Logical logistics
– “I’ve hardly worked in Germany at all”, Danilo Lange admitted at once. “After university I found work at Red Bull, and went to London to promote its product there. Then to Ireland, then Austria. I liked that brand. I’m keen on snowboarding and windsurfing, and an energy drink aimed at active young people was very much in line with my own outlook. When the company asked me to go to Russia in 2003, I did not hesitate for long. All sorts of things were being said about your country, of course. But I tried not to think about the bad things, and then I saw, as they say here, the Devil is not as black as he is painted.”
About Danilo Lange
He graduated from university in Munich. He came to Moscow in 2003 on detachment from Red Bull, to study the Russian market. As a result, the company opened its own office here, where Danilo Lange worked for several years. But in 2007, he founded his own advertising agency, Louder, offering a full range of marketing services. The agency now employs 45 people. Its clients include major Russian and international companies.
– What did you do in the Russian office?
– The trouble was that there wasn’t any Russian office. We were operating through distributors at that time. They were big companies, we had no complaints about them, the market was growing. However, this arrangement was not flexible enough. Imagine that the distributor orders a large batch of our drink. This usually happens when the previous batch is coming to an end. The money is transferred, and the distributor keeps asking every day when the goods are going to arrive. But it takes us time to dispatch them, ship them and put them through customs. Furthermore, it would be no bad thing to prepare promotions of some kind, advertising materials and gifts. This cycle can take up to two months. And this is time enough to lose the market! So the question arose: should we open an office in Russia or leave things as they were? To find the answer, we came to Russia. The delegation included lawyers, consultants, marketing specialists and your humble servant.
– So you came to assess the situation. Were you here long?
– Initially, for a fortnight. But this was not long enough to get to grips with the situation. We returned and studied the market for six months. As a result, we came to the unambiguous conclusion that we had to have an office in Moscow. We needed our own logistics system with its own warehouses to keep the supply of goods going continuously. And we also needed a company to promote the brand. And that was the right decision. In three years, our office grew till it employed 200 people, and regional offices were opened in St. Petersburg, Novosibirsk and Vladivostok. Sales doubled each year.
We came to the unambiguous conclusion that we had to have an office in Moscow.
– Was it difficult to open a firm in Russia? I mean from the technical point of view.
– You know, when you come from a major international company, there are no difficulties. How much do you think it costs to start up a firm? About a thousand dollars. But if your company pays twenty thousand, and engages the best lawyers and consultants, you have nothing to worry about. It was more bother to open our own agency later. But even that was not really difficult, I assure you.
Not the strongest competitors
– Why did you decide to stay in Russia?
– I always wanted to start my own business. Working in a big company, I learned to think flexibly. I realised that setting up a business was not so difficult as it appeared at first sight. If I had decided to do this in Germany, I would have had to work my way into a market already full to bursting with a whole load of competitors. But here, I saw a niche for an advertising agency. A wide niche. Of course, there are such agencies in Russia too, but having worked in Moscow, I could see that they were not the strongest of competitors.
Konstantin Ugodnikov, Head of Economics Department of “Lenta.ru” portal :
— The advertising services market in Russia is long past its formative stage. It is one of the most competitive markets in the country, including several thousand advertising agencies, from the biggest, such as News Outdoor, to small advertising agencies employing only a few people, mainly operating in the regions. The high level of competition forces the players in this market to be more specific about their specialisation and the sector in which they operate, and to raise the level of their own creativity. The economic sanctions introduced against Russia this year by a number of states have so far had little effect on the size of the advertising market. Its turnovers will probably only start to be reduced next year. And this will be connected with the general worsening of the economic situation in the country due to the fall of oil prices on the world’s stock exchanges.
True, there is another possibility: the economic crisis might raise the interest of potential advertisers in increasing their own advertising orders, because a fall in sales can encourage manufacturers and vendors to increase their advertising budgets. In this case they will most likely be inclined to place their advertisements in the less expensive media and avoid the most expensive sector, namely television. According to our forecasts, the winners in this case could well be small advertising agencies specialising in placing informative and banner advertising on the World Wide Web, and also agencies concentrating on producing external advertisements and operating in the medium and small business sector.
There are such agencies in Russia too, but having worked in Moscow, I could see that they were not the strongest of competitors.
– In what sense?
– Let’s say you want to order a box like this (Danilo Lange points to a well-packed bottle of whisky). In the countries of Europe, there are many companies which would undertake this. Here in Russia, there are also many who would like to get the order. They will say: Of course, we’ll do it, it will be even better. But you sign the contract, and then after some time, they call you: “W can’t manage a red handle, it will be white. But that’s not very important, is it?” Then they ring again: “Against that background, the lettering comes out black, not brown. But that’s nothing, surely?” And there can be any number of such calls. The result is that you get not what you wanted, but only something vaguely like it. But the box makers just shrug their shoulders. That’s the Russian mentality, they say. In Germany or any other Western country, such a thing is simply not possible. And I realised that I could always find clients who were used to the European standard of quality. And so it proved.
I realised that I could always find clients who were used to the European standard of quality. And so it proved.
– Did you open the firm on your own?
– Of course not, no way. I could never have taken this on all by myself. Only with partners. At first, they were Finns. They already had their own agency, which I helped them develop. But then I left, because I decided to do business with my Russian friends whom I had got to know when I was still working at Red Bull. In general, the choice of partners is a very difficult matter. To attain the required level of trust, you have to know people very well, you have to have dealt with them for several years. But I can’t imagine doing it without partners. Our business is concerned with creativity, with ideas, which are often born in brainstorming sessions. Partners help in taking difficult decisions, they suggest what result will follow in one case or another.
I can’t imagine doing it without partners. Our business is concerned with creativity, with ideas, which are often born in brainstorming sessions.
Constant time pressure
– What is the nature of your business?
– We are a creative advertising agency, specialising in trend marketing. When a major firm with a name known world-wide starts up a PR company covering the whole world, we do it in Russia. We pick up the initiative and break it down to suit the local market. True, it can happen that our initiative spreads all over the world. For example, one of our partners is the Porsche car company. We carried out a video mapping project with them. We gave them the very first work, and they spread this trend all over the world. With this project, we were rated among the top three on a specialist American site. And our project for BMW was shown in their Munich headquarters, and all the regional marketing directors applauded. We are proud of that.
Ilya Kulakov, Managing Director of the advertising agency TM-Design:
— In our business, a lot depends on the qualifications of the creative employees – the designers and copywriters. One can only compete in the market by offering a product of good quality from the creative point of view. Danilo Lange undoubtedly does offer such a product. That is why he has such an impressive list of clients. However, this does not mean that he does not have worthy competitors. Even ignoring the market leaders, i.e. the big international agency chains concentrating on equally big clients, there are quite a few strong players in the medium and small business sector, who will not be able to continue without orders even now, quite apart from the sanctions and the generally worsening economic situation.
The cost of entering the advertising market varies considerably, depending on many factors, but if we are talking about a small agency targeting small and medium businesses, a startup is possible with capital of about one million roubles ($20,000). You have to lease an office, take on staff (a designer, a copywriter), produce a website and start your own advertising campaign on the internet.
– So most of your clients are foreign companies. Why don’t you work with Russian brands?
– Very few Russian companies sell their products as a brand. Furthermore, many local businessmen pay more attention to SR than to PR – relations with the State authorities and lobbying. It seems to them that this is more reliable and profitable. But we don’t handle that at all. We specialise in promoting brands aimed at young consumers, like Adidas, Subway, etc. But I don’t rule out the possibility of working with Russian companies in the future. It’s just that we have enough on our hands right now. Many Western companies are sending us proposals for participating in their tenders and campaigns. And that is sufficient for us, we don’t want to expand too quickly. Even if I were hungry, I wouldn’t eat a whole elephant at once. I would eat slowly, one piece at a time. It’s the same in business.
Many local businessmen pay more attention to SR than to PR.
A certain Russian bank recently suggested that we should give away 500 gifts: balls, torches, boxes… That isn’t our style, and we respectfully declined. But I cannot foresee the future. Perhaps in a year’s time I shall have to run from door to door in search of clients. And then we would be happy to fulfil such an order.
– So the Western business principles which you studied at university work like clockwork here, without failures?
– I wouldn’t say that. There are local nuances here. The most important is deadlines. The difference between the expected and actual times of carrying out work. In Russia, everything is done at the last minute, under constant time pressure. I don’t know why. Even if you plan something in advance, in some incomprehensible way, everything will be finished in emergency mode on the very last day. You just have to be prepared for this.
In Russia, everything is done at the last minute, under constant time pressure.
For example, at the Olympic Games, we had a project for an American house. We opened it on time, there was a splendid ceremony and everyone congratulated us on a great result. But if only they’d known what it cost us! We had planned everything beforehand, we had been granted the site by the organising committee in good time. But when they began bringing in the materials, it turned out that at this very time, freight transport to Sochi was closed. Why? “Oh, we forgot to tell you. This restriction applies for the whole of next week.” And we had 20 trucks. And we were pressed for time, but had to wait for permission for a whole week. This is not a criticism, you understand. It’s just a recognition of the fact, it turns out that way very frequently. We try to work out the time taking all possible force majeure circumstances into account. But something which could not in any way have been foreseen is bound to happen.
Another factor is the cost of leasing an office. In every European city, we are used to finding offices at 200-300 dollars per square metre per annum. But in the centre of Moscow, it’s 900-1000 dollars per square metre. This is just nonsensical. How can we find room for our staff at such a price? It takes up all our profit! Leasing prices in Moscow are becoming lower now. The sanctions, the crisis… One should not say so, perhaps, but for a healthy business this is all to the good.
They know how to sell themselves
– And what about your staff? After all, they are Russian too, they also have the Russian mentality…
– Not necessarily. When they join our company, not a trace of this mentality remains. Anyway, the personnel problem in Russia has many aspects. On one hand, I like the way my people work. They don’t just do what is asked of them, they study, they learn, they ask for more and more work… But on the other hand, there are problems too. For example, you get a CV from a 23-year-old girl listing a life experience and career path that it would take me an hour to tell you. Obviously it isn’t true, but she considers herself the ideal candidate. In Russia in general, there is a big problem in the gap between people’s ambitions and what they can actually do. Many of them know how to sell themselves, but when it comes to the actual job… And yet we are selling brains. Our creative staff forms the main component of our success.
In Russia in general, there is a big problem in the gap between people’s ambitions and what they can actually do.
– So how do you solve this problem?
– In various ways. At first we only took on people through employment agencies. That’s the first filter, the agency itself weeds out those who are clearly not suitable for us. But we don’t have staff problems now, we don’t use agencies any more. We are known in the market, and we receive several CVs every week. Most of them we reject at once, but there are people we meet and talk with. And occasionally we even create a position we didn’t have before especially for one of these.
– Do you pay your staff less in Russia than you would have to do in Europe?
– It depends on the position. Rank-and-file staff receive about 20% less. One of the reasons for this is that they pay less income tax here, only 13%. But in management positions, our people are very well paid. Fully comparable to European rates. By the way, when there is a crisis in a country, you can find good staff for less money. And if the economy is growing, there are fewer people in the market, and sometimes you can’t find the one you want at any price.