Consumer Behavior in Transforming Socialist Countries: the Case of Slovenia

Citation:

Janez Damjan (1993) ,"Consumer Behavior in Transforming Socialist Countries: the Case of Slovenia", in E - European Advances in Consumer Research Volume 1, eds. W. Fred Van Raaij and Gary J. Bamossy, Provo, UT : Association for Consumer Research, Pages: 236-243.

European Advances in Consumer Research Volume 1, 1993      Pages 236-243

CONSUMER BEHAVIOR IN TRANSFORMING SOCIALIST COUNTRIES: THE CASE OF SLOVENIA

Janez Damjan, University of Ljubljana, Slovenia

I. INTRODUCTION

Former socialist countries in Central and Eastern Europe have transformed with a great speed in the last few years, and it is no surprise we see an enormous business and research interest for this new world. It seems also logical to expect revolution in behavior of consumers in those countries, since their economic and social environment has been so drastically changed. Many consumer and other behavioral scholars in the West recognised this new research opportunity on time, and there were already several conferences and articles about changing Europe. [Two typical examples of such meetings are: ESOMAR Conference "International Marketing Research: New Tasks, New Methods, New Scenarios", in Ljubljana, in February 1991 and Thames Polytechnic Business School International Conference "Business in Changing Europe", in London, in April 1991.]

In a relatively short period of time, a lot of interesting studies were carried out, especially about cultural and value differences among different countries in Central and Eastern Europe. However, almost all of this work has been done by researchers from Western Europe or the United States, who have the necessary methodology and knowledge, but they might lack some first hand experience with "transforming socialist cultures".

Myself being an insider in one of the former socialist countries might allow me, not to present rigourous peace of research in consumer behavior, but just to discuss some already available data and specific observations about Slovenian consumers.

Consumer behavior research has actually relatively long tradition in Slovenia, since first consumers studies about washing powder brands were already carried out in late sixties. In later years, certain number of our researchers had tried to keep up with the development of consumer research methods, but it was rather because of their academic and personal interest, than because of actual demand from business.

In fact, it was very comfortable situation to do research without much pressure for results from anybody. But at the same time it was rather frustrating experience on the international scene, where our research had not gained much attention, no matter how sophisticated would be. Consumer research, or other marketing activities from the planned economy, obviously didn't make much sense for marketing experts in the West.

In the last few years, there has been no more money just for academic research in consumer behavior, but there is a lot of business opportunity for basic marketing research and consulting. However simple this might seem at first sight, direct transfer of knowledge from popular marketing textbooks just doesn't work all the time. There are some facts, valid for all transforming and fast developing countries in Eastern Europe, which make life for marketers and everybody else, quite difficult. Negative economic growth, lowering productivity, galloping inflation, big unemployment, social unrest and decreasing buying power, are everyday headlines in newspapers.

Chart 1.1. is just a small illustration of Slovenian situation during last five years. We can clearly see worsening of economic situation, especially during last two years.

On such basis very important question can be raised: What were the consumer reactions to great economic and social changes, which practically meant lower living standard for large majority of people ? Next to this question it is certainly relevant to ask, how to approach "consumers with empty pockets, but great expectations". Here we talk about topic of economic crisis behavior, which has gained lately relatively little attention in the West (Shama, 1980, Van Veen, Schelbergen, 1984). By my opinion, it is of the greatest importance to learn more about consumer reactions to decreasing buying power, which is not of just temporary nature.

Beside addressing this general question, in this paper, I also want to test my hypothesis, that people's perception of economic crisis was even greater than actual worsening of living standard or changes in buying habits. The reasoning for that comes from results of one earlier study on eating habits, in several states of former Yugoslavia. [Damjan, Vodopivec, Stular: "Searching for Fast-Food Segments: A Case of Teaching Yugoslavs to Use Ketchup Properly", 1990.] We found out, that perception of change in social structure occurred to greater extent than changes in values and attitudes, and to much greater extent than changes in actual behavior of housewifes.

Unfortunately, there has been no systematic or longitudinal research of Slovenian consumers, which could bring valid answers to the above questions. But there was some relevant statistical data available, which I combined with more qualitative information, what will allow me to bring some conclusions at the end of this presentation.

II. DATA FROM STATISTICAL OFFICE OF SLOVENIA

It is well known, that prices of many products used to be controlled by the state, in socialist countries. With introduction of market economy, most prices are set freely by enterprises, and great changes in price relations can be observed.

It can be seen, from the Charts 2.1. to 2.3., that working time required to purchase goods has increased for almost every product listed, during last five years. This means sharp decrease in buying power for majority of consumers, especially in years 1990 and 1991.

The most shocking increase of prices can be observed for bread (from 9 to 27 minutes), but it is not really surprising, if we know the political strategies of socialist governments, who hold down the prices of basic products. Movie ticket, as an example of services, also became relatively much more expensive, and this is valid for most services. For other products there are no such clear patterns, since they are more influenced by season or world trends.

On the basis of such changes in relative prices of certain products, great changes in the structure of monthly household expenses could be expected, e.g. higher share of household budget for food, energy, and transportation, but less for savings. However, data available from Statistical Office of Slovenia, do not confirm our hypotheses.

Relatively small changes in structure of average monthly expenses in Slovenian households can be observed, on Chart 2.4. There is just a slight increase in share of food & beverages group and transportation, and share of savings dropped for 2 %.

It would be possible to conclude, that Slovenian consumers have not changed their budget structure in last few years. But there was certainly a problem with data, which had been collected like an opinion survey. Respondent gave judgments, how much had they spent for certain products during last period, and of course, they could provide only round figures. One tends to say, he spends quarter of a budget for food, not 23 or 28 %, so changes of 5 % and more is hard to obtain.

CHART 1.1

SOME ECONOMIC INDICATORS FOR REPUBLIC OF SLOVENIA

CHART 2.1

WORKING TIME REQUIRED TO PURCHASE GOODS

However, the presented data lead us to belief, that changes in buying habits of Slovenian consumers have not been so dramatic, as it could be expected from large price increases, and unemployment problems during last five years.

III. PUBLIC OPINION RESEARCH DATA

The second group of data, which could bring us more into depth of our discussion, is part of regular Public Opinion Surveys, which have been held in Slovenia ever since year 1969. Unfortunately, very few questions were standardized and repeated through years, but some are available, which are relevant for our research topic.

From Chart 3.1. can be seen that very large majority of Slovenians has to live very economically, and there are very few at both extreme points. Only this last year, we got considerable percentage of those, who had to cut down on food, and there is strong general shift toward worsening of family economic situation.

CHART 2.2

WORKING TIME REQUIRED TO PURCHASE GOODS AND SERVICES

CHART 2.3

WORKING TIME REQUIRED TO PURCHASE GOODS

We can see similar pattern even more clearly on Chart 3.2.; after year 1990 there were more and more people whose quality of life got worse or even much worse in comparison to five years ago. This greater perceived change can be probably explained with a fact, that term "quality of life" is less direct than "economic situation".

Share of respondents who agreed that things had improved in last five years decreased sharply after year 1990, with the only exception of "democracy". However, after elections in spring 1990, many got disappointed with political life, and more than half of respondents agreed, level of democracy has not really improved lately. So, the more we move towards softer terms for describing social and economical crisis in Slovenia, the more people agreed to perceive changes.

CHART 2.4

STRUCTURE OF AVERAGE MONTHLY EXPENSES IN SLOVENIAN HOUSEHOLDS

CHART 3.1

PRESENT SITUATION OF MY FAMILY

In connection with political life in Slovenia, three additional pieces of information will be presented, which I also see as relevant for our discussion on consumer behavior.

First, we can see on Chart 3.4. that most people agree, economic situation got worse after elections in 1990, and they think, things were changing too slow in the year after elections.

On the Chart 3.5., we can further see that people are pessimistic about near future but are very optimistic about ten years time. So, we could perhaps say, that despite people being nervous, they are ready to wait for better future.

This is further illustrated with Chart 3.6., which shows that large majority of respondents would definitely choose Slovenia again, as place to live. Maybe that explains, why there are lately relatively few economic immigrants from Slovenia to other countries. In fact, just one month before the war events in Slovenia in June 1991, respondents in Public Opinion Poll rated Slovenia before all other former socialist countries by the quality of living. It would be certainly very interesting to compare these data with results from other transforming countries..

CHART 3.2

QUALITY OF LIFE IN SLOVENIA NOW IN COMPARISING TO FIVE YEARS AGO

CHART 3.3

THINGS HAVE IMPROVED IN LAST FIVE YEARS

IV. PILOT STUDY OF CONSUMERS

After analysing data from Statistical Office and Public Opinion Surveys, I took a small but very logical step, and I collected some data directly from consumers. In my interviews, most important questions regarded consumer reactions to economic crisis, which was mainly reflected by declining buying power.

Van Veen and Schelbergen (1984) presented systematic outline of the possible reactions of households and consumers to a decline of the spending capacity. Four types of reactions were considered: (1) activities aimed at the preservation of the current consumption and spending (2) activities aimed at adjusting consumption and spending (3) anticipatory activities and (4) passive reactions). The consumer's reactions are influenced by three major factors; i.e. type of spending capacity decline, the socio-economic situation, and the psychological situation.

CHART 3.4

SLOVENIA AFTER ELECTIONS (IN APRIL 1990)

CHART 3.5

PREDICTIONS OF LIVING CONDITIONS IN SLOVENIA AFTER INDEPENDENCE

In our pilot study only 30 employed women, age 30 to 50, were interviewed, so we could not test the whole model. However, as it can be seen from Chart 4.1., adjustment activities prevailed, and preservation activities were more common than anticipating. This result gives us maybe some ground to say, that the end of economic crisis is anticipated by respondents, or at least it should not worsen, anymore.

Buying less of certain goods, seems the most common reaction to a decline in spending capacity, and this was confirmed through direct question about shopping habits for clothing. These women, however, did not do more shopping on sales, and didn't start sewing their own clothes. It seems, they simply wear clothes longer. With a further research of buying habits, in the area of clothing for example, we could certainly get a lot of valuable information for marketing managers during periods of economic crisis.

V. SOME CONCLUSIONS

Respecting limits in data, presented in this paper, it is certainly difficult to talk about any firm conclusions. At this point, it is also important to mention that Slovenia was always relatively open for new ideas from the West, and it had never really experienced hard style socialism. So, our experiences can not be generalized to all former Eastern bloc; but this holds for any other country, despite the fact of having common experience of socialism during last 50 years.

For Slovenia, I can certainly say, there has been no big revolution in behavior of consumers in last few years. Heavy economic problems are reflected in public opinion, and almost everybody agrees, that quality of life declined sharply during last five years. However, actual changes in behavior, observed through structure of household budget, were smaller than expected. It seems, people are very clever in adjusting to crisis situation, also using financial and other reserves. An interesting observation was, that great optimism exists for the ten year period, despite quite realistic perception of the present situation and moderate pessimism for the next three years.

CHART 3.6

WOULD YOU CHOOSE SLOVENIA AS PLACE TO LIVE?

CHART 4.1

CONSUMER REACTIONS TO ECONOMIC CRISIS

There is certainly some evidence in our data, for hypothesis, that people's perception of economic crisis is even greater than actual worsening of living standard or changes in buying habits. This fact might be very important for politicians, and other public servants, as well as for business people. However, to really accept this thesis, we should collect data with much more controlled methods.

At the end, I want to emphasize an observation, that the gap between West and East, between developed and transforming markets, is growing larger than ever before. In the area of marketing and consumer research, this means, we can not simply copy great marketing textbooks, or import traditional marketing methods, concepts and strategies to fast developing markets. Consumers, firms and societies, in Central and Eastern Europe, have many specific problems, which need a lot of new research and some original solutions. This also means great opportunity for research and business people from all sides of the world.

REFERENCES

Damjan J., Vodopivec B, Stular M., "Searching For Fast-Food Segments: The Case of Teaching Yugoslavs to Use Ketchup Properly", Proceedings of ESOMAR Conference, Monte Carlo, 1990.

Millar C., Restall C., "The Emergent Consumer; Markets and Values in Transition in Eastern Europe", IMRIC London, 1991.

Van Veen W. M., Schelbergen F. J., "Private Households Coping with Declining Spending Capacity", paper presented at the IAREP Colloquium, Tilburg, 1984.

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