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‘Customer is King,’ Soviet Business Leaders Told

April 12, 1988

MOSCOW (AP) _ Soviet businessmen got a cram course in Madison Avenue advertising, complete with Diet Coke commercials and reminders that the ″customer is king,″ as an annual meeting of U.S. and Soviet business leaders opened Tuesday.

The 11th yearly session of the U.S.-U.S.S.R. Trade and Economic Council, which works to foster commercial ties between the superpowers, comes at a time when the Soviets are actively courting foreign capital and expertise to rejuvenate their stagnant state-run economy.

However, the notorious bad quality and limited range of Soviet goods has hindered many firms and trade organizations from selling abroad, despite exhortations from Mikhail S. Gorbachev to increase exports.

″Soviet organizations should expect to meet a large amount of skepticism as they enter the American market,″ James H. Dowling, president of Burson- Marsteller, a U.S. public relations firm, told an all-day seminar held by the council to help Soviet firms plan sales and marketing campaigns in the United States.

Elsewhere at the Foreign Trade Center, a sprawling hotel and convention complex on the banks of the Moscow River, business and government officials from the superpowers held separate meetings to discuss cooperation in industry, science and technology and in specific fields like machine-building .

About 400 Americans are to take part in the three-day gathering. Commerce Secretary William Verity headed the U.S. delegation.

Two Soviet products that have found a niche in the U.S. market are Stolichnaya vodka and Belarus tractors, Dowling told an audience of about 150 people.

But he cautioned budding Soviet exporters that ″abundance of choice″ in the U.S. market makes it tough for newcomers.

″The customer is king,″ Dowling said during his one-hour address that explained the mechanics of the American marketplace in terms that would be unfamiliar to many Soviets.

″The seller who wins the order will thrive and prosper,″ Dowling said. ″The seller who doesn’t will fail.″

Despite economic reforms designed to make Soviet firms more responsive to consumer demand, shortages and lack of high-quality goods remain common problems, and the customer, far from having a choice, must often settle for poor merchandise because there is no alternative.

G. Marc Hamburger, an assistant vice president of The Coca-Cola Co., showed the audience a series of TV spots promoting Diet Coke, with the pounding music and action-packed visuals drawing curious Soviets to the door of the auditorium.

Soviet advertising is bland and extremely scanty by Western standards. Earlier this year, the policy-making Central Committee of the Communist Party and the government Council of Ministers issued guildlines to bring about a ″radical restructuring″ in how Soviet-made goods are promoted abroad.

″In advertising, as in other branches of our economy, there have been revolutionary changes,″ said Yuri M. Deomidov, general director of the Soviet state-run firm Vneshtorgreklama, which markets the country’s goods and servives overseas.

Under Gorbachev’s leadership, the Communist Party and government have been striving to increase both quality and quantity of economic production, cut bureaucratic fat and make goods stamped ″Made in U.S.S.R.″ more competitive abroad.

U.S. sales to the Soviet Union totaled $1.5 billion in 1987, or only about 0.5 percent of all exports, and two thirds of the business was in grain sales.

The volume of U.S.-Soviet trade was three times larger in 1979, before President Jimmy Carter imposed trade sanctions after the Soviet military intervention in Afghanistan.

Verity has said he does not expect major breakthroughs to come from the Moscow meeting, but that he hopes the trade talks between the countries will create a ″new climate″ in superpower trade.

On Monday, officials of Honeywell, Inc. and the Soviet Ministry of Mineral Fertilizer Production announced they are forming a company to design automated control systems for factories under the ministry’s jurisdiction and for sale to third countries.

Honeywell will own 49 percent of the joint venture, with the remainder held by the Soviets, James Verrant, a Honeywell senior vice president.

The Soviets hope to boost their fertilizer production by using the new technology, thereby also improving harvests in the weak farm economy.

Another U.S.-Soviet joint venture began Tuesday, when two New Jersey entrepreneurs began selling pizza from a specially equipped van on the streets of Moscow.

Shelley M. Zeiger said he and his American partner, Louis Piancone, intend to open as many as 25 jointly owned pizza restaurants around the Moscow area, if the Soviet government approves and demand is sufficient.

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