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. Last Updated: 07/27/2016

Advertisers Aim Below the Line for Customers

Russian advertising has come a long way since the days when snappy slogans like "Drink Tomato Juice: It's Good" were commonplace.

The industry ballooned during the 1990s, and spending rocketed to $1.7 billion by 1997. But when the financial crisis hit in 1998, clients evaporated practically overnight, and those that remained slashed their budgets.

Three years later, however, the industry is back on its feet, thanks to new techniques like sponsored concerts and sampling — collectively known as below-the-line advertising, or BTL.

Before 1998, Western multinationals, which dominate advertising spending in Russia, had fought a saturation advertising war almost exclusively focused on establishing brand loyalty through television and posters.

Following the crash, cash-strapped advertisers quickly turned to below-the-line advertising's relatively cheap and highly targeted promotions to recapture the few remaining consumers who still had money to spend. "Post-crisis was the golden age of BTL in Russia," said Sergei Koptev, president and CEO of D'Arcy advertising agency.

At the same time, industry professionals realized that far from increasing sales, the media blitz had alienated many consumers who resented being bombarded with images of products they would never be able to afford. And the constant repetition of brand logos on television every couple of minutes made people feel "brainwashed," said Stephan Belaiche of TBWA/Russia, a leading advertising agency in Moscow.

"It was overkill. There was a pendulum swing from total interest in the product to a dead stop," said Virginia Garnett, a partner at The Point, a dedicated below-the-line advertising and public relations agency in Moscow.

To recapture consumers, agencies and clients decided to invest in the intimate and highly consumer-specific world of events and promotions. "Many clients now understand that there is a need to be closer to the consumer. Image building is not everything," Belaiche said.

Though many promotions in Russia are adapted from success stories in the West, such as prize draws and in-store sampling, others are initiating campaigns in new directions.

Swiss-based Nestl? recently took its promotional campaign to the State Registry Office, or ZAGS — also known as the Wedding Palace. As parents and friends gathered around a young couple just married, there among the tears, the confetti and the heartfelt congratulations was a willowy girl handing round trays of Nestl? milk chocolates.

"The promotion has been very well-received," said Steve Watson, confectionery marketing manager at Nestl? Food in Moscow. Far from being angry at the commercialization of the happy day, the extended family welcomed the products as sincere symbols of goodwill.

Music event sponsorship is another increasingly popular method of campaigning, particularly for alcohol and tobacco manufacturers facing restrictions on more traditional forms of advertising.

Philip Morris kicked off its summer efforts this year with Marlboro sponsorship of the Ibiza Experience Tour 2001, taking famous DJs to 10 major cities across the country. The press release for the event in Krasnoyarsk, a rusting industrial city deep in Siberia, stated, somewhat optimistically perhaps, that the tour would bring with it the "atmosphere of the legendary Ibiza Island, the Mecca of the [world's] club movement."

One legacy of Soviet austerity that has helped indirect advertising is that local consumers, not tied to any brand, are highly fickle. "Brand loyalty, particularly to Western products, is still very low in Russia," said Koptev of D'Arcy. "People are very sensitive to novelty — they always want to try new things."

Though a headache for many in-house brand managers who have to struggle to keep customers, this is a godsend for promotion and PR organizers who specialize in direct interaction with consumers. Without the inherited loyalty to products that is so common in the West, the impact of a well-coordinated campaign can be dramatic.

The concept of cause-related marketing, which ties the sale of a product to a donation to a good cause or charity, is potentially another huge marketing area that is still waiting to be explored.

The idea seems particularly well-suited for Russia, where communist sensibilities of community support remain firmly rooted, while, at the same time, state support has fallen away.

"It is such an obvious fit for Russia," Garnett said. "People still feel responsible for each other here."

Even modest donations might harness the loyalty of entire interest groups, especially in remote or poverty-stricken regions. Garnett, who has tried without success to convince clients to spend as little as $10,000 to support a youth football team in Samara, remains hopeful but exasperated at the lack of response. "Talk about the brand loyalty it would create," she said. "C'mon! It would double volumes overnight."

A number of obstacles stand in the way of indirect advertising in Russia. First of all, advertisements on television, still preferred by some large ad agencies and their clients, are inexpensive by Western standards. "It is just too easy for them to get a budget approved by presenting cost per 1,000 figures for nationwide TV exposure," said Belaiche of TBWA/Russia.

Another drawback is that for many players, below-the-line advertising is just not profitable enough. As agencies fight to land the biggest advertising accounts, multinationals are able to cut back commissions. As profit margins fall, the incentive to develop innovative, time-consuming campaigns diminishes.

Other conditions like the size and extreme climate of the country makes trying to coordinate promotions at any distance from Moscow a logistical nightmare. It is understandable why many stick with nationwide television coverage, which can all be organized from the comfort and safety of a Moscow office.

More sophisticated below-the-line methods such as direct mail campaigns are also still not as widely used as in more developed advertising markets. The development of information technology in Russia is still relatively low, and consumer database profiling is a fledgling sector. Without more targeted information, mail shots for a luxury vactaiotn in Spain are as likely to end up in the mailbox of a pensioner as a wealthy couple who might be able to afford it.

Still, the prospects for indirect advertising are strong. The market was estimated at $1.4 billion in 2000, according to Gallup AdFact, and though most companies' figures are guarded secrets, many multinationals claim that below-the-line advertising now accounts for upward of 40 percent of their marketing budget. The traditional above-the-line advertising sector is saturated with hundreds of agencies, but the below-the-line niche has room to grow some 500 percent, according to one executive.

At the moment, Russia's total advertising market accounts for just 0.5 percent of the gross domestic product, compared with an average 2 percent of the GDP in more developed markets. But this imbalance is likely to decline, and spending is likely to rise. As below-the-line advertising increasingly accounts for a larger slice of the pie, it won't be long before it comes of age.