MBS Blog

As with many emerging markets, Russia should continue to grow despite the Global Economic situation. The direct link between oil price levels and economic growth is key.

This from  www.themoscowtimes.ru:

GDP Posts Weakest Growth in 3 Years

10 December 2008By Maria Levina / Special to The Moscow Times

Economic growth fell to its slowest rate in three years in the third quarter, at 6.2 percent, the State Statistics Service reported Tuesday, and economists say even lower growth is in store for 2009.

Actual GDP growth in the quarter missed the Economic Development Ministry’s forecast of 7.1 percent, driven by significantly slower growth in the construction, retail, transport and communications sectors.

The decline continued a slide from 8.5 percent GDP growth in the first quarter and 7.5 percent in the second, and if the trend continues the final number for the year could be in the 6 percent range.

“Next year’s GDP growth could range from negative 5 percent to plus 5 percent, depending on what happens to oil prices and the steps taken by the Russian government,” said Yevgeny Gavrilenkov, chief economist at Troika Dialog. “If it continues to throw away currency reserves to defend the ruble, Russia may face a fiscal deficit and zero economic growth.”

He said allowing the ruble to depreciate is one step that could be taken to prop up growth numbers. 

“In the past, the Russian economy grew even with oil prices of $30, $40 and $50 per barrel but at a different exchange rate,” he said. “In the current environment, Russia’s goal should be to achieve positive economic growth and avoid a fiscal deficit.”

In year-on-year terms, growth in the fourth quarter could end up at zero, partly as a result of slower production growth and partly because the number was strong in the final quarter of last year, said Yekaterina Malofeyeva, chief economist at Renaissance Capital.

She said she expects growth this year to finish above the 6 percent mark — at 6.2 percent — and that next year’s figure could range from zero to 3 percent.

“If oil prices average $70 a barrel next year and the ruble is allowed to depreciate, GDP growth could reach 3 percent,” Malofeyeva said. “Otherwise, it could be flat.”

Although the Economic Development Ministry has yet to release an official forecast, in recent informal comments it has put the number at 3 percent to 3.5 percent if oil prices average $50 per barrel for the year.

But economists say conditions have been shifting so rapidly that providing anything resembling an accurate forecast for 2009 would be difficult until all the numbers for the final quarter of this year have been released.

The Economic Development Ministry said Monday that it was revising its forecast for manufacturing growth for the year downward, from 5.2 percent to 2.9 percent. The figure for the first 10 months of this year was 4.9 percent, so the ministry’s forecast suggests that it is expecting disastrous results in November and December, with production dropping by over 10 percent. 

Gavrilenkov said he believed that a 2.9 percent production forecast was overly pessimistic but, if accurate, would mean that the country is entering a severe depression.

He added that losses on the manufacturing side could be balanced somewhat by growth in the service sector, as consumer spending has remained relatively strong. As such, he said he expected GDP growth of 6.8 percent to 6.9 percent this year.

Natalya Orlova, chief economist at Alfa Bank, said she was surprised by how low the production numbers were.

“Given that the October numbers showed there was essentially no growth (0.6 percent), we originally assumed a drop in production of 2 to 3 percent in November and December, which would still imply a growth rate of around 5 percent for the year,” Orlova said. “But if we are to believe the numbers from [Economic Development Minister] Nabiullina, with a drop of more than 10 percent in November and December, then the situation seems more serious.”

Technorati Tags: emerging markets, Russia, Natalya Orlova, Alfa Bank, Moscow, Yekaterina Malofeyeva, Renaissance Capital, exchange rate, Russian Government, oil prices, ruble, devaluation, Yevgeny Gavrilenkov, Troika Dialog, State Statistics Service, Economic Development Ministry, construction, retail, transport, communications, Anton Olff, GDP, Maria Levina, www.themoscowtimes.ru, economic growth,

If you want to peer into the future of marketing and advertising, then this article in the U.S. edition of the Wall Street Journal (www.wsj.com) is the vehicle. Although it could be construed that it only reflects a snapshot from an American perspective, the odds are that these modes will be replicated…or perhaps even improved…in emerging markets.

As internet access-particularly broadband-becomes more widespread in Russia, Ukraine for example, then additional avenues for reaching and informing consumers will increase.

Marketing in the World of the Web

Bemes, clouds and MySpace: Welcome to the brave new world of retail.

By TOM HAYES and MICHAEL S. MALONE

Retailers will eventually recover from the consumption tailspin that threatens this holiday season. But quite apart from the recession, there are other, profound changes underway in the retail sector. As the evidence mounts about the power of social networks to reconfigure individual behavior, the crucial question facing industry is: How to leverage this phenomenon into actual profits?

The second generation of Internet (”Web 2.0″) companies such as MySpace, Facebook, Linked/In and YouTube exploded upon the scene three years ago. Today, MySpace and Facebook together have more users than the entire U.S. population; and the online community concept is already becoming a powerful tool for everything from creating customer loyalty, to assistance in product design, to a sounding board for company strategy.

Corporations from IBM to Toyota and Johnson & Johnson have been rushing to establish their own affiliated social networks and bind their customers ever more closely. There isn’t a smart company today that isn’t implementing some kind of online community, wiki or blog strategy.

But companies with millions of members of online communities are now asking: What next? How do we sell them products and services, or mobilize them into massive de facto R&D, manufacturing and sales departments? We have been studying the challenge and have concluded that very few of the traditional techniques of classical marketing (call them Marketing 1.0), or even of eCommerce (Marketing 2.0) will work in the world of social networks. A very different set of tools, concepts and practices is needed. Call it Marketing 3.0. Here are five:

- From loyalty to attention. Before you can win consumer loyalty, you have to capture and reward consumer attention. Old propositions — network television’s tired offer of 22 minutes of canned sitcoms in exchange for eight minutes of untargeted commercials — won’t cut it. Consumers are demanding a better deal.

Some brands are starting to flirt with better exchange rates: Virgin Mobile gives a minute of free phone time for every minute of advertising a customer accepts. Ryan Air recently announced it would offer $15 coach tickets from the U.S. to Europe, subsidized by passenger attention to advertising and in-flight sales pitches.

Smart marketers will of necessity become obsessed with customer attention in the way they once obsessed over customer loyalty. The shrewd brands will create elaborate attention-rewards programs, and incentives to break through the noise and make that critical initial connection.

- From crowds to clouds. Once you get that attention — once you generate heavy traffic to your site, gather a large league of “friends” on MySpace, or spawn a dedicated following on Twitter — how do you monetize the crowd?

Smart brands are turning their crowds into “clouds”: organic, self-forming and often self-governing communities of interest. Companies such as Hewlett-Packard, Frito-Lay and Harley-Davidson use their clouds as feedback loops to get better faster by obtaining good, timely, often brutally honest customer insights. And the members of clouds can become true believers; they don’t just watch your commercials, they make them.

Right now, few companies are emotionally equipped to wring the best benefits of a cloud, because the most valuable voices out there usually belong to the malcontents. In the old model, customer-service departments aimed to placate or jettison disgruntled customers. In the cloud model, the idea is to cultivate and reward them. That’s not an easy transition.

- From places to spaces. Consumers are increasingly organizing themselves into new communities — not just the big generic social communities, but myriad idiosyncratic slices of narrow, passionate interest (i.e., BlackPlanet, Inpowr and MomsCafe).

These new market spaces, or “meganiches,” may seem small, even strange at first. But when they’re efficiently targeted, they can be highly responsive, lucrative and loyal. Well-established meganiche Web sites include Gamefaq.com for video gamers, Dpreview.com for digital photography aficionados, and Howardchui.com dedicated to mobile phone zealots.

With this shift toward self-organization by consumers, national advertising campaigns as we know them will increasingly become a waste of time and money for many companies. The trick for brands is to cohabit social spaces with these consumers. Social media, and its verb form, “friending,” requires entirely new forms of advertising: bottom up instead of top down, personal rather than public, and subtle rather than full frontal.

- From memes to bemes. In the Age of Broadcast, good advertising could occasionally manufacture memes of tremendous social impact. Think of “Where’s the Beef?” or “I can’t believe I ate the whole thing.” If you can’t recall an irresistible or effective turn of phrase of late, it’s because it is exceedingly difficult to spread a meme in today’s fragmented media environment. Marketing 3.0 is now the science of devising and managing directed business memes: call them bemes. Bemes are sent by members of social communities to each other and typically contain a reward or exclusive offer, which, when redeemed, also results in a reward coupon for the sender. This encourages members of social communities to propagate a “viral” ad. One well-documented beme was “The Subservient Chicken” from Burger King.

Brute force marketing won’t work inside social networks. The best online marketing now takes place among people who know and trust each other. Consider how rumors work. Like a rumor, a beme is a bit of useful information that rewards each person who passes it along. Want to be a sensation? Create a beme that consumers willingly accept and share with others.

- From silos to simultaneity. Too many retailers today persist in believing that online shopping is merely a virtual extension of real world shopping. That is a big mistake.

Rather, online and offline need to coexist, and we need to rethink how they relate. For example, to their surprise, companies like BestBuy (which even encourages customers to shop the aisles but buy online from in-store kiosks) and Macy’s are discovering that physical retailing is a perfect way to move units online. That is, the physical world has become the showroom for the virtual realm.

Retailers now must reimagine a world where consumers experience products in stores but ultimately buy them on the Web: Stores are for experiences, the network is for inventories. And what in turn prepares potential customers for what to look for in stores? Online communities.

All of this suggests that Marketing 3.0 is not only different from its predecessors, but actively undermines them. If your marketing program fails to adapt to this new world, it won’t just become irrelevant — it will actually work against you.

Anton Olff

Technorati Tags: marketing, advertising, Wall Street Journal, American perspective, internet, broadband, Russia, Ukraine, MySpace, retail, consumption, social networks, Facebook, Linked/In, Youtube, IBM, Toyota, Johnson & Johnson, R&D, eCommerce, Virgin Mobile, Ryan Aur, Europe, customer loyalty, rewards programs, Hewlett-Packard, Frito-Lay, Harley-Davidson, commercials, social communities, BlackPlanet, Inpowr, MomsCafe, Gamefaq.com, Dpreview.com, Howardchui.com, friending, Burger King, BestBuy, Macys,