Full text of DOI:10.1016/S1090-9516(00)00032-8

The Response of the ‘New
Consumer’ to Promotion in the
Transition Economies of the
Former Soviet Bloc
R. Bruce Money
Deborah Colton
“They have first world minds, third world wallets.”
-Economics Intelligence Unit report on Russian consumers.
“Maybe I still have to stand in line, but it is one line I can buy six products at once. . .
People are so much more polite and polished here. They’ll even tell you the price of
something if you ask. It’s easy and cheap. They stay open and they don’t take breaks.
It’s competition, you know.”
-66-year old Russian pensioner describing a new Wal-Mart style market.
“People had tears in their eyes when they saw the presents, and they knew it came
from Philip Morris.”
-company spokesperson on gift-giving to Hungary’s poor
“This is not the market. It’s the Middle Ages.”
-Boris Korobov, mayor of a small Russian town
Before the collapse of communism, promotion in the former Soviet Bloc functioned more as either
propaganda or generic information rather than what marketers would call marketing. Today’s “new
consumer” in these transition economies, however, is being forced to integrate Western-style promotion
with traditional suspicion of marketing, all in systems that have transitioned more in some countries of
the region than others. What does this mean for the multinational marketer? What old and new
characteristics of the consumers in that region will force marketers to adapt their approach to
promotion? Through research propositions this conceptual paper explores major themes of consumer
behavior specific to the transitioning economies of the area, proposing, rather than answering, the right
questions marketers need to ask about new target markets. For managers, the article offers implications
and recommendations derived from these questions.
The New Consumer in the Former Soviet Bloc 189

he above quotes demonstrate the
nature of the challenges, opportu-
boros to hang on the living room wall,
as some Romanians do as a symbol of
prestige and fashion. Marketing in the
“new order” former Soviet Bloc means
marketing to a “new order” consumer.
By the transition markets of the
former Soviet Bloc we mean Poland,
the Czech Republic, Slovakia, Hungary,
Romania, Bulgaria, as well as consum-
ers in former countries of East Ger-
many, Yugoslavia, and the USSR that
would be categorized as Central and
Eastern Europe (Russia, Ukraine, Bela-
rus, and the Baltic states). Marketing
managers and academics alike would do
well to focus more on this region of the
world, which has a combined popula-
tion of 305 million. With the exception
of the former East Germany (now in-
cluded in the reunified Germany’s fig-
ures), the real GDP of the area is pro-
jected to increase at an annual rate of
4.5% in the years 2000 through 2005,
the highest growth of any region in the
world (Coplin & O’Leary, 1999). The
region imports a total of $350 billion
worth of goods, a huge target for mul-
tinational marketers. Beyond the usual
first-in franchisees of fast food outlets,
many large Western industries have al-
ready started expanding aggressively
into the area, such as pharmaceuticals
and major oil, led by Royal Dutch Shell.
Car ownership in Russia has tripled in
the last five years.
T
nities and complexities of marketing in
the transition economies of the former
Soviet Bloc. Before the fall of commu-
nism, so-called “consumers” stood in
long lines to buy poor quality goods in
scant supply produced and distributed
in Byzantine fashion in a centrally
planned economy. Customer service did
not exist, because, in theory and prac-
tice, customers did not exist. Employees
received the same pay, whether or not
the company they worked for made
money or even had customers. To re-
place the battle cry of “historic produc-
tion levels” with “marketing, market-
ing, marketing” is obviously a history-
wrenching process, as experience in the
region has shown. Granted, transition is
a continuum rather than a dichotomy
(Hibbert, 1998), and some countries,
such as Hungary, through more contact
with the West, are closer to a market
economy than the historically closed
economies of Russia and the former
East Germany, for example. However,
tears of gratitude, even from the poor,
for “big tobacco’s” Philip Morris is not
what usually comes to mind when mar-
keters think of the usual responses by
consumers to give-away promotion. We
also don’t imagine American consum-
ers framing old, empty packs of Marl-
R. Bruce Money, International Business Program
Area, Darla Moore School of Business, University
of South Carolina, Columbia, SC 29208, USA
Tel.: ϩ1-803-777-0140; Fax: ϩ1-803-777-3609
Ͻmoneyb@sc.eduϾ. Deborah Colton, Interna-
tional Business Program Area, Darla Moore
School of Business, University of South Carolina,
Columbia, SC 29208, USA Tel.: ϩ1-803-777-
2301; Fax: ϩ1-803-777-3609 Ͻcoltonp2@
smail.badm.sc.eduϾ
Besides the important substantive
reasons to study the consumers of the
former Soviet Bloc, interesting theoret-
ical reasons compel our research. The
topic of customer response to promo-
tion has received ample attention in the
consumer behavior literature, from
mostly an American perspective. Ap-
190 Journal of World Business / 35(2) / 2000

plying what we know about buying be-
havior from U.S-based research to other
regions of the world can be misguided
at best (Aaker & Williams, 1998). Con-
sistent with calls for more global mar-
keting research (Silk, 1993), specifi-
cally in this area of the world (Springier
& Czinkota, 1999), this conceptual pa-
per explores important relationships be-
tween constructs germane to consumer
response to promotion that multina-
tional marketers should consider. The
paper contributes to international mar-
keting knowledge and practice in at
least two ways: First, it identifies how
the degree of transition in these econo-
mies affects important factors (such as
perceptions of risk) in how consumers
approach a buying decision and how
their demographics might affect their
attitude towards promotion. Second, the
paper helps set an agenda for research-
ers for empirical testing of this paper’s
propositions as well as subsequent is-
sues (such as response to promotion)
that managers might consider important
in future efforts in an important poten-
tial market.
petition, but by full employment and
subsidies, which made consumers come
to expect little, but a consistent little. In
the communist era, expectations were
low and reality was harsh. In postcom-
munism, expectations are high and re-
ality has worsened. Twice as many Rus-
sians believe that “life was better”
under Stalin than Gorbachev (Econo-
mist, 1998). Five years ago the biggest
concern of Russians was “rising pric-
es,” whereas now they worry most
about being paid anything with which to
buy expensive staples, particularly
since the ruble’s devaluation in 1998.
Only 8% of businesses pay taxes in
what is called “live” money (cash). A
local police department was paid with
6,000 pairs of woolen socks (Higgins,
1998), in exchange for suspending ef-
forts to collect delinquent taxes from
the clothing manufacturer.
What Americans call corruption was
and still is a daily part of reaching the
consumer. About 25% of all foodstuffs
in the channel are skimmed off for gov-
ernment officials and their families—
merely the perk office (Starr, 1994).
Half of all perishables spoil before even
reaching a market. Recent U.S. food aid
meant for destitute Russians was being
handled by the same Politburo official
of previous failed attempts and many of
the aid items ended up for sale in street
kiosks (Whitehouse, 1999). The reputa-
tion of active organized crime, spawned
by one of the highest literacy rates in
the world (96%) combined with the
frustration of market transition, is well
deserved. The same gift-giving Philip
Morris in Hungary had its kiosks in
Moscow blown up by local cigarette
distributors. The problem with cheating
The article is organized as follows:
The conceptual model is introduced by
way of substantive and theoretical back-
ground on the topic. Research proposi-
tions are then developed, along with
implications for marketing managers.
MARKETING IN THE FORMER SOVIET
BLOC
The consumer in the “new order” is
justifiably confused about the benefits
of capitalism. Communist economies
were driven not by incentives and com-
The New Consumer in the Former Soviet Bloc 191

on taxes is not consequences from the
authorities, but blackmail from the Ma-
fia. “This is not the kind of place where
the average person should come and try
to open up shop,” according to one
American entrepreneur featured in an
MSNBC report, “Sometimes it’s
rough.”
“Czech made” soft drinks are promoted
to relieve the stress of urban life, and
juice maker Agros stamps “Polish Prod-
uct” prominently on its labels (Woo-
druff & Drake, 1998). Two entrepre-
neurs, one in Russia and one in the
Czech Republic, very successfully mar-
keted products labeled “Ordinary Laun-
dry Detergent” as satire and backlash to
traditional consumer products Western
advertising of brands like Tide, “that
clean better than ordinary laundry de-
tergent.”
Distribution systems are unreliable
and arcane. Half of all Russian perish-
ables spoil before they reach the mar-
ket. Unreliable and disrupted patterns of
delivery in Hungary still have the con-
sumer looking for cosmetics in the store
next to bakery goods one day, next to
candy the next, and not at all for weeks.
Some of the problems are more due to
the marketing mindset rather than logis-
tics. Buyers for stores are hagglers try-
ing to get the best price on whatever
items are available, not necessarily try-
ing to spot goods that consumers want.
Signs of change, however, make the
region seem tempting for marketers.
Food-loving Hungarians are eating
more processed and imported food
thanks to the advent of supermarkets
and food advertising. Nearly half of all
Czechs, Hungarians, and Poles are un-
der 30 years of age, portending a grow-
ing consumer base of people who are
more open to Western marketing ways.
An interesting sort of nationalism and
country of origin effect continues to run
through the consumer’s response to pro-
motion. Marketing vodka, the “water of
life,” to the Russians by non-Russian
firms has been a spectacular failure
(Beck, 1998). Coca-Cola ads, featuring
the Russian “firebird” myth and heroes
of folk legends, however, have been
well received. A Hungarian distiller airs
advertising touting its 200-year history,
THEORETICAL BACKGROUND
Since the collapse of communism,
much research attention has been di-
rected at the macroeconomic reforms
(e.g., trade policy, fiscal policy)
whereas microeconomic issues, such as
marketing, have commanded relatively
less. Of the few of studies of marketing
in Central and Eastern Europe most
have treated the marketing concept
(Naor, 1986) or marketing from the
firm’s perspective (Hooley, 1993). Few
treat elements of the marketing mix, in
particular promotion, and consumer be-
havior (Shama, 1992).
The goal of marketing in communist
Romania was to improve living stan-
dards by meeting the population’s sci-
entifically determined needs (Naor,
1986). Promotion’s role in a socialist
economy was largely utilitarian, where
consumers are informed only of a prod-
uct’s function and where socially unde-
sirable products, for example, alcohol
and tobacco, were not promoted beyond
meeting existing demand (Fazekas,
1978; Naor, 1986). In one of the only
192 Journal of World Business / 35(2) / 2000

longitudinal studies, researchers exam-
ined the elements of the marketing mix
in Romania during and after commu-
nism. Lascu, Manrai, & Manrai (1993)
described the environment for promo-
tion before the fall of communism as a
seller’s market, directed at informing
and educating the public about prod-
ucts, state agencies, and state stores.
Also, store displays and billboards were
of poor quality and point-of-purchase
displays were almost nonexistent. Trade
shows were very popular with the pub-
lic, attracting not only the target busi-
ness customers but also the average
consumer who used the shows as a win-
dow to the outside world’s markets.
In the economies of scarce and poor
quality goods, the pretransition con-
sumer suffered information “underload”
(Susjan, 1999). After many markets
opened, the shock of foreign goods was
followed by the desire to learn more
about them. However, objective infor-
mation, such as that found through Con-
sumer Reports, was still very difficult to
come by. Therefore, subjective evalua-
tions of products became the norm, un-
der the influence of aggressive Western
advertising. In studying the transforma-
tion of consumer behavior in Hungary,
Poland, and Russia, Shama (1992)
found that when faced with reduced
purchasing power in severe economic
challenges, consumers adapted by tak-
ing on another job, trading in the black
market, or by using their savings. In
addition, many consumers engaged in
comparative shopping, and tried to re-
duce risk by purchasing higher quality
goods when possible. Overall, previous
research suggests that the role of mar-
keting is changing drastically in Eastern
Europe as the economies of the region
continue their transition.
Of course, the former Soviet Bloc is
comprised of many countries, cultures
and subcultures, whose consumers most
likely vary widely in their approach to
buying goods and services. Some of
these differences may naturally mani-
fest themselves as individual tastes and
preferences that would surface in any
group of people. However, others may
be caused by wider issues and more
general differences in economic devel-
opment and national culture (Hibbert,
1998). In any case, overgeneralizing the
following conceptual development to
all consumer reactions in all countries
of the region would be misguided at
best, dangerous at worst. Marketers new
to the region would do well to take a
local partner to find their way through
various regulatory structures, for exam-
ple (Meagher, 1993). Nevertheless, we
hope that the present research serves as
a beginning to better understand how
consumer behavior in the former Soviet
Bloc will be shaped by the various
forces at work in that area of the world.
CONCEPTUAL MODEL AND PROPOSITION
DEVELOPMENT
It is against this backdrop of marketing
in the region that we present our model
and its research propositions. As shown
in Figure 1, the model considers factors
that affect consumer attitude and re-
sponse to promotion in transition econ-
omies. Degree of transition may influ-
ence “individual difference variables”
(Mittal, 1994), to be defined. Those
variables, together with demographic
The New Consumer in the Former Soviet Bloc 193

Figure 1
Adapted from
characteristics of age and income help
developed and tested in the U.S. and
lack validation in international settings.
International marketing research often
assumes, either explicitly or implicitly,
that theories developed in the U.S. are
universally applicable and do not ac-
count for measure unreliability in test-
ing (Davis, Douglas, & Silk, 1981). In
one exception, Lee & Green (1991)
tested the Fishbein model in predicting
purchase intentions in Korea, finding
that subjective norms were considerably
more important than attitudes for Kore-
ans compared to Americans.
Although not explicitly compara-
tive in nature, the current research
also uses the Fishbein model in deter-
mining response intentions to promo-
tion in the former Soviet Bloc. Degree
of transition to a market economy
helps shape the beliefs about the con-
sequences of a market economy and
evaluation of those consequences.
Subsequently the beliefs about prod-
determine consumer attitude and, in
turn, response toward promotion. Only
a portion of the complete model is
treated in this study; other components
of the model could be developed by
future conceptual studies.
The conceptual framework considers
the Fishbein behavioral intention
model, also referred to as the theory of
reasoned action (Fishbein & Ajzen,
1975). The model holds that behavior is
determined by behavioral intentions,
which are a function of attitude and
subjective norms—beliefs about others’
expectations and the motivation to com-
ply with those beliefs (Bagozzi, Baum-
gartner, & Yi, 1992). In general, the
model has been found to hold strong
predictive power in determining behav-
ioral intentions. However, the support
for the model has been derived from
U.S.-based research; indeed the major-
ity of consumer behavior theories are
194 Journal of World Business / 35(2) / 2000

Figure 2
Adapted from
uct quality, availability, price, and
consumer behavior in those countries.
Countries within the region had sys-
tems, despite the umbrella ideology of
communist rule, that varied from one
country to another (Samli & Jerma-
kowicz, 1983). Centrally planned or
“vertical linkages” are more concen-
trated in economies such as Romania
that were characterized by strong cen-
tral authority and strict totalitarian
economic rule (see Figure 2). “Hori-
zontal linkages” emphasize more of a
market orientation with some degree
of competition, characterized by the
fairly progressive economies of the
precivil war Yugoslavia and Hungary.
These are also referred to as “mature”
transition economies, such as Poland,
employment influence individual dif-
ference variables. In turn, individual
difference variables, together with de-
mographics, influence consumer atti-
tude and response toward promotion.
Thus, the conceptual framework in
this paper incorporates a portion of
the Fishbein model and employs its
constructs in theorizing about con-
sumer behavior in Central and Eastern
Europe.
Degree of Transition
We propose that the degree to
which countries in Eastern Europe
have transitioned from centrally
planned to market economies affects
The New Consumer in the Former Soviet Bloc 195

as opposed to those just beginning the
transformation (Susjan, 1999).
American fare (movies like “Pretty
Woman”) as Westerners (Frank, 1997).
Consumerism or materialism, the desire
to possess material goods and the im-
portance they play in one’s life, has
grown as more products become avail-
able. Global consumerism stands in
contrast to consumer ethnocentrism, the
degree to which consumers resist for-
eign products (Shimp & Sharma, 1987;
Netemeyer, Durvasula, & Lichtenstein,
1991).
In the former Soviet Bloc, the influx
of Western goods, in addition to vivid
advertising, has ignited consumer de-
mand for those goods (Ger & Belk,
1996), what we call a “new consumer-
ism.” Some markets have been flooded
with products and services from around
the world, depending on the degree to
which a given country’s government
and infrastructure has allowed it. In
other words, the differences in degree
of transformation to a capitalistic,
market-based economy leads to differ-
ences in the manifestation of consumer-
ism. In a horizontally-linked economy,
that is, Hungary, where consumerism
has been allowed some degree of lati-
tude for many years, the desire for new
Western goods and services may not be
as strong as in a vertically-linked econ-
omy, that is, Romania, where the tran-
sition is not as well developed, expo-
sure to Western goods is relatively
recent, and desire for such goods seems
to be extremely strong (Ger & Belk,
1996). Expressed as our first research
proposition:
Comparing an authoritative system to
an integrative system, horizontal link-
ages are stronger in the latter. In every-
day life, more vertical linkages meant
more product shortages and longer lines
to wait for goods often not even in the
store (Samli & Jermakowicz, 1983).
Access to Western goods as an exam-
ple, the differences between Romania
(fewer goods) and Hungary (more) have
extended beyond the fall of communism
(Ger & Belk, 1996). Therefore, as the
current research postulates, various
countries in today’s Central and Eastern
Europe will show differences in various
phenomena of consumer behavior be-
cause of varying degrees of transition to
a market economy.
Individual Difference Variables
“New Consumerism”
Theodore Levitt argued in “The
Globalization of Markets” (1983) that,
partially due to advances in communi-
cation, consumers everywhere converge
in their desire for convenience, quality,
and value in universally desirable prod-
ucts such as electronics and personal
care products. Although the debate con-
tinues over the advisability of standard-
izing marketing (Aaker & Joachimstha-
ler, 1999; Douglas & Wind, 1987),
nowhere more than in the former Soviet
Bloc is Levitt correct. Half of all
Czechs now call themselves “middle
class.” The experience of Nova TV (de-
signed to be a kind of culture-specific
PBS) in the Czech Republic demon-
strated that consumers wanted the same
P1:
Vertically linked (authori-
tarian) economies that have
been transformed to a lesser de-
196 Journal of World Business / 35(2) / 2000

gree will have a stronger “new
consumerism” than economies
that are more horizontally
linked (market) where the tran-
sition to a capitalist economy
has progressed farther.
authoritarian, lesser-transformed econ-
omy would spawn a higher level of state
orientation than in a more horizontally-
linked, transformed economy that is
home to consumers accustomed to more
choices per unit of disposable income:
P2: Consumers in countries that
are transformed to a greater de-
gree to a market economy are
more likely to be action oriented
than consumers from countries
that are transformed to a lesser
degree, who will be more state
oriented.
State versus Action Orientation
One individual difference variable
specifically appropriate to Eastern Eu-
rope is state versus action orientation as
defined by Bagozzi, Baumgartner, & Yi
(1992). State orientation is passive,
characterized by an attitude of “I’m just
a consumer–I can’t change things.” We
propose this to be more prevalent in
vertically linked economies with strong
central authorities that are less transi-
tioned to a market economy. Action ori-
entation, on the other hand, embodied in
a “customer is king” attitude, would
prevail in typical Western economies or
transition economies that have been
open to a marketing philosophy for a
relatively longer period of time, such as
Hungary or Poland.
In a centrally planned economy,
where comparative shopping was lim-
ited or nonexistent, consumers expected
little difference in quality, price, and
product offering. The carryover effect
in countries such as Russia or Romania,
high in vertical linkages, is expected to
be strong. This is especially true given
that prior research on pricing has found
negative pricing situations (“pricing
losses”), such as decreased purchasing
power, have more of an impact on con-
sumer mindset than do pricing gains
(Kalwani, Tim, Rinne, & Sugita, 1990;
Tversky & Kahneman, 1991). In other
words, limited purchasing power in an
Variety Seeking
Surveys indicate that 31% of Russian
consumers say they “are always on the
lookout to try new products” (Emerging
European Markets, 1997). The propor-
tion is even higher among women at
34%, and highest for the under-24-year-
old age group at 54%. The environment
of transition in the former Soviet Bloc is
charged with variety-seekers, flooded
with new products from the West. How-
ever, international marketing research
has mostly ignored variety-seeking be-
havior. Variety seeking has been shown
to increase when consumers prefer a
diversity of attributes (Kahn & Leh-
mann, 1991) and when a positive im-
pression is made with a free sample in
the absence of negative information
(Kahn & Isen, 1993). Consumers in
countries where the transition is further
developed probably have seen a larger
influx of products with greater attribute
diversity. Also, more sophisticated pro-
motion has probably generated a greater
amount of positive reaction to Western
The New Consumer in the Former Soviet Bloc 197

goods. Although, as shown by research
in Hungary, too many product choices
may confuse consumers (Feick, Coulte,
& Price, 1995), former Soviet Bloc
“new consumers” generally seek greater
variety, much as Western consumers
do:
are more dependent on transaction util-
ity as compared to acquisition utility,
they are more likely to be deal prone
rather than value conscious.
As demonstrated in previous re-
search, former Soviet Bloc consumers
are demanding lower prices and higher
quality due to their strained resources
(Lascu et al., 1993). These demands are
more consistent with acquisition utility
than with transaction utility. Although
many consumers in the region may dis-
play characteristics of deal proneness,
those from countries that are still more
authoritarian and vertically linked will
respond to promotion more out of value
consciousness. Intuitively, some may
respond to a promotion just because it is
in deal form. However, consumers in
less-transitioned economies who are not
accustomed to Western style promo-
tions may be suspicious of them. This
would lead consumers in economies in
early transition to be more value con-
scious than deal prone.
P3: Consumers in countries that
are transformed to a greater de-
gree to a market economy are
more likely to engage in variety-
seeking behavior than consum-
ers in countries that are trans-
formed to a lesser degree.
Acquisition-Transaction Utility: Value
Consciousness and Deal Proneness
Degree of transition in Eastern Euro-
pean economies is also expected to in-
fluence the value consciousness and
deal proneness of consumers there. Us-
ing acquisition-transaction utility the-
ory, Lichtenstein, Netemeyer, & Bur-
ton, (1990) explored these two
constructs. Deal proneness refers to the
tendency to respond to promotions pri-
marily because of a perceived “bar-
gain,” whereas value consciousness is
the interest in paying low prices for a
given level of desired quality. Also, to-
tal utility is the sum of acquisition and
transaction utilities. Specifically, acqui-
sition utility is the ability to satisfy an
intrinsic need, and transaction utility is
the difference between the price one
feels one should pay and the actual pur-
chase price. Consumers are apt to be
more value conscious rather than deal
prone if their level of acquisition utility
is higher relative to their level of trans-
action utility. Conversely, if consumers
P4: Consumers in countries that
are transformed to a greater de-
gree to a market economy are
more likely to be influenced by
deal proneness (more dependent
on transaction utility) than are
consumers from countries that
are transformed to a lesser de-
gree, who will be influenced
more by value consciousness
(more dependent on acquisition
utility).
Perceived Risk
How consumers handle the risk and
ambiguity of buying has been treated
198 Journal of World Business / 35(2) / 2000

extensively in U.S.-based consumer re-
search. The behavior of non-U.S. con-
sumers in the face of risk is less clear. In
the mid-1990s, a survey among Rus-
sians found that they are extraordinarily
concerned about contamination through
“chemistry” (perhaps a carry over from
the Chernobyl accident) and are hesitant
to use harmless products such as hand
soap liquid and vitamins (East Euro-
pean Markets, 1997). It is also widely
believed in Russia that cellular phones
cause skin cancer and televisions emit
dangerous radiation. Hoover, Green, &
Saegert (1978) found that Mexicans
perceive the same ambiguous event or
information with less risk than do
Americans. Thus, promotions used to
reduce risk perceptions for some con-
sumers are less effective when the level
of perceived risk is relatively low.
However, in environments where price
is the dominant factor, that is, a lower
price means lower risk (less to lose),
price promotions may be quite effective.
The consumers in countries in transi-
tion are quite price conscious, for good
reason. In Russia, a package of Head &
Shoulders shampoo costs about 120 ru-
bles; the annual income of the average
Muscovite is 1,200 rubles. Also, many
unfamiliar brands become available to
consumers for the first time. Naturally,
exposure to many new brands increases
uncertainty but not necessarily per-
ceived risk of a wrong choice, if the
price is low enough. Consumers want to
try many unfamiliar brands yet are re-
stricted from doing so because of their
limited means in countries less wealthy
than those who have transitioned some
years ago are. Purchasing power in Slo-
vakia, Hungary, and Poland has in-
creased in recent years. Thus, perceived
risk of a wrong product choice may be
lower in better-off countries than in
less-transitioned economies.
P5: Consumers in newly transi-
tioned countries are more likely
to be price conscious than risk
averse.
Consumer Demographics
Just as Belk, (1985) found that
younger consumers tend to be more ma-
terialistic than older ones, demographic
variables may, together with individual
difference variables, shed light on how
transition economy consumers view and
respond to promotion. This may assist
marketers in reaching strategically
equivalent segments (Kale & Sudhars-
han, 1987), groups of consumers that
transcend national boundaries in their
consumption patterns. Attitudes and re-
sponses to promotion vary between
countries (Keegan, 1969), depending on
general education level, disposable in-
come, average household size, and level
of female employment (Cotton & Babb,
1978). Highly literate consumers who
live in urban areas, are nonminorities,
and are members of the majority reli-
gion are more likely to view promotions
positively that are in print or electronic
form. On the other hand, rural, ethnic
minority consumers with low literacy
and members of a nonmajority religion
are more easily persuaded by personal
selling (Bridges, Florsheim, & John,
1996).
Although prior studies have shown
that demographic variables directly pre-
dict response to promotion, Mittal,
The New Consumer in the Former Soviet Bloc 199

(1994) argues that demographic effects
are mediated by psychological pro-
cesses as well as perceived costs and
benefits associated with responding to
promotions, in particular, coupons. El-
ements in Mittal’s model parallel ele-
ments in the Fishbein model, that is,
perception mediators are similar to be-
liefs. Consequently, studies that have
established demographics as predictors
of response to promotion explain who
responds rather than why they respond.
Considering the former Soviet Bloc and
the framework developed here, it makes
sense to treat demographics as anteced-
ents to attitude, which in turn affects
response. That is, we propose that con-
sumer demographics influence consum-
ers’ attitudes towards promotion.
extremely careful consideration of both
price and quality. Attitude toward pro-
motion would be more positive if the
promotion leads the consumer to be-
lieve he/she received “more than his/her
money’s worth”; in essence, the con-
sumer is receiving a net increase in pur-
chasing power. We propose:
P6:
The stronger the percep-
tions that a promotion increases
disposable income purchasing
power, the more positive the at-
titude toward that promotion.
Age
Another demographic variable that
may affect attitude toward promotion is
age. Belk (1985) found that older con-
sumers are less consumption oriented
than younger consumers. Older Central
and Eastern European consumers often
re-enter the labor force to afford only
necessities (Shama, 1992). Conse-
quently, they feel that their standard of
living has deteriorated with the advent
of a market economy. The older gener-
ation also has the tendency to hold on to
the past because of fear for the future
and unfamiliarity with new products.
The consumers that long for “the good
old days” are more likely to resist the
influx of Western products. Only about
half of Russians want to proceed with
market reforms, and those are typically
younger consumers. Indeed, most of the
“new consumers” in Russia are under
age 35 (East European Markets, 1997).
We propose that:
Income
Consumer demographics that are
most likely to influence attitudes toward
promotion are those that have been af-
fected most by the collapse of commu-
nism. Income, in terms of purchasing
power, dropped significantly for the av-
erage Eastern European consumer. The
IMF reports that the purchasing power
of the former Soviet Bloc countries is
only 20% of that for developed nations.
The average Moscow family spends
75% of its income on food. Price is
extremely important to such consumers.
Research in Poland, Hungary, and Bul-
garia has also shown that price is more
important than quality to consumers in
those countries (Hooley, 1993).
With the decline in purchasing
power, consumers are more likely to
spend their resources wisely. That is,
purchasing luxury goods would involve
P7:
Younger consumers have
more positive attitudes toward
200 Journal of World Business / 35(2) / 2000

promotion than do older con-
sumers.
attraction for Russian goods by creating
the “Peter I” brand, the package em-
bossed with the 18th century seal of
Peter the Great. But nationalism, ac-
cording to one local official, only goes
so far in explaining why some foreign
products sell and others do not. There
are over 200 varieties of local Russian
ketchup available—a new offering by
Heinz, regardless of its attributes, may
simply be entering a market too
crowded.
IMPLICATIONS FOR MANAGERS
In the form of research propositions,
this paper has explored some major
themes and issues that academics and
managers alike should be aware of in
their quest for new knowledge and prof-
its in the former Soviet Bloc. Making
sense of a market and charting a course
in this area the world where marketing
is daunting at best, because “market”
and “profit” can still carry very negative
connotations, associated with chaos and
injustice (Czinkota, 1997). Below we
have summarized some suggestions for
managers in dealing with the vagaries
of the new marketplace in that area of
the world.
Expect the Worst, Wait for the
Better
The entire concept of a brand is new
to these consumers (Gander, 1998). The
product was important in the commu-
nist era, and the product needed protect-
ing because it was scarce. One Ameri-
can entrepreneur in Russia spotted
hockey pucks in a local sports shop for
a penny each. His plan was to ship them
to Minnesota, where he had tried suc-
cessfully selling them for a dollar.
When he tried to increase the scale of
the operation, the store only had a few
dozen, wouldn’t tell him who the man-
ufacturer was, and, when he found the
company, it was not interested in selling
to him at any price. Joint venturing with
the right partner might see a company
around some of the bureaucratic, logis-
tical, and cultural obstacles.
Building brand awareness is very dif-
ficult because product standardization
can actually be very difficult. Try mix-
ing a pitcher of Kool-Aid in one city in
the region, then doing the same thing in
another. The water itself tastes very dif-
ferent, so the products are not the same.
Point-of-purchase displays are some-
Manage the Country-of-Origin
Effect
Some companies have used country-
of-origin effects to their advantage,
such as the “Born in the U.S.A.” cam-
paign by Chevrolet in Russia. Selling a
piece of pizza, although Italian in its
origins, is like selling a “piece of Amer-
ica.” Consistent with Parke, Roth, and
Jacques’ (1988) advice, companies
should recognize their country-of-origin
assets and liabilities, then proceed ac-
cordingly with marketing strategy. Rus-
sians may prefer their own produce and
dairy products, but would appreciate
Western packaging so that yogurt, for
example, would be less difficult to
spoon out of a round container rather
than a Soviet-era small box. Marlboro
successfully used the country of origin
The New Consumer in the Former Soviet Bloc 201

times limited to labels taped onto the
windows of street kiosks. Patience
pays: Tesco, a U.K. supermarket chain,
has been extremely successful with its
line of “Value” private label products,
which are very competitively priced.
ternet service providers are growing at
an 805% annual rate in Russia.
B-to-B Implications
Naturally, the issues we have raised
about the response of the “new con-
sumer” in the former Soviet Bloc would
also apply to business-to-business ex-
change, because companies also “con-
sume,” and the decisions to do so are
made by people of the region. Of
course, many adaptations in the concep-
tual model may be necessary, such as:
At Your Service
Marketers should not ignore the
growing and changing service function
of their business or the service sector in
general. When Transaero Airlines com-
menced regional flight service in Rus-
sia, its only criteria for hiring flight at-
tendants was having no prior experience
with Aeroflot, infamous for poor
Soviet-era service. Customers are start-
ing to enjoy convenience-store hours,
but they come at a price: a carton of
cigarettes in one Russian store jumps in
price from $20 to $24 for the hours of
10 p.m. until the next morning. Loyalty
and incentive programs, like frequent
flyer award programs, are proliferating,
especially among the Poles (Furber,
1999). Polish Airlines had three levels
of awards and service (blue, silver, and
gold), but actually treated all customers
about the same, causing big defections
to British Airways. The financial ser-
vices industry presents perhaps some of
the most promising opportunities for
growth. Only 30% Poles have any type
of relationship with a bank. ATM ser-
vices are becoming popular in the re-
gion, but more growth is possible in
some of the larger economies. Slovenia,
one of the smallest, has the highest ma-
chine density in the region, with an
ATM per every 109 people, a figure
comparable to the U.K. and France. In-
1. Whether a company is independent
or a subsidiary of a large multina-
tional corporation;
2. If a subsidiary, how long the com-
pany has been doing business in
the region;
3.
General experience of the com-
pany in dealing with the global
economy;
4. Company “demographics” such as
age and size.
An example of how companies as
well as consumers in the region are
changing is the Prva Komunalna Bank
(PKB) in Slovakia. It targeted as poten-
tial commercial customers a group of
municipalities, previously ignored by
competitors. The bank successfully cap-
tured most of the market share in this
segment by using Western European
product and promotion concepts aggres-
sively in a market where such innova-
tion was unknown previously. (Ennew,
Wright, & Kirnag, 1996). Another ex-
ample of growing sophistication in
business-to-business services is adver-
tising. Whereas in the early days of the
202 Journal of World Business / 35(2) / 2000

transition, Polish ad agency creative
people were merely artists such as
painters, advertising in the region is
now becoming more technical and in-
formative. Effies, the American Market-
ing Association’s award for advertising
effectiveness, are now being awarded in
the Czech republic.
economies through decades of capital-
ism in a few years is proving to be
difficult at best, but it presents opportu-
nity for tremendous growth in many
product categories that are mature in
domestic markets. There is opportunity
to benefit from the chaos in the region
for international marketers, and we
have explored issues in this paper that
may assist them in doing so.
Business-to-business implications of
the changing nature of exchange are
important because consumers may be
reaching a saturation point of foreign
goods. According to a former Russian
official, “The reason imports have
stopped growing is that we’ve reached a
level where people can’t consumer
more” (East European Markets, 1997b,
p.8). Opportunities abound to increase
sales through business-to-business
transactions in the region. GIS (Geo-
graphical Information Systems) compa-
nies are offering their services to mul-
tinationals that want to alleviate
logistical problems by plotting distribu-
tion networks and sales territories
(Reed, 1999). American defense con-
tractors are trying to convince govern-
ments in the region to replace their
USSR-era military equipment with
more contemporary technology and
clothing (Kahn, 1998). Financial and
advisory services for businesses are in
high demand because experts in these
areas are in short supply after decades
of planned economies (Kiep, 1991).
In conclusion, the former Soviet Bloc
market fascinates Western academics
and marketers because it makes an in-
teresting laboratory of change. Located
next to the relatively successful econo-
mies of Western Europe, the region ex-
perienced the failure of the great exper-
iment in communism. Trying to bring
Acknowledgments: The authors thank
Tatiana Kostova and Martin S. Roth for
their assistance.
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The New Consumer in the Former Soviet Bloc 205