By Agnieszka Górnicka, Inquiry Market Research, email@example.com
The history of free market economy in Eastern Europe started in 1989-1990 with the first (partially) democratic elections in Poland and the downfall of the Berlin Wall. For the citizens in Eastern European countries it brought freedom of speech, economic activity and democracy. After many decades of planned ‘socialist’ economy, which only true achievement was constant lack of almost anything, Eastern Europeans were happy to buy anything, just because it was there to buy. After a few years dominated by open-air bazaars, new supermarkets and shopping malls started to open the doors for the public, and shopping became the favourite pastime for families. In order to afford more expensive products like TV sets or cars, people started to take loans. A completely serious reason for purchase was ‘because this was advertised’.
After 25 years, all Eastern European markets are now much more mature. In most product categories there are a few market leaders who dominate the landscape and safeguard their market share. Consumers now consider their choices and became picky. Their lifestyles are also more similar to those in the West. But there are a few important differences.
It is the first and most important factor which plays a role in shaping consumer behaviour. Still, even if Eastern salaries don’t match those in Western Europe, economic growth is evident in almost all countries. Although the Eastern European countries started from a similar economic level, their current situation is very different. At the beginning, each Eastern European economy had to struggle with devaluation of the national currencies, high inflation and rising unemployment in the early years of freedom. All countries introduced market-economy reforms, but they adopted different strategies. Now, after 25 years, we can see significant differences within the region. It may be surprising at the first glance but the richest countries are not exactly the biggest ones. The GDP per capita is now highest in smaller countries like the Czech Republic, Slovakia and Lithuania. The largest country in the world – Russia – is placed not even in the middle of the ranking. The most obvious difference within the region between the two neighbouring countries, Ukraine and Slovakia, as these separate worlds. In 2013, Slovakia’s GDP was more than three times as high as Ukraine’s; as the consequence of war in Eastern Ukraine, the economy shrank by half so the factor is now closer to 7.
The share of expenditures on food
A good indication of the economic situation of each country is given by the share of expenditures on food in the monthly household budget. In all Eastern European countries, the proportion of the cost of food has fallen over the past 2 decades, while there was little change in Germany or in the UK. Still, the proportion of the budget that goes to the necessities like food and drink is quite high in Eastern European countries.
It is particularly noteworthy that Russians spend nearly one-third of the monthly household budget on food, while the residents of other countries have to spend an average of only one-fifth of the budget in rest of the region, or even less.
You're probably wondering what happens to the rest of the budget. Spending on various areas of life, goods and services will vary from country to country. Russians have very small household maintenance costs.
Eastern European consumers beyond numbers
For the qualitative researcher, the most interesting part starts when we look for the reasons behind differences in economic indicators, and these come from different values and attitudes across the region. If there is a characteristic that applies to the entire region, it is the mistrust towards strangers and new, unexpected situations.
One of the best starting points to compare different cultures is the Hofstede model (see e.g. Geert Hofstede, Culture’s Consequences: Comparing Values, Behaviors, Institutions, and Organizations Across Nations). The model is based on six indicators, which are Masculinity/Femininity, Individualism/Collectivism, Indulgence/Restraint, Power Distance, Long term Orientation and Uncertainty Avoidance. One of the striking things is that in almost the entire Eastern European region, the Uncertainty Avoidance is very high (with Slovakia as a notable exception). That means that Eastern European consumers are slower to adopt new trends (in particular technology) and need time to accept new situations. Most societies are fairly conservative and, as the recent immigrant crisis has shown, also xenophobic. An extreme showcase of Uncertainty Avoidance is the Eastern Europeans’ love for fences. Most people try to rationalise it (isn’t it safer if we fence off our neighbourhood?) but in reality, the fence is a small-scale manifestation of the same fear: that something unexpected could happen in front of our door. Only Slovaks show a little more relaxed attitude.
Russia is a country in which power plays a major role – this is evident in value-centred studies, and the Hofstede’s Power Distance index is also extremely high. Both men and women take care to demonstrate status symbols: martial arts and big cars for men, strong makeup and expensive jewellery for women, all kind of luxury items for both sexes; in fact Russians are the most frequent buyers of luxury watches and clothing across the region.
On the other side of the scale we find the Czech Republic, where people pay little attention to status symbols. They appreciate tranquility, comfort, domesticity and nature. The last is particularly appreciated by Czechs – even the national anthem is about the beautiful landscapes: rivers and rocks in the woods.
The Czech passion for outdoor clothing is therefore no surprise. Outdoor outfits are worn not only the trip to the countryside but also on a typical weekday in the city. Luxury goods vendors have therefore to look for Russian tourists on the shopping streets of Prague.
While many Eastern European countries are individualistic, Romanians make a strongly collective society. Group members, be it family or friends, have strong influence on tastes, product choices and even life decisions. Also, group loyalty is more important than many other social norms. Not surprisingly, group opinion will affect clothing, food and almost any other purchase. This is both a challenge and an opportunity for marketers – in Romania, it is often sufficient to convince a few people to achieve success.
The Eastern European countries are often viewed from the Western perspective as a homogenous bloc. But although they share several decades of common history under the communist regime, they are fundamentally different in their history, culture and traditions. These differences mean that the key fundamental values in the Eastern European societies are different, and this has a direct impact on purchasing behaviour.
- Did you know that Russians are true fashion lovers? Russians can afford the love for fashion, because they carry the lowest housing costs within the region. This results from the communist housing policy, which offered anyone the right to housing, even if very modest one.
- 80% of Russia's financial potential is concentrated in Moscow.
- When the rouble collapsed at the end of 2014, the Russians bought Cartier watches and rings from Tiffany en masse as a safe investment. Also the large discrepancy in wealth distribution leads to the special importance of status symbols.
- In Poland, at the end of the 80’s you had to spend 10 average monthly salaries to buy a TV set; 20 years later Poles could afford almost 4 TVs for their average salary.
- In Czech Republic, people pay little attention to status symbols.They appreciate tranquility, comfort, domesticity and nature. The last is particularly appreciated by Czechs - even the national anthem is about the beautiful landscapes: rivers and rocks in the woods.
Eastern European attitudes
- Eastern Europeans are not very keen insurance buyers – the very thought of something unexpected is not comfortable.
- For brands that want to conquer the Eastern European markets, it is always a good idea to present the advertised product as safe and long lasting. Claims such as "for decades" or "without surprises" are particularly present in the Polish and Russian advertising.
- Hofstede’s Indulgence scores in Eastern Europe are among the lowest in the world.
- Advertisers should avoid slogans like "Spoil yourself", "A moment of pure pleasure" as they are hardly a buying incentive.
- The GDP per capita is now highest in smaller countries like the Czech Republic, Slovakia and Lithuania. The largest country in the world – Russia – is placed not even in the middle of the ranking.
- Eastern European consumers are slower to adopt new trends (in particular technology) and need time to accept new situations. Most societies are fairly conservative and, as the recent immigrant crisis has shown, also xenophobic.
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