Opportunity to create brand awareness in Cuba as economy opens

03 August 2016 Consultancy.uk

Cuba has recently been in the headlines. President Obama was the first US head of state to visit the country in 90 years, following warming diplomatic relations. The country has begun a process of opening its economy, as well as expanding its international trade. The opening up of its economy creates opportunities for both local businesses as well as international businesses seeking to establish their brands.

In a new report from The Boston Consulting Group, titled ‘Understanding the Evolving Cuba Consumer’, the firm explores the profile of Cuban consumers, as well as the market potential for foreign brands. The report is based on a survey of 440 Cubans, 326 of which were in Havana and 114 were from the provincial city of Santiago.

Three distinct profiles

Cuban profile
The Cuban economy has enjoyed relatively strong growth in recent years, partly on the back of its opening up to the world. In 2014 the economy generated nominal GDP of $89 billion on its 11 million inhabitants. The country has seen a number of years of around 3% growth, which is projected by the firm to continue in the near future. Additionally, the economy is benefitting from increased tourism, as well as increased remittance from Cubans living overseas. Exports generated around $4 billion, while remittance added around $3 billion.

The local economy is, however, relatively stratified. According to the analysis, this is partly due to there being two currencies, the Cuban peso (CUP) and the Cuban convertible peso (CUC). The latter is pegged to the US dollar and is primarily for tourists and those working with tourists, while the CUP is the domestic currency.

In terms of income groups, there are three strands. Around 50% of the population lives off government salaries, the salaried, amounting to around $25 per month. This group has an income of around $400 a year. The second group (~30%), the emerging Cubans, have a more mixed income, through salary as well as income from CUC, either by remittance or from tips from tourists. The final group (~20%), the ‘self-sustaining’, are able to make considerably more money from tourists or have higher earning remittance access. The group earns around $1800 to $2000 per year, mainly through CUC.

Cuban consumers spending pattern

The research finds that Cubans tend to spend the largest portion of their income accessing basic goods. Basic food accounts for 33% of their spend, while clothes and shoes soak up an additional 10% of their income. Other categories related to everyday living, account for 90% of their spending. The ‘other’ category, represents barely 6%, far lower than other emerging economies, and far behind the US, where 24% is spent on ‘other’ discretionary items.

Accessing basic goods

Accessing goods
The research also finds that there is a relatively high level of unmet need. While the Cuban government provides basic food stuffs from Ration stores – where heavily subsidised food items are accessible – not all goods are accessible there. And while other government stores provide access to a range of other goods, the informal market takes up the slack for a variety of goods.

While 92% of consumers use Ration stores for basic goods, 12% also access specific goods through informal markets or as gifts from overseas. For clothing there is a considerably larger proportion of Cubans accessing informal channels to access goods. Electronics too are sourced by 20% of Cuban through non-government means.

Non basic goods categories

Brand awareness
The research additionally finds that there is a relatively low level of brand awareness among Cuban people. Since the government supplies the basic goods, brands as such are relatively irrelevant to the meeting of those needs. Brand awareness is, however, expected to increase among basic goods as more companies are able to access the market.

The research did find that where there is brand awareness among the population, it is largely due to remittance as well as contact with Cubans, and others, outside Cuba. When it comes to specific brands, for electronics Haier (57%) was the most well known, followed by LG (44%) and Sony (27%). In terms of apparel, Adidas (55%) has managed to most deeply penetrate the local market, followed by Nike (32%) and Puma (25%). In terms of mobile phone brands, penetration is particularly high for Alcatel (44%), followed by Samsung (41%).

Internet access

Unregulated access
While there are a number of ways to access Cuban people with branding, the internet is currently not one of them. 88% of salaried people have not had access to the internet in the past year, while 64% of the emerging group has not had access to the internet. Given that these groups account for almost 80% of the population, advertising to most of the Cuban people, through the internet, remains relatively difficult.

And, even when people do use the internet, it is predominantly to connect to family and friends. The only group to use the internet to access e-commerce related goods is the self-sustaining group, of which 23% had made an online purchase in the past year.

According to Russell Stokes, a BCG Partner and co-author of the report, “Cuba is an undeveloped market for consumer goods, which means companies can’t apply the conventional tactics that have worked elsewhere. As the opportunity grows over the next several years, Cuba will be a turbulent ride. But it will ultimately reward companies that can ride out the bumps.”

×

Branding the modern consultancy: why reputation hinges on it

03 April 2019 Consultancy.uk

The reputation of firms and brand strength remain a key aspect of business in the management consulting industry. Karla Alexander, Brand Manager at Propero Partners, below reflects on the state of reputation management in the consulting industry.

In a time where public perception is enough to make or break a company, the wise are reminded that when it comes to brand and reputation, the strength of one does not necessarily equate with the quality of the other. Nowhere is this more clearly demonstrated than in the impact a spate of recent issues has had on firms that form the backbone of the industry, including KPMG and Grant Thornton.

Such was the damage to KPMG’s reputation last year, that the Bank of England took the decision to investigate its viability following a string of high-profile corporate scandals. Whether or not the sum total of the firm’s track record is enough to restore its image remains to be seen.

This proves that brand and reputation are not only among the most valuable intangible assets – they are also among the most fragile. And their reach extends into the centre of any firm, regardless of its size or market share.

The lesson here for challenger firms and smaller consultancies is two-fold. As well as learning from the mistakes of their peers, it’s also important not to conflate brand with reputation. While they both share the same objective – to win the hearts, minds, and wallets of clients – brand provides the opportunity to differentiate, whereas reputation provides the opportunity to demonstrate credibility. Far from being the same thing, it’s this very difference that binds them together.

Branding the modern consultancy: why reputation hinges on it

Reputation is the driving force behind a person’s decision to award a firm their business, based on values that align with their own – be it honesty, transparency, integrity, accountability. However, none of these characteristics are particularly compelling or distinctive on their own. To carve out key points of difference, to stand out, and to become known, liked, and trusted among a sea of competitors offering similar services, companies should turn to their brands.

Brand is the culmination of culture, vision, values, and identity, which when used consistently and religiously, can create fresh opportunities for firms. People no longer buy services in isolation but look for a purpose or a lifestyle to buy into. Strong brands create an appetite for themselves and command a higher price tag because people will pay for them. The more pulling power and emotional resonance a brand has, the more successful the firm will be.

Protecting a brand

That’s why, regardless of abundant choice, there is still only one Deloitte, one PwC, one EY – and there’s a reason why the Big Four audit nearly 100% of UK’s top 100 corporations. This relentless focus on building and protecting their brands and reputations on the basis of being the best, has, over time, resulted in a market monopoly. However, problems arise when one is given more weight than the other. This point is particularly relevant in the case of KPMG, and in others where firms have flaunted their reputation for being untouchable in the face of the client.

Brand and reputation working together are directly attributable to significant business outcomes (such as financial performance, loyalty, awareness) and should be treated as such. Focus too much on brand and you risk alienating the people who value credibility, such as prospective and existing clients, shareholders, and the best talent. Focus too much on reputation and you risk stagnating in the market, with a service that no one knows or cares about.

In order to overcome these challenges, the first step for many firms will be to take a step back. Before any meaningful work can begin, consulting firms need to assess the current state of their brand and reputation, and establish key characteristics for both. For brand, this might be relevancy, consistency, positioning, identity, and appeal. For reputation, this might be staff turnover, service quality, growth rate, client relationships, leadership, and diversity and inclusion.

Regardless of the findings, there’s always room for improvement. An uptick in the performance of brand and reputation can be achieved by measuring the impact that one has on the other, integrating business and marketing strategies, and setting strict KPIs.

Guardianship and getting results from this activity isn’t the job of one person or one team. People at all levels of the firm should be thought of as brand ambassadors, and should be willing to do what it takes to protect the reputation of the business no matter the cost. After all, everyone benefits when good things are said about a firm when it’s not in the room.

Related: Why building trust and brand belief is key for consulting firms.