The term transitional economies refers primarily to the countries formerly dominated by centralized command economies. These include Albania, Bul-garia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Slovakia, Poland, Romania, countries from former Yugoslavia and Russia. Some include Turkey in this group of countries. However, there are parallels between these
transi-tional economies and nations in other parts of the world that are shedding state-controlled economies and adopting free market such as China. The most advanced countries in the creation of market-led economies belong now to European Union. Marketing executives in these countries agree that consum-ers are becoming more demanding, which means that companies must refine their market segmentation and develop customized products. As competition increases, retailers are becoming more powerful and product’s life cycle is becoming shorter.
After the fall of communism in 1989, protected and subsidized economies began to liberalize. Industries were privatized, there was a dramatic influx of foreign goods an foreign investment, and national economies experienced a long period of inflation. At the same time, state-managed distribution sys-tems declined in importance. In these transitional economies, consumers’
standards of living eroded under the impact of price inflation and the loss of guaranteed (Hooley, 1993).
EXAMPLE
Types of consumer decisions in Romania
Direct research shows that situations of extended problem solv-ing and choices of great consumer involvement preceded by complex cognitive processes are very rare and concern goods that are bought either for the first time, rarely, or else are very risky. In the case of goods that are frequently purchased and that are widely available, decision-making processes are often characterized by low consumer involvement and by routine or limited problem solving. This happens due to the fact that both consumer possibilities and consumer willingness to transform information are limited. In addition, consumers have access to information that is stored in their memory and that is sufficient for decision making. Despite a limited search for information, the consumer does use information while making a buying deci-sion, although some types of information are more preferred than others.
Source: Angheluta and Zaharia (2010)
67
Consumers have responded thought a variety of strategies. For example, they get second jobs. Estimates from 1989 suggest that three-fourths of Hun-garian household participate in secondary forms of employment (Gabor, 1989). Many consumers spend more time preparing their own food for con-sumption, and sell private goods and produce directly to other consumers.
Some of them have also reduced consumption or learned to do more compara-tive shopping. But consumers have also changed their consumption patterns in unexpected ways. Engel’s law states that as real income goes down, so does the share devoted to luxury products. However, in 1990 as real income de-creased in many countries of these region, like in Poland, Hungary and Czech Republic, the demand for perceived luxury products increased. This may be explained by unavailability of luxury goods in the past or by the luxury boom gripping The United States, Japan, and Western European countries.
At this stage of market developments, multinational consumer products companies have experienced dramatic sales growth in Central and Eastern European countries (Haley, 2000). However, real household income in much of this region are stagnating, and penny-pinching is the norm. Moreover, shoppers in these transitional countries no longer view imported brands as necessarily superior. For example, perception of “made in Poland” are increas-ingly positive, and many shoppers in Poland as well as in other Central and Eastern Europe are looking for homegrown quality products (Smyczek &
Glowik, 2010). Some local firms have transformed themselves into successful marketing oriented companies. Media are revolutionized, scores of consumer-oriented magazines are now available, as is commercial satellite television.
Producers in almost all fast-moving consumer goods categories are offering smaller unit sizes to accommodate local budgets and little-and-often purchas-ing habits.
One clear trend is that the priorities of Western Europe, which include the mergence of green segments and a voluntary simplicity movement, are not likely to characterize this part of the world in the short run. Consumers in transitional economies have been denied things or such a long time that there is a large demand for consumer products. We can say that more resource-conscious packaging may be a trend in Western Europe, but in transitions economies, consumers first want to taste the privileges of a better standard of living before they work to save the planet.
The growth of Internet use is extremely high in Central and Eastern Eu-rope. The Polish Public Opinion Research Center estimate that 15.8 million Poles (48 percent of the population) have access to the Internet, with approx-imately half of those considered active user (Lemiańska, 2011). These trends have provided markets growth for industrial computer suppliers and personal computer makers. The advertising industry has grown dramatically in transi-tional economies in the past decade. In Kazakhstan, Kazakh-language televi-sion is leading a charge for Kazakh-language advertising, for example (BBC Monitoring Service, 2010). Nonetheless, consumers remind skeptical of heavy-impact, high-frequency advertising, as it reminds them of communist propa-ganda techniques. While Western Europeans expect to be informed about dif-ferences, Eastern Europeans adverting to provide information about product per se and expect variety in product range.
ACTIVITY Give an example of the way in which new technology has affect-ed consumer behavior.
Give an example of how internet has created social change in the international market.
It is difficult to predict the future of consumer behavior in the transitional economies, and some will fare better than others. For example, the shallow-ness of Russia’s democratic culture, weak economic regulation, and hostility toward individual initiative constitute significant obstacles to the implementa-tion of a market economy (Johansson, 2009). Furthermore, consumers in many of these economies have described a negative evolution in their experi-ence of Western consumerism. It starts with an immense greed, a kind of fe-ver, a wish to buy everything. Then, consumers discover powerlessness and relative poverty. Because of their poverty, many of these consumers view dis-plays of Western consumers goods to be more like exhibits in a museum than the fruits of participation in a market economy (Haley, 2000).
69