Marketing in Russia

Market Basics Economic crisis in 1998 affected Russia Russia & Eastern Europe has a strong

economic growth & a huge potential Large Educated middle class is fuelling

demand for consumer goods Emergence of democratic system is causing

changing government rules & regulations Free markets & capitalism are still taking root

– Many people are yet to learn the rules of capitalism and free markets

Market Basics Newly Democratized countries like Russia and

former Soviet states have income levels comparable to that of developing countries

Russia has highly educated population who are aware of the latest standards

People are proud of their past achievements and hope for a better future

High tech sector like software, machinery etc is fast growing

Oil & Energy plays a major role in local economy

International Agencies International Agencies like World Bank,

EBRD etc play important role by Lending capital, economic planning and technical assistance

Firms engaged in infrastructure development need to interact & build networks with international Agencies Telecommunication Roads Electric Power

Political Factors Political Risks are still high in Russia Government intervention in business is not

uncommon Changing rules & regulations add to the

headache Political attitudes towards capitalism and free

market is not very encouraging Export-Import controls still hinder trade Export controls from Western countries hinder

trade in high tech goods

Market Segmentation First stage of segmentation will be ethnic

segmentation Hungarians in Slovakia etc.

Psychographic Segmentation based on income levels and attitudes Kuptsi (Merchants) Cossacks Students Business Executives Russian Souls

Attitudes & PreferencesKuptsi Cossacks Students Business

ExecutivesRussian Souls

Dominant traits

Reliant, nationalistic, Practical, Seeks Value

AmbitiousIndependentNationalisticSeeks Status

PassiveScraping byIdealisticPractical

AmbitiousWestern orientedSeeks Status

PassiveFollowersHopeful

PreferencesCarCigarettesLiquor

VolkswagenChesterfield Stolichnaya

BMWDunhillRemy Martin

2CVMarlboroLocal Vodka

MercedesWinstonJohnnie Walker

LadaMarlboroSmirnoff

Product Positioning Income Level, Usage Conditions, and needs

drives positioning For Basic products at low end pricing will be

beneficial High-end customers demand the finest quality

products MNC’s can take first mover advantage at the

high end market Competition from domestic players exist with

basic products

Marketing Tactics Russians 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

Market penetration pricing will help a firm gain market share and win in the long run

Financial instability forces firms to repatriate profits at the earliest

Distribution Distribution infrastructure is weak and

inefficient Lack of market middlemen makes distribution

ineffective and expensive A 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 Firms 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

Need to educate consumers on use of end products

Promotion Advertising media such as TV, Print and radio

exists but with limited reach Use media to educate customers about the

merits of new products Creditability of advertising causes problems

for marketer – People distrust products which are advertised extensively

Hard sell advertising often faces backlash Word-of-mouth is considered more reliable

Closing Thoughts Russia offers a huge market potential Abundant natural resources has attracted lot of

foreign capital Lack of rules and institutions to control &

regulate capital markets hinders growth Urban markets in Moscow are as sophisticated

as developed world Rural market is vast and is yet to be tapped Need for market middlemen and market

institutions exists