The Link Between Social-Economic Environment and Consumer Behavior in Russia

Citation:

Natalia Ivashkova (1995) ,"The Link Between Social-Economic Environment and Consumer Behavior in Russia", in E - European Advances in Consumer Research Volume 2, eds. Flemming Hansen, Provo, UT : Association for Consumer Research, Pages: 325-326.

European Advances in Consumer Research Volume 2, 1995      Pages 325-326

THE LINK BETWEEN SOCIAL-ECONOMIC ENVIRONMENT AND CONSUMER BEHAVIOR IN RUSSIA

Natalia Ivashkova, Russian Economic Academy

The purpose of this paper is to examine a linkage between consumer behavior and economic, social and cultural environment in Russia. We will describe the latest changes in macro-consumer environment and its impact on consumer behavior, review general characteristics of Russian life style and consumers, and at last briefly outline issues of consumer behavior research in Russia.

The most characteristic features of Russian history before perestroika were socialist regime and command economies. Consumer sovereignty was replaced by soverignty of the Central Planning Board. Such economy was more society oriented rather than individual. The objective was to please masses rather than each of its members.

The state was little concerned with identifying consumer needs and producing goods for private consumption. Economy was characterized by chronic shortage and inefficient supply. The work of the trading organizations, cost of selling, advertising, market research were labelled unproductive and, consequently unimportant. However, a few Institutes in Russia were engaged in the investigation of consumer needs, supply and demand, process of sales, development of consumer market and other problems, which can be defined in complex as marketing.

Unfortunately many of the marketing research results were not applied in practice.

CHANGES IN MACRO-CONSUMER ENVIRONMENT

Rapid movement from command to market economy in Russia is accompanied by changes in macro-consumer environment. These changes often led to contradictory consequences. High inflation rates, recession and threats of unemployment affect consumer choices and behavior. At the same time, market economy has led to the rise of business opportunities for some Russian and international enterprises. From this point of view these changes increase focus on consumer - responsive supplies of goods and services, on satisfying consumer needs and wants.

Political changes towards democracy in respect to consumer behavior means widening of consumer needs, not restricted by any kind ideological limits.

Speaking about cultural environment it is necessary to mention that Russian culture was formed under the influence of both eastern and western cultural traditions. For this reason some features in the norms and values, common for Russian differ for western Europeans. Among specific Russian characteristics are: impulsiveness, sincerity, friendliness, pride. Between the most important values many people used to mention family, security, independence.

In Russia with its 40 different religious groups, religion is also an important factor. Some changes in this area are connected with the rising number of religious believers, especially among young. In this respect, we should point out the differences in consumer behavior betwenn Russian orthodox, catholic, Jewish and Muslim believers.

GENERAL CHARACTERISTICS OF RUSSIAN CONSUMERS AND LIFESTYLE

Great changes in environment have effect on both, social stratification and consumer polarization. For this reason, it is practically impossible to give a precise and detailed classification of the social calsses. Using income criteria it is possible to divide Russian population into the following social classes (groups):

1. The poor.

Families with young children and retired persons. Their income does not support even the minimum consumption level. This group represents a rather considerable proportion, about 30% of the population.

2. The second class:

This group is composed of people working for state enterprises as well as scientists, teachers, doctors, engineers and other employees of budget financed organizations. They have nearly the lowest level of real wages. About 90% of their income is spent on food and life necessities. This group is estimated to be about 40%.

3. The middle class.

The middle class (estimated to be 20%) is composed of employees working for firms, enterprises and other organizations which gain benefits of the market economy. They spend about 35% of their income on food.

4. The upper class is formed by so-called "new Russians". These are people who have taken their chance in the changed economic reality. They are owners of private business, company directors, bankers. They spend less than 5% of their income on food. About 10% of the population belong to this group.

A part of this group (0.001%) consists of very rich people, concentrated mainly in Moscow. If the average Russian needs $400 dollar per month to survive, the very rich need $20.000.

It is very difficult to define Russian lifestyle because people from different social groups and subgroups spend their time and money in different ways. We will try to describe Russian lifestyle in a most general manner. Three quarters of the Russian population live in urban areas of the country, but the most popular hobby for Russians is gardening. Many of them have their own cottages (dacha) in the country (often a very small house) with a small piece of land. Russians spend a lot of time especially in summer in their cottages, growing fruits and vegetables and improving construction of their self-made houses.

The new Russian rich have their houses anywhere near the Garden Ring in Moscow. Most buy old flats, costing around $3000 per square meter. The new rich have their dacha not far from Moscow and they are not gardeners. Rich people need space for sauna, swimming pool, bedrooms with balcony. Those houses cost up to $500.000.

People in Russia are fond of visiting theaters, art galleries, exhibitions and museums but usually evenings are spend at home. Many Russians spend time reading newspapers and magazines or watching TV. Long serials, which became a real phenomena in the social life of the country, are especially popular among women and elder people.

It is necessary to mention that growing number of people from wealthy social groups prefer to spend time in nights clubs, restaurants, etc., which has become available not only for very rich, but for the top of middle class as well.

An image of Russian man as of a man with a bottle of "Vodka" is not so characteristic as it was 10 years ago. It seems that people drink less than they used to as now they have wider choice of life opportunities.

ISSUES OF CONSUMER BEHAVIOR RESEARCH

Consumers now have greater choice, more information and less need to stand in shopping lines. More product assortments are available to them. At the same time for many consumers their standards of living are declining.

The effect of these changes adjusted consumer behavior. Consumers try to increase their resources by getting a second job, participating in the private economies as part-time employees, reducing their savings to maintain their standard of living.

Consumers change their shopping and decision-making behavior by reducing consumption of such kind of food as meat, fresh fruits and vegetables, doing more comparative shopping, taking fewer risks by buying better quality products or more durable products.

At the same time, with regard to the process of consumer polarization, there is a great demand for luxury goods. Income influences needs and wants of new rich Russians.

For example, in 1993 in Moscow was sold as many Mercedes 500 and 600 as in all Western Europe. Another example is heavy demand for luxury santekhnika. In special stores bathtubs are priced at $9000, $4600 and $2300. According to the salesperson the $9000 dollar baths "sell fast", the $4600 baths "sell one after other" and for the $2300 bath "people queue".

In fact, price and product availability are important factors. But, according to the number of surveys, the most important factor affecting purchasing decision is product quality (unexpectedly for investigators). Consumers will pay high price for qualitative clothes and durables in spite of relatively low income.

Two other important factors are the presentation of the product and its country origin. It is significant that other elements of the marketing mix, such as packaging, product variety, branding and advertising, which several years ago were of limited importance, now are considered to be important.

Special surveys were conducted to investigate consumer's purchasing behavior for a new product. One of the surveys was devoted to consumer attitudes towards buying fashion. In the survey, people were divided into four groups by using such criteria as extent of enthusiasm in buying fashion clothes, willingness to pay a high price for stylish clothes, preference ratings on certain attributes, influences on purchasing decision.

As a result, four homogeneous groups were disclosed and classified:

1. The Avantgarde (8%).

Member of this segment can be characterized as willing to try new, alternative clothes. They have their own vision of personality. They are young, enthusiastic and independent in their decision making.

2. The selectives (42,2%).

Consumers of this segment buy fashionable clothes selectively, according to their own taste and style. They are young, well educated, independent in decision making and have high personal income.

3. The independents (41,7%).

These consumers have limited reaction toward fashion. They are conservative, practical and buy fashioned as well as non fashion clothes. Representatives of this group are middle-aged, sensitive to advice from the family and salesperson. High price usually makes them refuse to purchase. They pay much attention to quality, durability and comfort of clothes.

4. The indifferents (8%).

This segment is most uniform. Here, the consumers are absolutely indifferent to changes in fashion. They are mainly elderly, have low education and low personal incomes. They are highly price sensitive and usually rely on the opinion of the family and the salesperson.

These results might be interesting for Russian and foreign companies in order to understand Russian consumers.

Very often it is difficult, especially for foreign companies to understand Russian consumers. This is because of lack of information, the unreliability of available data, different definitions and methods of accounting a number of secondary data, difficulties in gathering primary data.

With regard of this now a number of foreign companies conduct cooperative research with Russian marketing institutions. Recent years consulting business and marketing research infrastructure are rapidly developing in Russia.

Russian researchers are ready to assist all the business activities.

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