How are place branding initiatives financed in private and public collaborations? What are the pros and cons of different place brand financing models?
Below the recommendations of our panel of place branding specialists. If you like any specific answer or approach, don’t hesitate to get in touch with the person. Most of our panel members are available as advisors.
Our clients are typically local government entities, DMOs or a chamber of commerce representing small cities and regions. The projects predominantly involve a single source of funding. Although, these funds may have been ‘bundled’ from more than one source.
Because of the destination marketing orientation of many place branding projects in the USA, the lead organization is likely to be a DMO or chamber of commerce. Hence, the source of funding is likely to be the local lodging tax. Even if the City is to be involved or leads the project, the funding is likely to be sourced from the lodging tax.
While a City may be supportive of a place branding project, it may prefer for the DMO or Chamber to lead the project in an effort to work around the strict rules, reporting regime and influence of Counselors. The City might make a small financial contribution.
An interesting variation was in Oshkosh WI where the CVB’s lodging tax funds were supplemented by an investment by the Oshkosh Area Community Foundation.
We have observed other situations where fund raising has been conducted citywide to generate small amounts from a variety of organizations. While we haven’t been involved in this type of project, they do seem to lead to brands that are diluted and end up being designed to please the disparate goals of contributors.
To answer this question, I define place brands as goods to hint at their excludability and rivalry characteristics. The financing models are connected to the definition of place brands as public, common, club and private goods. I think this can easily explain the kind of problems place branding carries on when coming to the financing models.
A place brand is a public good if conceived as place image based on the place’s identity, which derives from the history and path of progress of the whole community.
Managed by the public authority, it is usually put in place through public money expenditure, and thus freely available, consumable and usable by anyone in (and outside!) the place.
The problem is to make the brand really non-excludable and to make it relevant and perceived as such by a broad set of stakeholders. Often, as much literature shows, this is not the case. The branding strategy may remain too vague and, to be non-exclusive, may end up being ineffective and even irritate part of the local community feeling anyhow excluded, or perceiving the waste of public money threwn to the idea of branding the place.
In some cases, the “public” place brand may end up becoming a sort of common good: anyone can take advantage of the place brand, but the effect of its usage creates a barrier to the usage by other stakeholders, with evident rivalry. This can occur when public policies – spending public funds – strengthen a stereotypical image of the place until any other interpretation of the place is considered unrealistic (for instance, the tourism destination perceived as unrealistic business centre).
In this case the place brand can be even more conflictual and problematic, and the financing model may pose problems of legitimacy.
An interesting financial model can be connected to the place brand as club good: the arrangement makes the interested stakeholders participate in financing (and shaping) branding actions. By virtue of their involvement, made sure by a financial participation in the activity (the real interest for the initiative is stated before any concrete action), they may feel more represented, active and owners of the brand with benefits for the resulting branding effort.
In this case we have a public-private financing model. The “club brand” has to be maintained open though, which can lead to problems, from a brand governance perspective.
Finally, place brands as private goods refer to organisations that make use of the place brand for building their own brands (being individual or network brands), something clearly connected to place branding (and that place branding experts should consider as such).
There are only three basic funding models – private sector, public sector, public/private sector.
The organization I led was wholly public sector funded through a government grant. The pluses of this model is it brought a level of certainty to the budget that allowed for support of multi-year initiatives (like a robust advertising campaign), and it facilitated government attention to coordinating place development with place marketing.
I spent a good part of each day educating government decision makers about place branding and prioritizing development initiatives to create the greatest competitive impact.
The downside of this model is the oversight paperwork. Government money always comes with strings and the bureaucracy makes it challenging to be competitively responsive. The thing I found most frustrating was that it also brought a political assessment to every action.
Full private sector funding eliminates a lot of the political overtone to the strategic brand planning. But it means a good part of the organization’s effort will be focused on fund raising, and funding uncertainties make multi-year initiatives challenging.
It also makes it more challenging to weigh in on place development decisions. One of the biggest complaints I hear from economic development professionals in privately funded organizations is that they are left out of important strategic decisions within their community.
In my opinion, the best model is a public/private sector partnership. But it is also the most challenging to sustain. This model requires everybody to have financial skin in the game. It also helps ensure the place branding initiative gets both attention and priority.
The downside is this model requires an exceptionally strong leader to be effective. The organization leader must understand how to successfully accomplish things in both the private and public sectors. It is important that the leader is able to earn the respect/trust of CEOs and elected officials. The leader must also have excellent collaboration skills to overcome the inevitable conflict in interests that will arise. These leaders are hard to find; but the success of the model is highly dependent on doing so.
Many DMOs partner with the private sector to fund place branding initiatives. DMOs usually have considerable assets and know-how, which are very valuable to their partners.
In this way, DMOs not only get access to additional resources, they can also learn from the partner, which can encourage greater rigor, professionalism, and innovation.
Partnerships are many and varied, and DMOs should focus their efforts on creating long-term, strategic and ambitious partnerships, ahead of short-term, tactical marketing deals, and/or annual memberships. Strategic partners can be hotels, venues, credit card companies, OTAs, airlines, attractions, cultural institutions, mobility companies, mobile phone companies, professional services companies, etc., as well as regional and national agencies.
High-paying, strategic partners should be offered bespoke deals, which last at least three years, and which meet both the partner’s and the DMO’s goals and objectives. (The DMO needs to be careful not simply to subsidize the partner’s own marketing activities.)
The DMO also needs to be very clear about what the partner is getting, what are “add ons” and whether and when it will work with the partners’ competitors.
The DMO will subsequently need to have a dedicated account manager for each strategic partner.
Finally – and, importantly – the partnership must not divert the DMO’s focus from its core mission: to make the city more attractive and to promote it, in order to create jobs and growth.
Funds allocated from governmental or municipal budgets obviously seem to be the most straightforward way of financing place branding initiatives.
However, often direct financing only by local governments does not secure sustainability of place branding projects in the long run. Although announced tenders followed by branding activities create necessary attention, interest and involvement, at the end of the day the deep inner motivation of participating stakeholders is triggered to a big extent by the amount of allocated money. Consequently, enthusiasm tends to fade together with financing.
Another source of funding can be provided by one of the private companies. The risk here is that such company can “monopolize” the branding initiative, dominate and impact the brand – a place brand’s reputation will get naturally dependent on that company’s reputation and well-being.
Successful place branding initiatives require sincere commitment of many parties – private and public – and their efficient collaboration. Commitment presumes that each party contributes to the joint project its fair due – local airlines, airports, associations of local hotels, transportation companies, expo centers, tour operators, travel agencies, restaurants, tourist guides, souvenirs vendors and many others. Each party’s share is individual in each case and can differ depending on the local environment.
Riga city branding seems to be one of the more successful models which has proved its sustainability and efficiency during almost 10 years.
Riga Tourism Development Bureau (LIVE RIGA) was officially registered on October 28th, 2009. Its founders and shareholders are Riga City Council (70% of shares), the national airline airBaltic (10%), the Latvian Hotels and Restaurants association (10%) and the Association of Latvian Travel Agencies (10%). The project started when strong interests of all parties matured and matched – rapidly developing airBaltic needed support of Riga brand as a major destination and a transfer hub. The airline had extensive sales & communications channels abroad, which it was ready to deploy in order to promote Riga.
At the same time, local partners in Riga were proud of the national carrier’s brand and achievements and were ready to collaborate and support airBaltic in all their activities at home and internationally.
Thus, the Riga city branding initiative successfully materialled into the LIVE RIGA brand, which naturally was inspired by – and also had visual identity of – the airBaltic brand.
Riga municipality joined in as a majority shareholder, providing financial support to the well-structured, organized and motivated team and legal entity.
How our work at Promote Iceland is financed differs with each project, but in general it is 50/50 public private, with contracts between government and private sector of around 3 years – still with dependence on finance and budget planning every year.
These are projects that we do with both tourism and trade. The initative for those projects can come from the government, Promote Iceland or the private sector. The projects have their own project boards, and there are regular marketing meetings about the strategy, objectives and progress.
It’s an interesting question because we’ve seen it addressed in many different ways. Context matters as well. Who pays to initiate a place brand project is less important, in my view, than who pays to sustain and develop it over time. To succeed, a place-based brand needs a healthy ecosystem where public, private and community players are all invested in shared, long-term goals and investing in mutually rewarding opportunities.
Governments often play a vital role in providing seed capital to set the foundations of a place brand, including research that can help shape economic policies as well as investment in national and international outreach. But governments are also subject to the vagaries of election cycles and shifting priorities.
Private business leaders may have the ambition and need to build the reputation of their locale to attract talent and investment. But they may lack a clear governance structure and the professional know-how to manage a sustained branding effort.
That’s why Business Improvement Districts (BIDs) and similar private enterprise organizations where the business community funds place branding work through a self-imposed business tax can work well. BIDs have the focus, structure, professionalism and accountability to drive results.
At the recent launch of the new Dupont Circle BID in Washington, DC, Mayor Muriel Bowser said, “A BID is an organization of people who wakes up every morning focused on one particular place.” She described the importance of neighborhood champions and highlighted the key tenets of the work of business improvement districts: “Clean, safe, programmed and championed!”
As self-financing organizations, BIDs can be more nimble in identifying opportunities and mobilizing support from governments and other stakeholders.
Place brands need to be robust platforms that enable numerous, diverse stakeholders to participate and collaborate. Private groups can be champions and catalysts for large-scale initiatives that will require public support as well.
Public entities can provide strategic investments and policy support that help drive success. There are many ways to finance place branding efforts. The only wrong choice is to try to go it alone, without bringing other stakeholders along.
In my experience the public sector usually funds the costs of developing a place brand strategy and its management, while the private and not-for-profit sectors join it to invest in the projects that bring the brand alive and deliver on its objectives.
Examples of public sector-led brand strategy development that I have worked on are the development of the city brand of Mississauga in Ontario in Canada, the city brand strategy for Cork in south west Ireland, the development of the tourism brand strategy for the Wild Atlantic Way, also in Ireland, and the development of the underpinning work for the Hidden Heartlands tourism development strategy in Ireland. And more recently, on the development of a new nation branding strategy for Australia.
In all of these examples, the cost of consultant fees was met by the public sector, as have been the costs of the brand management teams and the costs of organising forums for the active involvement of the private sector in the development of the brand strategy.
Also, in all of these examples the public sector funded the initial, and sometimes ongoing, costs of promoting brand awareness and marketing the new offers and experiences being developed as part of the new brand strategies.
I’ve recently been working in Stockholm for Visit Stockholm, helping the agency to develop a strategy for ongoing engagement with the key private sector stakeholders in a partnership to agree a development strategy for the visit sector, one that will be a key element of the new Creative City brand strategy which the city has also funded.
However, notwithstanding the lead organisational and financial roles taken by the public sector in these places, without exception they have involved the private and civic sectors in consultations on the development of brand strategies and engaging them in their implementation, encouraging them to join with it to invest in projects that exemplify the brand in action.
While the public sector will focus on funding the machinery of brand management and brand tracking and general promotion of and building awareness of the brand’s offer and experiences, it is largely the private sector and non-government institutions that will fund the development of the brand’s assets – for example facilities, services, programmes, events and exhibitions in the cultural and entertainment sectors.
And, it is increasingly the case that the civic sector is getting involved in funding projects that help to deliver on the brand offer. We are aware of one civic sector organisation that is funding a country brand strategy without any funding from the country’s government, although senior civil servants in government departments are individually being involved in consultations on the brand strategy and its implementation.
So, while the public/private/civic partnership model of developing and funding a brand strategy has been the predominant one in recent years, there is clearly scope for the lead to be taken by the private sector, or the civic sector, where the public sector is reluctant or unwilling to do so.
There is no formula that works for every place. The size of a place, the type of government, the level of economic development, the regulatory framework, and the level of institutionalization of branding are all factors that affect the ways in which place branding initiatives are funded.
Another factor is the particular understanding of “place branding” that local actors embrace. Do they understand place branding as intertwined with place planning and development, or do they view it more narrowly as place promotion? In each case, the types of funding mechanisms would vary.
In general, places that want to invest in long-term branding efforts develop a regulatory mechanism that allows them to raise funds for branding activities through a combination of taxation, fees, and private industry contributions.
For example, in the US, Brand USA is a non-profit entity established by Congress, which passed the Travel Promotion Act of 2009. Brand USA works to increase international tourism to the US and, according to the organization’s website, “no US taxpayer dollars are used to fund Brand USA’s marketing efforts.” Instead, funds are raised through fees paid by foreign travelers coming to the US and contributions made by private industry partners.
It is important to note that public funding for place branding and development does not always come in the form of cash. Often, it can be given in the form of tax breaks and other “incentives” to private investors and companies.
This approach is controversial because it essentially means that a place is agreeing to forfeit tax revenues that could be put towards public services for residents. For an insightful study of how this has worked in the case of New York City, I recommend Miriam Greenberg’s book, Branding New York: How a City in Crisis Was Sold to the World (Routledge, 2008).
Place branding initiatives are government-financed in most countries, and they are also administered and implemented by the government.
In many cases, the projects are put onto a public tender. Since the deliverables are not hospital beds or school meals, the tender briefs can vary massively from country to country, depending on what books or case studies the officials in charge had relied upon when writing the brief.
Tenders also tend to prioritize local suppliers, which is not always good for the eventual outcome quality, since there may be little local expertise in place branding as such, and the contracts would go to a local graphic design agency.
Places in distress or with little state budgets may get financing from international organizations, such as the World Bank, or even from private funds of wealthy diaspora members. Ironically perhaps, the latter tend to be better executed because the funder in question would keep an eye on quality and project effectiveness.
If projects are initiated from the grass-roots, they will still eventually apply for governmental funding, since people may be willing to sacrifice their time and expertise, but not money directly.
I have not heard of crowd-funded place branding projects. In fact, if people care about the place enough, there will be life in it somehow that will attract people without necessitating a place branding project.
Basically, money can be made through licensing and venture investment into projects that express the local way of life and create material objects (fashion, street food, music).
Financing place branding initiatives is a delicate issue – and also one of the main problems in place branding. The budgets are very low in comparison to company marketing budgets, while the tasks and aims to fulfil are at least at the same level (or even more complicated).
The most common model nowadays is a kind of basic public financing and some “private partnership” models, where mainly local companies co-finance the place branding attempts.
Like in all public-private-partnerships, this can lead to the typical problems: how much do you do or bend your approach to please the partner paying? How much influence do you give to stakeholders that pay – especially in comparison to other stakeholders like residents that are more important in the general place branding strategies, but do not directly pay…
The negotiation of aims and content becomes potentially more stressful if one side substantially finances the approach.
Besides the downsides, we also have to see the positive effect of public-private funding models:
- First, it saves public money (taxpayers’ money).
- Second, it buys in commitment. If companies pay for the approach, they are probably also more willing to help and share content for the success.
- Finally, it is a good indicator for success measurement. If companies are willing to support, it shows that they believe in the success of the approach.
In sum, it is a question of balance. If you rely too much on stakeholders’ money and have to follow rather their agenda, instead of your own – it creates more problems than it helps to solve. Ideally, it is however a good way to jointly brand a place.
More about our panel and previous answers to frequent questions on place branding here.
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