The World: Insider's View - Hungary

Hamstrung by a culture where the price dominates purchasing decisions, agencies have had to revise their approach, Pietro Leone writes.

The Hungarian market is quite unlike almost any other in Europe. Not least because it is heavily price-driven, with shoppers more interested in value for money than brand loyalty.

This proved to be an early salutary lesson for the first international marketers and global agency networks. When they entered Hungary in the early 90s, they found themselves in a greenfield market where the practice of marketing was not properly understood. Faced with ten million consumers unfamiliar with the art of commercial persuasion, marketers thought they had reached the promised land.

But while shoppers were fascinated by the increasing number of alternatives on the shelves, their budget constraints necessitated a tough selection process based on personal values and needs. Forced to admit that succeeding in Hungary was going to be more difficult than anticipated, marketers and agencies began developing sales-focused activities to drive volume, grow market share and create the illusion of a strong business for the future.

Fiercely competitive sales drives made shoppers sensitive about finding the best deal, rather than paying more for a better brand. Marketers ran price promotions on a regular basis, making the "value for money" proposition skewed more towards money than value. So in the late 90s, Hungarians were fully trained "cynical shoppers", with the rational side of the equation by far the strongest.

In this context, the Hungarian retail landscape continues to evolve through consolidation and large key accounts taking leadership. Despite increasing purchase power, educated shoppers continue to seek the lowest price tag. Marketers are now facing real difficulties when negotiating shelf space with retailers, because reach is vital in a market where brand loyalty is not an asset.

Marketers are now working more and more closely with retailers to enhance value at the point of purchase and enable shoppers to experience brand value before deciding to purchase.

This new approach to marketing has a significant impact on how agencies operate. Instead of communicating only to the end-consumers of products when they are sitting in front of their TVs, agencies are developing campaigns to reach shoppers throughout the entire buying cycle - seeking ways to prolong the shopping experience and occupy the time between one purchase and another.

By understanding the driving factors in each category and offering distinctive deals to influence shoppers to buy one brand over another, agencies are becoming the "glue" between marketers and retailers. In a country where brand still means less than price, this is destined to become more important than the ability to create a nice TV commercial.

- Pietro Leone is the regional chief executive of Grey Global Group for Central & Eastern Europe and Turkey.