From an old order, a new frontier

Editor’s note: Misha Neverov is a co-founder of Amry Research and is based in the firm’s Hershey, Pa., office. Robert Schieffer is a co-founder of Amry Research and professor at Kellogg School of Management, Northwestern University, Evanston, Ill.

In the last decade, Russia’s economy and the disposable income of Russian consumers has grown steadily, attracting the attention of multinationals and their global marketing research departments. Like the launch of Sputnik in the 1950s, the rapid ascent of Russian economy in the past decade has taken many by surprise. The chaos of the 1990s has been replaced with a previously-unseen level of market efficiency and growing prosperity across much of Russia. As marketers, we have witnessed the country undergoing a dramatic repositioning from the grayness of scarcity, turmoil and food lines to the glitter of advertising, an abundance of supermarkets and expensive cars clogging the streets. The swing from poverty and despair in the late ‘90s to the optimism and national pride of today have brought Russian consumers rapidly into the flat world of the 21st century.

One of the primary indicators of this explosive growth is disposable income: Russian disposable income has risen by 27 percent every year since 2000. Multinational companies have paid close attention to the emerging Russian market (as well as other BRIC [Brazil, Russia, India, China] countries) as mature markets slowed in growth. Russia is expected to surpass Germany as Europe’s largest consumer market by the end of 2008. As companies’ interest in Russia increases, so does their need for information about the growing market, especially as consumers have more choices and the market becomes more competitive. A burgeoning Russian marketing research industry has evolved to help meet this need.” There is an increased importance of market research overall, and more decisions based on consumer feedback,” says Lyudmila Krokhina, consumer and market insights director for the Wrigley Company in Moscow.

While marketing research overall has been rapidly growing in Russia throughout this past decade (with the growth rate peaking in 2005 at 28 percent), online marketing research is a relatively recent development. Just as we saw in the U.S. during the 1990s, the transition to online research requires both time to gain acceptance and a critical mass of consumers being available online. Today, the global research community has grown more comfortable and familiar with online research. Many have gone from being skeptical about this methodology to embracing it, and for most it is now just another tool in their toolbox. The expansion of Internet penetration in Russia now allows us to leverage the cost and speed benefits of online research, just as we’ve been doing in the U.S. and Europe for the past several years.

The move toward online research couldn’t have come at better time. In a market that spans 11 time zones and has only 58 percent landline telephone penetration, face-to-face interviews lack national coverage and telephone surveys have their own set of challenges. The fixed-line industry has not been privatized, so some of the regional phone companies connect only 20-25 percent of their licensed consumer base and are plagued by long delays in installing lines, reminiscent of the socialist era.

Come together

So as Russia’s marketing research industry has grown and the online population in Russia has grown, the two have inevitably come together. But how does online research in Russia differ from that in other geographies?

The first question in any discussion of online research in Russia revolves around the level of Internet penetration. So, among the 142 million Russians living in Russia, exactly how many access the Internet?

Answers vary by source, due to differences as basic as methodologies used and as fundamental as the definition of an Internet user. The Russian Public Opinion Foundation (FOM, www.fom.ru ), in its quarterly The Internet in Russia study, uses the following methodology: large (34,000 respondents) stratified random sample of adults 18 or older drawn from 1,950 cities, towns and villages from 68 out of 89 federal districts (covering 94 percent of the population). These studies, conducted since the summer of 2002, segment Internet users according to frequency. As of this writing, the latest published FOM tracker, spring 2008, puts the daily audience for the Russian Internet at 15.7 million users, and the weekly audience at 25 million users. More familiar to U.S. readers, comScore measurement pegs the number of Russian Internet users at 17.5 million (as of June 2008).

While the exact level of Internet penetration is subject to debate, most agree that the Russian online population is growing quickly, with comScore reporting 27 percent year-over-year growth (as of June 2008). The northwest region, which includes St. Petersburg, has 26 percent Internet penetration. The Moscow metropolis, with its population of over 10 million (7 percent of the entire nation), has the highest incidence, with an Internet penetration of 42 percent. High-speed Internet is also becoming very popular: the number of broadband-connected households increased at a rate of 98 percent in 2006 and is expected to continue to increase by over 50 percent in the near future. Some project that around 25 million households, half of the country’s population, will be broadband subscribers by 2012. Currently, over 5.5 million Russians have broadband service. 

The second question for someone new to online research in Russia would be: What does “representative” mean for a Russian sample? The Russian Federation has a highly heterogeneous population, so to exhaustively reflect all of Russia’s widespread territories, a sample would be comprised of people from at least all eight regions, if not each of the 89 federal districts, and balanced across age, gender, socioeconomic class, education, etc. However, most research tends to focus on the major metropolitan areas on the country, primarily because spending power is highly concentrated in few cities.

Furthermore, retail distribution is (at least for now) still fragmented among several chains, unlike Wal-Mart’s countrywide retail distribution in the U.S. Chances are your company, or your client’s company, is not interested in comprehensive geographic representation, but in specific regions being targeted. Historically, a typical market entry into Russia would commence with establishing business in Moscow, followed by St. Petersburg, then expanding to regional cities. Moscow, besides harboring most of nation’s wealth, also has the highest Internet penetration, making it a good sub-market for online research. As Moscow real estate prices continue to skyrocket, it is interesting to note the emergence of alternative entry strategies: for example Carl’s Jr., heavily preempted by McDonald’s, Subway and other chains, chose to enter Russia by opening restaurants in St. Petersburg first.

Our experience in Russia has shown that its citizens, excited about the variety and choices that the last few years have brought, are eager to share their opinions when the online interaction is appropriately facilitated. Response rates on many Russian panels are over 50 percent, and can go as high as 70 percent depending on the survey.

Some caveats

Naturally, there are some caveats to keep in mind when conducting online research in Russia. Internet adoption has occurred similarly to adoption in other countries - those who were first to be online were young, educated and wealthy. But some of the hard-to-reach demographics are inverted compared to U.S.: young males are not particularly difficult to reach compared to women over 35. “The Internet is focused on the most active part of our population ... it usually enrolls younger respondents more open to innovation ... therefore, if this audience is your target indeed, the Internet is just the tool you need,” Krokhina says.

Groups that tend to be underrepresented online include older, less-educated and less-well-off consumers. The male/female ratio is inverted online compared to the general population. Response rates will vary by demographic as well: expect lower response rates from people over 40, as they are less comfortable with the Internet. There are strong cultural gender roles. Women carry a highly disproportionate share of household responsibilities, leaving working women with even less time to respond to surveys.

The right project

When trying out an unfamiliar methodology, often researchers are looking for the right project to experiment with. Projects that are not top priority, that are low-cost, that are “nice to have” - or any combination of these - are often the first that researchers assign to an online method. But, Krokhina says, “Even in those cases, we’re so limited by the time pressure that in the majority of cases, we have to look for standard solutions which require the least discussion or carry the least uncertainty.” While the Internet is a faster method in field time and analysis, the internal discussion and debate over conducting online research in Russia can lengthen the time it takes to conduct a project, at least until the company is comfortable with the method.

One way to overcome that is to begin looking at the methodology early internally, even before the right project comes along. By gaining alignment on when and how the online methodology would best fit in your industry, when the right project comes along, the team will be ready for it. Another strategy is to have an early discussion with online research companies to better understand how your standard studies can be converted to online (typically, that only requires some questionnaire adjustments and some programming). Finally, a best practice would be to conduct parallel tests using both the online and offline methods. Changing methodologies often creates new absolute benchmarks and norms, but investing in parallel studies provides the opportunity to normalize the data across methodologies and thus limit the impact of this change.

Other tips:

  • When talking to a general audience, avoid graphics-heavy pages, as a large portion of respondents still access the Internet through dial-up.
  • In ranking questions, use a 1-5 scale, with 5 being the high end of positive. The Russian school system uses 5 through 1 as grades, similar to A through F in the U.S., with 5 having a strong association as good/excellent.
  • Just as in any non-English market, when starting from an English questionnaire, translate the questionnaire to Russian and then back-translate from Russian to English. While a bit time-consuming on the front end, this step can save innumerable headaches on the back end.

Competitive advantage

The best time to consider an investment in understanding the needs, attitudes and preferences of the Russian consumer is now. Gaining this insight could provide your firm with a sustainable, competitive advantage in this important, growing global market.


References

Public Opinion Foundation (FOM), www.fom.ru.

Federal State Statistics Service, www.gks.ru.

Connor, John T. et al. Out of the Red: Investment and Capitalism in Russia. Wiley and Sons, 2008.

Galitskii E.B. et al. “How do Internet users differ from the rest of Russians?” FOM database.