A recent study of the situation and development of brands by Hungarian companies concluded that the companies are relying on cost cutting instead of long-term brand strategies; the end user still thinks that “brand” equals luxury. We spoke with Zsuzsanna Jánosy, co-author of the study and manager of the brand strategy consultancy agency BrandTrend Kft.
How did you come to collaborate with the Austrian DIE MarkenWertExperten Institute on the study?
We have more than ten years of experience in brand strategy and communication. To be able to use our knowledge for consultancy we were looking for a partner abroad, since the Hungarian market is relatively limited. Our company culture and our definition of “brand” is influenced by both the German-speaking and Anglo-Saxon cultures, since both my colleague András Kőszegi (also manager at BrandTrend Kft.) and me have spent a long time in Germany and Austria as well. So we noticed quite quickly that Hungarian companies using the “German” thinking are planning and conducting their brand activities for a much longer term. We wanted to compare the mentality of the entrepreneurs in both countries with focus on the small and medium enterprises. One of the biggest problems in Hungary is that the companies are producing quality products but are having great losses on the “brand” side. We wanted to compare how the two countries reacted to the crisis and we concluded that in Austria they used a more long-term strategy. In both countries there is a need to deal with the development of the Internet and to reach the new generation of consumers with a new brand communication.
Could you summarise the findings of your study?
Hungarian companies are not placing as much emphasis on the “brand” topic as they should, because a brand means economic advantage nowadays. Most entrepreneurs do not understand that investing in the brand has the same value as investing in a production asset. Short-term thinking is characteristic – we cannot speak of “strategy” only “tactics”. Building brands is not only the task of big companies; SMEs must also get more active in this area. Although there are known brands on the current market, such a trademark is not something static, rather organic, meaning that constant investment and reanimation through strategic brand communication must be used. Still, the companies see only the cost side instead of the great economic potential. Still, half of the asked entrepreneurs think that their brand image is good and will be improving in the future.
So the entrepreneurs are not paying enough attention to the brand image building, since they are satisfied with their reputation?
Reputation is not the same as attractiveness, brand loyalty or long-term company potential. The entrepreneurs are satisfied with their presence on the market, but to our question they admitted that they are not doing enough in this area. They agree that a reduced interest by the consumers will follow – the first step towards the brand burnout – and the growing interest towards cheaper products is forcing them to allow price reductions. A bigger part of entrepreneurs are threatened by such a brand burnout immediately, since despite increasing investment in their brands the demand for them is still falling. When you ask the consumers whether they prefer Hungarian products they will say yes – but when they stand in front of the shelves they will reach for the cheaper imported product. When Hungarian entrepreneurs are dealing with their brand image, it’s mostly only about their logo, so the brand communication, the conscious brand strategy is missing.
What does a brand image mean in Hungary? Is there a difference from the Western concept?
The Western markets are more long-term oriented in the field of communication. In Hungary they tend to use ad-hoc communication, there is no real long-term strategy. In the West the culture and structure of the companies is more fixed, the communication is tailor-made based on those and for the local market as well. But us we begin with the communication – if we do something at all, because often the costs scare away the companies entirely. The consumers still tend to think that “brand” has something to do with luxury and therefore it is not affordable – while in fact Lidl and Aldi are also brands. Unfortunately most entrepreneurs have the same opinion and they do not even start to build a brand image. In the case of SMEs this work would mean no more than an open and well-planned marketing strategy.
How high is the brand loyalty of Hungarian consumers?
There is a loyal section but in general the Hungarian wages are not comparable with the Western ones, so most of the consumers are very price-sensitive.
Companies are following the same fashion and they are also responsible for the fact that when the consumer has to choose from many similar products, he makes his decision not based on “added value” but on price. The companies are contributing to the price spiral and try to beat the competition with lower and lower prices. We also should not forget that free-market economy is new to Hungary, it arrived only after the political turn, and many Hungarian companies have still not broken away from what used to be before, where a few companies have secured big market shares for themselves. There are many possibilities; the situation is not hopeless at all. For the companies it is more important to change their way of thinking about structure and think of trade based on their own values than to invest high amounts.
Reputation is also necessary for success. What is the best way to make a brand popular?
Success does not begin with communication but with the definition of the brand, on which we build the strategy that will be a base of our communication. The company must define their true inner values and rely on their philosophy, products and the market itself instead of ad-hoc communication. The buildup of such values is important because nowadays you cannot sell anything with pure product information. You also should not forget that 95% of the consumers’ decisions are made subconsciously.