RUSSIAN RESPONSE

Direct marketing in Russia is only a bit more than a decade old, but it’s already become one of the nation’s most dynamic marketing and communication alternatives. In fact, the DM business in Russia is virtually doubling with each passing year.

In 2000, direct marketing was estimated to account for some $75 million (U.S.) worth of economic activity in Russia. Of this amount, $27.5 million was related to direct mail, $6.3 million to telemarketing, $13.8 million to express mail service, $5.6 million to non-addressed mailings, $2.7 million to e-mail, $25 million to creating databases and address lists, and $13.7 million to mail order catalog marketing. When the level of year 2000 DM activity is compared with that of 1997, the growth rate is phenomenal, particularly since during that time the Russian economy was suffering from a deep economic crisis. Growth between 2000 and 2002 also was impressive, but direct marketing still represents only 6.4% of the advertising market.

Non-Russian companies generate most of those dollars. Slowly but surely, however, Russian businesses are looking to DM techniques to further their advertising and marketing efforts. Recent data shows that per capita advertising expenditures in Russia amount to $12.05, and per capita direct marketing expenses run about 77 cents. It’s important to note, however, that the growth of company spending on direct marketing has gone up by a remarkable 47.7% during 2000-2001, and DM spending is estimated to climb to some $400 million by 2005.

The structure of a vibrant direct marketing sector in Russia is gradually developing, as vendors specializing in services such as call center operations and database management emerge. And a direct marketing trade association has been established in Russia. The Russian Association of Direct Marketing (RADM) already has 43 member-companies, including representatives from direct marketing agencies, postal organizations, call center operators, mail order catalog companies, courier firms, and others. Like its American counterpart, RADM offers services such as market research, educational events and exhibitions.

Currently, direct mail (and more particularly the distribution of advertising materials via the postal service) is the predominant direct marketing activity in the Russian Federation. Businesses across Russia have begun to recognize the value of advertising mail distribution and mail order marketing. Today, companies are quick to understand the necessity to be competitive, target customers and accurately measure audience response.

But direct marketing activity in Russia is still in its infancy. While it’s still too early to talk about the viability of conducting direct mail campaigns across Russia, it is feasible to look at attempting such efforts in some of the country’s large cities and regions. Without question, Moscow and St. Petersburg represent prime markets ready for development. Moscow alone comprises some 750,000 legal entities and companies serving a population of more than 10 million.

Opportunities abound in business groups of all types, including large wholesale trade companies and producers, organizers of commercial exhibitions and fairs, trade houses and retail chain stores, election campaigns and conventional brick-and-mortar retailers. While foreign companies presently predominate, Russian producers of goods and services are increasingly attracted to DM as a vehicle for launching pilot projects and smaller scale ad campaigns to identify promising target markets.

Over the past three years, a number of effective direct marketing campaigns have been conducted both for multinational corporations and domestic businesses. Those organizations have found that the Russian response to DM offers has been an impressive 10% to 20%. The response to Reader’s Digest’s entry to the Russian market alone resulted in a 60% response rate to its initial offer.

Noteworthy campaigns also have been carried out by Yves Rocher, to create a database of potential customers, and by Nestlé and Proctor & Gamble to promote new brands, gather data and foster brand loyalty. Large chain stores, such as Metro Cash & Carry and Ikea, have explored the Russian market via DM methods as well.

Supermarkets such as Ramstor, Perkryostok, and Seventh Continent have run direct marketing campaigns of their own, as have more traditional European mail-order companies such as Otto and Quelle. Mailed distribution of advertising and marketing information within Moscow and other major regions has proven very successful.

The reconstitution of the Russian Federation in the early 1990s was followed quickly by the appearance of a mail order trade. Mail order is perfectly suited to a country as vast as Russia. While it is quite complicated to establish a distribution network that would cover all the nation’s regions, the Russian Post can boast of an infrastructure comprising over 40,000 post offices.

This makes Russia ripe for direct marketing development. In 2002, catalog volume increased by 2.2 times. Based on expert estimates, the income generated by mail-order businesses is forecast at some $100 million.

Recent developments in the organization and structure of the Russian post office also will go a long way toward furthering direct marketing’s impressive growth. The Russian Post is undergoing an extensive restructuring to better meet the nation’s communication and business transaction-related needs, including bringing about centralized governance to replace Russia’s 92 separate, and roughly autonomous, postal jurisdictions.

The goal is to provide a system of unified postal rules and tariffs (including those related to direct mail) throughout all regional branches, improved logistics and delivery services, a wider range of postal operations, including the introduction of corporate account services, and upgraded postal training.

To accelerate the advancement of DM in the country, workshops focusing on development of the direct mail market have been conducted for the past several years. One of the most recent was an international conference in Moscow organized and sponsored by the Direct Marketing Advisory Board of the Universal Postal Union, the Russian Post, and the Russian Association of Direct Marketing.

RADM is also working in other ways to further direct marketing’s development within the Federation. The association’s goals include motivating corporations to report changes of address; furthering the development of postal codes and presort capabilities; improving the ability of direct marketing agencies to track statistics on returns; promoting the benefits of a national change of address system; creating an electronic postal code database; assembling an address database of individuals; and establishing ethical codes covering the collection and use of consumer information.

Oksana G. Kutcheriavaia (middle) is head of marketing and sales service, and Olga Kryuchkova (l) and Irina Dronova (r) are marketing managers for the International Post Office division of Russian Post.