INSIGHTS INTO THE STRUCTURE AND PRACTICE OF MARKETING RESEARCH IN A SOCIALIST STATE: THE POLISH EXPERIENCE

Robert L. King, Virginia Polytechnic Institute and State University Teresa Pa~aszewska-Reindl, Institute of Internal Trade and Services

Adam J. Kochane, PREDOM-POLAR

Abstract

This paper describes the structure and focus of market­ing research in the Polish socialist state at two levels of operation: (1) centralized activity, as typified by the Institute of Internal Trade and Services, the na­tion's leading marketing research unit; and (2) enter­prise level activity, illustrated by PREDOM/POLAR, Poland's state enterprise for manufacturing refrigera­tors and washing machines for the domestic and foreign markets. By comparison with western standards, the Polish marketing infrastructure is not highly developed, and its traditions are recent. The focus of contempo­rary marketing research is influenced by the economy's bureaucratic organization and resulting rigidities in marketing structures and practices, and by the interests and special competencies of the nation's small number of specialized marketing research groups.

Introduction

During recent years the western popular press has given increased attention to economic conditions within Poland, and in particular, to market supplies of con­sumer goods and the resulting impact on consumer well­being. At the same time, professional bodies of mar­keting academicians and practitioners have brought forward only limited descriptive and analytical studies related to contemporary marketing structures and prac­tices in Poland and other central and eastern European states. This is particularly true concerning the struc­ture and practice of marketing research.

Walters' (1975) study noted that "Poland's trade system has evolved into a modern marketing system." However, it did not directly consider the role of marketing re­search in that system, and it seems heavily dated by recent developments in Poland. Mayer (1976) provided a useful system for comparing and contrasting free enterprise economies with traditional socialist econom­ies, and along with Hanson (1974) described some dis­tinctions among the socialist countries ~~-!Jc-vis the development of marketing practices. Similarly, King (1980b) addressed the growing descrcpancy between traditional socialist philosophy and contemporary adver­tising practices in Poland. However, none of these efforts gave more than passing attention to the status of marketing research.

However, a separate study by King (1980a) reviewed and summarized the findings of several recent marketing studies conducted by Polish researchers concerning con­sumer shopping time in Poland. These studies, based upon large scale survey and consumer panel research, covering a range of topics such as the use of private automobiles in shoppin~,queuing time, and consumer evaluation of the stock of retail shops, suggest that the practice of marketing research is better developed than western professional literature and popular opin­ion indicate.

The purpose of this paper is to describe, if on a highly selective basis, the structure and focus of marketing research at two levels of operation in the Polish

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socialist state. First, attention is given to central­ized activity, as typified by the work of the Institute of Internal Trade and Services in Warsaw, the nation's premier marketing research organization. Second, enterprise-level activity, illustrated by experiences of PREDOM/POLAR, the state enterprise which manufactu~s refrigerators and washing machines for both the domestic and export markets, is described.

The paper is intended to provide a preliminary statement rather than a definitive, comprehensive statement about the structure and focus of Polish marketing research. The authors recognize that the reader might find greater interest in the results of an industry-wide study of marketing research practices throughout Poland, or in a Polish-American comparative analysis of types of data collected and uses made of the data. However, the present effort is limited to developing the more selec­tive and preliminary (but hopefully informative and precise) statement noted above. In addition to the re­searcher's usual limitations of time, cost and space, this effort was further constrained by a paucity of relevant scholarly literature, by the obstacles inherent in exploring aspects of an economic system which is philosophically and structurally different from one's own, and by the political sensitivities which one might anticipate, particularly in the current situation. Even so, the following observations should prove in­structive to the marketing academician or practitioner interested in evolving marketing practices in socialist economies.

Polish Marketing Research - An Overview

Interest in market and consumer research in Poland developed largely during the 1960's, although there is ample evidence of the conduct of marketing research previously. However, in 1967 the government made the study of market phenomena obligatory for all trade or­ganizations. Various research units, including the Institute of Internal Trade, The Institute of Economy of Services and Small Production, and research insti­tutes of universities and other higher schools (pri­marily technical universities and academies of econom­ics) previously had promoted scientific research of market and consumption problems, either on their own initiative or on instruction of central authorities or economic units involved in manufacturing and the trades. However, those investigations did not constitute a uniform, coherent system of research. By the late-1970's a new organization for conducting marketing re­search and influencing consumption patterns was intro­duced, combining some of the previously scattered activities.

The Institute of Internal Trade and Services

The central role in the new organization of Polish mar­keting research is played by the Institute of Internal Trade and Services, which is the leading unit in con­ducting research and the coordinating body for both nationwide and local area studies. The Institute was established in 1976 by the government of the Polish

People's Republic (Decision Number 27 of the Prime Minister, April 12, 1976). It was formed by the merger of two existing research organizations, the Institute of Internal Trade and the Institute of Economy of Ser­vices and Small Production.

The Decision which established the new Institute de­fined its objectives, areas of activity, and basic organizational structure. The Institute's goal is to conduct research efforts consistent with the national economic development program, and in particular:

(1) Organizing and conducting research in the areas of organization and management of the trades and services, economics of the trades and services, their operating techniques, and market and consumption-forming activities;

(2) Elaborating and disseminating new information related to the trades and services, resulting from editorial and documentary research conducted by the Institute's staff;

(3) Editing and disseminating popularized publications, reports, translations, etc., as well as cooperating with the institutions originating these materials;

(4) Publicizing the results of completed research, and cooperating in introducing the findings into prac­tice;

(5) Organizing scientific conferences and symposia, seminars, lecture, exhibitions, etc. on subjects related to trade and services activities;

(6) Cooperating with high schools and other scientific institutions and trade and services organizations within Poland and abroad;

(7) Issuing opinions and "experts' reports" concerning problems of domestic trade and services;

(8) Participating in national and international organi­zations concerned with the marketing of goods and services;

(9) Improving the professional and scientific skills of the Institute's staff;

(10) Participating in the process of teaching and de­veloping personnel in behalf of internal trade and services; and

(11) In general, keeping abreast of relevant scientific development, both domestically and abroad, related to the Institute's areas of activity.

The Institute works toward these goals through its own research staff, through cooperation with higher schools and institutes concerned with trade and the services, and through use of experiences of representatives of trade enterprises. It is managed by a director, who is assisted by deputy directors responsible for trade re­search, service research, and for supporting the re­search process. The Institute has an advisory board called the "Learned Council," created by the Minister of Internal Trade and Services. This 30-member body is composed of members of the faculties of institutions of higher education, prominent representatives of trade and service, and others concerned with economic perfor­mance. In addition, the Institute's director has a con­sultative organ, the "Institute's Council," composed of heads of the Institute's units and representatives of social and political organizations.

Th2 Institute has established a separate section for market research and consumption-formation, including

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both central and local units. The central units in­clude the Department of Market Research and Consumption­Formation and the Center for Cooperation with Consumers. Local units, which serve the marketing research needs ot regions and "macroregiciris", ·are' located in Katowice, Pozna~, Szczecin, and Warsaw. With the creation of four additional local units in the next few years, each of Poland's eight macroregions will be served directly.

During 1979 marketing studies were conducted for the first time within the new system. Responsible authori­ties generally agreed that the revised organization and newly introduced studies stood the test of experience. The Institute conducted 64 marketing research investiga­tions, including 47 which focused on instruction of economic units within Poland's domestic trade and ser­vices structure, and 17 which contributed to the nation­al five-year program of scientific investigation. Overall, 14 of the studies involved routine (or recur­ring) testing, 25 were non-recurring in nature, and 22 concerned product quality, which was treated as a dis­tinct category of research.

Routine (or recurring) studies of national market phe­nomena included the following:

(1) A Computer System for Short-Term Forecasting - Using econometric models, the Institute has developed an automated forecasting system for use by the Minisay of Internal Trade and Services. Each quarter this system yields short-term forecasts for 140 consumer products.

(2) Monthly Regional Market Situation Reports - Monthly and quarterly market situation reports are prepared presently for three districts (Katowice, Szczecin, and Poznan) and one macroregion. The Institute plans to expand this activity to all eight micro­regions within the next few years.

(3) Consumer Opinion Studies - The Institute now col­lects consumer opinion data concerning changes in the market situation through the use of consumer panels. According to plans for this new under­taking, a nationally representative panel of con­sumers will be polled at six-month intervals. Partial results from the initial study in Poznan in 1979 were met with extensive interest within and beyond scientific, trade, and governmental circles. The consumer panel program was to be fully launched during 1980.

(4) Market Analysis Based on Business Conditions - The Insitute systematically collects quarterly data from the significant economic, industrial, and com­mercial units concerning supply and demand condi­tions for about 200 products, consistent with the product list used in short-term forecasting and mar­ket situation reporting previously noted in items (1) and (2) above. Preliminary investigation has already been carried out, and full-scale studies are scheduled for the early-1980's.

(5) Market Reports by Industry Branch - Based upon data collected by the Institute from a nation-wide shop panel, reports will be made quarterly to interested economic units concerning the market situation for household appliances, radio and television equip­ment, and furniture items.

Non-recurring studies conducted by the Institute focus nn such problems as industry branch forecasts, product­specific market supply, and consumer preference. Typi­cally these studies are made at the request of economic units (enterprises, etc.). The following examples illustrate the range of non-recurring studies undertaken

recently by the Institute: "Forecast of Poultry Con­sumption through 1990," "Influence of Retail Prices on the Demand for Leather Goods," "Consumers' View of the Market Supply of Children's Articles in Daily Use," and "The Household-Market Supply of Detergents and Cleaning Agents."

Product quality research is undertaken principally by the Laboratory of Organoleptic and Utility Research, and partly by the Institute's Department of Consumer Opinion. This research may be concerned with prototypes of goods, or with products already on the market. Test­ing consists of evaluation by selected consumers or of utility tests using panels of experimental households.

Another significant function of the Institute is con­sumer education. While this is not a marketing research activity, it is worth noting that the Institute is ~c­tive in seven basic family and household problem areas: family feeding, equipping households, clothing, family and household hygiene, rest and relaxation after school and work, meeting the material needs of children, and help in household management for women who work inlarge industrial plants. During 1979 in support of these pro­grams, the Institute produced more than 25 brochures, 33 television programs, more than 50 expositions, 3400 demonstrations, and several recordings and slide presen­tations. Also during 1979 the Institute published 35 consumer information books with a combined printing of 1,264,000 copies. These activities provide excellent opportunities for disseminating the Institute's market­ing research findings, and for implementing some of the actions which it suggests.

Finally, the Institute disseminates marketing research findings through its professional publications program. A substantial journal, Roczniki Instytutu Handlu Wewn~trznego i Uslug (Annals of the Institute of Inter­nal Trade and Services) is published quarterly. Two series of publications, Biblioteka Instytutu Handlu Wewn~trznego i Us}ug (Library of the Institute of Inter­nal Trade and Services) and Opracowania i Materia}y (Works and Materials), report the findings and scientif­ic contributions of original research in the domestic economy. Bibliographical listings and analyses of Polish and foreign economic literature appear in Przegl9d Dokumentacyjny z Zakresu Handlu Wewn~trznego i Uslug (Documentary Review of Internal Trade and Serv­ices). Elaborations based on foreign sources, intended to acquaint Polish trade leaders with theoretical works of prominent non-Polish scientists and with experiences and practical solutions to operating problems of foreign enterprises and institutions, are published in HandelNa ~wiecie (Trade in the World). The Institute distributes its materials through its own Section of Publications and Dissemination.

Marketing Research at the Enterprise Level

Probably western marketing academicians and practition­ers are even less familiar with the organization and op­eration of marketing research at the enterprise level than at the central level in the socialist state. In order to provide better insight into the conduct of mar­keting research at the "individual firm" level, the fol­lowing description of the activity at PREDOM/POLAR is provided.

PREDOM/POLAR, located in Wroc}aw, is the dominant state enterprise concerned with the manufacture of refrigerators and washing machines for household­level use. Its annual rate of refrigerator production is about 600,000 units. Within the Polish refrigera­tor market PREDOM/POLAR faces competition from another organization, "Silesia," which produces about 130,000-

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140,000 units annually. Also, Soviet-built units are available in Poland. It is estimated that PREDOM/ POLAR holds about 55 percent of the domestic market, and the Soviet product has about 28 percent.

In view of PREDOM/POLAR's refrigerator-manufacturing capacity of about 775,000 units annually, and given the relatively saturated domestic market for the product, international markets are important. About 80 percent of the organization's exports go to western countries, from which payment is received in badly needed convertible currency. PREDOM/POLAR produces some units which are sold under the Philips brand name in Western Europe. Some thought has been given to entering the American market, possibly through manu­facturing for private branding, although no decision has been taken regarding this possibility. It is felt that a private-branding contract for 100,000 or more units annually could make excessive demands on the organization, which presently utilizes 75 to 80 percent of its plant capacity.

Data are not available to establish a norm for the structure and practice of marketing research at the enterprise or other operating level in Poland. How­ever, based upon discussion with enterprise-level managers in several consumer-goods manufacturing in­dustries, as well as with central planning authorities, it is probable that PREDOM/POLAR ranks among the more progressive organizations in terms of having estab­lished a formal, systematic program of marketing re­search. Consequently, the following description of the organization, staffing, and research program of a single firm should be viewed as illustrative of the better marketing research operations in Poland, rather than as typical of Polish firms generally.

Marketing research activity is centered in PREDOM/ POLAR's marketing department, which was established in January 1980. This department has a staff of five professional pers0ns including the manager, a special­ist in methodology, a new-product development special­ist, a test-marketing specialist, and a planner­coordinator. Except for the manager, all marketing staff members are young women with little post-education experience. Expansion of the department staff to in­clude four additional professional members is planned for the near future. Presently, sales department personnel have primary responsibility for PREDOM/ POLAR's advertising efforts, in coordination with the marketing department. As the latter unit grows and matures, it expects to assume wider responsibility, including management of the advertising program.

The principal types of marketing research activities engaged in by PREDOM/POLAR are outlined in Tabl e 1 . Even before the formal marketing department was estab­lished, the firm collected information concerning existing levels of household appliance ownership and the unmet demand for them within the Polish market, and on a very selective basjs in export markets. These types of data presently are developed within the mar­keting department systematically at 12-to-18 month intervals, depending upon the organization's need for the data. Essentially, this information is used by management in forecasting demand, discovering new mar­ket opportunities, and directing internal research­and-development activity.

One other form of marketing research which has been conducted by PREDOM/POLAR for the past ten years or longer is consumer preference research. This informa­tion, collected twice each year, aids management in determining its promotional program and channels of distribution to be used. The scope of this research is widening, and during the past two years motivation

TABLE 1

MARKETING RESEARCH ACTIVITIES AT PREDOM/POLAR

T7pa of Mnkotlnl ltaaauch Actlvltx

1. Pra .. nt lawl of appliance _,uahip (houaehold-lawl)

J. Motivation analyaia

4. Analyaia of product/price ratio

5. Con•~~ preference raaaal'ch

6. Teat Nrbtlna

7. Current aalee and inventorieo in the retail ohopo

-•tic • Poratp

-•tic • Pordan

-•tic • Lt•tted Poratan

DooMatic • roratan

-•tic

Doooeotlc

Dcneatic

analysis has been initiated on an 18-to-24 month cycle. This information will be used to help the organization develop and modify product features so that they will better meet consumers' needs. Also, it is expected to provide data useful in developing promotional campaigns. Similarly, test-marketing activity, which will be conducted "as needed," was initiated by the marketing department two years ago.

Also, the organization now routinely conducts a "product-price" ratio analysis at least quarterly. Data generated by this activity, which includes the domestic and export markets, are used to establish the "optimal product line" which will support the image desired by PREDOM/POLAR's management, essen­tially through product-feature modification and adjust­ments in export-pricing levels.

Until recently, PREDOM/POLAR received information about wholesale inventory levels of its product types rou­tinely from the senior domestic trade organization, but it had no knowledge of retail shop inventory levels or sales rates. During the past two years, the mar­keting department has begun systematic monthly collec­tion of this missing information. These data are in­tended to minimize territorial misallocation of goods, and to more nearly match supply with regional market demand. The information will be useful in determining how intensive the organization's promotional efforts should be, in addressing the question of price changes, and in timing the introduction of new products to the market.

friMrY IJ!e(a) Of the !aaaarch

To foracaat •llrBIIIte daNnd.

To diacOYar nw Nrbt oppor­tunitlaa, and to direct N.D at PUDIII/PCI.Al.

To eatabliah end -.ltfy prod­uct faatureo to ada,. to con­ewner neecla; to uee in plan­nina pro.otional C8111J>aiana; to oet optl,..l export priceo.

To oet optlNl product Una in order to create clealred laa1• t to .odify product featureo; to define laval of export pricao.

To determine •ana of pr-.otlon; to help in influoncina prefer­ence•; in lelactlna channel a of diltributlon.

To aid in ao/no-ao dec il tone for nev producu alraody de­veloped

To control dtotrlbution of ROode territorially; to balance oupply according to re1Jlonal demand; to detemlne how lntendlve promo­tion ahould be; to indicate price chan&•• and new product Introduc­

tion tt••·

rr••uenn

Annually

... .... d •• (12-11 -the)

18-24 ""'· cycle

lwry 2-3 -the

AI needed

Monthly

How Lona Conducted

Put 10 yra.

Peat 10 yra .

Paot 2 yra.

Peat 2 yra.

Traditionally, but increued

Put 2 yro.

Paat 2 yro.

To aid In planntns capital ln- Biannually Paat 7 yra. veetMnte; to direct and "pace" R&D actlvitlea; to plan purchase of adequate oupplieo for produc-tion~ to eet e11lee object!vee; to balance future IHlee end de-a~ancl.

212

Finally, the marketing department staff is responsible for developing the organization's biannual long-range demand forecast. Management uses these data in taking a wide range of decisions, including the planning of capital investments, directing and pacing research­and-development activities, in assuring adequate sup­plies of materials to support planned production levels, in setting sales objectives, and in attempting to achieve a market balance between demand and sales.

While one gains insight into socialist marketing thought and practice by learning the types of research data which are collected routinely and occasionally, it is also instructive to consider the types of re­search which are conducted less intensively at the enterprise level. For example, the following areas of marketing research receive comparatively little, if any, attention.

First, research of export markets has been minimal due to several organizational limitations. Studies of export markets must be conducted by PREDOh/l·ULAR in cooperation with "Uniwersal," which is the official foreign trade enterprise concerned with sales of house­hold appliances among other products. However, "Uniwersal" and PREDOM/POLAR are supervised by differ­ent governmental ministries, the former by the Ministry of Foreign Trade and the latter by the Ministry of Machinery, resulting in some bureaucratic obstacles. Also, the cost of researching foreign markets is relatively high. Even so, PREDOM/POLAR's export objec­tive may force substantially increased attention in

this area soon. The firm now ships about 20 percent of its physical volume to foreign markets, but it hopes to increase this share to 40 percent by the mid-1980's.

Second, PREDOM/POLAR's research of distribution chan­nels and pricing within the domestic market is rela­tively underdeveloped. Few intermediaries (trade enterprises) exist between the manufacturer and con­sumer, and these few are multidivisional in structure, typically selling all over the country. As a rule, their distribution policies cannot be influenced directly by PREDOM/POLAR, and attempts at indirect influence are complicated by the fact that the inter­mediaries are responsible to the Ministry for Internal Trade, while the manufacturer is responsible to the Ministry of Machinery. As a result, before PREDOM/ POLAR could establish its own network of retail shops, it would be necessary to win approval of the Ministry for Internal Trade.

Also, the established procedure for distributing goods to the trade in Poland is quite different from that in the United States, where sales tend to be made on an "individual order" basis. Within the Polish mar­ket PREDOH/POLAR signs agreements with the four principal trade enterprises, covering the quantity and types of products to be shipped each month. These agreements are made at least seven months in advance of their effective dates, resulting in considerably reduced flexibility in supplying goods to the trade, even though the agreements are not always precisely met.

Concerning price changes, the individual Polish organi­zation has much less influence than does its American counterpart. In Poland the manufacturer notifies the state price commission of the maximum retail price which it proposes, and the commission has the power to disapprove the proposal. This procedure is time­consuming, and the structure is rigid. As a result, relatively little attention is given to researching distribution channels and pricing in the domestic mar­ket.

Third, promotion research is rarely done, possibly because the role of promotion in the past has been underestimated. PREDOM/POLAR's media schedule for a recent year illustrates advertising's limited inten­sity in the domestic market:

(1) Newspapers - Advertisements of about one-quarter page size were placed in each of six newspapers in five major Polish cities.

(2) Magazines- One to four advertisements, usually half-page color ads, were placed in each of five weekly and one monthly magazine.

(3) Outdoor - Limited outdoor ads were used, mostly in stadium locations.

(4) Radio - The medium is rarely used.

(5) Television- The medium is not used.

(6) Brochures and Pamphlets - These materials are typically used at trade shows and during promo­tional campaigns.

While this advertising schedule is light by American standards, it is relatively heavy by comparison with other Polish industry groups (King 1981). However, the efficiency of PREDOM/POLAR's advertising program remains essentially unmeasured, although marketing staff members speculate that it is low.

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Conclusions

Although Polish marketing research remains under­developed compared to the American experience, sub­stantial organizational gains have been made even in the past five years. Trained personnel of the Institute of Internal Trade and Services are in place and in close contact with the Polish business, educa­tional, and governmental communities. The Institute seems to be an excellent choice for leading in the development of a marketing research infrastructure in Poland.

Even so, troublesome issues such as the following suggest that the effective impact of marketing research in Poland in the near future may be severely limited. Given current conditions in Poland, it is quite pos­sible that markating re~earch activity may be dramat­ically reduced in the name of "economy." Or, wide­spread shortages of consumer goods may fix managerial attention even more firmly on production issues, a familiar problem to marketing personnel in Poland. When the current situation is rectified, there remains the problem of bureaucratic conflicts, with the poten­tial for results ranging from delays in implementing actions supported by marketing research, to outright rejection of those actions. Further, there is room for doubt that marketing research findings will be readily implemented at the operational level, even when they are officially supported, in view of the pervasive production orientation and in the absence of a much stronger system of individual incentives than presently exists in manufacturing and trade enterprises. Finally, should marketing research achieve widespread acceptance, the gigantic task of educating research practitioners and marketing managers who will use this new information remains.

Still, once the current economic situation is brought under control, the Polish consumer's best hope may rest in the earliest possible implementation of strengthened, systematic, sensitive and pervasive marketing information systems. In this regard, devel­opments of the past five years give cause for optimism.

References

Klemens Bia~ecki and Jerzy Borowski, Marke~ing i~ Socialist Society (Warsaw: State Publishers in Economics, 1978)~

Jerzy Dietl, "Use of Harketing Research: A Diagnosis and a Forecast," Roczniki Institutu Handlu _ _l-le~t_rznego i Us~ug, No. 1 (93) (1980), pp. 17-25.

R. G~owacki, En~e~rise in the Market (Warsaw: State Publishers in Economics, 1977).

Philip Hanson, Advert~sj~_ and Socialism (London: The Macmillan Press, Ltd., 1974).

K~talog Wydawnictw Instytutu Handlu Wewn~trzne~_i Us~ug, 1950-1977 (Warsaw: Institute of Internal Trade and Services, 1977).

Robert L. King, "Consumer Shopping Time in Poland: Some Insights from Contemporary Polish Research," in V. V. Bellur (ed.), Developments in Marketing Science, Volume III (Marquette--;- Mi~hTgan :--A-cademy-;;-f-Ma-r:-ketiii:g Science, 1980), pp. 104-108.

Robert L. King, "Evolving Advertising Activity and Socialist Philosophy in Poland," in James E. Haefner (ed.), Advertising 1980: Voice of a Nation at Work (Urbana, Illinois: University of Illinois, 1980), pp. 20-24.

Robert L. King, "Insights into Consumer Advertising Practices in a Socialist State: A Study of Consumer Magazine Advertising in Poland," in H. Keith Hunt (ed.), Advertising in a New Age (Provo, Utah: Brigham Young University, 1981) pp. 40-45.

Josef Kramer, "Local Consumption Patterns," I.H.W.I.U. Library Paper No. 158 (Warsaw: Institute of Internal Trade and Services, no date).

Charles S. Mayer, "Marketing in Eastern European Social­ist Countries," University of Michigan Business Review, Vol. 28 (January 1976), pp. 16-21.

Teresa Pa~aszewska-Reindl, "Market Research on the Back­ground of Market Channel Linkages," Roczniki Instytutu Handlu Wewn~trznego i Us~g, No. 3 (86), (1978), pp. 12-31.

I. Rutkowski and W. Wrzosek, Marketing Strategy of Sales (Warsaw: State Publishers in Science, 1976).

J. Hart Walters, "Marketing in Poland in the 1970s: Significant Progress," Journal of Marketing, Vol. 39 {October 1975), pp. 47-51.

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