Thursday, 26 November 2009

Dodge those Russian mines


As the boom fizzled out in Russia, where did that leave the country’s nascent design industry? Alexei Goncharenko offers his top survival tips.
Until 2006, the annual ad market growth in Russia was in the region of 20 to 60 per cent, which was surely the definition of ‘Boomtown’ for start-ups and big players alike.

Huge ad budgets became an everyday occurrence even for medium-sized local businesses. With high spending on advertising, brands had to represent themselves to an ever more expectant consumer. Thus,to an extent, the market became self-propelling.

Back in 2000, the only strong brands on the market were the ubiquitous international players such as McDonald’s, Coca-Cola and Pepsi. Russian companies slowly realised the power a strong brand gives them.

One of the first to rebrand was oligarch Mikhail Fridman’s Alfa-Bank, which reinvented Russian banking by sporting a smart new red ‘A’, courtesy of Wolff Olins.

Another Wolff Olins/Fridman success story was mobile phone operator Beeline, characterised by a stylish yellow and black striped roundel. As Wolff Olins carved open a new-world telecoms brand, Landor Associates’ riposte was an airline identity, for Russia’s number two airline S7, whose lime-green liveries certainly communicate change. Meanwhile, Minale Tattersfield rebranded the gargantuan state-controlled oil industry trio of Lukoil in 2000, Rosneft in 2006 and Gazprom Neft this year, in conjunction with local consultancy Mildberry.

Following an era of prosperity, Russia was hit particularly hard by the recent economic downturn, partly as a result of international financiers’ new conservatism towards emerging markets, and partly because of the plunge in oil prices.

Not surprisingly, advertising and branding markets shrank instantly. Budgets were cut by 50 to 80 per cent, and branding projects were curtailed without compensation. Some brands disappeared completely. What was a flourishing market the year before looked more like an abandoned city.

Those still standing within advertising and branding now have to endure free creative pitches, lower fee structures, longer client decision-making times, and a longer wait for payments, if they are made at all - upfront payments are but a distant memory. Being a representative of a well-known international network is no protection against such shoddy treatment by clients.

The chasm between the Anglo-Saxon and Russian business cultures can be clearly illustrated with a simple case - if you want to create a new brand for your business, what would you do?

Ordinarily, you might get the lead consultancies to pitch, choose a winner, execute the task and pay. The Russian way is to organise a free pitch, choose your pet consultancy as winner and arm it with all the best ideas of all the other pitch participants. That’s how you get the job done.

And you can leave the job unpaid for an indefinite time if you select your most trusted pet consultancy. Forget about copyright and other trivialities ruining your mood.

It is not uncommon for a middle-level Russian client to use your ideas and never consider paying for them. Each of us has numerous anecdotes to make this point.

In 2006, we took part in a pitch organised by one of Russia’s leading juice producers, where we presented our ideas for a new ‘milk cow’ product package.

Although we didn’t win the pitch, it didn’t stop the client passing on our ideas to a third party for implementation.

Taking legal action is unlikely to resolve the issue and would just waste further time and money. While plagiarism may be the ultimate form of flattery, unfortunately, it doesn’t pay the rent.

It is ironic, for a society that prizes designer ‘bling’, that creativity has such a low value among Russian businesses, both large and small. There seems to be no embarrassment in offering £200 for a new logo.

Clearly, we in the design community have to take some responsibility for educating clients as to the benefits of properly considered and targeted design solutions.

In spite of this, would I still recommend consultancies to go to Russia?

The answer is definitely yes, if you are an experienced trooper, skilled in detecting and disarming business mines. The market is showing signs of revival. Should the recession be V-shaped rather than W-shaped, the growth might be exceptional once again.

But, most importantly, be armed with a trustworthy local pathfinder.

Post-recession Market pitfalls
  • Free creative pitches have become more common
  • Fees are lower than they used to be, and low value is placed on creativity in general
  • Payments can be slow to come through
  • Upfront payments have become rare
  • Clients may keep you waiting longer for a decision
  • Beware of clients that use the ideas you pitched without ever paying for them

source from: Design Week
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