Roustam Tariko, founder of the Roust Holdings planned to establish a brand that will set up new standards of top notch quality for new variety of global Russian brands. Traiko focused on setting up the standards by something which is distinctive due to its Russian Heritage so that Russians can take pride in it, and also to fulfill this requirement vodka was the obvious option as it is developed in Russia and strongly associated with the country. Tariko launched the vodka and by 2002, Russian Standard was outselling all other brands achieving the top position in the vodka market. This success of the Russian brand was attributed due to its constant product quality, packaging, and merchandising and undoubtedly because of its strong depiction of Russian heritage. Encouraged by its success, Tariko's management launched the Russian Standard in the Europe aiming to make it the best vodka globally. Russian Standard vodka was making business in around 10 European countries, the business wishes to enlarge the business by further crossing the boundaries by entering into the united states Market. Vodka is very famous in the US; it has an enormous market, largest around the globe and there are many best selling companies that offer top quality vodka. Launching Russian Standard vodka in US means high competition with the already existing brands that are quite popular among customers. The Russian Standards also expanded the list as Tariko made a decision to launch a new kind of bank which will serve foreign trade companies, small company and individual customers. The challenge faced by the Russian Brands team was to make the two diverse businesses compatible with the other person while maintaining the standards of the Russian Brand. The report presents a brief overview of the brand equity idea of the Russian Standards and the reason why behind its success story, discusses the horizontal brand diffusion in terms, and also debates within the opportunity of launching Russian Standard in US and whether it requires to change its ways of attract the clients.
Brand equity is considered to be always a crucial source for profitability. A firm with strong brand equity can have a significant edge in the market when compared with its competitor. It can be able to charge higher prices using its brand image backing it up. The firm can also enjoy a larger market share, a possibility of further product extensions and even draw more investment in to the existing business. This is the reason why in today's world, branding or brand image has turned into a very important strategic issue for businesses. Businesses such as Pepsi, Coca Cola, Ralph Lauren, Nestle etc have very strong brand equities, because of which they are able to enjoy huge market shares as well as the ability to price their products greater than what they might have if they didn't have their respective brand names.
Brand equity is the value of your company which is merely due to its name. As observed by Dr. Ramachandran (2010) brand equity is the results which is related to the product's brand as compared to the same product with out a brand.
Due to the benefits strong brand equity can offer, every corporate entity works their utmost to excel others in the retail sector. Nevertheless the question arises that why is a brand's equity more powerful than it is? According to Keller's (2003) brand equity pyramid, there are mainly four steps and six blocks which establish a consumer based brand equity for a company, namely; Salience (identity), Performance and Imagery (meaning), Judgments and Feelings (Response) and finally Resonance (relationship) (Appendix 1). They are the steps at which the consumer asks respective questions related to the firm, and each step leads onto another until the consumer places complete confidence in the firm, and so the firm is able to acquire strong brand equity.
This model by Keller (2003) can be used to explain how the Russian Standard brand could establish strong brand equity and how this brand equity helped the business to get commendable success in Russia.
The initial step in the pyramid is that of Salience, or identity. This is actually the step where in fact the consumers ask the firm or product, "who are you". This means that when a firm is introduced on the market, the firm establishes distinct identity. It establishes its association to a specific product class, i. e. consumers consider the firm/product according to this distinct identity. Brand salience can be explained as to "how often and easily the brand is evoked under various situations and circumstances?" (Keller, 2001)
The start of the Russian Standard brand was with a mindset that its products were to be established so which would be able to gain resilient consumer association. The target was to establish an exclusive product, which focused on Russian traditions. The brand identity established by Tariko was such that the Russian Standard brand was discovered as the typical for Russians. Desire to was to attain for the emotional facet of consumers while they can relate themselves to the brand and claim pride in owning it. As the case study points out that the Russian Standard Vodka is determined as a traditional Russian souvenir, like "matryoshka" wooden dolls, Red Army captain watches, and lacquer boxes from Palekh (Grigorian, 2000). The intricate details taken into account in establishing the brand salience for the Russian Standard Vodka can be largely attributed to the brand equity so it enjoys today.
Keeping the brand equity to be able to build and protect the equity a brandname positioned as reduced brand must keep up with the expectancy by the consumers. For a premium brand the client expectancy isn't only from the quality of the product but it starts from the manufacturing to the pricing to packaging to delivering as well concerning promotion (NetMBA). In every these levels reduced quality level is expected. Russian standard has been careful in keeping quality at the utmost level while carrying out the four P's. The product was produced with quality ingredients. The packaging was outlining quality in every aspect including meticulous details like design, labels, bottle caps and cases. The pricing was done to put the merchandise in the premium to super premium category and the distribution was carefully laid out to acquire shelf spaces in fancy restaurants and night clubs and even in the highly perceived supermarkets.
Moving onto the next step of the Keller's pyramid, "Performance and Imagery" are what gives a brand its meaning in the minds of the consumers. The performance block includes all the principal characteristics of the brand, i. e. how well is the brand able to comply with the consumers' psychological and functional requirements. This portion of the pyramid basically includes the basic features of the product, pricing, design, sturdiness etc. Whereas, the brand imagery part of the pyramid includes all the characteristics that are linked to the merchandise, i. e. the product's user profile, the values and history that the product reflect along with the distributional structure of the product(Keller, 2003).
The Russian Standard brand was known because of its quality, packaging and strong distribution channels. It was made to be the first domestic brand to make a rich mosaic of imagery. It focused not only on quality but also on the purchase price, packaging, merchandizing and communication. The Russian brand emphasized on depicting the Russian heritage to hook up to the Russian customer and also achieve and ensure product quality that will attract the customers and make them loyal to the brand. The Russian major scientific institute which specialized on food research, in 1990s, along with Mendleev formulated a formula for vodka, this was patented to be exclusively Russian, it was considered symbolic of quality. The product quality based on Mendeleev's suggestions of the vodka was very important to Tariko, which was then communicated to the people through intensive advertisement promotion, the designed bottle of vodka showed Mendeleve's signature so that the customer will felt secure about the grade of the product. By establishing this strong connection of vodka with the Russian heritage, Traiko developed a certain sense of meaning and understanding among his customers that these were attracted emotionally and physiologically for the Russian Brand vodka, which sense of owning and connecting to the merchandise not only attracted as much locals but also ensured their loyalty towards the merchandise. Apart from this, the Russian Brand also priced the product in an exceedingly appropriate way; the price was to get its image as a special brand. The vodka was priced more than other local brands, while still it was less expensive than the imported brands. This helped the Russian Standard Vodka to be named at the very top brand, in league with the imported brands; whilst at the same time it helped in gaining profits for the firm as well (Appendix 3) (Anselmsson, 2007). It mainly targeted the connoisseurs and strivers who preferred high quality products and prestigious brands.
Moreover, the packaging of the Russian Standard Vodka was unique and fashionable. The exclusivity of the product and its own other brand values was reflected by its packing. Attention was paid to every little detail of packaging of the vodka bottle; from bottle case to its cap and moreover the shape of the bottle all were designed to emphasize on Tariko's objective of depiction of the Russian heritage and also ensure class and quality to the customer's requirement and satisfaction. The packaging was designed by one of the top most design house, so that it would reflect the brand's quality. The act of concentrating on the packaging of something was in itself something new for a business in Russia. Quality used to be the sole source of focus for something, leaving the focus from pricing, packaging or the distribution channel, whereas, in modern marketing techniques, product, price, place, packaging and promotion constitute the marketing mix for just about any product. Therefore, packaging was a different one of the major known reasons for the Russian Standard vodka to acquire its brand meaning in the eyes of the consumers.
Furthermore, the nostalgic touch to the packaging which reflected the value of the brand increased the brand meaning. The shape of the bottle resembled that of the traditional Russian orthodox churches, and there is a historical signature on the packaging as well. . This helped the consumers in establishing distinct brand imagery for the Russian Standard brand and relate to it.
On the other hand, the strong distribution channel of the Russian Standard Brand also helped to create its brand imagery. The Tariko's import business prior to the Russian Standard brand helped the new vodka to acquire advantaged shelf space instead of what it could have had in case Tariko had no prior reputation. Therefore, the beginning for the Russian Standard Vodka's placement in the market was privileged with supermarket promotions, usage of prominent restaurants, clubs and bars.
The judgment and feelings of the consumers are the next building block. . This is basically the feelings and perceptions of the consumers about the brand (Keller, 2008). The brand judgment includes the brand quality, credibility, and differentiation. The quality includes the value or satisfaction the brand provides the consumers. The Russian Standard Vodka was trusted by the consumers because of its quality. The advertised quality was supported by the actual quality of the product. The appropriate marketing mix helped the consumers to relate with the product. The thought of the campaign was showing a transformation from the previous Russian standards and the new ones. It had been meant to make a modernized image in the minds of the consumers. However, this was not perceived as desired by many consumers. Most of the people considered it as disrespectful to degrade Russian traditions no matter which era they belonged to and the message could not transfer to most people as well. So the campaign didn't communicate the intended premium image. It was suitable for the international market however the response from the Russian market stopped it from getting used abroad. It had been not portraying the "embracing days gone by and inspiring progress" mantra the business was following.
The feeling that was called upon by the advertisement within the consumers was in a way that they preferred using the Russian Standard Vodka as opposed to the imported brands. The brand acquired more appeal through its unique packaging and quality. The on-premise promotion on the other hand worked better for the business. It was promoted as a prestigious brand in restaurants and night clubs. The off-premise promotion was also carefully planned to portray its elegance by acquiring quality displays and shelves in the supermarkets.
The consumers in the present day times demand a lot more than simply the functional benefits from a product. They demand "intangible benefits such as image, status, personality, lifestyle, success and other factors that they can strongly relate to" (Aziz and Yasin, 2010). The Russian Standard brand was one of the extremely first brands in Russia which used each one of these aspects into consideration when introducing its products on the market. Prior to this, quality and the merchandise was the only consideration for the firms. They believed in the 'supply making its own demand' design of selling instead of the making a product relating to the demand of people. However, the Russian Standard brand changed the traditional style of marketing and for that reason was able to hugely reap the benefits of rapid success in Russia. The Russian Standard brand used all the five P's of the marketing mix to powerfully introduce itself in the market. Following that onwards, it maintained its quality and built a solid name for itself by being consistent and ground breaking in promotion. The Russian Standard brand could set up a reputation which appealed to the consumer's nationalistic sense. The theory was to create a strong consumer-brand relationship. Brand resonance can only just be healthy if the consumers feel that they are simply in synchronization with the brand's identity and values. Due to its patriotic look the brand was able to delve into the Russian market well. It had been in complete harmony with the traditions of the Russian people.
Therefore, from the analysis above, it could be said that the rapid success of the Russian Standard brand was not only due to strong product quality they offered but also because of its right choice of marketing mix & most importantly its uphold with the Russian Identity. As the Roust Organization has already developed strong merchandizing and communication skills and relationships with the both kind of trades that is on-trade and off-trade, it was easy for the Russian Standards to be introduced to the consumers, but it was the Russian Standards strong conviction towards brand equity that they become increasingly popular with the folks and establish a certain kind of bond with them. It could be rightfully said that the success story of Russian Brand vodka emphasizes on all the aspects of the brand equity i. e. to determine brand salience and keep themselves intact with brand meaning to strengthen the bond with the customers keep counter check on the brand response and improve incase of any negativity and keep maintaining the high standards, and last but not minimal to provide brand resonance to the clients to allow them to feel pride in using the Russian Brand vodka. Thus it enjoyed rapid success and were able to maintain steadily its position at the top, with these brand equity concepts followed it is today thought concerning be one of the traditional Russian Souvenirs.
Horizontal brand extension is one of the diversification strategies for the firms. As can be seen in the Ansoff's matrix in appendix 2, whenever a firm increases its business into new products and markets, it is said to be diversifying its business. The huge benefits from diversification include, profitability, growth, reaping economies of scale if the diversification is within the same product range, avoiding reliance on an individual product etc. Taking advantage of the equity of existing brands can produce many benefits for the business (Strach and Everret, 2006) even enhance the perception for the core brand (Aaker, 1991).
There are two types of diversification strategies; concentric diversification or conglomerate diversification. Concentric diversification is the one where in fact the product class remains the same. This plan is to include related products or markets from that of the current line of business. On the other hand, conglomerate diversification is where the firm diversifies into areas that are unrelated to the current product range.
Synergy is the power of several instruments to work together to produce something more than what they might have created separately. Inside a firm's case, a synergy would be the excess benefit acquired by two different organizations working together, instead of what they might have acquired if they worked separately (Ellwood, 2002). Inside the Russian Standard brand's case, the banking industry and the vodka industry are two unrelated industries. However, the Russian Standard brand's aim to establish both these businesses under an individual brand name could have been to reap the benefits of synergies. That is possible if the lender and the vodka business together can give a stronger brand equity or profitability as opposed to their working as separate businesses under two different brands (Aaker, 1991).
The possible motivations for conglomerate diversification include profitability, reducing firm specific risk, and limited growth in today's business along with other benefits associated with diversification in general. As observed by Martin and Sayrak (2001), the diversified organization may benefit from a larger tax liability than the original business. Moreover, there could be other advantages from diversification such as risk from suppliers can be reduced, overhead costs can be distributed amongst a larger business (economies of scales), and your debt capacity may increase as well (Lewellen, 1971 as cited in Martin and Sayrak, 2001). Furthermore, the additional business can become a way to obtain internal financing for the combined brand, which can considerably decrease the firm's financing costs. This can be done by the management of the combined organization, by redistributing resources within the organization, in which a larger amount of funds can be placed in the areas where there is potential of a higher gain than some other department (Stein, 1997 as cited in Martin and Sayrak, 2001).
On the other hand, conglomerate diversification may create a number of problems for the existing firm. You can find likelihood of administrative problems arising with an increase in the scale of businesses (VanAuken, 2011). There may be managerial issues, i. e. an intensification of the principle-agent problem in an organization. Along with this, there can be an inadequate degree of experience for the existing firm in the new industry. There may be requirements of the new industry that the existing management is totally unacquainted with. New marketing mix, technical equipment, personnel and far more will be required for the home based business that your current management may well not have the ability to obtain.
In conglomerate diversification there are cases where the diversification has been extremely successful as well as cases where diversification was a source of loss in shareholder's value in the initial business (Martin and Sayrak, 2001). Maksimovic and Philips (2002) in their research found out that conglomerate diversification reduces shareholder value, whereas in Martin and Sayrak's (2001) work they have got given a wide range of supporting as well as opposing arguments, without a significant conclusion as to whether conglomerate diversification is effective for the initial firm or it actually dilutes its initial shareholder value. However, it must be noted that almost all of this literature is on merging or acquiring conglomerate businesses rather than establishing a new business like the Russian Standard brand did.
In case of the Russian Standard brand, (Grigorian, 2000) the bank was met with immediate success. Therefore, the success of the lender could be attributed to the existing brand of the Russian Standard Vodka, but even if it was not because of this then there is definitely no dilution of the brand because of the conglomerate diversification.
However, it may be difficult to measure in the Russian Standard brand's case if the success of the bank was due to credibility of the brand or the right marketing mix for the bank itself. It could be the situation that the bank may still have had the same success minus the Russian Standard brand's name associated to it, because the strategies to establish the bank were appropriate and the marketing mix was correct for the respective environment. This can be quite definitely possible considering the fact that most of the individuals didn't associate the Vodka and the Bank despite having the same brand name; "few customers made a clear link between the two businesses" (Grigorian, 2000).
Another aspect in this example could also be the actual fact that who owns the business, Roustam Tariko, had established much credibility for himself as well by being successful very early. His sense of strategic business thinking made him successful in making a brand image of Russian Standard. Desire to to meet international quality standards and enhance the image of his country reflected well in his branding strategies. The Russian standard vodka and bank, though both were quite different in conditions of relativity but as both were being run by Roust their relativity was somehow subsided by the credibility of the parent company (Ellwood, 2002). Both brands were leveraging on the Russian Standard's image. Therefore the brand would likely diversify rather than considering to be diluted.
Therefore, it could be said that even though the banking and vodka businesses are not compatible and few modern businesses actually go for conglomerate diversification, the Russian Standard brand could handle both businesses well. As "reputation" (Ali, 2008) is one of the key factors that can affect the results of brand extension, the Russian Standard brand had a strong brand equity due to its vodka business that could perfectly afford to withstand any brand extension.
Another diversification strategy is to increase one's existing business into new markets. As can be seen in the Ansoff matrix (appendix 2), the "market extension" (Jewell, 2000) is when the existing product is introduced in a few new market. This is another extension strategy that the Russian Standard brand was considering, i. e. extending its vodka in to the US market. The advantages of market extension include profitability, an chance to reap economies of scale as the essential product will stay the same and growth of business and functions (VanAuken, 2011). Whereas, the marketplace extension process may cause difficulties for the prevailing firm, because the new market may be completely different from the particular firm has been employed in initially. A detailed analysis of the actual market, information of the competitors and consumers, legal regulations, monetary and social environment, all are required before the extension may be produced. An totally new marketing mix is required for the same product for this to be introduced in a new market. If the product is launched in the new market with the same marketing mix, then your probability of its success may be reduced considerably. It is because, consumers in each market have distinct requirements and the social, economical and legal situation is also not the same as the prevailing market. Moreover, the actual market may already be saturated with competition, as is the truth with the US market for Vodka (Sahani, 2008). The US market already has a number of well positioned, distinct local and foreign brands. Each one of the brands available in the market is distinct in its own way, i. e. each has a specific segment of the market that it's very well catering to. Therefore, it can be said that introducing the Russian Standard Vodka in the US market is a difficult task, however with the quality product that it has, it may as well achieve success to grasp a portion of the market. In order to do this, a new marketing mix will be required for the Russian Standard Vodka to reach your goals in the US.
The Russian Standard Vodka was hugely successful in Russia not simply due to its quality, but also its appeal to the nationalist sense in Russia along with its privileged distributional channels. They are the attributes of the Russian Standard Vodka that might not be there when the vodka is introduced in america market. THE UNITED STATES market which is today's most significant consumer of vodka, has already been very saturated in conditions of premium vodka brands. The consumers will never be attracted to the brand merely due to its 'Russian' origin, nor will the brand have the ability to acquire advantaged distribution channels (Sahani, 2008). Also since the relationship between the two countries will always be on the verge of disagreements (Graham, 2008), this can act as setting up a certain biasness for the foundation of the brand. Predicated on the market analysis the super premium to premium segment already carries a lot of imported brands. For Russian Standard to make its space the super premium segment will have an advantage in conditions of no competition from local brands, since the super premium segment only includes the imported variety. So if Russian Standard vodka changes its market strategy they can be noticeable in america market. Change in the strategy will have to be emphasized in new and strategies of advertising, for this function it is very essential for the Russian Standard management to carefully study the united states market, know very well what the clients need and want, and what does the other vodka brands offer them, whether will there be any loopholes or any gap between your customer requirement and brands offers and when Russian Standard vodka can overcome that gap. The American market is totally not the same as the Russian market, therefore Russian standard faces a great challenge in first capturing the attention of the American and consumers and then providing them with a much better vodka than its competitors. The Russian Standard vodka can be launched in US market, but for an effective launching a lot of literature review and planning is required. In the discussion above it could be said easily that the Russian Standard will have to adapt to the united states market to make their space. Many aspects of the Russian Standard vodka advertising and management campaign will plays essential role, among which pricing is the most important of all. The price should be appropriate enough to capture the attention of the Americans and maintain class as well. The grade of the Russian Brand vodka will ensure brand loyalty from the clients, but the real challenge is faced in actually making space in already so brand crowded market of the vodka in america.
The Russian Standard Vodka marketing mix for the US market will have to have a substantial media campaign as well. It is because, all other competing brands in US have noteworthy amounts of investment property on advertisement, and are using user profiling (associating celebrities to add value to the brand) with their advantage. That is one place, where in fact the Russian Standard Vodka must focus to determine a brandname image that will appeal to the respective consumers. With the existing scenario going pretty much for Russian Standard at home a global impact will add to the equity of the brand. So far as the image and global inconsistency can be involved in order to venture into a foreign market the characteristics must be understood. Since the US is a big market and individuals are very accustomed to freedom and rationality Russian Standard must adapt to the culture to be able to produce the brand image (Deresky, 2006). This might impact global consistency of the brand but in order for this to be associated exclusively to Russia the Russian Standard brand must be put up as a brand for the elite. One the brand recognition will be spontaneous and second it will enjoy cost effective global positioning (Sahani, 2008). As the current situation of the brand is leading in the Russian Market the intervention in the US market will not be an incorrect decision.
Another aspect in consideration with the adaptation to the US market involves the brand Russian standard itself (Deresky, 2006). This can have an optimistic and a negative impact while branding in US. The word Russian associates the Russian traditions with the brand. This may impact in the unique positioning in imported vodkas market. The name gives the merchandise a Russian trait and the market does consist of men and women inspired more by brands with foreign attribute associated to them. However, the marketplace also involves people that can be biased in terms of foreign associations. Since Russia has been on major disagreement terms with US in history, some kind of biasness or stereotyping might lead to the undermining of the brand (Graham, 2008).
Launching Russian Standard Brand vodka in the United State would be challenging but not completely an impossible job. With change in strategies and with new concepts of brand equity which will be in line with the US markets, the Russian Standard Brand may be able to make their space in the strong world of vodka in the United States.
Therefore keeping these aspects at heart the venture into the US market can be risky at some points since it is the major vodka market in the world. On the other hand additionally, it may provide Russian Standard the global position it is looking for. It will enhance the equity at home and in other markets it plans to venture into. The loyalty increase and so will the company reap economies of scale by pricing it in the super premium market.