How advertising can impact Romanian economy

1. How advertising can impact Romanian economy

2. Scope of this report
In 2014, Deloitte UK together with Advertising Association released a study in UK called
“Advertising Pays”. It was the second edition of the study which investigates how advertising can
unlock UK growth potential.
Among other conclusions, an analysis shows that 1£ spent by an SME is 8 times more efficient for
them than the same amount spent by a larger business.
Romanian environment
Based on a survey, we have analysed the perception related to the advertising market in Romania.

3. Companies views of advertising- overview
During the past 4 months, we have conducted a series of interviews with key decision makers in
medium sized to large companies in the following sectors:
FMCG, Telecom, Retail, Pharma, Financial Services, Media/ Advertising agencies, Utilities
The views of the main TV operators were also gathered through direct interviews.
Among others, competition and innovation are considered to be important drivers in advertising
spend. Where competition is fierce, advertising budgets tend to increase in order to increase the
visibility of the product.
Same way, when a new product is launched or a structural change occurs, companies allocate
additional advertising budgets to promote the new product or brand (see Telekom rebranding,
Orange TV, Vodafone M-pesa).
3
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4. What are the first things you think of when you
hear the word „advertising”?
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4
ADVERTISING
The variety of answers proves the
multiple roles that advertising
plays in today’s economy and the
importance that a company
attaches to it.

5. Advertising & Marketing–International Overview
The global Advertising & Marketing revenue growth rate is estimated to increase at a CAGR of 6.0%
during 2013-2018 driven by growth in the digital advertising segment.
419
376
CAGR 2.5% CAGR 6.0%
409
427
451
473
509
538
581
617
633
700
600
500
400
300
200
100
0
2008 2009 2010 2011 2012 2013 2014e 2015e 2016e 2017e 2018e
In US$ billion
Global Advertising & Marketing revenue
Source: IBIS 2013, Bloomberg (March 2013), Global Media Report, Mc Kinsey & Company, 2013
5 Global Media Sector - Overview

6. TV continues to be the most efficient type of advertising,
followed by Online/ Digital advertising and Radio.
Outdoor advertising is media that is everywhere and that cannot be turned off or
put down. Consumers spend quite a lot of time out of home and as they move
through their daily lives they take note of the advertisings they see.
6
35%
23%
10%
10%
5%
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Interviewers explained that television advertisings can deliver massive audiences
to the advertiser. TV stations were the first choice for large national brand names.
Unlike some traditional advertising, online advertising can deliver visitors
immediately — through a simple click on your advertising — and provides
measurable results.
Radio continues to be a powerful way for companies and brands to engage with
consumers.
Newspapers and magazines have lost share since people get their news from so
many sources these days.
18%
With billions of people across the world on social media, it is a great way to
reach tons of people at a relatively low cost.

7. Top 50 spenders by industry
When analyzing top 50 spenders on TV, FMCG industry appears to be dominant
57%
2% 12%
13%
17%
FMCG
Pharma
Telecom
Financial
services

8. What factors influence the size of advertising
budgets?
8
8%
32%
44%
60%
36%
8%
12%
8%
4%
4%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Results of prior years' campaigns
Evolution of YTD profitability
Changes in strategy and plan
The opinion of the general manager
The value of the marketing business plans
Comparisons with other market players
Comparisons with other countries
8%
36%
52%
16%
42%
12%
52%
48%
76%
46%
40%
12%
4%
36%
0%
4%
High influence Influence Neutral No influence No influence at all
Based on the results of the survey, it shows that decisions are made based on short term
profitability and strategy.
At the other end, comparisons with other countries and companies are least relevant.

9. Which investments contributes more in the
success of a business
Quality of the products
Operational cost reduction
Advertising
Supply chain expansion
Discount campaigns
Infrastructure
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9
32%
36%
32%
54%
57%
48%
82%
43%
57%
46%
33%
36%
36%
18%
11%
7%
11%
11%
14%
18%
7%
4%
7%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Training and personnel recruitment
Very important Important Neutral Not important
The results of the study showed that the success of a business is influenced the most by:
- Quality of the products. Without a quality product or service, it is difficult to maintain
profitability.
- Reduction of operational costs.
- Advertising. The purpose of advertising is to convince customers that a company's services or
products are the best.

10. Success factors in advertising strategy
Common general conclusions emerged across the board:
 The strongest results are achieved when businesses use multiple advertising channels and
develop a structured campaign
 Better targeting brings better results
In Romania, is not a common practice to measure the effectiveness of marketing expenditure due
to complexity of the process and lack of data& resources

11. An industry with an impact 100x its size
3% of Romanian management population impacts a 50bn EUR turnover consumer market, 33% of the
GDP
11
3% of
Managers
0.5bn EUR
Marketing & Communication
Budgets
Sources: ARMA, BRAT, IAA, IPSOS, Deloitte calculations
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50bn EUR
Internal consumption of Branded
Consumer Products and Services

12. Impact of TV advertising expense on turnover in
the last financial year (2013)
70%
% of companies that increased GRP
To cross check the findings, two case studies were performed on two advertising-intensive
industries.
Source: Romanian Association for Audience Management, Amadeus
Financial Data from various sources (i.e. Amadeus, Ministry of Finance etc.)
Deloitte calculations
61%
% of companies that increased turnover

13. Case study 1: significant impact of advertising in
FMCG industry
The impact of TV exposure on the turnover was analysed for top 3 companies in FMCG industry over a 4-year period
(2010-2013).
Company B:
Decrease in TV exposure
had no significant impact in
turnover. It was due to high
level of TV exposure
compared to the competition.
Company C:
Increase in TV exposure had
insignificant impact since the
company had a level of TV
exposure much lower
compared to the competition.
General remarks
TV exposure has a
significant impact on the
FMCG industry, should
expenditure exceed a certain
threshold.
In some cases the impact
becomes visible with a delay.
2010 2011 2012 2013
2010 2011 2012 2013
GRP
Turnover
Company A:
Increase in TV exposure has
driven an increase in
turnover.
2010 2011 2012 2013

14. Case study 2: lower impact of advertising in a
mature mass-market industry
The impact of GRP on the turnover was analysed for top 3 companies in mass-market industry over a 4-year period
(2010-2013).
2010 2011 2012 2013
2010 2011 2012 2013
2010 2011 2012 2013
Company A:
Decrease of TV advertising
spending in 2011-2012 had
not resulted in a decrease in
the turnover of company.
Company B:
Minor changes in TV
exposure had no significant
impact on turnover, the latter
remaining relatively constant
Company C:
Slight increase in turnover
was not directly linked to
investment.
GRP
Turnover
General remarks
When brand awareness is
very high, small variations in
TV exposure are not
reflected in turnover .

15. What is the size of the workforce involved in
marketing& communication related activities?
554,500
94,909
18,567
Significant influence
Total employees in retail and
wholesale trade and hospitality
industry (HoReCa)
Indirect impact
Sales agents and client facing
employees
Direct impact
Advertising, marketing
Source: Romanian National Institute of Statistics, Deloitte calculations
Note: for each category, the numbers refer to incremental number of employees

16. Positive impact of advertising on the
professional and people’s lives
Ipsos survey performed in Romania on perception of advertising revealed that :
• 61% of those interviewed perceive a positive impact of advertising on their lives,
both at personal and professional level.
• 36% of Romanians believe that advertising has a neutral impact on their lives,
• 3% believe that advertising has a negative impact on their lives
61%
36%
3%
Positive
Neutral
Negative
Source: Ipsos
Note 1: total number of respondents is 1,000 (nationally representative sample)

17. How authorities can help
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The national strategy for competitiveness for 2014- 2020 states that the state’s vision is:
“The development of a competitive business ecosystem, based on a stable regulatory environment,
focused on entrepreneurship, innovation and creativity, which should focus on trust, efficiency and
excellence and place Romania among 10 European economies”
When investigating how authorities can help, a number of suggestions have emerged:
 All legislative initiatives affecting the advertising & media market should be put up for
debate with industry representatives, before being enforced
 Industry representative bodies should become dialogue partners of the authorities in order
to grant them the chance of a proactive approach
 Greater stability and predictability of the entire business ecosystem

18. • Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of
which is a legally separate and independent entity. Please see www.deloitte.com/ro/about for a detailed description of the legal structure of Deloitte
Touche Tohmatsu Limited and its member firms.
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