Marketing in Russia

Market Basics 5Economic crisis in 1998 affected Russia 5Russia & Eastern Europe has a strong economic growth & a huge potential 5Large Educated middle class is fuelling demand for consumer goods 5Emergence of democratic system is causing changing government rules & regulations 5Free markets & capitalism are still taking root – Many people are yet to learn the rules of capitalism and free markets

Market Basics 5Newly Democratized countries like Russia and former Soviet states have income levels comparable to that of developing countries 5Russia has highly educated population who are aware of the latest standards 5People are proud of their past achievements and hope for a better future 5 High tech sector like software, machinery etc is fast growing 5Oil & Energy plays a major role in local economy

International Agencies 5International Agencies like World Bank, EBRD etc play important role by Lending capital, economic planning and technical assistance 5Firms engaged in infrastructure development need to interact & build networks with international Agencies Telecommunication Roads Electric Power

Political Factors 5Political Risks are still high in Russia 5Government intervention in business is not uncommon 5Changing rules & regulations add to the headache 5Political attitudes towards capitalism and free market is not very encouraging 5Export-Import controls still hinder trade 5Export controls from Western countries hinder trade in high tech goods

Market Segmentation 5First stage of segmentation will be ethnic segmentation Hungarians in Slovakia etc. 5Psychographic Segmentation based on income levels and attitudes Kuptsi (Merchants) Cossacks Students Business Executives Russian Souls

Attitudes & Preferences KuptsiCossacksStudentsBusiness Executives Russian Souls Dominant traits Reliant, nationalistic, Practical, Seeks Value Ambitious Independent Nationalistic Seeks Status Passive Scraping by Idealistic Practical Ambitious Western oriented Seeks Status Passive Followers Hopeful Preferences Car Cigarettes Liquor Volkswagen Chesterfield Stolichnaya BMW Dunhill Remy Martin 2CV Marlboro Local Vodka Mercedes Winston Johnnie Walker Lada Marlboro Smirnoff

Product Positioning 5Income Level, Usage Conditions, and needs drives positioning 5For Basic products at low end pricing will be beneficial 5High-end customers demand the finest quality products 5MNCs can take first mover advantage at the high end market 5Competition from domestic players exist with basic products

Marketing Tactics 5Russians are ambivalent about their domestic products Doubt quality of local products Have loyalty to local products Want to protect local production/factories Country-of-origin effects are strong 5Market penetration pricing will help a firm gain market share and win in the long run 5Financial instability forces firms to repatriate profits at the earliest

Distribution 5Distribution infrastructure is weak and inefficient 5Lack of market middlemen makes distribution ineffective and expensive 5A new value chain may have to be created to over come existing problems Power cuts makes it necessary to redesign electric appliances Electrolux uses small local service contractors McDonalds had to grow potatoes to supply its stores

Distribution 5Firms must engage in training and developing various middlemen in basic marketing principles and practices How to sell, distribute & service Also train bureaucrats on the role of free market system Value of distribution network The need and functions of middlemen 5Need to educate consumers on use of end products

Promotion 5Advertising media such as TV, Print and radio exists but with limited reach 5Use media to educate customers about the merits of new products 5Creditability of advertising causes problems for marketer – People distrust products which are advertised extensively 5Hard sell advertising often faces backlash 5Word-of-mouth is considered more reliable

Closing Thoughts 5Russia offers a huge market potential 5Abundant natural resources has attracted lot of foreign capital 5Lack of rules and institutions to control & regulate capital markets hinders growth 5Urban markets in Moscow are as sophisticated as developed world 5Rural market is vast and is yet to be tapped 5Need for market middlemen and market institutions exists