Young & Rubicam, Soviet Ad Agency in Joint Venture

American companies trying to break into the Soviet market but bewildered by how to sell their products in the vast, state-run economy will be able to get marketing advice from a new joint venture announced Wednesday by the U.S. advertising giant Young & Rubicam and a Soviet ad agency.

Alex Kroll, chairman and chief executive of Young & Rubicam, said the new, still unnamed firm would focus initially on helping clients establish their corporate identities here and in marketing industrial products, technology and know-how as the Soviet economy opens up to greater foreign participation.

Many Young & Rubicam clients--among them Ford, Kodak, Johnson & Johnson, Chevron and R. J. Reynolds Tobacco--are already negotiating with Soviet companies about joint ventures, Kroll said, and many others are looking for Soviet partners as the country’s economic reforms translate into increased trade.

“Our job is to match Western clients’ abilities with the needs in the Soviet market,” he said.

In fact, Pepsi-Cola found that it faced certain difficulties in marketing its soft drinks when it entered the Soviet Union in the 1970s. It could not, for instance, rely on extensive use of television or popular magazines to create consumer interest.

The new company, a partnership with the Soviet advertising agency Vneshtorgreklama, will engage mainly in development marketing strategies appropriate for the Soviet Union and then in Western-style sales promotion, business-to-business advertising, direct mail and public relations campaigns.

“While opportunities for broad-scale consumer advertising may be limited for a while, there are lots of opportunities for commercial communications,” Kroll said, “and our job will be to uncover those opportunities.”

While still small in volume and low key in tone, advertising has been growing here in recent years. But Soviet consumers remain skeptical about its intent, believing that state stores and companies are trying to persuade them to buy overpriced or poor-quality products that otherwise could not be sold.

January Start-Up

As the Soviet leadership slowly introduces elements of supply and demand into an economy that had been based almost totally on central planning, advertising is beginning to play a role in helping develop market forces. Earlier this year, Soviet trade officials invited American advertising and marketing executives to give a seminar here.

With Vneshtorgreklama owning 51% of the new company and Young & Rubicam 49%, officials expect the joint venture to begin operations in January, with two senior Young & Rubicam executives working in Moscow with six Soviet advertising specialists. A letter of intent was signed Wednesday, but neither side expects any difficulties in drafting the final agreement because only limited capital is involved.

“We believe we can put our clients in touch with the Soviet market that is rapidly opening to their products under (Soviet leader Mikhail S.) Gorbachev’s reforms,” another Young & Rubicam executive said. “This is a service that, up until now, has been offered only in small ways by various agents here who had a few contacts in the foreign trade organizations.

“With advertising, with direct mail, with other campaigns, we are confident we can bring our clients and their products to the attention of Soviet executives across the country who are now able to make their own business decisions, their own buying decisions, without going through the central ministries and trade organizations in Moscow.”

The joint venture will also advise Soviet companies, particularly new, cooperatively owned enterprises, on how to market their products abroad.

Yuri M. Deomidov, general manager of Vneshtorgreklama, said there was a pressing need to improve the whole approach of Soviet exporters to foreign markets as part of a major effort to reform and expand the country’s economy.

‘Panorama of Possibilities’

“Our trade delegations go out looking for markets, but they have done no homework, no marketing research before they set out,” Deomidov said. “Sometimes they ignore the most proven methods of marketing, even advertising, so we have to strengthen our business communications in many ways.”

Kroll added that helping the Soviet Union to increase its exports to the West, which now buys most natural resources and raw materials from Moscow, is “one of the most exciting and interesting aspects” of the new company.

The firm will be “looking at the panorama of possibilities--what should be marketed, how it should be marketed, what its price position should be and so forth,” he added.

Deomidov said Vneshtorgreklama had a number of foreign partners before but these earlier deals had generally fallen far short of expectations because of their focus on the sale, still very limited, of Western consumer goods here.