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Plant location and place marketing: understanding the process from the business customer's perspective
Industrial Marketing Management 31 (2002) 393 – 401
Plant location and place marketing: understanding the process from the business customer’s perspective Wolfgang Ulagaa, Arun Sharmab,*, R. Krishnanc a
EDHEC Graduate School of Management, Catholic University of Lille, France Department of Marketing, University of Miami, 521 Jenkins Road, PO Box 248147, Coral Gables, FL 33124-6554, USA c California Polytechnic State University, San Luis Obispo, CA, USA
b
Received 10 March 2000; received in revised form 15 July 2000; accepted 12 September 2000
Abstract In the past decade, there has been an increased interest in place marketing, especially as countries and locations have been spending more money to encourage firms to locate their offices and plant locations in the place marketer’s area. In this paper, we examine the place marketing from the perspective of the marketer and that of the business customer, specifically in the area of communication and information distribution (in the era of the Internet). In literature, place marketing strategies vary from the very simple to the very sophisticated. Through examination of present marketing and communication practices of place marketers, we find that these strategies are unplanned or ‘‘seat of the pants.’’ We also find that the primary reason for the lack of deliberate and targeted strategies is a lack of understanding of customer decisionmaking processes. We suggest that only by understanding differences in business customer segments of the market can place marketers become more efficient and effective in winning plant placements. Using data from business customer decision-making processes, we attempt to close the knowledge gap. D 2002 Elsevier Science Inc. All rights reserved. Keywords: Place marketing; B2B; Business-to-business marketing; Marketing strategies
1. Introduction In the last decade, there has been a resurgence in the marketing of places. Countries and regions are increasingly competing to attract businesses and investment. In recent times, countries, states, and regions have established departments and enhanced budgets to attract businesses and plant locations. For example, European governments and regional authorities employ more than 3000 people and spend 12 billion dollars each year to compete for jobs and corporate taxes generated by foreign business customers [1]. The primary role of place marketers is to promote the region and provide information to firms seeking plant and office locations, i.e., in the area of communication and information diffusion. However, in spite of the critical role of information diffusion in the success of place marketers, there is little data available on the communication practices of place marketers. In addition, effective information * Corresponding author. Tel.: +1-305-284-5935; fax: +1-305-2845326. E-mail address: [email protected] (A. Sharma).
diffusion may be more critical with the emergence of the Internet. Place marketers may need to develop additional communication strategies, as data from other place marketers may be easily available and comparable on the Internet. We focus on the communication and information diffusion practices of place marketers. In this paper, we use the phrase place marketers to designate agencies, departments, and other entities engaged in the promotion of a location for plant or office placement. We use the phrase customers to designate business firms seeking to locate their plants and offices. In spite of the importance of this topic, the state-of-theart and efficacy of place marketing and communication practices have not been examined. Only by understanding the present situation and the ‘‘knowledge gaps’’ can better strategy be suggested. Our purpose in this paper is to attempt to close the ‘‘knowledge gap’’ between place marketers’ current practice and the requirements for effectiveness. The area of information distribution, especially in the era of the Internet is of great interest. This paper extends an earlier research project that only examined business decision making [2]. In the next section, we explicate the research in this area. This is followed by a presentation of
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data collected on place marketers. The knowledge gaps are then identified. We then present our data collection methodology for business customer decision-making processes followed by a discussion of results. The last section of the article discusses implications of our findings and directions for future inquiry.
2. Literature review Plant location research can be divided into three perspectives. The first perspective is prescriptive, i.e., describing how plant location decisions should be made. The second perspective is nation based, i.e., what a nation should do to be more attractive for firms to locate plants in that country. The third perspective is business customer based, i.e., what criteria are actually used to make plant location decisions. The decision-making criteria for plant locations are regarded as transitory and evolving [3– 6]. The three perspectives are discussed next. The first research stream is prescriptive — the research deals with both how plants should be organized and where plants should be located [7 – 10]. For example, some researchers have examined what type of plant to build. In that arena, Schmenner [11] suggests that plants be based on products, market area, product-market, processes, or general purpose. This list has been modified by Ferdows [12], who suggests that foreign plants should be offshore factories (low cost), source factories (offshore factories with autonomy), server factories (national and regional manufacturing), contributor factories (national and regional manufacturing with product and process responsibility), outpost factories (collect information in advanced markets), or lead factories (new products and processes). In addition, management scientists have determined algorithms for optimal plant location [13]. An issue that arises from this research is the lack of diffusion of these models in practice. The second type of research addresses the broad question of what makes locations and nations attractive to manufacturers. For example, Kanter [14], Porter [15], and Kotler et al. [16] discuss issues such as competitiveness, strategic postures of nations and areas, nations’ strengths and weaknesses, strategic thrust, investment policies, industrial portfolios, infrastructure, institutions, and strategic implementation. In our context, the nation- and locationbased strategies are less relevant as we seek knowledge about place marketing practices of departments in the same region competing for customers. The third stream of research identifies factors that firms use to make location decisions. Kotler et al. [6] suggest that plant location decision making is based on: 1. local labor markets; 2. access to customer and supplier markets’ 3. availability of development sites, facilities, and infrastructure’
4. 5. 6. 7. 8. 9. 10.
transportation; education and training opportunities; quality of life; business climate; access to R&D facilities; capital availability; and taxes and regulations.
Researchers have also suggested that plant location factors are evolving [4,6,17]. Quality factors such as quality of workforce, quality of life, quality of education and quality of industrial freedom are becoming more important. The previous literature review identified two gaps in our understanding. First, what types of strategies do place marketers design and implement? Second, what is the decision-making process in plant location decisions in the context of place marketing? This insight is needed to reduce the ‘‘knowledge gap’’ that exists.
3. Place marketing strategies In order for us to understand place marketing practices, we collected data from place marketers. Our purpose was to understand place marketing processes from the perspective of all departments and agencies involved in place marketing strategies. Due to the proximity of the researcher to the Alsace region in France (Eastern France at the German border), in-depth interviews were conducted in this area, as follows:
A senior manager from the department in charge of investment in the region. Senior managers from both counties that form the region. A senior manager from the promotion department of Strasburg, the largest city in the region. A senior manager of the department of the region that was seeking firms to reindustrialize regional potassium mines. A senior manager of a firm that was planning to lay off personnel was asked by the government to seek firms to hire those personnel.
To ensure that the interviews from one region did not bias our results, we also interviewed senior managers from five successful place marketers in other French regions. The data collected from the five other regions did not differ from that of the original interviews. 3.1. Results 3.1.1. Markets and competition Place marketers have a very narrow market view. Their major concern is not client firms, but the competition. They are focused on competition, and they first perceive their
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major competition as firms within the regions, and only then that they recognize competition across regions within the same country. Place marketers rarely mention other countries and see markets as an outgrowth of divergence of objectives and political frictions within the region. 3.1.2. Marketing planning All place marketers established marketing plans describing business customers sought and planned marketing activities by industry and country. The majority of place marketers did not use channels of information provided by the national level place marketer — DATAR — to generate leads with foreign customers. Instead, they preferred to build their own channels of information with their own office in multiple countries. Judgments of effectiveness of information channels also differ across place marketers. However, all place marketers agreed that establishing formal and informal networks with existing and potential customers and middlemen was important. The segmentation strategies were not well developed. Although the market was segmented, there were no differences in prospecting and communicating with customers across segments. If probed, place marketers felt that differential strategies were not needed for different segments. 3.1.3. Market sensing In terms of their own view of the market, place marketers identify three key dimensions of success for place marketers. The interesting issue was that this view was predominantly internal, i.e., place marketer factors rather than business customer factors. The first dimension, and interestingly, the most important dimension was the political environment at the place marketer. The senior managers felt that a consensus among the political interests in an area is critical. The success factors were described as:
A long-term philosophy and orientation rather than a goal of a short-term increase in employment. The respondents felt that short-term strategies do not succeed. The independence of the place marketer from local and political pressures. The place marketer was set up as a one-stop department for the area under consideration. The respondents felt that a sharing of responsibilities with other place marketers was not conducive to business. The respondents felt that a stable political environment was also critical for place marketers. The second dimension dealt with the place marketer’s relationship with the customer. In this context, the success factors were described as:
Early access to and knowledge of new projects. Rapid response to the customer’s inquiries.
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In-depth understanding of the customer’s project. Addressing or providing solutions to the customer’s needs. Developing a relationship with the customer. A customer-first attitude and delivering on promises. Handling all aspects of the investment project from the beginning to the end.
The third dimension dealt with the staff of the place marketer. The success factors were:
Experience of the staff in terms of knowledge of local actors, knowledge of potential customers, etc. Strong relational skills, listening skills and empathetic skills. Ability to keep information confidential, including not talking to third parties about ongoing discussions with customers, including local politicians, until the decision is made. Use of outside specialists if required by the project (construction engineers, lawyers, etc.).
3.1.4. Marketing practices The marketing practices of most place marketers were fairly simple. They attempted to determine potential customers through their offices, middlemen and national offices. They then attempted to provide the type of information required by the investing firm. As stated earlier, they did not differentially offer information to segments. 3.1.5. Knowledge gaps The discussion and planning criteria stated by place marketers was predominantly internally focused. The question of how their customers make decisions was not articulated by the senior managers. When probed, they stated that they made place marketing plans without decision-making process inputs. We also found that a lack of knowledge was highest in the areas of:
business decision-making processes; differences between decision making of segments; knowledge of industry specific market situations; key aspects of location needs; identification and importance of critical location factors; relative importance of investment and operating cost factors; and financial assessment techniques used by customers.
Therefore, most marketing practices were ad hoc; there was little consideration of customers’ needs. The strategies were more ‘‘seat of the pants,’’ rather than customer centric. A manifestation of this attitude was that all place marketers suffer from a lack of knowledge of how to measure the success of their own marketing activity. Only one place
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marketer has implemented auditing procedures that go beyond measuring the basic assessment of jobs created or investment volume secured.
place marketers practices and the decision-making processes. Based on the data from place marketers and our previous discussions, we will investigate the following issues:
What are the processes of plant location decision making? What are customers’ expectations regarding input from place marketers? What information sources are used in decision making? Are there differences in decision-making processes based on customer characteristics [18]?
4. Knowledge gaps and research issues The data from place marketers highlighted the fact that place marketing decisions were being made as ‘‘seat of the pants’’ rather than as deliberate strategies. The reason may be that place marketers have inadequate knowledge of customer decision-making process data. Therefore, we examine place marketing decision-making processes, and seek insights on better practices of place marketing. The problems of place marketers will become more severe with the advent of the Internet. The Internet is an intelligent ubiquitous information platform. The biggest impact of the Internet has been on informational access — providing access to a vast amount of information that can be programmed to cater to the stated or unstated needs of users. In this way, the Internet can instantaneously provide specific and detailed information to a business firm’s employees, suppliers, and customers. Additionally, the Internet provides a community in the virtual world, creating communities that share news and expertise in a specific area. Business infomediaries such as Plasticsnet.com, Verticalnet.com, and Ultraprise.com provide communities where business members can participate. Finally, firms can complete transactions in a 24/7 environment. In the era of the Internet, the implications of the ‘‘knowledge gap’’ will become more severe. The better place marketers will be able use the Internet to leverage their communication activities. As a result, there is an urgent imperative to reduce the knowledge gap that exists between
When decision-making processes are examined, we can also examine whether the criteria developed by Kotler et al. [6] are still valid.
5. Customer research 5.1. Context We examined the decision-making processes regarding manufacturing site selection decisions. The exploratory nature of our research and the need to develop a theoryin-use perspective required the use of a qualitative research methodology [19,20]. We adopted a multiple-case research design [21,22,19] as it is regarded as desirable for reliability purposes [23]. 5.2. Design The research project started with a pilot case study [19]. We observed and conducted interviews with the manage-
Table 1 Our sample Company
Country of origin
Sector of industry
Size of company
Size of project (initially)
United Biscuits (feasibility study) Amoco (feasibility study) Behr (construction under way) Hazlewood Evers Specials (plant established) Grand Met Foods Ha¨agen Dazs (plant established)
Great Britain
Food-processing, chilled goods Chemical products
Group: US$4.4 billion; Division: US$760 million Group: US$27 billion; Division: US$4 million Group: US$950 million
US$10 million, 500 jobs
USA Germany Netherlands
Air-conditioning (automotive) Food (soya)
USA
Food (ice cream)
Group: US$800 million; Subsidiary: US$5 million Group: US$12 billion; Subsidiary: US$300 million
US$336 million, 220 jobs US$30 million, 190 jobs US$1.6 million, 5 jobs US$50 million, 83 jobs
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ment of the chilled food division of a major British foodprocessing group, a process that took 5 months. This indepth study provided insight into all aspects of methods through which the company addressed complex decision making. Based on this, an interview guide was developed for the remaining four case studies. The respondent firms were divided into two groups (sample characteristics are presented in Table 1). There were three relatively large firms — United Biscuits, AMOCO, and Ha¨agen Dazs — all with annual revenues of over US$4 billion, and two smaller firms — Behr Germany and Hazlewood Foods — with annual revenues of less than US$ 1 billion. The larger-size firms also had more experience or expertise in plant location decisions. Previous research has shown that a factor that affects decision making is size of firm [18]. Sharma and Pillai [18] suggest that larger firms make decisions based on long-range considerations, including problem familiarization and solution development. Needs of the organization are carefully assessed and planned. Plans are modified to match organizational and environmental conditions. Central to this decision making is the premise that choice is the outcome of rational activity; sufficient information is available and decision criteria are known, clear, and consensual. Smaller firms have no formal policies [18]. There are one or two primary decision makers, and the entire decision process revolves around their preferences and actions. Other organizational members’ participation is limited to providing information solicited by the key member(s). The decision making is dependent on personal intuition and on judgmental evaluation procedures. Our interest concerned the nature of the decision-making process rather than the roles played by individuals. The plant location project had to be conducted in the same country (in this case, France) to ensure comparability of national environmental variables such as government policy regarding inward investment promotion, fiscal investment incentives, etc. We also attempted to examine different stages of decision making. Hence, one pending decision, one plant under construction, and two finished plants were analyzed. 5.3. Implementation In the firms examined, the manager in charge of coordinating the plant location project was interviewed. The interview took approximately 2 h and utilized an interview guide. At the end of each interview, the interviewee was asked to indicate the names of other members involved in the investment study. These respondents were subsequently interviewed. In total, 14 face-to-face interviews were conducted for the five case studies. In five additional cases where a face-to-face interview was not possible, the interview guide was mailed and subsequent telephone interviews were conducted.
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The interview guide addressed the following core issues of the site location decision processes, decision structures within the firm, and information sources used by companies. Expert interviews with plant location consultants and academics preceded the interviews. An in-depth secondary research regarding the company and its market environment was then conducted. The secondary data was compared to the results of face-to-face interviews. The details of the five case studies are summarized in the next section.
6. Results — decision-making processes The major finding of the research was that the process of plant location decision making is standardized in the larger companies and was ad hoc in the smaller firms (see Fig. 1). With ‘‘ad hoc,’’ we refer to decisions that did not have preplanned steps or stages. In other words, ‘‘ad hoc’’ decisions are based on the intuitions of decision makers rather than on the outcome of a defined process. Other findings relevant to our research are the following. 6.1. Market access is the major driving force The results suggest that market access was the major motivation of our sample. Three of the five companies that we studied faced a mature home market, whereas the European marketplace was considered as offering growth potential. Only one company located its new facility in France due to cost considerations. France attracted Behr due to labor flexibility and lower wages in France when compared to Germany, the company’s home market. It is interesting to note that US companies (Whirlpool, GM, Ford) are using the same logic for locating manufacturing facilities in Asia. 6.2. A small number of factors are used for decision making In the five companies that we studied, a limited set of location attributes were used to reduce the choice set. Some of these factors are labor factors (i.e., wage rate and work legislation), infrastructure (i.e., proximity to a logistics hub specializing in chilled food products or speed of delivery), financial incentives, and market factors (i.e., customer access). This small set of factors was replaced with a broader set of factors for final selection. 6.3. Formal vs. informal modes of decision making The larger firms used a formal model of decision making that included the generation of scores for locations under consideration. Two of the companies used the services of a site location consulting firm. A third company used an inhouse scoring model as its US holding owns a central department conducting site location studies for its subsidi-
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Fig. 1. Location model.
aries on a worldwide basis. The two remaining small companies qualitatively examined a limited number of location factors that were crucial to their project. However, their approach was ‘‘ad hoc’’ in contrast to the large firms studied in this research. 6.4. Usage of financial projections is based on size Of the sample, four companies generated extensive financial projections. These firms were typically examining investment costs, operating costs, national tax systems, profit and loss accounts, and incentives. One small firm estimated cost factors only. The interviewed companies used payback period and discounted cash flows as basic indicators that are consistent with previous research [6]. The financial projection time
period was based on the type of plant and the amount of capital needed for the project. For instance, the Dutch SME Evers Specials’ production unit was more labor intensive. The company, therefore, did not take investment costs into account, but concentrated on estimating operating costs over several years. In contrast, Behr, the German manufacturer of air conditioning equipment, needed a capital intensive production facility and therefore forecasted cost and sales for the next 25 years. 6.5. Size did make a difference in location decision making The final location decision was always dependent on the very senior executives of the firm, but the departments and individuals involved in the decision-making process differed from firm to firm, predominantly based on size of firm.
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Table 2 Sample firms and critical decision criteria Decision criteria
United Biscuits
Amoco
Behr
Evers Special
Ha¨agen Dazs
Local labor markets Access to customer and supplier markets Availability of development sites, facilities, and infrastructure Transportation Education and training opportunities Quality of life Business climate Access to R&D facilities Capital availability Taxes and Regulations
High High High
Low High High
High High Medium
Low High Low
Medium High Medium
High Low Low Medium Low Medium Medium
High Low Low Low Low Low Low
High Medium Low Medium Low Medium Medium
High Low Low Medium Low Low Low
High Medium Low Medium Low High High
6.5.1. Small firms Evers Specials is a small subsidiary of the Hazlewood group but is managed as an independent profit center. Because the company had no experience in plant locations abroad, the managing director of the firm worked together with the French distributor to conduct his site location study. Personal assistance of place marketers was essential to the project. Behr is a medium-sized German company with manufacturing plant locations in different countries. The managing director of the company appointed the future director of the French production unit as a project manager to coordinate all departments involved in the site selection process. The company began its search in cooperation with the Franco-German Chamber of Commerce, then switched to the local German office of the French host region of its future factory. Here again, as with Hazelwood, close cooperation with local development authorities was essential to the plant location decision. 6.5.2. Large firms The cases of the American ice cream manufacturer Ha¨agen Dazs and the British food company United Biscuits are very similar. Both companies held strong positions in domestic markets, but had little experience abroad. They, therefore, used the services of consulting firms to assist them in their site location project. In the case of Ha¨agen Dazs, the consulting firm worked in a project team with the Vice President of Purchasing and Operations and the Director of Operations. In the case of the British chilled food manufacturer, the consultants teamed with the Head of the Group’s Division, the Manager of New Business Development and the Director of Production. The US multinational Amoco has its own real estate department at corporate headquarters in Chicago. This unit of six in-house consultants assists all business units in plant location decisions. In the analysis of a site location project for a new petrochemical plant in Europe, the American real estate department collected all the data for its project through the European regional headquarters of Amoco Chemical Europe in Geneva.
In the three cases, the role of place marketers was limited to that of an information provider. Personal assistance during the site location project was not required. 6.6. Decision criteria — following the traditional model The decision-making attributes are similar to those suggested by previous researchers [6]. In Table 2, we indicate that most of the key decision criteria suggested by researchers were, at some point in the process, used as part of the consideration set of customers. The relative usage of each criterion indicated in the table depended on each company’s specific investment context. However, in all cases, a limited choice set of criteria could be identified. This limited number of criteria were used to preselect countries or broad geographical areas in the initial screening process. Only then, more detailed location factors were assessed to evaluate specific local site options. The key decision criteria clearly expressed two major underlying dimensions – cost-driven projects and marketdriven projects. Criteria such as labor costs, transportation costs, or available financial incentives helped a first group of decision makers to reduce the number of locations in the preselection phase (Behr, Ha¨agen Dazs). In turn, other projects established their choice set by focusing predominantly on market access criteria (United Biscuits, Evers Specials). Technical project specifications were only used as location criteria when comparing local sites within preselected regions (existence of a local water treatment facility). Only in one case (Amoco), the project’s technical characteristics (plant size and port infrastructure) were so important that they had to be considered as critical location factors.
7. Results — place marketers and information diffusion Market access was a critical factor in the decisionmaking process of customers. However, the choice of a specific location or region within a country was based on the communications or information diffusion processes of the
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place marketer. Our interviews show that customers contacted place marketers early in the decision-making process, either directly or through the consulting firm. In addition, importers and consultants played an important role in the diffusion of information. 7.1. Firms seek a communication link with place marketers In our study, we asked respondents to explicate their communication expectations from place marketers. All of the firms discussed the need for an open, frank, and trustworthy professional communication. Customers expect place marketers to behave as ‘‘world class suppliers.’’ Specifically, firms expect three major things from place marketers. First, they expect accurate and detailed information services. This information needs to be up-to-date, detailed, and precise. For example, place marketers should detail all cost elements when calculating the salary of a shopfloor worker in a chilled food manufacturing facility. The information should be updated very frequently and only relevant information should be provided. Second, customers expect constant communication before and after the plant has been located. Finally, customers seek a high level of expertise based communication from place marketers’ personnel. In addition to speaking foreign languages and understanding foreign cultures, place marketers’ personnel are expected to understand the company’s business and the key elements of its location project. A low turnover among staff members of place marketers was seen as an important asset.
8. Marketing strategies for place marketers Our research addressed the knowledge gap that place marketers have regarding information distribution. Specifically, the differences in decision making and, therefore, in information needs, must be stressed. Only by closing the information gap will place marketers move from ‘‘seat-ofthe pants’’ strategy to deliberate strategies. These strategies are discussed next. Customers have different informational needs that must be fulfilled by the place marketer [24]. Thus, business customers will prefer the marketing strategies that better cater to their needs. There are two theory-based reasons for predicting that business customers will prefer certain types of strategies. First, economics of information theory [25] suggests that decision makers would prefer to obtain information in the manner that matches their own decision making. Second, considerable research indicates that decision-making style affects business customers’ information preferences and the way in which they interpret relevant information [26,27]. Thus, decision makers are more likely to accept evidence that matches their own decision-making style while subjecting nonmatching evidence to critical evaluation (cf., [Ref. 28], p. 2098).
The decision-making process would suggest that place marketers practice ‘‘one-to-one’’ marketing. Several authors have recently suggested that firms practice ‘‘one-to-one’’ marketing through the use of mass customization [29 – 31]. ‘‘One-to-one’’ marketing focuses on the adaptation of product or offering, in order to meet the needs of customers. Place marketers should adopt a relational marketing approach rather than a transactional approach. Plant location is similar to selling large industrial projects, power plants, railway systems, and airplanes. In fact, place marketers need to develop strategic partnerships with their business customers. The partnership involves joint plant development effort, information exchange, and carefully developed location agreement. Our research suggests that small firms need more data on reputation and service and large firms need financial and performance data. Thus, designing place marketing strategies to meet the needs of customers will result in a strategic advantage [32,33]. The choice of a place marketing strategy for small and large firms is discussed next. In small firms, one or two primary decision makers have needs to be satisfied. Yet, they normally have insufficient expertise to evaluate locations fully. The marketing strategy would involve a single place marketer providing information to the decision makers and developing confidence in the place marketer. Larger firms normally evaluate products through experts in various departments. Thus, the large firm customer would prefer that experts in the place marketing firm provide the information needed by the experts in the plant location firm in a timely manner. The optimal strategy would be for experts in the functional areas to expeditiously satisfy the informational needs of the plant location firm. Thus, each expert in the plant location project team is matched with an expert in the place marketing organization. 8.1. Types of information to be distributed on the Internet The Internet has emerged as the primary vehicle for information dissemination. As such, place marketers need to develop Internet-based communication strategies. There are two aspects of which place marketers need to be cognizant. First, the Internet allows, and place marketers should take advantage of, customizing information for individual customers. Second, the Internet allows easy comparison, so that place marketers must be competitively aware of their offerings. Our interviews also uncovered the content and strategies of communications desired by customers. These are:
market size and access data, as this is one of the critical areas for choice for place marketers; extensive advertisements on the Web and access in search engine results, as the majority of plant location decision makers are not known to place marketers and place marketers are not aware of these firms;
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infomediaries to contact firms that are planning to make plant location decisions and create an initial contact; place marketing communications geared toward becoming part of a firms’ shortlists; and adapted information needed by plant location firms provided by place marketers.
9. Limitations and directions for future research The previous discussion suggests several limitations and ideas for future research. First, the problems associated with small sample in-depth interviews are acknowledged. This research only examined decision making in a single country; more research from other countries is needed to examine country effects. Similarly, more firms need to be examined. Future research may explore the impact of the legal environment on customers’ decision strategies. There is also a need for more research on the impact of the stage of the organizational life cycle and decision making on customers’ decision styles. Finally, this study examined new buy situations. An understanding of other buying situations (e.g., rebuy, modified rebuy, etc.) may aid in the design of effective place marketing strategies.
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[14] Kanter RM. Thriving locally in the global economy. Harv Bus Rev 1995;73(5b):151 – 60 (September – October). [15] Porter ME. The competitive advantage of nations. New York: Free Press, 1990. [16] Kotler P, Jatusripitak S, Maesinncee S. The marketing of nations. New York: Free Press, 1997. [17] Brush TH, Maritan CA, Karnani A. The plant location decision in multinational manufacturing firms: an empirical analysis of international business and manufacturing strategy perspectives. Manage Sci 1999;8(2):109 – 32 (Summer). [18] Sharma A, Pillai R. Customers’ decision-making styles and their preference for sales strategies: conceptual examination and an empirical study. J Pers Selling Sales Manage 1996;16(1):21 – 33. [19] Yin RK. Case study research: design and methods, applied social research methods. 5th ed. Newbury Park, CA: Sage Publications, 1994. [20] Kohli AK, Jaworski BJ. Market orientation: the construct, research propositions, and managerial implications. J Mark 1990;54:1 – 18. [21] Bonoma T. Case research in marketing: opportunities, problems, and a process. J Mark Res 1985;22:199 – 208. [22] Capon N, Hulbert J. Decision systems analysis in industrial marketing. Ind Mark Manage 1975;4. [23] Herriott RE, Firestone WA. Multisite qualitative policy research: optimizing description and generalizability. Educ Res 1983;12:14 – 9. [24] Szymanski DM. Determinants of selling effectiveness: the importance of declarative knowledge to the personal selling concept. J Mark 1988;52:64 – 77 (January). [25] Stigler GJ. The economics of information. J Political Econ 1961; 69:213 – 25 (June). [26] Alba JW, Hutchinson JW. Dimensions of consumer expertise. J Consum Res 1987;13:411 – 54 (March). [27] Hoch SJ, Deighton J. Managing what consumers learn from experience. J Mark 1989;53:1 – 20 (April). [28] Lord CG, Ross L, Lepper MR. Biased assimilation and attitude polarization: the effects of prior theories on subsequently considered evidence. J Pers Soc Psychol 1979;37:2098 – 109 (November). [29] Peppers D, Rogers M. The one to one future: building relationships one customer at a time. New York: Doubleday, 1993. [30] Pine JB, Victor B, Boyton AC. Making mass customization work. Harv Bus Rev 1993;71(5):91 – 103 (September – October). [31] Peppers D, Rogers M, Dorf B. Manager’s tool kit: is your company ready for one-to-one marketing? Harv Bus Rev 1999;77(1):151 – 61 (January – February). [32] Sheth JN. Buyer – seller interaction: a conceptual framework. In: Anderson BB, editor. Advances in consumer research. Cincinnati: Association for Consumer Research, 1975. pp. 382 – 6. [33] Blois KJ. Problems in applying organizational theory to industrial marketing. Ind Mark Manage 1977;6:273 – 80.
Wolfgang Ulaga is Professor of Marketing at EDHEC Graduate School of Management in Lille, France. Dr. Ulaga’s research interests focus on customer value management in international business-to-business markets. Arun Sharma is Professor of Marketing at the University of Miami. He received his PhD from the University of Illinois at Urbana Champaign and has published extensively in the areas of sales management and business marketing. R. Krishnan is Professor of Marketing at the California Polytechnic State University. He received his PhD from the Virginia Polytechnic and State University and has published extensively in the areas of value management and strategy.
Plant location and place marketing: understanding the process from the business customer’s perspective Wolfgang Ulagaa, Arun Sharmab,*, R. Krishnanc a
EDHEC Graduate School of Management, Catholic University of Lille, France Department of Marketing, University of Miami, 521 Jenkins Road, PO Box 248147, Coral Gables, FL 33124-6554, USA c California Polytechnic State University, San Luis Obispo, CA, USA
b
Received 10 March 2000; received in revised form 15 July 2000; accepted 12 September 2000
Abstract In the past decade, there has been an increased interest in place marketing, especially as countries and locations have been spending more money to encourage firms to locate their offices and plant locations in the place marketer’s area. In this paper, we examine the place marketing from the perspective of the marketer and that of the business customer, specifically in the area of communication and information distribution (in the era of the Internet). In literature, place marketing strategies vary from the very simple to the very sophisticated. Through examination of present marketing and communication practices of place marketers, we find that these strategies are unplanned or ‘‘seat of the pants.’’ We also find that the primary reason for the lack of deliberate and targeted strategies is a lack of understanding of customer decisionmaking processes. We suggest that only by understanding differences in business customer segments of the market can place marketers become more efficient and effective in winning plant placements. Using data from business customer decision-making processes, we attempt to close the knowledge gap. D 2002 Elsevier Science Inc. All rights reserved. Keywords: Place marketing; B2B; Business-to-business marketing; Marketing strategies
1. Introduction In the last decade, there has been a resurgence in the marketing of places. Countries and regions are increasingly competing to attract businesses and investment. In recent times, countries, states, and regions have established departments and enhanced budgets to attract businesses and plant locations. For example, European governments and regional authorities employ more than 3000 people and spend 12 billion dollars each year to compete for jobs and corporate taxes generated by foreign business customers [1]. The primary role of place marketers is to promote the region and provide information to firms seeking plant and office locations, i.e., in the area of communication and information diffusion. However, in spite of the critical role of information diffusion in the success of place marketers, there is little data available on the communication practices of place marketers. In addition, effective information * Corresponding author. Tel.: +1-305-284-5935; fax: +1-305-2845326. E-mail address: [email protected] (A. Sharma).
diffusion may be more critical with the emergence of the Internet. Place marketers may need to develop additional communication strategies, as data from other place marketers may be easily available and comparable on the Internet. We focus on the communication and information diffusion practices of place marketers. In this paper, we use the phrase place marketers to designate agencies, departments, and other entities engaged in the promotion of a location for plant or office placement. We use the phrase customers to designate business firms seeking to locate their plants and offices. In spite of the importance of this topic, the state-of-theart and efficacy of place marketing and communication practices have not been examined. Only by understanding the present situation and the ‘‘knowledge gaps’’ can better strategy be suggested. Our purpose in this paper is to attempt to close the ‘‘knowledge gap’’ between place marketers’ current practice and the requirements for effectiveness. The area of information distribution, especially in the era of the Internet is of great interest. This paper extends an earlier research project that only examined business decision making [2]. In the next section, we explicate the research in this area. This is followed by a presentation of
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data collected on place marketers. The knowledge gaps are then identified. We then present our data collection methodology for business customer decision-making processes followed by a discussion of results. The last section of the article discusses implications of our findings and directions for future inquiry.
2. Literature review Plant location research can be divided into three perspectives. The first perspective is prescriptive, i.e., describing how plant location decisions should be made. The second perspective is nation based, i.e., what a nation should do to be more attractive for firms to locate plants in that country. The third perspective is business customer based, i.e., what criteria are actually used to make plant location decisions. The decision-making criteria for plant locations are regarded as transitory and evolving [3– 6]. The three perspectives are discussed next. The first research stream is prescriptive — the research deals with both how plants should be organized and where plants should be located [7 – 10]. For example, some researchers have examined what type of plant to build. In that arena, Schmenner [11] suggests that plants be based on products, market area, product-market, processes, or general purpose. This list has been modified by Ferdows [12], who suggests that foreign plants should be offshore factories (low cost), source factories (offshore factories with autonomy), server factories (national and regional manufacturing), contributor factories (national and regional manufacturing with product and process responsibility), outpost factories (collect information in advanced markets), or lead factories (new products and processes). In addition, management scientists have determined algorithms for optimal plant location [13]. An issue that arises from this research is the lack of diffusion of these models in practice. The second type of research addresses the broad question of what makes locations and nations attractive to manufacturers. For example, Kanter [14], Porter [15], and Kotler et al. [16] discuss issues such as competitiveness, strategic postures of nations and areas, nations’ strengths and weaknesses, strategic thrust, investment policies, industrial portfolios, infrastructure, institutions, and strategic implementation. In our context, the nation- and locationbased strategies are less relevant as we seek knowledge about place marketing practices of departments in the same region competing for customers. The third stream of research identifies factors that firms use to make location decisions. Kotler et al. [6] suggest that plant location decision making is based on: 1. local labor markets; 2. access to customer and supplier markets’ 3. availability of development sites, facilities, and infrastructure’
4. 5. 6. 7. 8. 9. 10.
transportation; education and training opportunities; quality of life; business climate; access to R&D facilities; capital availability; and taxes and regulations.
Researchers have also suggested that plant location factors are evolving [4,6,17]. Quality factors such as quality of workforce, quality of life, quality of education and quality of industrial freedom are becoming more important. The previous literature review identified two gaps in our understanding. First, what types of strategies do place marketers design and implement? Second, what is the decision-making process in plant location decisions in the context of place marketing? This insight is needed to reduce the ‘‘knowledge gap’’ that exists.
3. Place marketing strategies In order for us to understand place marketing practices, we collected data from place marketers. Our purpose was to understand place marketing processes from the perspective of all departments and agencies involved in place marketing strategies. Due to the proximity of the researcher to the Alsace region in France (Eastern France at the German border), in-depth interviews were conducted in this area, as follows:
A senior manager from the department in charge of investment in the region. Senior managers from both counties that form the region. A senior manager from the promotion department of Strasburg, the largest city in the region. A senior manager of the department of the region that was seeking firms to reindustrialize regional potassium mines. A senior manager of a firm that was planning to lay off personnel was asked by the government to seek firms to hire those personnel.
To ensure that the interviews from one region did not bias our results, we also interviewed senior managers from five successful place marketers in other French regions. The data collected from the five other regions did not differ from that of the original interviews. 3.1. Results 3.1.1. Markets and competition Place marketers have a very narrow market view. Their major concern is not client firms, but the competition. They are focused on competition, and they first perceive their
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major competition as firms within the regions, and only then that they recognize competition across regions within the same country. Place marketers rarely mention other countries and see markets as an outgrowth of divergence of objectives and political frictions within the region. 3.1.2. Marketing planning All place marketers established marketing plans describing business customers sought and planned marketing activities by industry and country. The majority of place marketers did not use channels of information provided by the national level place marketer — DATAR — to generate leads with foreign customers. Instead, they preferred to build their own channels of information with their own office in multiple countries. Judgments of effectiveness of information channels also differ across place marketers. However, all place marketers agreed that establishing formal and informal networks with existing and potential customers and middlemen was important. The segmentation strategies were not well developed. Although the market was segmented, there were no differences in prospecting and communicating with customers across segments. If probed, place marketers felt that differential strategies were not needed for different segments. 3.1.3. Market sensing In terms of their own view of the market, place marketers identify three key dimensions of success for place marketers. The interesting issue was that this view was predominantly internal, i.e., place marketer factors rather than business customer factors. The first dimension, and interestingly, the most important dimension was the political environment at the place marketer. The senior managers felt that a consensus among the political interests in an area is critical. The success factors were described as:
A long-term philosophy and orientation rather than a goal of a short-term increase in employment. The respondents felt that short-term strategies do not succeed. The independence of the place marketer from local and political pressures. The place marketer was set up as a one-stop department for the area under consideration. The respondents felt that a sharing of responsibilities with other place marketers was not conducive to business. The respondents felt that a stable political environment was also critical for place marketers. The second dimension dealt with the place marketer’s relationship with the customer. In this context, the success factors were described as:
Early access to and knowledge of new projects. Rapid response to the customer’s inquiries.
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In-depth understanding of the customer’s project. Addressing or providing solutions to the customer’s needs. Developing a relationship with the customer. A customer-first attitude and delivering on promises. Handling all aspects of the investment project from the beginning to the end.
The third dimension dealt with the staff of the place marketer. The success factors were:
Experience of the staff in terms of knowledge of local actors, knowledge of potential customers, etc. Strong relational skills, listening skills and empathetic skills. Ability to keep information confidential, including not talking to third parties about ongoing discussions with customers, including local politicians, until the decision is made. Use of outside specialists if required by the project (construction engineers, lawyers, etc.).
3.1.4. Marketing practices The marketing practices of most place marketers were fairly simple. They attempted to determine potential customers through their offices, middlemen and national offices. They then attempted to provide the type of information required by the investing firm. As stated earlier, they did not differentially offer information to segments. 3.1.5. Knowledge gaps The discussion and planning criteria stated by place marketers was predominantly internally focused. The question of how their customers make decisions was not articulated by the senior managers. When probed, they stated that they made place marketing plans without decision-making process inputs. We also found that a lack of knowledge was highest in the areas of:
business decision-making processes; differences between decision making of segments; knowledge of industry specific market situations; key aspects of location needs; identification and importance of critical location factors; relative importance of investment and operating cost factors; and financial assessment techniques used by customers.
Therefore, most marketing practices were ad hoc; there was little consideration of customers’ needs. The strategies were more ‘‘seat of the pants,’’ rather than customer centric. A manifestation of this attitude was that all place marketers suffer from a lack of knowledge of how to measure the success of their own marketing activity. Only one place
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marketer has implemented auditing procedures that go beyond measuring the basic assessment of jobs created or investment volume secured.
place marketers practices and the decision-making processes. Based on the data from place marketers and our previous discussions, we will investigate the following issues:
What are the processes of plant location decision making? What are customers’ expectations regarding input from place marketers? What information sources are used in decision making? Are there differences in decision-making processes based on customer characteristics [18]?
4. Knowledge gaps and research issues The data from place marketers highlighted the fact that place marketing decisions were being made as ‘‘seat of the pants’’ rather than as deliberate strategies. The reason may be that place marketers have inadequate knowledge of customer decision-making process data. Therefore, we examine place marketing decision-making processes, and seek insights on better practices of place marketing. The problems of place marketers will become more severe with the advent of the Internet. The Internet is an intelligent ubiquitous information platform. The biggest impact of the Internet has been on informational access — providing access to a vast amount of information that can be programmed to cater to the stated or unstated needs of users. In this way, the Internet can instantaneously provide specific and detailed information to a business firm’s employees, suppliers, and customers. Additionally, the Internet provides a community in the virtual world, creating communities that share news and expertise in a specific area. Business infomediaries such as Plasticsnet.com, Verticalnet.com, and Ultraprise.com provide communities where business members can participate. Finally, firms can complete transactions in a 24/7 environment. In the era of the Internet, the implications of the ‘‘knowledge gap’’ will become more severe. The better place marketers will be able use the Internet to leverage their communication activities. As a result, there is an urgent imperative to reduce the knowledge gap that exists between
When decision-making processes are examined, we can also examine whether the criteria developed by Kotler et al. [6] are still valid.
5. Customer research 5.1. Context We examined the decision-making processes regarding manufacturing site selection decisions. The exploratory nature of our research and the need to develop a theoryin-use perspective required the use of a qualitative research methodology [19,20]. We adopted a multiple-case research design [21,22,19] as it is regarded as desirable for reliability purposes [23]. 5.2. Design The research project started with a pilot case study [19]. We observed and conducted interviews with the manage-
Table 1 Our sample Company
Country of origin
Sector of industry
Size of company
Size of project (initially)
United Biscuits (feasibility study) Amoco (feasibility study) Behr (construction under way) Hazlewood Evers Specials (plant established) Grand Met Foods Ha¨agen Dazs (plant established)
Great Britain
Food-processing, chilled goods Chemical products
Group: US$4.4 billion; Division: US$760 million Group: US$27 billion; Division: US$4 million Group: US$950 million
US$10 million, 500 jobs
USA Germany Netherlands
Air-conditioning (automotive) Food (soya)
USA
Food (ice cream)
Group: US$800 million; Subsidiary: US$5 million Group: US$12 billion; Subsidiary: US$300 million
US$336 million, 220 jobs US$30 million, 190 jobs US$1.6 million, 5 jobs US$50 million, 83 jobs
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ment of the chilled food division of a major British foodprocessing group, a process that took 5 months. This indepth study provided insight into all aspects of methods through which the company addressed complex decision making. Based on this, an interview guide was developed for the remaining four case studies. The respondent firms were divided into two groups (sample characteristics are presented in Table 1). There were three relatively large firms — United Biscuits, AMOCO, and Ha¨agen Dazs — all with annual revenues of over US$4 billion, and two smaller firms — Behr Germany and Hazlewood Foods — with annual revenues of less than US$ 1 billion. The larger-size firms also had more experience or expertise in plant location decisions. Previous research has shown that a factor that affects decision making is size of firm [18]. Sharma and Pillai [18] suggest that larger firms make decisions based on long-range considerations, including problem familiarization and solution development. Needs of the organization are carefully assessed and planned. Plans are modified to match organizational and environmental conditions. Central to this decision making is the premise that choice is the outcome of rational activity; sufficient information is available and decision criteria are known, clear, and consensual. Smaller firms have no formal policies [18]. There are one or two primary decision makers, and the entire decision process revolves around their preferences and actions. Other organizational members’ participation is limited to providing information solicited by the key member(s). The decision making is dependent on personal intuition and on judgmental evaluation procedures. Our interest concerned the nature of the decision-making process rather than the roles played by individuals. The plant location project had to be conducted in the same country (in this case, France) to ensure comparability of national environmental variables such as government policy regarding inward investment promotion, fiscal investment incentives, etc. We also attempted to examine different stages of decision making. Hence, one pending decision, one plant under construction, and two finished plants were analyzed. 5.3. Implementation In the firms examined, the manager in charge of coordinating the plant location project was interviewed. The interview took approximately 2 h and utilized an interview guide. At the end of each interview, the interviewee was asked to indicate the names of other members involved in the investment study. These respondents were subsequently interviewed. In total, 14 face-to-face interviews were conducted for the five case studies. In five additional cases where a face-to-face interview was not possible, the interview guide was mailed and subsequent telephone interviews were conducted.
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The interview guide addressed the following core issues of the site location decision processes, decision structures within the firm, and information sources used by companies. Expert interviews with plant location consultants and academics preceded the interviews. An in-depth secondary research regarding the company and its market environment was then conducted. The secondary data was compared to the results of face-to-face interviews. The details of the five case studies are summarized in the next section.
6. Results — decision-making processes The major finding of the research was that the process of plant location decision making is standardized in the larger companies and was ad hoc in the smaller firms (see Fig. 1). With ‘‘ad hoc,’’ we refer to decisions that did not have preplanned steps or stages. In other words, ‘‘ad hoc’’ decisions are based on the intuitions of decision makers rather than on the outcome of a defined process. Other findings relevant to our research are the following. 6.1. Market access is the major driving force The results suggest that market access was the major motivation of our sample. Three of the five companies that we studied faced a mature home market, whereas the European marketplace was considered as offering growth potential. Only one company located its new facility in France due to cost considerations. France attracted Behr due to labor flexibility and lower wages in France when compared to Germany, the company’s home market. It is interesting to note that US companies (Whirlpool, GM, Ford) are using the same logic for locating manufacturing facilities in Asia. 6.2. A small number of factors are used for decision making In the five companies that we studied, a limited set of location attributes were used to reduce the choice set. Some of these factors are labor factors (i.e., wage rate and work legislation), infrastructure (i.e., proximity to a logistics hub specializing in chilled food products or speed of delivery), financial incentives, and market factors (i.e., customer access). This small set of factors was replaced with a broader set of factors for final selection. 6.3. Formal vs. informal modes of decision making The larger firms used a formal model of decision making that included the generation of scores for locations under consideration. Two of the companies used the services of a site location consulting firm. A third company used an inhouse scoring model as its US holding owns a central department conducting site location studies for its subsidi-
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Fig. 1. Location model.
aries on a worldwide basis. The two remaining small companies qualitatively examined a limited number of location factors that were crucial to their project. However, their approach was ‘‘ad hoc’’ in contrast to the large firms studied in this research. 6.4. Usage of financial projections is based on size Of the sample, four companies generated extensive financial projections. These firms were typically examining investment costs, operating costs, national tax systems, profit and loss accounts, and incentives. One small firm estimated cost factors only. The interviewed companies used payback period and discounted cash flows as basic indicators that are consistent with previous research [6]. The financial projection time
period was based on the type of plant and the amount of capital needed for the project. For instance, the Dutch SME Evers Specials’ production unit was more labor intensive. The company, therefore, did not take investment costs into account, but concentrated on estimating operating costs over several years. In contrast, Behr, the German manufacturer of air conditioning equipment, needed a capital intensive production facility and therefore forecasted cost and sales for the next 25 years. 6.5. Size did make a difference in location decision making The final location decision was always dependent on the very senior executives of the firm, but the departments and individuals involved in the decision-making process differed from firm to firm, predominantly based on size of firm.
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Table 2 Sample firms and critical decision criteria Decision criteria
United Biscuits
Amoco
Behr
Evers Special
Ha¨agen Dazs
Local labor markets Access to customer and supplier markets Availability of development sites, facilities, and infrastructure Transportation Education and training opportunities Quality of life Business climate Access to R&D facilities Capital availability Taxes and Regulations
High High High
Low High High
High High Medium
Low High Low
Medium High Medium
High Low Low Medium Low Medium Medium
High Low Low Low Low Low Low
High Medium Low Medium Low Medium Medium
High Low Low Medium Low Low Low
High Medium Low Medium Low High High
6.5.1. Small firms Evers Specials is a small subsidiary of the Hazlewood group but is managed as an independent profit center. Because the company had no experience in plant locations abroad, the managing director of the firm worked together with the French distributor to conduct his site location study. Personal assistance of place marketers was essential to the project. Behr is a medium-sized German company with manufacturing plant locations in different countries. The managing director of the company appointed the future director of the French production unit as a project manager to coordinate all departments involved in the site selection process. The company began its search in cooperation with the Franco-German Chamber of Commerce, then switched to the local German office of the French host region of its future factory. Here again, as with Hazelwood, close cooperation with local development authorities was essential to the plant location decision. 6.5.2. Large firms The cases of the American ice cream manufacturer Ha¨agen Dazs and the British food company United Biscuits are very similar. Both companies held strong positions in domestic markets, but had little experience abroad. They, therefore, used the services of consulting firms to assist them in their site location project. In the case of Ha¨agen Dazs, the consulting firm worked in a project team with the Vice President of Purchasing and Operations and the Director of Operations. In the case of the British chilled food manufacturer, the consultants teamed with the Head of the Group’s Division, the Manager of New Business Development and the Director of Production. The US multinational Amoco has its own real estate department at corporate headquarters in Chicago. This unit of six in-house consultants assists all business units in plant location decisions. In the analysis of a site location project for a new petrochemical plant in Europe, the American real estate department collected all the data for its project through the European regional headquarters of Amoco Chemical Europe in Geneva.
In the three cases, the role of place marketers was limited to that of an information provider. Personal assistance during the site location project was not required. 6.6. Decision criteria — following the traditional model The decision-making attributes are similar to those suggested by previous researchers [6]. In Table 2, we indicate that most of the key decision criteria suggested by researchers were, at some point in the process, used as part of the consideration set of customers. The relative usage of each criterion indicated in the table depended on each company’s specific investment context. However, in all cases, a limited choice set of criteria could be identified. This limited number of criteria were used to preselect countries or broad geographical areas in the initial screening process. Only then, more detailed location factors were assessed to evaluate specific local site options. The key decision criteria clearly expressed two major underlying dimensions – cost-driven projects and marketdriven projects. Criteria such as labor costs, transportation costs, or available financial incentives helped a first group of decision makers to reduce the number of locations in the preselection phase (Behr, Ha¨agen Dazs). In turn, other projects established their choice set by focusing predominantly on market access criteria (United Biscuits, Evers Specials). Technical project specifications were only used as location criteria when comparing local sites within preselected regions (existence of a local water treatment facility). Only in one case (Amoco), the project’s technical characteristics (plant size and port infrastructure) were so important that they had to be considered as critical location factors.
7. Results — place marketers and information diffusion Market access was a critical factor in the decisionmaking process of customers. However, the choice of a specific location or region within a country was based on the communications or information diffusion processes of the
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place marketer. Our interviews show that customers contacted place marketers early in the decision-making process, either directly or through the consulting firm. In addition, importers and consultants played an important role in the diffusion of information. 7.1. Firms seek a communication link with place marketers In our study, we asked respondents to explicate their communication expectations from place marketers. All of the firms discussed the need for an open, frank, and trustworthy professional communication. Customers expect place marketers to behave as ‘‘world class suppliers.’’ Specifically, firms expect three major things from place marketers. First, they expect accurate and detailed information services. This information needs to be up-to-date, detailed, and precise. For example, place marketers should detail all cost elements when calculating the salary of a shopfloor worker in a chilled food manufacturing facility. The information should be updated very frequently and only relevant information should be provided. Second, customers expect constant communication before and after the plant has been located. Finally, customers seek a high level of expertise based communication from place marketers’ personnel. In addition to speaking foreign languages and understanding foreign cultures, place marketers’ personnel are expected to understand the company’s business and the key elements of its location project. A low turnover among staff members of place marketers was seen as an important asset.
8. Marketing strategies for place marketers Our research addressed the knowledge gap that place marketers have regarding information distribution. Specifically, the differences in decision making and, therefore, in information needs, must be stressed. Only by closing the information gap will place marketers move from ‘‘seat-ofthe pants’’ strategy to deliberate strategies. These strategies are discussed next. Customers have different informational needs that must be fulfilled by the place marketer [24]. Thus, business customers will prefer the marketing strategies that better cater to their needs. There are two theory-based reasons for predicting that business customers will prefer certain types of strategies. First, economics of information theory [25] suggests that decision makers would prefer to obtain information in the manner that matches their own decision making. Second, considerable research indicates that decision-making style affects business customers’ information preferences and the way in which they interpret relevant information [26,27]. Thus, decision makers are more likely to accept evidence that matches their own decision-making style while subjecting nonmatching evidence to critical evaluation (cf., [Ref. 28], p. 2098).
The decision-making process would suggest that place marketers practice ‘‘one-to-one’’ marketing. Several authors have recently suggested that firms practice ‘‘one-to-one’’ marketing through the use of mass customization [29 – 31]. ‘‘One-to-one’’ marketing focuses on the adaptation of product or offering, in order to meet the needs of customers. Place marketers should adopt a relational marketing approach rather than a transactional approach. Plant location is similar to selling large industrial projects, power plants, railway systems, and airplanes. In fact, place marketers need to develop strategic partnerships with their business customers. The partnership involves joint plant development effort, information exchange, and carefully developed location agreement. Our research suggests that small firms need more data on reputation and service and large firms need financial and performance data. Thus, designing place marketing strategies to meet the needs of customers will result in a strategic advantage [32,33]. The choice of a place marketing strategy for small and large firms is discussed next. In small firms, one or two primary decision makers have needs to be satisfied. Yet, they normally have insufficient expertise to evaluate locations fully. The marketing strategy would involve a single place marketer providing information to the decision makers and developing confidence in the place marketer. Larger firms normally evaluate products through experts in various departments. Thus, the large firm customer would prefer that experts in the place marketing firm provide the information needed by the experts in the plant location firm in a timely manner. The optimal strategy would be for experts in the functional areas to expeditiously satisfy the informational needs of the plant location firm. Thus, each expert in the plant location project team is matched with an expert in the place marketing organization. 8.1. Types of information to be distributed on the Internet The Internet has emerged as the primary vehicle for information dissemination. As such, place marketers need to develop Internet-based communication strategies. There are two aspects of which place marketers need to be cognizant. First, the Internet allows, and place marketers should take advantage of, customizing information for individual customers. Second, the Internet allows easy comparison, so that place marketers must be competitively aware of their offerings. Our interviews also uncovered the content and strategies of communications desired by customers. These are:
market size and access data, as this is one of the critical areas for choice for place marketers; extensive advertisements on the Web and access in search engine results, as the majority of plant location decision makers are not known to place marketers and place marketers are not aware of these firms;
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infomediaries to contact firms that are planning to make plant location decisions and create an initial contact; place marketing communications geared toward becoming part of a firms’ shortlists; and adapted information needed by plant location firms provided by place marketers.
9. Limitations and directions for future research The previous discussion suggests several limitations and ideas for future research. First, the problems associated with small sample in-depth interviews are acknowledged. This research only examined decision making in a single country; more research from other countries is needed to examine country effects. Similarly, more firms need to be examined. Future research may explore the impact of the legal environment on customers’ decision strategies. There is also a need for more research on the impact of the stage of the organizational life cycle and decision making on customers’ decision styles. Finally, this study examined new buy situations. An understanding of other buying situations (e.g., rebuy, modified rebuy, etc.) may aid in the design of effective place marketing strategies.
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Wolfgang Ulaga is Professor of Marketing at EDHEC Graduate School of Management in Lille, France. Dr. Ulaga’s research interests focus on customer value management in international business-to-business markets. Arun Sharma is Professor of Marketing at the University of Miami. He received his PhD from the University of Illinois at Urbana Champaign and has published extensively in the areas of sales management and business marketing. R. Krishnan is Professor of Marketing at the California Polytechnic State University. He received his PhD from the Virginia Polytechnic and State University and has published extensively in the areas of value management and strategy.