Global business arena offers numerous opportunities for the organizations to develop on national and international markets. External pressures, such as a competitive environment, political and economic factors, however, place a lot of emphasis on long-term general and marketing planning, which enable affiliation and guaranteed profits over the strategically relevant periods of time. Companies are becoming more dependent on their ability to meet the constantly changing market needs, and consumer expectations and loyalty becomes an increasingly valuable asset for the organizations in contemporary business environment (Rust, Moorman & Bhalla 2010). The markets differ by the average size and segmentation of the customers, product lifecycles, competitive environment and influence of the external environment on the shape and direction of the firm´s strategies. The role of consumer, however, remains critically important for the organizational sustainable development. One could argue that knowledge and accuracy of market data is one of the core competencies, which help companies build on their competitive advantage and remain profitable in the long term (Giles 1991). Modern economic landscape demonstrated that the emerging markets present great potential for the retail sector and many companies considering aggressive growth strategy look at organic and inorganic growth through entering developing economies. Under such strategic intention understanding of the local market and consumer behavior is critical for building on an appropriate strategy and ensuring alignment with the external environment. The objective of this document is to explore the dimensions of consumer loyalty as the core element of relationship management in a specific market and geographical segment. Given the growing size of the healthy food market and the interest of international organizations in Russian market, it was decided that organic and healthy market in Russian Federation can adequately limit and outline the scope of this research.
Customer Loyalty Explained
Before moving forward to the specific analysis of the brand loyalty trends in the Russian market, it is important to outline the key constructs of the consumer loyalty, which the research will focus on in order to build on the analysis of the Russian consumer trends. There are two elements to the loyalty: cognitive and emotional patterns and traits (Brandi 2001). From the cognitive element standpoint, people look at the control systems of health, such as weight control, degree of “sportiveness”, skin care and other physical attributes of an individual, which may help in driving conclusions about his or her health. Emotional element, on the other hand, refers to the value, which individuals place of healthy lifestyle and food perception. This value is influenced by historical pressures of food shortage in the past, price comparison with other “trends” in the industry and the expectations of the impact, such as social image. The purchase decision is based on two elements: need and desire. An individual comes to a store in order to satisfy the need of buying a product. At the same time the choice and preferences, which this customer has are based on a specific set of emotional attributes, associated with the purchase, store and the brand (Theng Lau & Han lee 1999). As such, McDonald´s customer is looking to purchase food and burger more specifically. Why does this individual look for McDoanld´s specifically and does not get satisfied with a “no name” cheaper option of a burger available on the market. The fact is that this customer is loyal to McDonalds brand due to perceived value. This perceived value is built of personal experience, market reputation of the product and its relative fit with the initial expectations and the “needs”, such as price, quality and service. With the above in mind, consumer´s loyalty is a step forward after consumer´s preference (Czerniawski and Maloney 1999). Once the company managed to attract the customer by meeting his “needs” it will have to find a way to guess and address his “desires” and standalone from the competition.
Russian Consumer and healthy Food Market
According to the Mintel report (2011), Russia is one of and, potentially, the biggest retail market in Europe. Statistics illustrates that the country almost doubled the size of retail domestic consumption over the period of the past five years and continues showing an increasingly interesting economic profile, attracting foreign investments and local capital. Based on the data, provided by USDA (2011), Russian organic market reached the level of USD$ 148 million, which is 7.8% increase, relative to the same period 2011. Some of the major challenges preventing the market for even more rapid expansion is the issue of certification, whereas Russian organic producers have to obtain certifications from a third country, such as the United States or European Union. The demand for healthy food is increasing at a pace, which local supply is not able to meet and many companies have to import the products from abroad, making a healthy food and organic products more expensive and, thus, outlining the profile of the market as upper scale, where the products are considered premium and the customer segmentation is naturally limited to upper middle and high classes (USDA, 2011).
As the disposable income continues to grow among Russian population, it is expected that the demand for organic food will increase respectively. The growth of demand for healthy products, however, will depend on the “education” of the consumer and awareness of the benefits for such product (World Bank 2013). USDA (2011) predicts an overall growth of 30% in organic packaged food sales in 2015 and almost the same increase is expected in the sales of organic beverages in the country. SWOT analysis, conducted by USDA (2011) indicates that consumer profile for the healthy food market is upper middle and high class. Both segments preference profile is based on similar common characteristics. First of all, typical demographic characteristics of a healthy food market customer are the age range between twenty five and forty five years old. These individuals generally possess a minimum of high school educational level. Secondly, the majority of the individuals in the target customer segment are very self-conscious and concerned with their experience. Thus, they frequent gym or are involved in other types of sport activities. Finally, healthy food customer will not be very price sensitive, but will be very demanding with regards to the relationships between the quality and offered price. There are several challenges, associated with this fact. First of all, the size of the market is still relatively limited, given the large proportion of poor and low income population. Secondly, as a healthy food and organic market is still very small in the country, one of the biggest limitations is the lack of knowledge and awareness of the product. With that in mind, the customer profile in the country is very specific, and creation of a customer loyalty is the key for a sustainable business model.
Consumer Trends Influencing Loyalty in Russia
Russian market is going through the process of evolution, where the influence of the past is facing the current trends and pressure from Western Europe. More young people realize the need to change their eating habits, still influenced by the shortage of things in the past and education, received from previous generations. To better understand the constructs of consumer behavior and loyalty specifically, it is critical to incorporate historical element in the analysis of consumer trends in the country. One cannot underestimate the impact of communism on the development of Russian food market. Improved economic conditions in the country have positively influenced tourism, leisure and dining trends in the country. This along with one of the highest ranks of the educational level in the world brought Russian consumer closer to the Western Europe mentality.
The reality shows that the shortage and restraints, through which people past over the past decades of communism boosted the development and interest of the population to the variety of options, which emerged after the 1989. Russian consumer is used to experiment and enjoys very demand driven market, where loyalty is a rare attribute and consumers´ “desires” are hidden in the variety, price and quality of the product (Fedotova 2010). Based on the research, presented by the Levada Center and outlined in the Telegraph article byFedotova (2010), Russian consumer is extremely loyal to some specific brands. Such brands, unfortunately, include a great portion of fast food chains, such as McDonald´s, which counts with 30% of Russian, which visit this restaurant regularly. At the same time, the statistics shows that over 28% of the Russian population is clinically overweight, which necessitates addressing health issues and slowly brings forward the concern about the food quality and healthy food options.
The above statistics explains the growing sales within health and wellness retail market, which grew from USD$ 18 million in 2004 to USD$ 183 million in 2009 for food and beverages alone (IMB, 2011). The desire to take care of own appearance is one of the dominant trends in building on the loyalty factor among Russian consumers. IMD (2011) research outlines that almost 65% of the Russian population, according to the consumer´s market survey are committed to looking stylish and at their best. This indicator, according to the authors is well above the world´s average. Russian market, however, is highly segmented, and health and wellness trend development is mostly observed in two centers –Moscow and Saint Petersburg, where population is more exposed to international mobility and influence from the west. The research, conducted by the international functional and healthy food corporations, such as Nestlé and Kraft Foods, indicates that the customers are looking for a combination of price and variety of products and the ability to meet these demands creates affiliated relationships between the company and the client. The research shows that the Russian consumer can be extremely loyal to the brand, should it trust its quality and have a social circle with a positive attitude towards the “style” and “trendy” image of these companies. With that, Brand image, its “modernity” and authenticity are critical to build on loyalty attributes of the Russian consumer (IMB 2011).
Prybysz (2011) summarizes the personality attributes and behavioral patterns which outline the complex nature of Russian consumer´s loyalty. First of all, the author claims that the concept of loyalty for a Russian consumer is threefold:
- Close to home;
The fact is that, in spite of the general perception that Russian people are very traditional and classic in their consumer choices, the research illustrates that over 76% of the consumers on this market are looking and willing to try something new. This makes the market more attractive for new players and creates demand for innovation and creativity among existing market players. Secondly, the same research outlines that many people go to the store already knowing the product and brand, which they will buy and 43% of the population are considered extremely brand loyal (Prybysz 2013). Finally, Russia is a collectivist culture and family plays a paramount role in explaining the shopping habits, where Russians often make purchases for the entire family and only 32% of the Russian population shop exclusively for themselves. Additionally, the statistics shows that the Russian consumer is short-term oriented as the 43% of the purchases are made with the intention to use the product on the day.
The above outlines the general elements, which build on the Russian consumer loyalty and can be used for the marketing strategy and consumer behavior analysis for the companies, already operating or willing to enter healthy food market in the country.
Limitations and Opportunities
While there is a lot of data available on the Russian consumer market and the trends for the health and wellbeing market specifically, healthy food is still a new product, which does not have a historical evidence to support one or another theory with regards to the specific attributes and behavioral patterns, which build on the loyalty of a Russian consumer. The reality shows that the brand loyalty is a complex concept, which is mostly determined by emotional side of individuals. With that in mind, each consumer group and even individual builds on an authentic loyalty model (Armstrong and Kotler 2012). In order to be able to capture the general trend and utilize the knowledge and understanding of consumer behavior, one would require more statistical and practical evidence, which can only be gained with time and actual participation of international businesses in Russian Health and Wellbeing market.
At times, conventional strategic marketing planning model will not be able to adequately analyze and explain the consumer behavior due to lack of evidence. In these situations, alternative marketing planning models should come to play and testing the market, utilizing existing marketing capabilities and experience in other countries may provide organizations with a valuable framework, including a model of consumer loyalty (Piercy 1990).
Consumer loyalty is a multifaceted concept, which is built upon two major elements: cognitive and emotional aspects of individuals. The reality shows that the concept of loyalty is different not only for specific consumers´ groups, but also varies significantly on an individual basis, as the set of values, which each of us places in the product, service or even entire Brand is specific and can be linked to the authenticity of personality. Trust, however, is the critical component of loyalty creation.
Russian market is historically very “blind” to the healthy trends due to the influence of the food shortage and shopping limitations, which were in place during the communism. Russian population only recently started to become more aware and interested in the healthy food and organic products. This interest is generated by both, the needs to improve the health of the population as well as the influence of improved economic conditions, driving tourism and, consequently, Western European cultural influence. Healthy food and wellbeing are becoming trendy and stylish among younger Russian population. Many international companies, focusing on the healthy food market try to build on these attributes and create consumers’ loyalty to their brand. The reality shows, however, that the concept of loyalty for a Russian consumer is still based upon the ability of the companies to meet the “need” for quality and reasonable price and the “desire” to be stylish and take care of self. These specific consumer loyalty elements are explained by the fact that a healthy food market in Russia is primarily driven by emerging upper class, which is historically concerned with the cost of living.
Brand Loyalty in a healthy food market in Russia is a complex concept. An analysis of the market and the insight into the core characteristics of the consumer allow driving the following conclusions with regards to the critical constructs of the loyalty:
The desire to take care of owns appearance is the key for a Russian consumer;
Loyalty to the Brand is based on social circle trends and quality perception;
Modernity and Authenticity in the Brand Image play a significant role in attracting regular customers.
With the above in mind, it is possible to make several recommendations to build on and increase the brand loyalty. First of all, healthy food product should be introduced to the market in partnership with the brands, linked to the healthy lifestyle image. As such, market entrance of the healthy snack brand can be planned through a gym chain World Fitness, which already gained strong market position among the target audience. First units can be open as an in-house snack café or store. Secondly, healthy food offer should become an experience and not simply a product and with that the organization, planning to increase the Brand loyalty should invest in ambience and advertisement campaign to bring the “trend” and “fashion” in the image of their product in a manner, similar to Coca-Cola Brand presentation, as an example. Finally, the accent in advertisement and promotional campaigns should be made on the specific features and attributes of the brand, which highlight its individuality. As such, the association can be made with specific element, such as Asai fruit, which is known, but not yet well introduced to the market.
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