GfK's Thain Playing to a Middle-Class Market

The billions of dollars spirited into offshore bank accounts dont even compare to the piles of cash stashed away under mattresses and in pickle jars right here at home. Middle-class Russians not the oligarchs own the bulk the nations cash, and they are just waiting to be given the green light to reinvest.

So says Greg Thain, managing director GfK Market Research Russia, a leading market research agency. Thain also founded the advertising agency Integrated Marketing Solutions and Training Strategies 2000, a job-skills instruction service.

Thain first dipped his toes into big-time market research in 1995 when he launched the Russian Market Research Co. to target an emerging middle class.

He says this group has made market research an increasingly indispensable part of business in Russia.

Despite having suffered a crippling blow after the countrys ruinous financial collapse in 1998, the middle class is on the comeback. According to an August survey by COMCON market research company and Expert magazine, the Russian middle class consists of roughly 4 million individuals.

The emergent demographic group is chiefly concentrated in Moscow, where it makes up 20 percent of the population and has an average monthly income of $500 to $2,000. With its preference for brand names, this group makes a particularly receptive audience for constantly evolving marketing campaigns.

After the crisis, Russian Market Research Co. was bought by GfK MR Russia, an affiliate company of GfK Group in Nuremberg, Germany. GfK Group says it is ranked among the top five market research firms in Europe and top 10 in the world.

In 1999, GfK Group made consolidated sales of $240 million with its worldwide staff of around 3,000. Thain declined to say what GFK MR Russias sales were last year.

Close Competition

Thain said he was seized by an urge to invest in an emerging market after running a publishing company for 11 years in London.

He eventually settled on Russia. "Its a hard-drinking but hard-working country," he said.

GfK MR employs 70 Russian nationals and claims to be the countrys No. 1 market research company.

Due to a lack of official statistics, however, that is hard to prove. Melena Polikanova, media research manager at the Initiative Media advertising agency, said it is nearly impossible to determine which research company is top dog.

GfK MRs closest competitors are COMCON, Romir, AC Nielsen and Massmi, Polikanova said.

COMCON head Yelena Konava agrees. "GfK MR is very big, but were very close," she said. "GfK, COMCON and F2 are Russias top market research companies, but its difficult to put them in order."

Myriad of Activities

Silver-haired and immaculately dressed, Thain cuts a dashing figure. He regularly plays tennis, cricket and sails. He is also chairman of the Moscow chapter of the English Conservative Party, which, he admits, is a small group. He also heads the European Business Clubs committee on media and advertising.

As if that were not were not enough, Thain is an approved candidate for the next round of European parliamentary elections.

COMCONs Konava said Thain may have spread himself too thin as a result. "He has lots of energy and tends to get involved in lots of companies at once, perhaps too many."

Thain founded IMS with Michael Green in 1994 and claims it to be the largest below-the-line ad agency in Russia. Below-the-line marketing includes promotion drives, store displays, direct marketing and telemarketing whereas above-the-line marketing involves television, radio and billboard advertising.

IMS employs 50 workers, most of whom are Russian.

Many more billions of dollars are spent below than above the line worldwide each year, Thain said, adding that when executed properly, telemarketing can be effective in Russia.

"The key is to be consistent," Thain said. Telemarketing may well surpass television as the preferred marketing medium as consumer databases improve, he said.

IMS industry ranking is impossible to pinpoint, but Julianna Slasheva, acting chair of the American Chamber of Commerce advertising committee, said IMS is well known for its databases, which are often used by multinational pharmaceutical companies.

Training Strategies 2000, which Thain founded in 1995, claims to rank among Russias five largest training companies, with its eight instructors dealing in sales, marketing, telecommunications skills and marketing.

Staffed by 10 Russians, the company owns the rights to English comedian John Cleeses "Video Arts" series of training videos. Training Strategies 2000 sells dubbed videos to companies like Philip Morris to train its employees.

Post-Crisis Upswing

"All three are making modest amounts of money," Thain said of his companies. "Weve moved into making money again."

The post-crisis economy has given birth to the first competitive Russian companies, Thain said. "The rubles [fall] starved Russian companies," he said of the national currencys 1998 devaluation. "But now that the playing field is even, domestic firms are doing much better and some [products] are even giving those from multinationals like Procter & Gamble a run for their money."

Thain is optimistic and supports the policies of President Vladimir Putin. "He seems to be taking the right approach to the private sector," Thain said.

However, before the country can expect significant further investment from abroad, the confidence in the economy destroyed by the crisis must first be restored, he added.

"I invested all my money here and lost it during the crisis," Thain said. "Things were just starting to look good when it hit and its beginning to look good again. Youve got to stick with it."

Despite his bullishness on Russia, Thain admits to one weakness: his vulnerability to its formidable winter. He is hunting for a villa in the south of France to hibernate with his wife and son.

Still, Thain plans to work in Russia for at least another 10 years. "Winston Churchill said Russia is a riddle inside a mystery wrapped in an enigma," he said. " I think you can do almost anything in Russia, but you need to push."