Macro changes in the international marketing environment affect marketing content, application, context and acceptance. Such changes can be traced from major geopolitical shifts in history, such as the dissolution of the Roman or Ottoman Empires, the Soviet Union, or the re-fusion of North and South Vietnam. You can track the medium and long-term futures of the two Chinas, North and South Korea, Cuba and Iran to prepare for upcoming market and marketing-oriented changes.
The reunification of West and East Germany resulted in major political shifts in the German marketing world. The unique ability and willingness of Western Germany to invest grand sums in the market-based approach strongly encouraged the emergence of certain marketing perspectives. Twenty-five years later, an entire generation has been exposed to new market interactions, orientations and rules. There are now population groups with key differences in perspectives regarding migration policy, employment planning and education options.
There is a link with the newly emergent “curative marketing” approach, which advocates the fulfillment of the field’s mission as a social science: to improve life and society by restoring economic and spiritual health for all. Here, we offer thoughts on the marketing environment, both as an influence on consumer behavior as well as context influenced by consumers, advertising and purchasing decisions.
Environment and Consumer Behavior
When the Berlin Wall suddenly collapsed in 1989, East German marketers were few, and their products faced a Herculean task to compete. Companies and products that had been protected by 60 years of state planning now faced global competition, particularly by West Germany. The companies that did not go bankrupt were often taken over by western companies. However, these new owners feared intra-company competition, and often terminated their East German products, even if they were better than their own. One example is the disappearance of the ecologically friendly Foron refrigerator from East Germany.
Often, East German products failed to be introduced in the purchasing plans of western supermarkets and retailers. Market shares of all East German products dropped after reunification, since people switched to West German products for their novelty and better quality. Today, the East German identity is again tied much more to products, with strong emotional connections leading erstwhile East Germans to consume products from their home region. The “good old things” from the past are now considered fashionable or hip. Many producers are using this wave of eastern reminiscences to relaunch and expand their brands.
Typical Consumer Behavior Influences
German population statistics tell us that within 25 years, the five former East German states (excluding Berlin as a city-state) experienced a population decline of 4 million, with many young, female and educated citizens heading west. In 1991, every 10th citizen in the region was over 65 years old; it is now every fourth. Eastern unemployment figures improved from 18% to 12%—still considerably higher than the 6% of the western provinces.
When marketing entered the Eastern German economy, some regions never recovered from the breakdown of the socialist system. With the exception of a few municipalities in Dresden, Leipzig and Berlin, most consumers in Eastern Germany still live with a unification treaty agreed upon average available income below $19,000, which compares to only 80% of the Western German average of $25,000.
The relatively high unemployment rate and an aging population influence the consumption patterns in former East Germany by, for example, leading to the popularity of discounts. East Germans are also using a more differentiated pool of criteria when making purchasing decisions. In spite of the gap in consumption expenditure per capita, overall consumption patterns in East and West Germany are becoming increasingly similar, which indicates a lower price level in East Germany. Private households in both parts of Germany spend the biggest proportion of their income on housing (East: 34.2%; West: 34.5%). The next largest expenditure is on transportation (East: 13.9%; West: 14.3%). Only the food, beverages and tobacco category presents a slight difference of 1.1% (West: 13.6%; East: 14.7%).
There are almost no differences in the frequency with which people go shopping for consumer goods. East and West Germany are similar in terms of shopping day and time preferences. Differences exist in how often consumers go to supermarkets: Eastern Germans usually prefer only one big purchase a week, while Western Germans prefer two in order to take advantage of the biweekly advertising cycle.
Consumption Behavior
Germans in the former East Germany have a different attitude toward marketing in general and advertising, in particular. While most West Germans are used to the ubiquitous noise of sensational promises by product advertisement, East Germans were raised in a less glitzy environment. For them, advertisement had and still has primarily an informative component. East Germans use it to compare and explore options before going to the supermarket and making the purchase. Some were disillusioned and felt betrayed when the promises of a product—such as looking like a model after eating chocolate bars—did not materialize.
Promotion and Products
On the product level, there are still visible differences, especially for large white and brown goods. Only every fifth household in the eastern provinces has a clothes dryer (22.2%), while 43.8% have one in West Germany. Less dramatic but still major is the difference in terms of refrigerators: 40.9% have them in the East, and 53.1% have them in the West, the German newspaper Die Zeit reports. For dishwashers, the numbers are 59.4% in the East and 69.5% in the West). Eastern German households have as many microwaves (71.8%) as their Western counterparts (72.7%), and have also caught up with telephones (West: 99.8%; East: 99.8%). Twenty years ago, only every second household in East Germany had a phone. At the same time, four out of five East German provinces are under the national average in terms of household Internet access. There is also a significant difference in Internet usage, where all five eastern provinces are far below the German average.
Buyers and Brands
Today, the overall popularity of brands from East Germany is increasing. However, there is only one product from the territory of the former German Democratic Republic: a fine sparkling wine called “Rotkäppchen,” which is one of the top 10 most popular German brands in both Western and Eastern Germany. In the field of alcoholic beverages, eastern products are becoming stronger and more recognized, such as Radeberger, Hasseröder and Köstrizer. More important, eastern products are overcoming the old stereotypes of being of low quality and cheap. Nowadays, both Eastern and Western German consumers describe their local brands as being “trustworthy,” “iconic/hip,” and “likable.”
At the same time, East German producers can count less on eastern German patriotism as a defining characteristic of customer behavior. Studies show that local patriotism is a much stronger factor for consumers older than 40 than for those who are younger. Half of the over-40 East German consumers would prefer Eastern German products, while this is only the case in a quarter of the 18- to 29-year-old age group. The producers need better marketing strategies to keep this younger generation of consumers close to their products.
What are some principal insights that we can observe after a major market disruption?
First, there is no shortcut for change and its acceptance. Eastern and Western Germany essentially presented optimal conditions in terms of available funding, ability to transfer funds, and willingness of the population to adapt. Nonetheless, one generation later we can still observe key differences from both a geographic perspective, where the East has remained more socialist in its orientation than the West, and also from an age perspective, where different age groups vary in their desire and success of leaving politics and socialism behind.
Second, there seems to be less willingness to accept differences across former boundaries, which can lead to disagreements of a substantial nature. The current debate about substantially different migration policies may serve as an example.
Observing the often hesitating processes of realignment, we should prepare for delays and disagreements with nations such as Cuba or Iran. Even if there is significant goodwill on all sides, the adjustments are slow and tedious. There will be less exuberant enthusiasm, leading to more delays and conflicts.
It is also noteworthy, however, that the success of a market orientation and of marketing thinking does, over time, typically improve lives and society. All this is likely to occur not by government fiat but by the choices devised and implemented by the private sector. Reduction of government involvement in former socialist nations helps growth and innovation. An orientation in favor of competition, risk-taking, private property and profit can enhance life experience and lifestyle, supporting the belief that self actualization resulting from taking individual economic and marketing decisions can be the great reward for all.
Michael R. Czinkota researches international marketing issues at Georgetown University. He served in trade policy positions in the George H.W. Bush and Ronald Reagan administrations. His International Marketing text is now in its 10th edition.
Margit Enke is a professor of marketing and international trade at Freiberg University of Technology in Germany and an expert in the fields of commodity marketing, emerging markets and brand management.