The sequence of events leading up to this research project began in late 1993 with a joint resolution between the governments of the United States and the Russian Federation that culminated in an internship program called Business for Russia. The program, jointly administered by the US Information Agency and the Russian Federal Employment Service, offered business internships to Russian entrepreneurs and government officials involved in business development. After a pilot program in 1994, which involved 350 participants, the 18-month program began in earnest in 1995 with 1,000 participants traveling to 24 US cities for one-month internships and home stays with American families.
The World Affairs Council of St. Louis, Missouri, was one of the grantees and hosted the first group of participants from the city of Perm in the Ural Mountain region of central Russia. The group consisted of 10 entrepreneurs, including the General Director of the Perm Regional Marketing Center and one government official, the Director of Industrial Production and Defense Industry Conversion for the Perm Regional Administration. This event led to this research project and to the selection of Perm as the location for study.
The city of Perm is a major river port and industrial center of one and a half million people and is the capital of the Perm Region. The region, roughly analogous to a US state, is the center of the defense industrial base of the former Soviet Union, and the economy of the three million residents has historically rested on heavy military-industrial production, including tanks, artillery, ordnance, aircraft, missiles and chemical production. Since perestroika-the restructuring of the economy-and the end of the cold war, and the consequent precipitous decline in the production of military hardware, the government has placed major economic emphasis on converting the excess defense industrial capacity to civilian pursuits.
The urgency of the conversion process has been driven by the severity of the economic crisis for the region. While the Russian economy in general has not recovered from the economic upheaval that was greater than that of the Bolshevik Revolution of 1917, the crisis for Perm has been deeper and more protracted than in many other regions. This is a direct result of the dependence of the region on a single aspect of the economy-and one that has experienced the deepest and most lasting decline from pre-perestroika levels.
Purposes of the Study
This study was undertaken in the summer of 1996, under the auspices of the Perm Regional Administration and the Regional Marketing Center, with two primary goals in mind. The first goal was part of a process of introducing modern marketing research techniques into an area where marketing research was both new and rudimentary. In fact, prior to perestroika, most of the techniques of data-gathering and analysis used in marketing research were the exclusive province of the government and were effectively illegal otherwise. The State Planning and State Pricing Committees (GOSPLAN and GOSKOMTSEN) studied demand prior to pricing goods, but for political reasons only the Committee for State Security (KGB) and probably-but not certainly-the Central Committee of the Communist Party of the Soviet Union (CPSU) had access to accurate statistical data on the Soviet economy.
While sophisticated marketing and political research techniques have been in use commercially in the Moscow and St. Petersburg regions for several years, most visibly in the presidential election campaign of 1996, they have been used primarily by international joint-venture companies. At the time of this study, questionnaire-based sample surveys and focus groups were the only marketing research techniques available in the Perm Region.
Market segmentation is the attempt to categorize consumers according to demographic or psychographic variables that presumably contribute to their consumer behavior.1
Q Methodology is the most accurate, robust and useful research technique for psychographic market segmentation. It is, however, neither widely used nor understood by marketing researchers. This project was designed as a hands-on teaching tool for the research professionals in the Regional Marketing Center and as a non-proprietary demonstration to potential clients of the efficacy of market segmentation.
To the best, albeit imperfect, knowledge of the researchers, this has been the first use of Q Methodology in the Russian Federation.
The second, but no less important, goal of this study was to attempt to understand the underlying psychological and behavioral structure of the emerging Russian consumer market. Since perestroika, the Russian consumer market has changed dramatically-and is continuing to change at a very rapid rate-from a centrally-controlled economy to a western-style demand economy. Periodic shortages of all types of goods, so frequent in the Soviet era, are a thing of the past. Shortages of goods no longer exist, and both foreign and domestic goods of all kinds are available across Russia, at least in cities, but shortages of currency to buy those goods is still an everyday problem for large numbers of consumers.
In the earlier controlled economy, the decision regarding the types and quantities of goods to produce was centrally decided and directed. In a free-market, demand economy-the avowed goal of the Yeltsin administration and the de facto current status of the lion's share of the consumer market-consumers decide for themselves which products will be consumed and at what rate. This study is an attempt to describe and define that decision process, at least as it existed in the summer of 1996.
Evolution of the Russian Market System
Since perestroika the market environment for the Russian consumer has radically changed. In order to understand the current environment, it is necessary to look at the transformation from the Soviet-model planned economy to the current free-market, demand economy.
The process of restructuring of the Soviet planned economy into a market economy, which began in 1990, became radical and irreversible in 1992. In 1992, prices and foreign trade regulations were liberalized in Russia, mass privatization of business began, and private enterprise was given economic freedom. In 1993, the reform process slowed. The period 1994-1996 was one of consolidation. More companies were privatized, and the new private ownership system firmly established itself. Free-market economic institutions such as the Russian version of a Securities and Exchange Commission were established as well. The private sector became the dominant sector of the economy, with the independent business sector progressing most. The independent business sector is defined as those businesses that are privately owned or owned by a group of private individuals rather than by other corporations. In 1991, 15% of the Gross Domestic Product (GDP) was attributable to the private sector. In 1996, it was 72%, including 28% attributable to the independent business sector.
In 1992, the radical economic reform of price liberalization led to inflation. That year domestic prices grew by a factor of 26. During the process of price liberalization, the chief element of the free-market mechanism, the natural market price, did not function as hoped to stabilize prices due to a scarcity of goods and of private producers. Consumers in a very short period of time lost the majority of their incomes and savings to inflation. By the beginning of 1996, the individual monetary income increased by 25-27 times compared to 1991. Over the same period, however, consumer prices increased by 47 times, so the real value of individual monetary income in 1996 was only 53.8% of the 1991 level.
The plunge in real income, galloping inflation, and the resulting decrease in consumer demand led to a decrease in retail trade volume. Household consumption fell by one quarter. People began investing a significant share of their savings in hard currency (mainly US dollars) to hedge against inflation.
A sharp economic division of society took place. On one hand, a substantial group of the very rich, who make up between five percent and 12 percent of the population, with individual annual incomes of over $60,000 (in Moscow, $120,000), was developing. And on the other, there was destitution of the larger part of population with incomes that were below the poverty line. The gap between salaries of richest 10% and poorest 10% of Russians grew to 26 times in December of 1995. In Moscow the formation of the upper class took place faster. Approximately 21% of population (nearly 32 million people) in Russia in April of 1997 had incomes below the poverty level, and fully one-third of the population barely make ends meet. The official minimum wage is one fifth of the "survivable minimum" as periodically calculated by Russian economists. It is the amount of income that allows a person to satisfy basic needs and to purchase minimal necessary food without malnutrition. The minimal pension is less than the "survivable minimum" as well.
Changes in Russian Individual Income, Spending, and Bank Deposits
Russia Moscow Ivanov Kalmykia Dagestan Average monthly salary and compensation 1994 281.6 ($62.58) 364.6 175.5 145.4 106.5 ($81.02) ($39.00) ($32.31) ($23.62) 1996 875.9 (159.25) 1171.9 523.8 410.2 288.6 (213.07) Total monthly monetary income per capita 1994 378.5 (84.11) 876.4 171.5 (38.11) 176.0 179.5 (39.89) (194.76) (39.11) 1996 820.7 (149.22) 3188.7 377.5 (68.64) 286.7 244.0 (44.36) (579.76) (52.13) Monthly consumer spending per capita 1994 237.8 (52.84) 495.1 93.7 (20.82) 54.2 (12.04) 39.8 (8.84) (110.02) 1996 573.8 (104.33) 2370.5 229.4 (41.71) 160.6 103.4 (18.18) (431.00) (29.20) Discretionary income (difference between monetary income and consumer spending) monthly 1996 246.9 (44.89) 818.2 148.1 (26.93) 121.1 140.6 (25.56) (148.76) (22.02) Bank deposits of over 90 days per capita 1996 136.4 (24.8) 780.8 2.0 (0.36) 4.3 (0.78) 18.0 (3.27) (141.96)
Note: Figures in thousands of rubles. Figures in parentheses are in then-year dollars, calculated at the exchange rate of 4,500 rubles/ dollar for 1994 and at 5,500 rubles/dollar for 1996. Source: Journal Expert.
Large income differences can be seen within the country-the income gap between an average Muscovite and an average inhabitant of Dagestan and Inguishetia is 13 and 17.3 times, respectively.
The number of unemployed is continuously growing and was 6.6% of labor force at the beginning of 1997. This does not include the hidden unemployment when people work but are not paid for months, or when people work only two or three days a week, or are forced to take mandatory vacations.
Production of consumer goods countrywide in 1996 decreased 58% compared with 1990. Food industry production in 1996 was 34% of its 1990 level. Light industry, producing mainly textiles and clothes, is down to 12% for the same time frame. Officially reported production volumes, however, are substantially lower than actual production volumes.
The process of middle class formation is still in the beginning stage. A totally new phenomenon is a tendency of income growth among young people and their high material income level compared to the older generation.
In the last year, the ruble has begun to stabilize and consumer spending and real savings are growing. The tendency toward savings in hard currency is decreasing. The implications for marketers are optimistic.
Product
In the Soviet Union consumer goods were given a low priority. State priorities such as the arms race were primary, and only those resources left over were available for the development and production of consumer products. The command economy was inefficient, and innovations were often unwelcome. As a result, the USSR lagged behind the West in both consumer product choice and quality.
The consumer product mix available to buyers was planned by government agencies. Demand was often miscalculated, and stores were flooded with products very few wanted. Producers usually did not care about the how appealing the products were, considering function more important than style. Style and conspicuous consumption were considered inappropriate by both the government and society. Product choice was quite limited, but basic consumption needs were for the most part met by the economic system.
All major product categories were produced domestically, and the very few imports came mostly from the socialist block countries. There were occasions when some goods were bought from capitalist countries. After the Soviet Union earned hard currency by selling oil during the crisis of the early 1970s, some Western goods such as French perfumes appeared in Soviet stores at relatively affordable prices. Western goods were also brought into the country by those traveling abroad and sold either on the black market or through so-called "commission shops."
As the Soviet economy was collapsing in late 1980s and early 1990s, shortages of goods became more severe. The year of the worst shortages was 1991. At one point Moscow city authorities reported that the city of eight million only had three-day supply of bread available. After the liberalization of consumer prices and international trade in 1992, the market quickly filled with goods, both domestic and foreign. Low-priced, low-quality goods flooded the country. Today product selection in Russia is dramatically higher than ten years ago. A consumer can buy virtually anything if he or she can afford it. Quality is becoming more and more important, and brand loyalty is developing. The proportion of foreign-made goods is over 50% in many product categories, including foodstuffs.
With the economic reforms in Russia, the old system of goods with guaranteed levels of quality and prices was dismantled. Instead, the market filled with second and third-rate imported goods, often of lower quality than their Russian counterparts (chocolate, vodka, cigarettes, sausage, soap, toys, etc.) The newly-impoverished average Russian consumer had little recourse due to the lack of reliable information on the mass of new products and their quality. Over 50% of food products sold in Russia and approximately 80% of modern household appliances are imported. Novelty, a desire to try everything, positive stereotypes about the quality of foreign-made products, and the old habit of buying in large quantities were the main influencers of consumer purchasing decisions.
Price
In the Soviet economy, all prices were set by the State Pricing Agency (GOSKOMTSEN) and by the local pricing authorities. Prices incorporated costs involved in production and distribution of products, strictly regulated profits of producers, distributors and retailers, as well as additional taxes. Instead of setting prices according to demand, the government used prices to regulate demand as a form of social control. When setting prices, the government considered average incomes and set prices on basic items so that everyone could afford them. Because of geographical and other factors, there were variations of prices for similar items: for example, a pound of sausage would be priced higher in northern Russia than in Moscow. Prices did not reflect consumer demand, and procedures to set prices were overly complicated. As a result, many mistakes occurred, and the government was unable to macroeconomically balance incomes and prices. This was a major factor in the shortages of the late 1980s and early 1990s.
Despite the command economy, market prices were not unknown to the Russian consumer. In the late 1920s, during the so-called NEP (New Economic Policy) period, many retail prices were allowed to float. During the post-WWII years, a huge black market existed where goods were sold according to demand. Also, farmers' markets existed where fresh food products could be bought at market prices. The Soviet government was never able to gain complete control of retail prices.
The price liberalization of 1992, driven by extreme shortages and even the threat of civil war, accomplished its goal. Prices evened out and today free-market prices exist for most categories of consumer products in Russia. Although production costs, particularly labor, in Russia are significantly lower than in the developed Western economies, prices on most goods are similar or higher than in the West. This is due mainly to inefficient production and distribution systems, taxes, and monopolies that still exist in many areas.
Place
In the Soviet Union, the retail trade network was state-owned and planned. There were four main types of places where a consumer could go to buy goods: state stores, cooperative stores, farmers' markets, and the black market. The majority of purchases were made in state stores. Most of them were relatively small and specialized, for example, a milk store or a bread store. Western-style supermarkets existed in several large cities. Service at the state stores was notoriously rude: the sales clerk, not the consumer, had the upper hand. Because of frequent shortages and misallocations, retail and wholesale employees were in a power position. They controlled access to consumer goods. The ability of a consumer to "get" (most Russians used the word "get" rather than "buy") things was dependent on contacts that would lead them to the source of desired products. In many cases, a shipment of high-demand products would come from a warehouse to a store, but would never appear on the shelves. Everything would be sold by store employees under the counter to their friends.
The cooperative store network was an alternative network that served rural areas. In larger cities, cooperative stores sold mainly food products. If both cooperative and state stores existed in the same city, the prices, selection and quality would be better in cooperative stores. Although organized by the consumer cooperatives, cooperative stores were eventually owned by the state.
Collective farm (kolkhoz) markets were organized in most cities and towns; this is where individuals as well as cooperatives and collective farms could sell surplus produce. The selection in kolkhoz markets was superb in quality and quantity, but prices were high. The prices in kolkhoz markets were set within certain limits by the forces of supply and demand; the fact that foodstuffs were more expensive on kolkhoz markets indicates that the products sold in government stores were underpriced.
High-demand goods, many foreign-made, were sold on the black market-usually in people's homes or under the counter. Although accurate estimates of the black market do not exist, it was obviously quite large.
The official outlet for such goods was the commission shop where predominantly foreign-made, high-quality, expensive goods, both used and new, were sold. Items were brought in by individuals to be sold on consignment. Although the price was determined by a procurement manager at the store, it usually reflected, to some extent, market price. Most items were brought into the country by travelers. Commission shops were, in effect, a legalized black market and were despised by many Russians, who nevertheless would come in on occasion to look. Most came to look, rather than to buy, because the prices were high.
After 1992, new retail stores were allowed to open, and the old government-owned stores were privatized. The newly privatized government-owned stores have not changed much. They offer little selection and relatively low prices. This is due both to lack of retail management expertise of the owners, who are often employees and former managers, and to financial difficulties.
Newly created so-called "commercial" stores are perhaps closest to the Western convenience store. They are nicely decorated and have a good selection of products, but prices are usually high. Most new stores are relatively small, although more and more modern supermarkets with modern inventory management are being built. Some of the upscale commercial stores are geared toward the noveau riche of Russia and carry an exclusive inventory of highly prestigious, expensive items. Also more and more brand outlets are being built, such as Reebok, Levi's, and other stores. There the items are high-priced, and the target market is the affluent. Brand outlets exist mainly in large cities.
In the early 1990s, there was an explosive growth of kiosks. Located virtually on every corner, they serve mainly as convenience outlets. The main items are alcohol, cigarettes and snacks, although other food and non-food items are sold in kiosks.
Another popular retail outlet is the open-air discount market. An average Russian consumer, used to buying in bulk, likes these markets because he can buy goods considerably cheaper-and bargaining over prices is the norm. The advantage to sellers is low start-up and overhead cost. Today virtually every city is surrounded by these markets. Also, many former farmers' markets have become discount markets.
The process of Russian reforms significantly affected the trade system. The Soviet retail trade system provided a person with basic necessities and guaranteed a moderate quality and affordable price level. But people had a very limited and homogenous selection of products from which to choose. Quality products were only found in a "special distribution system" that existed for the Nomenklatura--top party and government officials-and was closed to the majority of population.
In large cities, expensive, prestigious shops that were able to satisfy the most capricious tastes of the "New Russians" began to open.
The alternatives to traditional stores have become: open markets and kiosks-through which up to 30% of consumer goods are sold; large discount markets; sales within factories and organizations; sales agents who besiege company offices; home sales presentations of goods and services (for instance, tableware, perfumes, vacuum cleaners, "time-share" vacation plans); telephone sales; and networking plans where the buyer either pays the seller for later delivery, or gets the goods immediately if he or she can bring four more buyers (for example, in Perm, sugar and electronics are sold this way).
Promotion
After WWII, the secondary stage in Soviet marketing began to develop. It was fueled by a combination of pent-up demand and discretionary income. The Soviet government employed various promotional techniques, including advertising, to cater to awakening consumer interest. Advertising was used mainly for its informative function, to inform the buyers of new products available. Although the scope of advertising in the Soviet Union was extremely limited compared to the West, it existed in many of its modern forms: newspaper, magazine, billboard, radio, and TV.
After the economic reforms of the early 1990s, consumers were flooded with various forms of advertisement. Although many consumers were annoyed by it and others were distrustful due to unethical and fraudulent practices, quite a number of consumers consider advertising credible. Early ads were of poor quality, but this is rapidly improving and some Russian agencies are winning international ad competitions. The majority of consumer product advertisement is still commissioned by foreign companies to promote their products in Russia.
Russian producers quickly reacted to the consumer's quality image of everything foreign-made by putting English words and "Made in ..." labels on packaging. Large quantities of Russian-made consumer goods, constituting a significant segment of domestic production, were deceptively marketed with labels indicating they were made in foreign countries or were foreign brand-name products.
The abundance of aggressive and often unethical advertisement that flooded Russian consumers prompted the passage of the 1993 laws "On Protection of Consumer Rights" and "On Advertisement." It is now prohibited to sell imported food products without mandatory product information in Russian. Public consumer rights organizations have been created and are gaining strength. Consumers have had some negative experience with foreign-made goods, and they are becoming more careful and react more cautiously towards foreign-language labels, returning to well known but recently neglected quality domestic brands. As the prices of foreign- and Russian-made goods are becoming more comparable, foreign producers are beginning to increase the competitive pressure. In addition, trade organizations prefer working with foreign product suppliers since they provide goods on consignment. Consumer demand is shifting toward better quality, more fashionable products.
Accordingly, the new Russian consumers are in the midst of a dynamic and rapidly evolving marketplace. Many embrace the new free market, albeit with reservations about some aspects of the changing environment; many others are nostalgic for "the good, old days." Probably most fall somewhere in between. The continuing struggle between progress and resistance to change is a universal human condition.
Against this backdrop this study attempts to shed some light on the nature of contemporary Russian consumer attitudes.
The Design
Cross-cultural studies are fraught with problems. There are problems based in language differences and translation imperfections and there are problems based in cultural differences. These problems are compounded-and confounded-by the inextricable relationship between language and culture. Rather than attempt to mitigate these problems or to attempt to understand and compensate for them, the researchers decided to avoid them to the extent possible.
Therefore, the study was designed, conducted and analyzed in Russian, primarily by Russians. The only non-Russian involved, one of the researchers, advised on methodology, but deferred to the judgment of Russian colleagues on matters of culture and language usage. All subjects were Russian. Translation of the elements of the study into English for the purposes of this paper were done following the completion of the research. The after-the-fact English translations, in the opinion of the researchers, accurately represent the meaning of the Russian original, but in any area of dispute the Russian text should be considered authoritative.
In order to explore the attitudes of Russian consumers, the study was structured on the four elements of the marketing mix: price, place, promotion, and product. These elements of the marketing mix are a western marketing concept that is widely understood and accepted by the Russian marketing community and taught in contemporary Russian marketing textbooks.
The Q Sample
The concourse of statements was developed from relevant marketing texts, mass media sources and interviews with consumers. A sample of 32 statements was ultimately selected, composed of four sections of eight statements, each statement relating to one element of the marketing mix-price, place, promotion, product. The choice of this design was made in order to lend structure and balance to the Q sample, not in an attempt at factorial analysis of the results.3
Therefore, no attempt was envisioned to statistically measure the contribution of the individual elements of the marketing mix to the resulting factors, i.e., market segments.
The P Sample
The sample of 56 subjects was limited in one regard, due to opportunity and to time constraints. The majority of the subjects were communications professionals in the city of Perm. They were involved in advertising, marketing, mass media, public relations and related fields. While there was a common thread of current activity uniting them, their academic and professional backgrounds, socioeconomic and political backgrounds and ages varied considerably. Because of the recent dramatic change in economic structure, age in particular is presumed to be a variable of interest in the analysis of consumer attitude, i.e., younger consumers appear to be more open to and accepting of change than their elders.
To compensate for this potential lack of diversity, the researchers made an effort to select other subjects from other backgrounds. In selecting these subjects, factors such as socioeconomic status, employment status, educational background, former membership (or lack of it) in the Communist Party of the Soviet Union (CPSU) and geographical location were considered. With regard to geographical location, four of the subjects were residents of Moscow. No patterns emerged that call into question the composition of the P sample.
The subjects were given the deck of statements and instructed to sort them from "most agree" to "least agree" into a quasi-normal, nine-category format (see Appendix A).
The resulting 56 sorts were factor analyzed using the QUANAL program.4
An unconstrained run of the program, using an eigenvalue cutoff point of 1.0 produced a six-factor principal components solution.5 An attempt at an optimized Varimax6 rotation was unsuccessful after the 100-iteration program default, however, so another run was attempted with the maximum number of factors to be extracted constrained to five. This resulted in a successful Varimax rotation of a six-factor solution with two of the original factors reflected. Factor eigenvalues ranging from 18.0671 to 1.8109 accounted for 54 percent of the total variance.
Factors four, five and six collectively accounted for only eight of the 56 subjects and consideration was given to dropping them from the analysis, but the meaning of the factors was sufficiently clear and differentiated from factors one through three that they were retained. A 0.8 correlation between factors one and three (Appendix C) was initially cause for concern, but the very clear distinction between the two factors emerged during the analysis.
The analysis of the results included consideration of the individual factor arrays for each type (Appendix D), descending arrays of differences between types, demographic data on subjects strongly associated with each type, and subsequent interviews with selected subjects.
The Type I individual is a practical shopper, both quality- and value-oriented, and willing to pay a reasonable premium for quality. The Type I shopper is willing to put some considerable time and effort into evaluation of a product, but is not greatly influenced by famous or prestigious brand names. In fact, he or she is a fairly strongly anti-status purchaser, i.e., puts more emphasis on intrinsic characteristics than on perceived value in a product.7
The Type I shopper enjoys the decision-making aspect of the shopping experience as a social event and enjoys being pursued by the seller. It follows that Type I would prefer to shop in small, conveniently-located stores offering personal service. He or she dislikes crowds and relatively impersonal big stores and, in general, would like to avoid inconvenience. He or she would also like to minimize the process of buying commodity products, i.e., products for which the purchase decision has already been made, and thus is a good candidate either for home delivery of such products or for the convenience of a large, American-style discount store.
Type I makes no great distinction between domestic and imported products, putting more emphasis on the relationship between price and the intrinsic value of the product. He or she relies on and trusts advertising for preliminary evaluation and responds to promotional activities such as personal sales. Attractive packaging is a plus for the Type I individual.
Type II, "The Frugal Moralists"
Type II shoppers are wary of marketers. They trust nobody and believe nothing except what their eyes tell them. More price-driven than other types, they are not status-oriented-in fact, they are anti-status. Type II consumers are quite moralistic about consumerism. An American consumer of this type might be described as exhibiting "Yankee thrift," but for a Russian, the characteristics are likely more closely related to a background of several generations of socialist morality-that is to the Marxist ideal of, "From each according to his ability; to each, according to his need."
Type II shoppers do not like to make things for themselves, but prefer to buy products or contract for services. They tend to distrust advertising and consider shopping a necessary evil. They are indifferent to packaging, brands and level of service in stores. Price is the major, if not the only, factor in purchasing decisions. Quality, and therefore, perceived value, is not very important. Russian-made goods are preferred to foreign-made goods, but familiarity and the price discrepancy between such products likely contribute as much or more to this choice as does nationalism.
Type III, "The Uninvolved Pragmatist"
The Type III consumer is very similar to Type I except that the Type III individual doesn't regard shopping of any sort as a social event or even as a particularly pleasant experience. If the Type III individual is married, he or she-and there is reason to suspect that Type III is largely if not predominantly male-probably relies on a spouse to do most of the shopping, or at least to make the decisions regarding which products to purchase.
When shopping is necessary, the Type III individual is a value-oriented and, to a somewhat greater extent than Type I, a price-sensitive consumer. All other things being equal, Type III likes convenience, but is willing forsake convenience to shop around for value.
Type III consumers probably evaluate products initially via advertising, although they tend to trust it less than Type I, and they make no great distinction between domestic and imported products. Type III dislikes promotional activities, especially personal sales, more than Type I.
Type IV, "The New Russians"
Type IV shoppers are capricious, pretentious and-most interesting to marketers-voracious consumers. They are brand-oriented and price-sensitive in that they tend to shop as high on the price and prestige scale as they are able. Conspicuous consumption is a conscious goal. "Expense, prestige, convenience" are key words for this type. They are aggressively social shoppers and like shopping to be a pleasant, non-confrontational experience. Type IV never bargains.
Value-oriented, but defining value in a very different way than other
types, they expend considerable time and effort to evaluate products. They
evaluate products less for their intrinsic merit and more for perceived
value. They, more than any other type, are the target market for non-Russian
products. Skeptical of advertising, they prefer to face-to-face contact
and building rapport and trust with salespeople. This type of consumer
is the prototypical target audience for one-to-one marketing8
of high-markup, low-volume products. They, for example, define the
market for foreign cars in Russia.
"New Russian" is a derisive term commonly applied to that small and newly affluent segment of Russian society, most of whom are presumed to have come by their wealth through socially distasteful, if not outright illegal, means, and who ostentatiously display the trappings of wealth. They are widely despised and very nearly as widely envied. A segment of Russian consumers of unknown, but apparently significant, size aspires to the consumption patterns of the stereotypical "New Russian."
Type V, "The Introverted Shopper"
Type V is similar to types I and III in product choice and price sensitivity. They are willing to pay a reasonable premium for quality and at the same time are concerned with the price-quality ratio. As with Types I and III, convenience is important, as is value for the money. Type V prefers Russian-made goods.
The main difference from Types I and III is in shopping patterns. Type V seems awkward with people and so tries to minimize personal interaction while purchasing. Type V despises sales agents and would prefer, if possible, to shop through catalogs or in large department stores where interaction with salespeople is low. Similar to Type III, Type V doesn't consider shopping a social event. He or she prefers to deal with fixed-price, established stores-yet another way to avoid personal interaction.
Type V pays attention to advertising and is willing to shop around. Not very self-confident, Type V does not depend on his or her own judgment so much as the judgment and advice of others. Type V is a good target for advertisers and a good prospect for catalog retailers.
Type VI "The Bargain Hunter"
The three most important characteristics of a product, so far as the value-conscious but very price-sensitive Type VI individual is concerned, are: (1) price, (2) price and (3) price. Type VI lives to bargain and looks upon shopping as a competitive sport. Street markets are exclusively the favorite place to shop because of bargaining opportunity.
Type VI is a hands-on shopper and prefers to evaluate the product, particularly the price, himself prior to purchase. Although Type VI wants value for the money and can afford quality, he does not believe in paying a premium for higher quality. Type VI prefers domestic products, but responds well to foreign goods as well. To what extent the price differential between domestic and foreign goods influences him or her is not known.
The Type VI person is status-sensitive to some extent and responds positively to advertising and promotional activities. The advertising that will effectively reach the Type VI individual is product-oriented advertising, not store-oriented.
The strengths of Q Methodology are many and considerable in the attempt to understand consumer behavior, but one significant weakness is particularly vexing for marketing research. In that Q Methodology uses a purposively selected p sample, statistical extrapolations to determine the size of the factors within the population are not possible. While this is of little concern to the behavioral theorist, it is often of primary concern to the marketer-and it is the marketer who finances marketing research.
Normally in a Q Methodologically-based marketing research study, the process involves two stages. The first stage uses Q Methodology as a market segmentation strategy in an attempt to understand the nature of the market at issue. The second stage employs a normative technique, e.g., a sample survey employing Q Blocking,9 to determine the relative size of each of the market segments.
While the first stage of this research process is crucial to designing effective marketing and advertising programs, the second stage is of critical importance to marketers planning the rollout of new products or new marketing venues. Accurate estimates of first-year sales, either of new products or of existing products in new venues, allow the marketer to avoid the twin disasters of the inventory costs of overproduction on the one hand and consumer frustrations over shortages of unexpectedly popular products on the other.
This study employed only the first, Q Methodological, stage of the market segmentation model. That process was sufficient for the goals of this project-as a demonstration of the efficacy of Q Methodology as a market segmentation technique and to further understanding of the emerging Russian consumer market. We can say with some assurance that the market segments, represented by the Q factors, do exist within the population of Russian consumers and we can make recommendations on the relative value of, and how to reach, each type of consumer. We cannot, however, without conducting a normative follow-on research project, judge whether or not any single market segment is an economically viable target market for a specific product or marketing technique.
Advertising and Promotion
This study addressed advertising only in the sense of the subjects' response to and trust in advertising content. It did not attempt to associate media consumption characteristics to market segments. While this information is of great interest to marketers and could have been built into the Q sample, it would complicate the analysis of the data and is better dealt with in the follow-on normative phase of a market segmentation research project.
Most of the market segments are logical targets for mass media advertising. Types I, III, V and VI all appear to trust advertising content to some extent and to use advertising for at least the initial evaluation of products. Type V is the most trusting of advertising. The similar Types I and III both view advertising as a worthwhile way of evaluating products, although Type III is somewhat more skeptical than Type I. Type VI, the bargain hunter, will likely pay more attention to product-oriented advertising than to store-oriented advertising.
Types II and IV report being skeptical of advertising. For the "Frugal Moralist" Type II, the objections to advertising are likely psychologically central and they are apt to actively avoid advertising.
Type IV, the "New Russian," is, individually, a marketer's dream consumer in that Type IV is predisposed to purchase and prefers status-laden, high-profit-margin goods. Type IV may report not trusting or valuing advertising, but to the extent that advertising affects the status or perceived value of a product, is indirectly influenced by advertising. For Type IV, institutional advertising is likely to have a greater effect on purchase decisions than is product-centered advertising. One-to-one marketing for high-status, high-markup products is one promising approach to reaching the Type IV individual.
Place
Each of the market segments expresses preferences concerning the shopping environment. Some even make distinctions based on the type of product at issue and the extent to which decision-making is required for the purchase decision.
Department Stores: Type V, "The Introverted Shopper," prefers to minimize personal interactions while shopping and is a good candidate for large, relatively impersonal department stores where he or she is able to make the price-quality decisions that are important with a minimum of social interaction with salespeople.
Small Shops: Type I, "The Quality-Oriented, Practical Shopper," prefers small shops when shopping for products that require decision-making. Type I enjoys the social interaction with sales people and derives satisfaction from the feeling of being pursued. Type IV, "The New Russian," also prefers small shops, but probably a more exclusive class of shop than Type I. If money were no object, the Rodeo Drive shopping environment might well be the ultimate goal of Type IV.
Discount stores: Discount stores, on the American model of WalMart and Target, are the ideal shopping venue for Type I shoppers for the purchase of commodities, i.e., everyday products that are necessary, but for which no significant decision-making is involved. Type II prefers a "no frills" shopping experience. Type III, "The Uninvolved Pragmatist," similar in most ways to Type I, is attracted to the discount store environment for most of his purchases because it minimizes the aspects of the shopping experience that he considers faintly uncomfortable.
Mail Order: Type V, "The Introverted Shopper," is the natural audience for catalog merchandising, an approach that has been only recently introduced into Russian marketing. Catalog shopping is a way of avoiding entirely the social interactions of the shopping experience that Type V considers so distasteful.
Street Markets: Type VI, "The Bargain Hunter," would shop exclusively in the typical Russian street markets if that were possible, because of the opportunity to bargain and haggle over prices. Fixed prices are anathema to Type VI and remove the enjoyment from the competitive shopping experience.
Relationship Marketing: Type IV, "The New Russian" is a candidate
for the one-to-one10
marketing approach. One-to-one marketing, i.e., the attempt
by a marketer to provide a sufficiently broad range of products to meet
all the needs of an individual customer, is most profitable when the products
are low-volume, high markup products. This approach, made practical in
recent years by computer technology, involves data gathering and analysis
of the needs and wants of individual customers and provision of products
to meet those needs and wants. It aims at increasing "share of customer"
rather than the traditional mass marketer's goal of "share of market."11
Commodity products (high-volume, low markup and relatively undistinguished
from the competition) can only be offered by one-to-one marketers as an
adjunct to the more profitable primary products. Therefore, Type IV, with
exclusive, expensive, status-oriented taste in consumer products, is the
natural target audience for one-to-one marketing.
Home Delivery: For Type I, "The Quality-Oriented, Practical Shopper," home delivery is a practical alternative to large discount stores for commodity products for which a purchase decision is unnecessary.
Price
There is considerable variability in Russian consumer opinions on the tradeoff between prices of products and value received. This study has not gathered data on the ability of consumers to afford to consume, only on their preferred patterns of consumption, and therefore cannot attempt to correlate types with ability to purchase. The ability to afford a particular product, i.e., level of discretionary income, certainly would be expected to affect real-world purchase decisions, but there is no guarantee that the income levels of consumers making up each market segment correlate with the purchasing preferences of the segments.
The high end of the Russian consumer market is dominated by Type IV, "The New Russian." Type IV would like to receive value for money spent, but weighs "value" rather differently from the other types. Type IV is very status-conscious and willing to pay a considerable premium for that status. Associated with their status-seeking behavior is the strongest preference of all types for upscale foreign products, apparently believing that foreign products are somehow better-or trendier, or of higher quality-than their Russian counterparts. A high price increases the perceived value and, therefore, the desirability of a product for the Type IV.
Types I ("The Quality-Oriented, Practical Shopper"), III ("The Uninvolved Pragmatist"), and V ("The Introverted Shopper") are quite similar in their approaches to the tradeoff between quality and price. Type III is somewhat more price-sensitive than Types I and V, but all take a practical, middle-of-the-road view of the balance of price and quality.
Types II ("The Frugal Moralists") and VI ("The Bargain Hunter") view low price as the primary consideration in the purchase decision process, but for quite different reasons. Type II takes a moralistic viewpoint toward the consumer process and considers high prices to be an indication of frivolous excess or, worse, reprehensible capitalist exploitation of the consumer.
Type VI, on the other hand, considers shopping a competitive sport and considers the price of a product, relative to similar products, the criterion by which he determines who won and who lost the competition. As a matter of pride, Type VI will only buy at the lowest point on the price scale for any particular product.
Product
There was some variability among types regarding two aspects of the product-status and origin.
Type V, ("The Introverted Shopper"), was ambivalent regarding status, expressing no particular orientation toward or against high or low status products. Type IV, "The New Russian," on the other hand, expresses a very strong preference toward high-status, particularly foreign-made, products. Type VI, "The Bargain Hunter," also expressed an interest in high-status products, but is extremely price-sensitive and will only purchase high-status goods at bargain prices. Although there is no direct evidence in this study, Type VI is the probable target market for the large quantity of counterfeit name-brand products available in Russian street markets.
Types I ("The Quality-Oriented, Practical Shopper"), II ("The Frugal Moralists"), and, to some extent, III ("The Uninvolved Pragmatist") all leaned toward an anti-status approach. Types I and III apparently consider that quality rather than status is the appropriate tradeoff against price. Type II, as in other areas, considers status a moral issue and views status-seeking as an unworthy activity.
The market segments also divided along the lines of preferences for domestic Russian products or foreign-made products. It is worth noting that the study made no distinction as to any particular origin of foreign-made products. Along with Japanese, American and Western European products, Eastern European products are popular and well-regarded by Russian consumers. Poland, Hungary and Czechoslovakia are all significant exporters to Russia.
Types II ("The Frugal Moralists"), and V ("The Introverted Shopper") both preferred domestic Russian products, but again for different reasons. Type II, as in other matters, considers the purchase of Russian goods a moral positive. Type V seems insecure in exercising his or her own judgment, particularly in making changes, and is content to stay with known, i.e., Russian, products.
Type IV ("The New Russian") prefers foreign-made products for status and related perceptual reasons. Types I ("The Quality-Oriented, Practical Shopper"), III ("The Uninvolved Pragmatist") and VI ("The Bargain Hunter") express no discernible opinion on the origin of consumer products.
A Closing Thought
Russian consumers appear to be driven by much the same considerations as their American and Western European counterparts, although they are perhaps less set in their ways because of the newness of the environment. While this study provides some guidelines for marketers, we cannot conclude that the needs and wants-and resultant consumer behavior patterns-of Russian consumers will remain static for any considerable length of time. For example, in the year since this study, there has been a clear trend away from foreign-made goods in favor of quality domestic goods. Much improved marketing and packaging have contributed to this trend, as has a feeling of national pride in things Russian, but the primary stimulus appears to be the maturation of the Russian consumer. As the dynamic of the changing Russian marketplace continues, it would be interesting to repeat this study in a few years to look at changes in a rapidly maturing and increasingly sophisticated Russian consumer population.
(Appendix A removed for HTML version)
Q Sample - English Translations
1. I shop several stores to find the least expensive products. 2. I prefer to purchase products on sale at a discount. 3. I prefer to stock up on products if they are cheaper. 4. I think stores should offer a discount for regular customers. 5. If something is expensive for me, I talk myself out of buying it. 6. I make everything in order to buy what appeals to me. 7. It seems to me that it is better to pay a little more for better quality products. 8. For me, price plays the major role in the selection of products. 9. I consider an inscription in a foreign language on the package a sign of the quality of a product. 10. I'm interested not so much in the price but in the relationship between price and quality. 11. I buy only brand name products from well-known firms. I'm not going to wait to buy goods from some unknown company because they are most likely of poor quality. 12. Personally, I prefer domestic products. The packaging isn't fancy and they don't advertise, therefore they are cheaper than imports and are not inferior to them in quality. 13. I buy only expensive products from well-known companies. Let people see that I can indulge myself. 14. I prefer imported products--they are more interesting and higher quality. 15. I prefer to buy less expensive things and I often change brands. 16. Attractive packaging gets my attention. 17. I buy products in expensive department stores. They are more expensive, but the products are of higher quality. 18. I prefer to shop in the market. There it is possible to bargain. 19. It irritates me for salespeople from all sorts of companies to bother me at work. 20. Personally I prefer to shop in big department stores. 21. I like small, cozy stores where you may take your time choosing merchandise and chat with the salespeople. 22. I would arrange for morning home delivery of various products. 23. Where I buy something is absolutely irrelevant so long as I like what I purchase. 24. It would be great if you could buy everything you need from home even if the prices were a little higher. 25. Companies advertise products because otherwise people wouldn't buy them. Good products speak for themselves. 26. It's nice when you open a package and find, besides the contents, a small souvenir or trinket enclosed. All at once you feel they care about you and next time you want to buy the product again. 27. I don't care a bit about pretty packaging or famous trademarks. That's for rich people. What's important is that things be inexpensive and good quality. 28. I don't trust advertising--I rely on my own intuition and the opinions of my friends. 29. I prefer a product the capabilities of which can be graphically demonstrated. 30. It wouldn't be bad if stores were to give full information about their products. 31. I prefer to choose products from a catalog. 32. If goods are advertised in the mass media, then prices will be lower and quality higher.
CORRELATIONS BETWEEN TYPES
Type I Type II Type III Type IV Type V Type VI Type I 1.000 .377 .802 .424 .304 -.023 Type II .377 1.000 .356 -.079 .116 .087 Type III .802 .356 1.000 .364 .404 .020 Type IV .424 -.079 .364 1.000 .154 -.480 Type V .304 .116 .404 .154 1.000 -.046 Type VI -.023 .087 .020 -.480 -.046 1.000
Ordered Statement Arrays (Z=>1.0) by Type (English Equivalents)
DESCENDING ARRAY OF Z-SCORES AND ITEM DESCRIPTIONS FOR TYPE 1
29. I prefer a product the capabilities of which can be graphicall 1.82
4. I think stores should offer a discount for regular customers. 1.70
7. It seems to me that it is better to pay a little more for bette 1.52
21. I like small, cozy stores where you may tak your time choosing 1.39
30. It wouldn't be bad if stores were to give full information abo 1.26
10. I'm interested not so much in the price but in the relationshi 1.24
26. It's nice when you open a package and find, besides the conten 1.19
22. I would arrange for morning home delivery of various products. 1.01
15. I prefer to buy less expensive things and I often change brand -1.19
25. Companies advertise products because otherwise people wouldn't -1.19
13. I buy only expensive products from well-known companies. Let -1.26
14. I prefer imported products--they are more interesting and high -1.30
32. If goods are advertised in the mass media, then prices will be -1.48
9. I consider an inscription in a foreign language on the package -1.94
DESCENDING ARRAY OF Z-SCORES AND ITEM DESCRIPTIONS FOR TYPE 2
27. I don't care a bit about pretty packaging or famous trademarks 1.45
28. I don't trust advertising--I rely on my own intuition and the 1.41
8. For me, price plays the major role in the selection of products 1.34
29. I prefer a product the capabilities of which can be graphicall 1.27
5. If something is expensive for me, I talk myself out of buying i 1.13
23. Where I buy something is absolutely irrelevant so long as I li 1.05
4. I think stores should offer a discount for regular customers. 1.04
9. I consider an inscription in a foreign language on the package -1.35
17. I buy products in expensive department stores. They are more -1.97
6. I make everything in order to buy what appeals to me. -1.98
13. I buy only expensive products from well-known companies. Let -2.28
DESCENDING ARRAY OF Z-SCORES AND ITEM DESCRIPTIONS FOR TYPE 3
10. I'm interested not so much in the price but in the relationshi 2.19
7. It seems to me that it is better to pay a little more for bette 1.98
29. I prefer a product the capabilities of which can be graphicall 1.22
4. I think stores should offer a discount for regular customers. 1.09
25. Companies advertise products because otherwise people wouldn't -1.13
12. Personally, I prefer domestic products. The packaging isn't f -1.21
32. If goods are advertised in the mass media, then prices will be -1.28
13. I buy only expensive products from well-known companies. Let -1.33
15. I prefer to buy less expensive things and I often change brand -1.96
9. I consider an inscription in a foreign language on the package -2.09
DESCENDING ARRAY OF Z-SCORES AND ITEM DESCRIPTIONS FOR TYPE 4
26. It's nice when you open a package and find, besides the conten 2.00
21. I like small, cozy stores where you may tak your time choosing 1.66
7. It seems to me that it is better to pay a little more for bette 1.11
30. It wouldn't be bad if stores were to give full information abo 1.10
25. Companies advertise products because otherwise people wouldn't 1.08
23. Where I buy something is absolutely irrelevant so long as I li 1.04
13. I buy only expensive products from well-known companies. Let 1.00
5. If something is expensive for me, I talk myself out of buying i -1.04
12. Personally, I prefer domestic products. The packaging isn't f -1.05
32. If goods are advertised in the mass media, then prices will be -1.45
1. I shop several stores to find the least expensive products. -1.52
15. I prefer to buy less expensive things and I often change brand -1.53
8. For me, price plays the major role in the selection of products -2.50
DESCENDING ARRAY OF Z-SCORES AND ITEM DESCRIPTIONS FOR TYPE 5
31. I prefer to choose products from a catalog. 2.26
7. It seems to me that it is better to pay a little more for bette 1.92
23. Where I buy something is absolutely irrelevant so long as I li 1.30
19. It irritates me for salespeople from all sorts of companies to 1.25
10. I'm interested not so much in the price but in the relationshi 1.24
29. I prefer a product the capabilities of which can be graphicall 1.12
32. If goods are advertised in the mass media, then prices will be 1.03
5. If something is expensive for me, I talk myself out of buying i 1.01
16. Attractive packaging gets my attention. -1.23
27. I don't care a bit about pretty packaging or famous trademarks -1.35
25. Companies advertise products because otherwise people wouldn't -1.36
18. I prefer to shop in the market. There it is possible to barga -1.39
1. I shop several stores to find the least expensive products. -1.56
DESCENDING ARRAY OF Z-SCORES AND ITEM DESCRIPTIONS FOR TYPE 6
18. I prefer to shop in the market. There it is possible to barga 2.07
10. I'm interested not so much in the price but in the relationshi 1.43
12. Personally, I prefer domestic products. The packaging isn't f 1.31
6. I make everything in order to buy what appeals to me. 1.19
15. I prefer to buy less expensive things and I often change brand 1.19
17. I buy products in expensive department stores. They are more -1.03
27. I don't care a bit about pretty packaging or famous trademarks -1.07
31. I prefer to choose products from a catalog. -1.07
3. I prefer to stock up on products if they are cheaper. -1.15
30. It wouldn't be bad if stores were to give full information abo -1.47
25. Companies advertise products because otherwise people wouldn't -1.91
7. It seems to me that it is better to pay a little more for better -2.07
NOTES
1. William R. Dillon, Thomas J. Madden and Neil H. Firtle, Essentials of Marketing Research (Boston, MA: Irwin, 1993), 63.2. Courtland L. BovPe and William F. Arens, Contemporary Advertising (Boston, MA: Irwin), 171.
3. William Stephenson, The Study of Behavior (Chicago, IL: The University of Chicago Press, 1953), 102.
4. QUANAL is a computer program designed specifically for the analysis of Q Methodology data sets by Dr. Nicholas VanTubergen.
5. Steven R. Brown, Political Subjectivity (New Haven, CT: The Yale University Press, 1980), 56.
6. Ibid.
7. BovPe and Arens, 180.
8. Don Peppers and Martha Rogers, The One To One Future—Building Relationships One Customer at a Time (New York, NY: Doubleday), 15.
9. Albert D. Talbott, "The Q Block Method of Indexing Q Typologies." Paper presented at the annual meeting of the Association for Education in Journalism, Lincoln, NE, 1963.
10. Peppers and Rogers, 95.
11. Peppers and Rogers, 18.