February 24th, 2014
This post was co-authored with Evgenia Barkanova, Irina Kudryashova, and Irina Melnik, all MBA students at the Fuqua School of Business, Duke University.
Winston Churchill said, “Russia is a riddle wrapped in a mystery inside an enigma.” This becomes clear when thinking about U.S. companies marketing in Russia (more properly called the Russian Federation). Results from the last CMO Survey indicate that Russia is the international market with the highest sales growth rate. Sales are reported to have grown an average of 57% for U.S. companies that designate Russia as their largest international market. This compares with India at 38%, China at 26%, and Brazil with 19% growth.
Where is the enigma inside the Russian marketing mystery? Consider these facts. Russian is the world’s 6th largest economy. A member of G8 and G20, identified among the BRIC economies, and a recent entrant to the WTO, Russia is an emerging economic powerhouse. Strong earnings from the oil/natural gas industry have grown the overall economy and allowed the country to diversify its economy while retaining an above average GDP growth rate of 4.1 % from 2010-2012 according to the World Bank (compared to 2.4% for the USA). Even with these impressive credentials, Russia remains a difficult market for many foreign companies for a variety of reasons. What should U.S. marketers know about this Russian riddle? We collected the following case studies involving non-Russian and Russian companies as well as several interesting facts to offer these insights.
1. Sochi 2014: All eyes on Russia: The 2014 Winter Olympics in the Black Sea resort of Sochi promise a wealth of opportunities for foreign firms and investors. An estimated $50 billion will be spent on more than 40 transport, housing, stadiums, and other modernization projects along with upgrades in telecom, energy, and environmental protection to convert Sochi into a winter sports wonderland. Participating in this important international event could help non-Russian firms make inroads for future projects. Official sponsorships as well as using the Olympics for independent marketing events that piggyback on individual events and athletes could help build brand awareness among Russian customers. One threat is that the games may not go off as well as sponsors hope. The opening ceremony glitch with the Olympic rings is well-known by now and public perception of the games is so bad that @SochiProblems has already racked up ten times the followers compared to @2014Sochi—the official Twitter account for the games. The Olympic experience may serve as a metaphor for doing business in Russia … full of opportunities, but one is wise to prepare for more than the usual amount of the unexpected.
February 19th, 2014
Results from the February 2014 edition of The CMO Survey, a biannual survey of marketing leaders, offer strong evidence that markets are on solid footing. CMO optimism for the U.S. economy reached its highest point in five years. Asked to rate their optimism about the overall economy on a 0-100 scale where 100 is most optimistic, CMOs reported an average score of 66.1 which is nearly 20 points higher than a low score of 47.7 in February 2009 (see Figure 1). This optimism occurred across all sectors, ranging from manufacturing to biotech and consumer packaged goods.
Figure 1. How optimistic are you about the overall U.S. economy on a 0-100 scale with 0 being the least optimistic and 100 the most optimistic?
Underlying this optimism are improvements in key customer metrics such as increased entry of new customers into the market, increased customer acquisition, increased purchase volume, and increased customer retention. These top marketers also predict that customers’ top priority over the next twelve months will be a focus on product quality, not on low price. This shift indicates a belief that consumers are ready to spend again and are less interested in cost savings.
March 19th, 2013
From reading the press, I think it’s fair to say that we look to members of the financial sector to tell us where the economy is going. These soothsayers read the tea leaves using metrics like interest rates, capital expenditures, unemployment and stock market reactions. This is all well and good, but it is incomplete. I think it is also wise to tap into the collective wisdom of marketing leaders who have their fingers on the pulse of the market’s biggest engine—customers.
In the February 2013 CMO Survey, 468 U.S. CMOs rated their optimism for the economy on a scale of 0 (lowest) to 100 (highest). The average score was 62.7, which is up from 58.4 in August 2012. This ~10% increase is important but a set of follow up questions tells us even more. Specifically, CMOs were asked to state whether they were “more optimistic,” “less optimistic,” or “no change” compared to the prior quarter. In August 2012, results indicated that uncertainty was rampant with about one third of the sample more optimistic, another third less optimistic, and the final third no change (see Figure 1). Results of the February survey indicate that CMOs who were more optimistic increased from 29 percent of the sample in August 2012 to a whopping 56 percent in the current survey! This 93 percent increase offers a very strong signal that economic uncertainty is fading. (more…)
September 18th, 2012
The saying “a slow boat to China” means something that takes way too long to accomplish. More and more, however, that expression doesn’t match reality. The Chinese market is an increasingly attractive market for U.S. firms and the smart ones are moving there quickly.
Here is what I found in The CMO Survey (August-2012). In response to the question, “Which international market is your highest revenue growth,” 21.5% of CMOs responded with China. This is up from 16% reported just six months ago (The CMO Survey, February-2012). In response to the follow-up question, “Considering this international market, by what percent did your sales revenue increase in the last 12 months,” CMOs reported a whopping 51.5% increase! Here is a list of some of the strategies that seem to be paying off when selling to and in China.
- Localize products (somewhat). In the fall, Häagen-Dazs sells ice cream moon cakes in order to celebrate the mid-Autumn Festival. Mid-Autumn Festival is an important day for the Chinese, marked by family reunions and gift-giving. Eating and gifting moon cakes is an important part of the tradition. Häagen-Dazs mooncakes can be eaten in shops or can be bought in gift boxes. The company also sells coupons, which many to companies give employees as gifts for the festival. Häagen-Dazs also offers an “ice cream hot pot” which is a special treat for small groups or parties. The hot pot is a big palette of different flavored ice creams and a pot of chocolate sauce. In another example, KFC derives almost a third of its total company revenues from China through its 2000 outlets across the country. KFC localizes by introducing dishes that match Chinese customers’ tastes. Two examples are the Beijing Chicken roll with sea food sauce (similar to Beijing duck, a traditional Chinese dish) and Spicy Diced Chicken (resembling a popular Sichuan-style dish). Both Häagen-Dazs and KFC are big global brands that bring status, quality, and exclusivity to Chinese consumers. At the same time, they have localized some of their offerings to fit Chinese consumers’ lifestyle, tastes, and preferences. The appropriate balance of standardization and localization should be thought through for each brand and its customers. A good example of a high level of localization is Home Depot. As reported in the Wall Street Journal last week, Home Depot learned that the slogan “You can do it, we can help” or more recently “You can do it” wasn’t selling among Chinese consumers who don’t embrace the do-it-yourself culture common among Americans. Instead, as noted by WSJ, Chinese consumers prefer “” which means different products (that require less work from the customer) and additional services (that are sold with home improvement products).
August 22nd, 2012
New results from The CMO Survey are in and they ain’t pretty. Two key findings reflecting top marketers’ views about the economy stand out. First, Chief Marketing Officers (CMOs) expressed doubt about the outlook for the U.S. economy. On a 100-point scale where 0 is least optimistic and 100 is most optimistic, ratings dropped from a post-recession high of 63.4 in February 2012 to a score of 58.4 in August 2012. Figure 1 shows this trajectory over time. The greatest pessimism lies among business-to-business companies which dropped from an overall optimism score in February 2012 of 60.2 to a low of 53.6 in August. Business-to-consumer companies also decreased, but only from 63.8 to 61.5.
Figure 1. CMO Optimism for U.S. Economy (0-100 with 0 being the least optimistic)
July 13th, 2012
Apple was voted the overall winner of the 2012 CMO Survey Award for Marketing Excellence… yet again. Apple has been selected as the winner or co-winner for five consecutive years by the sample of top marketers. So why is Apple a great marketer?
When Apple, Inc. (then Apple Computer, Inc.) incorporated in January 1977, its investor/advisor, Mike Markkula, assembled a 3-point marketing philosophy. Amazingly, thirty-five years later, this philosophy remains at the core of what makes Apple so effective at creating and profiting from loyal customers. This, in my view, is the definition of a strong marketing capability. Here are Apple’s original three points:
- Empathy – We will truly understand their [customer] needs better than any other company.
- Focus – In order to do a good job of the things we decide to do, we must eliminate all of the unimportant opportunities.
- Impute – People DO judge a book by its cover. We may have the best product, the highest quality, the most useful software, etc.; if we present them in a slipshod manner, they will be perceived as slipshod; if we present them in a creative, professional manner, we will impute the desired qualities.
Apple has used these principles to become the world’s most valuable company (measured by market capitalization) and one of world’s most valuable brands. Here are ten strategies Apple has used to become one of the world’s greatest marketers:
February 28th, 2012
The results from The CMO Survey are in and one fact is very clear: Chief Marketing Officers are overwhelmingly optimistic about the U.S. economy’s outlook. When asked if they were more or less optimistic about the overall U.S. economy compared to last quarter, optimists outweighed pessimists 8 to 1. (more…)