locating and operating within the investment site. For governments, this usually means tax incentives, grants, tariff protection, and similar price mechanisms. If the marketer is a country, region or city, the product incorporates the intrinsic advantages and disadvantages of the investment site.

The activities that disseminate information about, or attempt to create an image of the investment site and provide investment services for the prospective investor relate to fourth ‘P’ promotion (Wells and Wint 2000, p. 4). More precisely place promotion can be defined as the conscious use of publicity and marketing to communicate selective images of specific geographical localities or areas to a target audience (Gold and Ward 1994, p. 2).

To promote investment, Morisset and Andrews-Johnson suggest the following functions: image building (by advertising in general financial media or participating in investment exhibitions), investor generation (engaging in direct mail or telemarketing campaigns, conducting industry- or sector-specific information seminars), investor services (providing investment counseling services and postinvestment services) and policy advocacy (participating in policy task forces, developing lobbying activities) (Morisset and Andrews-Johnson 2004, p. 33).

Under ideal circumstances the promotional activities targeted to attract new businesses, are not recognized as such, but seem to be perfectly aimed at the self-interest of the potential investor (Pieper 1994, p. 218).

Figure 2-4: The 4 P’s in Place Marketing

(adapted from Gubler and Möller 2006, p. 95)

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Evaluation

The effectiveness of the marketing actions must be checked by broad controlling measures (Dallmann 2005, p. 22). “Place marketing succeeds when stakeholders such as citizens, workers, and business firms derive satisfaction from their community, and when visitors, new businesses, and investors find their expectations met” (Kotler et al. 1993, p. 18). Attracting new firms alone is not enough. It is also important to retain existing businesses (ibid., p. 247).

It can be recapitulated that only places using leadership to manage the place’s resources in the complex place marketing process will be winners. Passively behaving locations will lose their competitive edge (Moilanen and Rainisto 2009, p. 25).

For a more compact overview of the marketing process, please see appendix Table X-2: Stages of the Strategic Market Planning Process.

2.7 Designing the Place’s Image

2.7.1 Image Marketing

“Whether positive or negative, focused or diffuse, held widely or by only a few, developed deliberately or by default, and formed from education, the media, travel, immigration, product purchases, business experiences or any combination of sources, every place has an image” (Papadopoulos and Heslop 2002, p. 295). In this context Kotler defines an image as “a whole set of beliefs about a place” (Kotler et al. 1993, p. 141).

Due to the complexity of images, they aren’t easy to develop or change. “They require research into how residents and outsiders currently see the place; they require identifying true and untrue elements, as well as strong and weak elements and they require a substantial budget for the image’s dissemination” (ibid., p. 37).

A place’s image can be measured by a target audience along a familiarity scale: know well, a fair amount, know a little, heard of, or know nothing. However, it is important to realize that since people's attitudes and actions toward a place are highly conditioned by their beliefs about it, a place's image varies within different target groups (Haider 1992, p. 130). Different people can hold quite different images of the same place (Kotler et al. 1993, p. 141). “From Greek mythology to French panache and Russian roulette, from German engineering and Japanese technology to British rock and Brazilian soccer, and from Brussels lace to Hollywood movies, references to countries and places are everywhere around us in our daily life, social interaction and work” (Papadopoulos and Heslop 2002, p. 295).

“How does an image differ from a stereotype? A stereotype suggests a widely held image that is highly distorted and simplistic and that carries a favorable or unfavorable attitude toward the place. An image on the other hand, is a more personal perception of a place that can vary from person to person” (Kotler et al. 1993, p.141).

Cost and effectiveness of the image strategy depend on the place’s current image and real attributes. Places may find themselves in one of the six image situations: positive image, weak image, negative image, mixed image, contradictory image or overly attractive image (ibid., p. 35). Tools to implement an effective image of a place can be slogans, themes, and positions, visual symbols (Big Ben – London, etc.) or events and deeds (Russia exports its ballet to create image) (ibid., p. 151).

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It is important to realize that an overly attractive image of a place is not always beneficial but may be counterproductive. Figure X-1: City Growth/Decay Dynamics of the appendix displays this problem.

Once a negative image has been connected to a place or region, it can be corrected in several ways. One possibility is to make a positive out of a negative image. If a region is mostly known for its bad weather, why not promote it as a winter wonderland. Other approaches could be the use of marketing icons or to simply remove the negative aspect (ibid., pp. 158-160).

In either case it can be concluded, that the concept of place image does not lend itself to the sharp clarity of definition that is possible with the brand image of a product except in respect to specific product categories associated with the place (O’Shaughnessy and O’Shaughnessy 2000, p. 60).

2.7.2 Branding

“A brand embodies a whole set of physical and socio-psychological attributes and beliefs which are associated with the product” (Simoes and Dibb 2001, p. 217). “A brand is created and shaped in the consumer’s mind” (Moilanen and Rainisto 2009, p. 7). With these definitions in mind, the complexity of the matter is apparent. Places are increasingly facing global competition in both their external and domestic markets, resulting in a growing in frequency in the application of branding techniques to places (Hanna and Rowley 2008, p. 61). Just as in image marketing, building and sustaining a place brand is demanding and differs significantly from controlling a traditional brand. It is common that a place brand is neither developed nor coordinated in one single direction but that there are many fields affected (e.g. tourism, technology, investment, or business) (Moilanen and Rainisto 2009, p. 1). What makes the matter even more difficult is the fact that even though the practice of branding geographic locations such as countries, regions, cities and towns is increasing, there is still a paucity of valuable published research on the topic (Hankinson 2001, p. 127).

Zerrillo and Thomas suggest an eight-stage model for building place brands. Stage 1: Sector Importance Identification, Stage 2: Markets Served Assessment, Stage 3: Purchase Decision Impact, Stage 4: Current Position Assessment, Stage 5: Future Position Analysis, Stage 6: Cost – Benefit Assessment, Stage 7: Program Implementation, Stage 8: Impact Measurement (Zerrillo and Thomas 2007, pp. 91-93).

Kurzhals represents a different approach. In his opinion a city or region is not invented and turned into a brand, but evolves historically. The idea is to use existent themes and offers and select them into high potential and low potential aspects and communicate them according to the needs of the target group (Kurzhals 2007, p. 30).

Kavaratzis and Ashworth state that place branding centers on people’s perceptions and images and puts them at the heart of orchestrated activities, designed to shape the place and its future. To them managing the place brand becomes an attempt to influence and treat those mental maps in a way that is deemed favorable to the present circumstances and future needs of the place (Kavaratzis and Ashworth 2005, p. 507).

Moilanen and Rainisto suggest three essential concepts in relation to brands: Central in their place branding concept is building the identity of the place.

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The identity is defined by the sender who can decide how he wants the brand to be experienced. The image on the other hand is developed in the receivers mind and shows how the brand is being experienced in reality. The third element in their concept is the communication of the message. The sender must decide on how he wants to communicate the message (Moilanen and Rainisto 2009, p. 25).

Brand identity, brand positioning and brand image are related as in figure 2-5:

Figure 2-5: Brand Identity, Brand Positioning and Brand Image

(adapted from Kavaratzis and Ashworth 2005, p. 508)

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Branding as such is at best complex and at worst impossible (Hankinson 2001, p. 127). However, developing a place brand can be seen as an investment that has a very high return on investment (ROI) if it succeeds (Moilanen and Rainisto 2009, p. 163). An example of a famous well developed brand is Paris (ibid., p. 7).

2.7.3 Distributing the Place’s Image and Messages

To distribute a place’s image it is important to first define the target audience. After that one must check which broad influence tools are available. The major influence tools are advertising, direct marketing, sales promotion, public relations, and personal selling. The next step in the distribution process is the selection of the right advertising media channel and vehicle. Television, radio, magazines, newspapers, billboards, direct mail, telephone, brochures and internet are at choice. It is important to then choose the right vehicle for the target (Kotler et al. 1993, pp. 162-193).

2.8 Services in Attracting, Retaining and Expanding Businesses

According to Morisset and Andrews-Jones, there are three kinds of assistance to investors:

- Preinvestment activities (idea is to provide basic information)
- Assisting investors during project implementation (for example, assistance with business or tax registration, sectoral licensing, land, construction, and utilities (offered by agencies that act as “one-stop shops”)
- Postinvestment services (including periodic meetings with existing investors in an effort to gather information on issues they face and help them resolve problems) (Morisset and Andrews-Johnson 2004, p. 39).

These presumptions are supported by Wells and Wint whose survey indicates, that investment counseling, expediting the processing of applications and permits, and providing postinvestment services are regarded as integral components of the investment promotion function by investment promotion agencies (Wells and Wint 2000, p. 25).

In this context the concept of a One-Stop Shop (OSS) is very appealing. The basic idea is that an investor would only have to be in contact with a single entity to obtain all the necessary paperwork in one streamlined and coordinated process. This service would be very helpful to investors and simplify the process enormously. Yet these OSSs are still exceptions rather than the rule around the world. Practically all governments that have tried to implement OSSs have encountered considerable resistance by the various government agencies responsible for the administrative procedures. Most important, other ministries and agencies fear that the creation of such an OSS would result in curtailing their authority and mandate. Thus, they quickly lead to intensive turf battles within the government bureaucracy. Without the necessary political support, OSSs have proved to be more a “one more stop” because investors have to interact with one more entity in the process of implementing their projects (Morisset and Andrews-Johnson 2004, p. 41).

2.9 Essentials to Successful Place Marketing

A theoretical framework helps to focus the analysis. Rainisto was one of the first to present a concept of the most critical elements of place marketing, see figure 2-6. His theoretical framework has three “dimensions” of success factors.

The factors in the prism represent the core building stones/fundamental structures in place marketing (planning group, vision and strategic analysis, place identity and place image, public-private partnerships and leadership).

The factors on the side of the framework ‘prism’ help face the challenges in the network and in the macroenvironment (political unity, global marketplace, local development and process coincidences).

The third dimension of the framework consists of the “how and ability” factors (strategic exploitation, organizing capacity, presence of substance, measurement and follow up) which bring additional strain to the challenges of place marketing. All of the framework’s success factors are linked together in an interactive way to support the success of a place marketing process (Moilanen and Rainisto 2009, p. 23).

Figure 2-6: Success Factors in Place Marketing

(adapted from Rainisto 2003, p. 227; Moilanen and Rainisto 2009, p. 22)

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2.10 Problems

According to Moilanen and Rainisto the most critical part of the place brand process is guaranteeing sufficient and continuous financing (Moilanen and Rainisto 2009, p. 159).

Another problem is that locations just like companies are exposed to constant change that can endanger their positive development. Such changes concern both internal aspects such as company flight or demographic change and external influences like phases of recession (Gubler and Möller 2006, p. 17). Contrary to physical products, the place as a product is altered for example by seasonal changes that transform the actual product (summer – winter) (Moilanen and Rainisto 2009, p. 21).

Besides, due to difficulties in control, many places find themselves in a situation where various organizations are marketing the same place but with different or sometimes even opposite arguments (ibid. 2009, p. 19). This can have negative consequences, as too many cooks spoil the broth.

3How Investors make their Choices

3.1 General Framework

According to Kotler et al. place buying equals place selling in its complexity. To be in a better position to compete for the buyer’s choice it is essential that the place seller more fully understands the place buying process (1993, p. 46). If the country as well as region marketers fail to comprehend how companies make their site selection, they are likely to lose the potential investor during the decision-making process. As stated by Pieper, it is important to see that investors looking for a new business location, are not only interested in the direct location, but incorporate an area within a radius of about 30 km in their decision making process (1994, p. 205).

This chapter addresses the following questions:

1. What are the main steps and factors influencing the place buying process?
2. What is weighted stronger: soft or hard facts?
3. What influence does place-rating information have on the decision making process?
4. What is the importance of Cluster?

3.2 Steps and Factors Influencing the Buying Process

Kotler et al. have identified five stages buyers tend to pass through in choosing a place, as summarized in table 3-1. The most common step interested investors or expanding companies start with after recognizing the problem, is choosing a region in which to invest (e.g. Latin America) and collecting information about the potential candidates. In this phase, each country (region) must be able to provide accurate and reliable information according to the company’s or investor’s needs. Better, it should anticipate informational needs. The country (region) should understand the locational characteristics companies are seeking as they relate to labor, tax climate, amenities, higher education, schools, regulation, energy, communication and business (Kotler and Gertner 2002, p. 257).

Table 3-1: Five Stages in Choosing a Place

(Kotler et al. 1993, p. 46)

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The amount of information collected has great influence on the evaluation process, as it narrows the buyer’s choice set. The box at the far left of figure 3-1 shows the total set of alternatives that are potentially available to the buyer. However, the buyer is only aware of a subset of these alternatives – the awareness set. Merely few of these alternatives satisfy the buyers buying criteria and make up the consideration set. As more information is gathered about these places, only a few remain as strong contenders and make up the choice set. The final decision is then based on the buyer’s evaluation criteria (Kotler et al. 1993, p. 49).

Figure 3-1: Successive Sets Involved in Buyer Decision Making

(adapted from Kotler et al. 1993, p. 51)

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Once the alternatives have been narrowed down, the buyer must organize the information and arrive at a final choice. Even though this decision making process is very complex, certain basic concepts exist that can help us understand the buyer evaluation process better. First the buyer sees a given place as a bundle of particular attributes. A factory site e.g. is valued by its land costs, labor skills, energy costs and taxes. Second, buyers decide which attributes are salient and important to then decide where each place stands on each attribute. Third, buyers develop a utility function for each attribute. Finally, the buyer arrives at an attitude toward place alternatives through some evaluation procedure (ibid., p. 51). The purchase decision is then formed on the basis of expected benefits and costs and is heavily influenced by the perceived risk and attitudes of others. After purchasing and experiencing the chosen place, the buyer experiences some level of satisfaction or dissatisfaction (postpurchase behavior) (ibid., pp. 46-58).

The top four key factors in deciding where to locate are, easy access to markets, customers or clients as the most important factor, availability of quality staff, quality of telecommunications, and transport, see table 3-2 (Cushman & Wakefield 2009, p. 4).

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Table 3-2: Essential Factors for Locating a Business

(adapted from Cushman & Wakefield 2009, p. 7)

3.3 Soft vs. Hard Facts

Location factors can be divided into hard and soft facts. Hard facts can be assessed objectively and manipulated directly. Examples of hard facts are: taxes, cost of living and education. Soft facts however are rated subjectively and changes are only possible in a long run context. Examples are: cultural offerings, quality of life, landscape and safety (Gubler and Möller 2006, p. 62).

It is important to see that even though investors are interested in hard facts in a first step, the final decision is mostly based on soft facts. (See figure 3-2).

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Figure 3-2: Temporal Course of Locational Decision Making

(adapted from Gubler and Möller 2006, p. 62)

3.4 Influence of Place-Rating Information

There are countless ratings and rankings available in the field of place marketing. The results can be very different depending on the location factors that have been assessed. Therefore not one of these surveys can really display the qualities of a location (Gubler and Möller 2006, p. 64). However, place rating systems can be a helpful guidance for place buyers to make their decisions and place marketers can use soft characteristics, as well as hard facts to paint their cities in the most favorable light (Kotler et al. 1993, pp. 62, 65). At best this system can help a place estimate its competitive position (Kurzhals 2007, p. 27). No matter if the ranking turns out to be positive or negative, it is only a snap shot. What counts is the image that can be built up in the target markets mind in the long run. And this is not only quantitative, but qualitative (ibid., p. 28).

Despite the problems with rankings, they offer a quick and convenient picture and require little effort to use. Nevertheless, place buyers would be foolish if they placed too high a reliance on the ratings (Kotler et al. 1993, pp. 67, 69).

Ironically, strong positive ratings sometimes produce negative outcomes, as in case of Seattle, Santa Fe, and San Diego. After surveys rated them as wonderful places to live, thousands of people were attracted to them which resulted in disproportional relocation. As a result the cities had to try to control congestion and development and even to discourage more newcomers (ibid.. 1993, p. 69).

3.5 Importance of Cluster

According to Porter, today’s economic map of the world is dominated by clusters - ;critical masses in one place - of unusual competitive success in particular fields. “Clusters are a striking feature of virtually every national, regional, state, and even metropolitan economy, especially in more economically advanced nations. Silicon Valley and Hollywood may be the world’s best known clusters” (Porter 1998, p. 78).

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„Clusters affect competition in three broad ways: first, by increasing the productivity of companies based in the area; second, by driving the direction and pace of innovation, which underpins future productivity growth; and third, by stimulating the formation of new businesses, which expands and strengthens the cluster itself” (Porter 2008, p. 229).

Figure 3-3 shows the effect of location on competition. A few elements deserve highlighting because they are important to understanding the role of clusters in competition. Factor inputs include tangible assets, which must improve in efficiency, quality, and ultimately specialization to particular cluster areas to increase productivity (ibid., p. 227).

The context for firm strategy and rivalry refers to the local conditions that affect how companies are created, organized, and managed and the intensity of local rivalry. Local competition stimulates innovation and efficiency (Porter 1990, p. 77). “Competition must shift from imitation to innovation and from low investment to high investment. Clusters, as will be evident, play an integral role in these transitions” (Porter 2008, p. 228).

Demand Conditions at home have to do with the nature of home-market demand for the industry’s product or service. A more demanding local market leads to regional advantage. Clusters of linked industries play a central role in setting demand conditions. The existence, extent and competitive strength of supplier industries and other related industries in the region that are internationally competitive are represented by related and supporting industries (Porter 1990, p. 77).

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