Inward Investment Marketing - Should 'Low Cost' be Part of Your Location Value Proposition?

Thursday 3 April 2014
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When the same subject repeatedly crops up in conversations with inward investment professionals, it probably means it's an important one that's worthy of further consideration. With this in mind, here's a concern that we keep hearing again and again:

'We don't want to shout about being a 'low cost' business location.'

From one perspective this is easy to understand. Locations with the greatest need to attract inward investment have often suffered most from economic decline and high levels of unemployment. Negative media publicity has often followed, leaving Place Marketing agencies and politicians anxious about external perceptions. This anxiety then feeds into a preference for marketing euphemisms such as 'cost competitive' or 'cost effective', when what is really meant is 'low cost' or, even less elegantly, 'cheap'.

Businesses want low costs!

But there's a problem with avoiding the 'low cost' label. Investing businesses (or their consultants) researching locations online are unlikely to be searching for euphemisms. Phrases such as 'cost competitive' will simply disappear into the online ether of un-searched-for terms. This is because investing businesses, assuming that they act in the interests of their shareholders, want low costs.

For many investing businesses, notably in industrial sectors, the niceties of how places are perceived by the general public are likely to be of minimal interest. If you don't believe this, take a look at marketing collateral for logistics and distribution sites - the chances are that the area's Low Wage Rates will be highlighted in bold. Or speak to site selectors working for large or small manufacturing companies and ask them what's most important: minimising land and labour costs or being located in an area that's perceived to be prosperous?

But 'Low Cost' isn't enough...

Your winning Location Value Proposition is to be found where the needs of inward investors align with the benefits of your location and its strengths versus competitor locations. And 'low cost' will only ever be part of that equation. Low location costs are often accompanied by shortages of skilled labour and training infrastructure (unacceptable for (e.g.) advanced manufacturing or technology sector investors) or poor transport connectivity (ruling out (e.g.) logistics-related investments for which low cost labour is often one key requirement).

So, should 'Low Cost' be part of your Location Value Proposition?

Here are our conclusions:

1. Investing companies want to minimise costs. So if your location is low cost, you should use it to your advantage, and provide solid evidence of your cost advantages versus competitor locations.

2. But investing companies also need to maximise profits and minimise risk. It's therefore essential to combine your low cost location benefit with other added value benefits, such as skilled labour availability, training infrastructure, technology expertise or transport connectivity.

Contact Clarity today to talk about developing your winning Location Value Proposition.

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