Economic Developers Spending Marketing Dollars in the Wrong Places

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New UC Berkeley national survey and study indicates that economic developers do not use the marketing strategies that they themselves believe are most effective.

Economic Development Marketing: Present & Future Book Cover

The most surprising finding wasn't that economic developers generally have a strong grasp on what are effective marketing methods, which they do. The surprise was that even with this knowledge, they don't spend their marketing budgets accordingly.

A University of California at Berkeley study released today reports that economic development organizations -- which help communities enable business investment and growth -- do not use the marketing methods that they themselves believe to be the most effective.

The results, taken from a national survey of economic developers nationwide, "were really unexpected," said Eric Simundza, a recent student at UC Berkeley's Department of City and Regional Planning, who co-authored the book with Anatalio Ubalde. "The most surprising finding wasn't that economic developers generally have a strong grasp on what are effective marketing methods, which they do. The surprise was that even with this knowledge, they don't spend their marketing budgets accordingly."

This lag between awareness and action results in spending that is wasteful not only for the organizations but for the public as well, as economic development organizations are often funded by taxpayers. The current economic crisis is causing hardships in communities across the nation, and for both public and private entities alike, the resulting pressures on spending necessitate that economic development organizations make responsible decisions with their budgets in order to accomplish more with less.

Economic developers were asked what strategies they found to be most effective, how much they have funded them, and how much they plan to fund them. The findings reflect significant changes in the field of economic development. Websites were rated the most effective medium to promote communities, followed by face-to-face meetings, indicating that successful economic development must combine elements of high-tech as well as high-touch. In a complementary survey, corporate real estate professionals reported the website to be the first point of contact that they have with an organization, and by the third stage of the site selection process almost one and a half times as much communication was found to take place through the website than through personal contact.

The rise in the importance of the website comes at the expense of print advertising. Requested subscriptions for site location magazines have been steadily declining, and the majority of organizations have cut funding for print advertising within the past five years and plan to make further cuts. Even though print advertising was seen as ineffective, it was the second most allocated expenditure in economic development organizations' marketing budgets.

Economic development is strongly rooted in place. To acknowledging this, the study highlights variations in industry targeting and marketing practices due to differences in the types of communities and the structures of the respective economic development organizations. Counter to what one might expect, small, rural, and Midwestern communities were more likely to fund the two most effective marketing strategies. Additionally, while larger communities in the Northeast targeted employers in knowledge-based industries such as professional services and the sciences, smaller communities in the West focused on creating the sorts amenities that will attract workers to an area rather than jobs, hinting at one of the most fundamental debates in the field about how best to achieve economic prosperity.

The 100-page book, titled Economic Development Marketing: Present and Future, is one of the most comprehensive academic studies ever performed on the methods that economic developers use to promote and attract expanding businesses to their communities.

One major finding was that 29% of economic development organizations market their communities to a global audience while 27% market nationally. "With economic developers in the United States competing with each other for location projects, effectively marketing their communities is a key competitive advantage," said Anatalio Ubalde, an author of the study and a co-founder at online economic development solutions provider GIS Planning, Inc., and http://www.ZoomProspector.com based in San Francisco. "Globalization, the shaky economy and rising fuel costs only compound the need to effectively compete."

Another major finding was that targeting the manufacturing sector is the top priority of economic developers even though it is a declining employment sector, and high-growth industries such as business and information services are less often targeted. Several site selectors interviewed for the book pointed to the importance of alternative energy and just-in-time delivery in the resurgence of manufacturing in the US, but acknowledged that large investments often result in fewer jobs than the industry of yesteryear. "Whereas business measures success on profitability, economic developers measure success by the number of jobs created, amount of capital investment and increased taxes to the local government. This accounts for the focus on attracting manufacturing, even though this industry has been in decline in the US for two decades," said Mr. Simundza of UC Berkeley.

When looking at a marketing program, the methods of evaluation are as important to consider as what is being evaluated. The study found that that organizations benchmark their marketing programs using criteria that are rather qualitative and difficult to measure, such as "change in perception about the community," more often than easily measurable criteria such as website traffic. The detailed look at the methods used to promote communities provided in Economic Development Marketing: Present and Future should therefore help many economic development professionals in evaluating their own marketing programs, not only in terms of what marketing strategies they use, but in terms of how they evaluate their success.

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Chad Catacchio
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