Marketing in Russia

1. Marketing in Russia

2. 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

3. 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

4. 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

5. 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

6. 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

7. Attitudes & Preferences

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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