Analysis: Romania's ad market remains in growth mode

As one of the few countries in which trust in the advertising industry is growing, Romania seems to be moving against the tide. While the local trend is more encouraging, the European advertising industry’s expectations for market advancement are only moderately positive, and the confidence of marketing and advertising professionals fell slightly in the first quarter of 2016.

Romanita Oprea

These are the Union of Romanian Advertising Agencies’ (UAPR’s) and the European Association of Communication Agencies’ (EACA’s) conclusions in a report on Romania. The European index indicates the average trust coefficient at European level has fallen from +11 to +8 (from January to April 2016).

This makes Romania one of a few markets with a high level of trust in the advertising industry. Why is this so? Carmen Capitanescu, marketing manager of Media Galaxy, points out that the country is going through an optimistic period with economic growth, fiscal relaxation and a sensible rise in investments. In response, consumption has increased and all the financial figures are encouraging for the moment. “But this optimistic environment is very sensitive to a series of factors like political challenges and social struggles. From another perspective, I feel that marketers’ influence within organizations is growing and the power and influence of the marketing function will increase over the coming years. This is a shift fueled by the increasing use of technology innovations in marketing that enable closer customer relationships, micro-targeting and improved measurement capabilities,” said Capitanescu.

In turn, Dana Bursuc, business consultant at Best Minds Design, is confident that the recent positive business development signs that the Romanian market has shown have boosted confidence. “While the extent to which the tentative recovery of economic indicators may be the subject of significant debate, recent fiscal relaxation measures and improvements in the labor market have certainly fueled positive perceptions, even if these positive signs have yet to become visible at the consumer level. In fact, consumer confidence is currently negative and is down from the previous year. This has, in turn, raised questions about the sustainability of the Advertising Business Confidence Index (ABCI). This index has exhibited strong signs of volatility and any positive opinions are fragile, at best, in Romania,” said Bursuc.

The evolution of the ABCI is often sensitive to political shifts, cultural specifics and other factors. Measuring people’s perceptions involves the use of qualitative data, which can be subjective. As such, the ABCI may not always be reflective of business realities. “The Romanian political scene was stable throughout the study fieldwork period, with the usual ‘controversial’ flavor, and no significant positive change was observed. It seems that Romanians have grown accustomed to daily political disputes and scandals; in fact, the meaning of political crisis has most certainly been redefined in recent years. Culturally, it is well known that Romanians tend to voice positive opinions when questioned during research studies and, overall, they lean toward answers that are perceived to be ‘politically correct’, unless a strongly opposed view is justified,” added Bursuc.

Still, the Best Minds Design representative underlines that this snapshot reveals a positive moment, an optimistic view of business development and the evolution of advertising demand in the first quarter. “This encouraging attitude may be predictive of future recovery signs in consumer confidence, even if this recovery is limited to specific clusters. However, it is important to note that this is not necessarily the case. There is no predictable statistical correlation between the ABCI and the specific drivers that underpin it. It is widely accepted that positive thinking tends to have a positive impact; as such, optimistic perspectives are healthier,” concluded Bursuc.

Looking for confirmation

Where does all this confidence come from in Romania’s case? “I think it is fueled by new and evolving opportunities to leverage insights across marketing investments to drive ROI. Advances in data and analytics are creating new grounds for our industry. Thanks to the new and more sophisticated analysis systems, both big and small brands can access information that allow them to connect the data to the consumers and create truly interesting and relevant services for them,” commented Capitanescu.

More than that, she also cites the new wave of information that brings confirmation. “Big data can support us in quantifying the speculation and ensure an overall perspective of the way consumers think, act and behave. Now marketers have the opportunity to understand the way shoppers buy and how the price and the value act versus the brand. However, data is not relevant unless interpreted carefully and comprehensively. It only tells part of the story; the rest is for marketers to discover and interpret based on experience and the knowledge they have of the consumer.” added the Media Galaxy representative.

The positive trend may also have to do with the argument that all perspectives and 2016 market projections look positive, judging by Initiative’s Media Fact Book report on major players’ forecasts. There is also the matter of competition: when it is high, the impact on advertising investment is positive. Advertisers will fight for visibility, pay for differentiation, and invest to attract consumers. “Furthermore, the vertical integration approaches that many advertisers have adopted allow valuable financial resources to be partially directed to sustain competitive fights, provided that advertising professionals and marketers demonstrate their added value and positive impact,” commented Bursuc.

As with all other industries, the crisis changed the media landscape and it still has a mark on the industry. Even though the market is recovering, players still watch every step and every decision they take more carefully.

So are we finally out of the crisis and moving on? According to Capitanescu, most segments have posted a revival in the last two years. “But we must remain alert and pay attention to what will happen next. The 2008 crisis surprised us all and only the strong and prepared ones stood their ground. As always, you must adapt or die. I do believe this will be a good year – the next months hold promise for growth and we are optimistic about customer spending and the growth of marketing budgets over the next period,” said Capitanescu.

However, on the agency side, Loredana Saru, client service director at the independent agency Jazz, believes that the crisis is still here and is not going anywhere yet. It changed marketers’ perspectives and made them rethink their strategies – from a survival mindset (reactive and less focused on creating real value in their business) to becoming more optimistic in taking new steps, but more cautious in calculating the risks and making plans. “Today, they are aware that with every increase, there is a price to pay, and they make decisions based on the desired results as well as the costs. They no longer dream or throw themselves into things like before, they are more focused on organic growth, on building real added-value for the consumers, which ensures the stability of their business,” said Saru.

Creativity steers the ship

In this context, one wonders why marketers see the market so positively. The rise of creativity and the awards received by Romanian agencies at major international festivals may indicate that “creativity sells”.

“When it comes to creativity, the crisis was a good moment to take marketers out of their comfort zone and start building value to increase brand sales, especially when competitors relied on old templates for fear of failure. For Romanians, failure is still perceived as a sign of bad management or a bad decision, and not as an experience, a step towards something better or a new beginning. Companies are reluctant to pay for a great idea, as it would require a financial investment. And, unless you come with a clear and measurable solution for the results (sales or brand), many ideas are left in the drawer, waiting for better financial times,” said the Jazz client service director.

She also points out that marketers tend to use advertising patterns and creativity, which is measurable; however, differentiation and innovation in communication should be embraced as well. “This is somehow our task, as advertising and brand specialists – to open their minds and give them new perspectives. In this interaction between agency and client, there are perspectives that meet and influence each other. We always try to make our clients understand that the power of communication does not only mean a PR or sales stunt, but one which can inspire, educate and transmit values to the consumers,” added Saru.

A positive outcome is also seen by Dana Bursuc who believes that the demand for advertising services will continue to grow, even if the market within which advertisers operate remains challenging. “This will have a positive impact on scoring. No major changes are expected at the macro level; as such, there is a foundation for a positive confidence index at year-end,” Bursuc added.

Maturity or not?

According to Carmen Capitanescu, the Romanian market has already entered a maturing process. The shopper journey to purchase is a lot more complicated than it was ten years ago, and one of the things that knits it all together is technology. Technology continues to advance at a rapid pace and shopper preferences are constantly changing. Nowdays, they are looking for specific benefits from brands, other than price. „In the midst of a rapidly evolving omnichannel world, a rock solid understanding of shopper behavior and their evolving expectations has never been more critical. It is important to know how to translate the shopper insights into dramatic growth opportunities for our business – anticipate and predict the future expectations, create seamless and connected brand experiences along the complex shopper journey – in-store, online and in-home,” explained the marketing manager of Media Galaxy.

Moreover, as she points out, in a context where technology allows blocking online ads and avoiding ads on TV, marketers must constantly seek new means to differentiate. „They must collaborate in real time with cross functional and cross industry teams and use new technologies and methodologies to accelerate purchase strategies. It is important to permanently be where the customers are and provide them with the opportunity to enjoy the highest quality, whether we are talking about products or services. These new paradigms have the force to further drive evolution in the industry, contributing to market maturity,” concluded Capitanescu.

On her turn, Dana Bursuc, attracts the attention to the fact that it depends on how one defines ‘maturity’ and the frame of reference. We can say that a certain percentage of the population can afford relatively high quality and that convenience is becoming more affordable for them in their everyday lives. “However, even that percentage is significantly lower than that of developed nations, where people will readily spend more for customization (as many do in North America, Japan, and Western Europe) to satisfy individual tastes and desires. If we take a broader view and consider the fact that Romania’s poverty index is one of the highest in Europe, the picture is changing, even if some progress is recorded,” said Diana Bursuc.

In terms of the advertising market, in particular, she believes that the situation is much better: demand is slightly increasing, as we noticed. In addition, the number of advertisers and the amount of investment is also growing. On the whole, a strong industry trend toward the development of higher quality services and product solutions can be observed. There can be no doubts that we are witnessing a visible evolution towards a more mature market.

“As mentioned above, the advertising industry can grow further by capitalizing on the increased competitiveness and performance pressure on the client side, which can result in increased spending in the fight for visibility share. Still, this approach doesn’t always help when agencies fight for a bigger share of market investments in the advertiser’s P&L; this builds neither a significant competitive advantage nor client loyalty. It is only if we look at the evolution of the average client-agency relationship that we can observe a dramatic decline, even if trends are different revenue-wise,” added Bursuc.

Also, whether we like it or not, it’s important to remember that businesses are changing, and the advertising industry is changing at the same time. Old business models will soon become outdated. For example, as Bursuc is pointing out, last year, IAB Europe announced that expenditure on online advertising had surpassed that of the television advertising market in 2015. The online channel provides advertisers with better targeting, increased effectiveness and efficiency, improved measurement across the entire buying cycle, more effective influencing tools, etc. This trend has impacted creative businesses, media companies, PR professionals and so on. In Romania, the online advertising channel is far from dominant. “However, this makes sense in the context of the smartphone penetration level and other market specifics. It is interesting to note that the majority of online ad investment share goes to international players, while local suppliers are getting less and less of the market. They are struggling within the limits of their platforms to deliver against clients’ programmatic needs and without a proper investment in building relevant value propositions it is unlikely that things will improve. Sometimes, an entity’s own business strategy may represent the main barrier to growth. The “cash cow” approach may satisfy shareholders in the short term; however, it doesn’t equip the business to deliver on customers’ needs and capitalize on the new market trends,” commented the business consultant of Best Minds Design.

But, real maturity in the advertising industry is most certainly impacted by both strategic approaches. “For that reason, it is crucial that the skills of existing teams are upgraded on a continual basis; for example, professional competencies, strategic and creative thinking, the ability to seize and build opportunities in a constantly changing environment, new learning skills, and different approaches to leadership are just a few of the critical skills that will underpin performance in the forthcoming years. I see many players are currently preparing themselves to outperform their competitors in terms of customer anticipation and are continually investing in efforts to raise the industry standards and increase confidence in the impact of advertising. What is certain is that a positive ABCI undoubtedly reflects, and will continue to reflect, their efforts,” concluded Dana Bursuc.

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