LUẬN văn THẠC sĩ some recommendations to develop the market share, the case of ILA vietnam in hanoi

The objectives will include: Study the comments of customers in Hanoi about ILA‟s products and marketing activities; analyse business performance of ILA in Hanoi; find out the problems o

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

Tran Thuy Linh

SOME RECOMMENDATIONS TO DEVELOP THE MARKET SHARE, THE CASE OF ILA VIETNAM IN

HANOI

MASTER OF BUSINESS ADMINISTRATION THESIS

Hanoi - 2011

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

Tran Thuy Linh

SOME RECOMMENDATIONS TO DEVELOP THE MARKET SHARE, THE CASE OF ILA VIETNAM IN

HANOI

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr Nguyen Thi Phi Nga

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i

ABSTRACT ii

TÓM TẮT iv

TABLE OF CONTENTS vi

LIST OF FIGURE viii

LIST OF TABLE ix

INTRODUCTION 1

1 Research Problem 1

2 Objective and aim of thesis 1

3 Scope and scale of thesis 2

4 Methodology 2

5 Data resources 2

CHAPTER 1: LITERATURE REVIEW 4

1.1 Market share 4

1.1.1 Definition 4

1.1.2 Ways to increase market share 5

1.2 Consumer decision making process 6

1.2.1 Information search 6

1.2.2 Source of information 8

1.2.3 Information search on the Internet 9

1.3 Customer Value, Satisfaction, and Loyalty 13

1.3.1 Customer Value 14

1.3.2 Total Customer Satisfaction 17

1.3.2.1 Customer expectation 18

1.3.2.2 Measuring Satisfaction 18

1.4.Marketing mix 19

1.4.1 The product 19

1.4.2 Promotion mix 27

1.4.2.1 Advertising 28

1.4.2.2 Sales promotion 31

1.4.2.3 Public relation 33

1.4.3 Place 34

1.4.4 Price 39

CHAPTER 2: THE CASE OF ILA VIETNAM IN HANOI 41

2.1 Introduction 41

2.2 Business analysis 44

2.2.1 Analysis of visitor and sources of information channel 44

2.2.3 Product analysis and comparison 47

2.2.3 New sales analysis 55

2.2.4 Re-enrolment and customers‟ loyalty analysis 57

2.2.5 Promotion mix analysis 58

2.2.6 Place 63

CHAPTER 3: CONCLUSION AND RECOMMENDATIONS 67

3.1 Conclusion 67

3.2 Recommendations 69

3.2.1 The information search on the Internet 69

3.2.2 Building Customer Value, Satisfaction, and Loyalty 70

3.2.3 Marketing mix 73

3.1 Product 73

3.2 Promotion mix 77

3.3 Place 81

REFERENCES 83

Appendix 85

LIST OF FIGURE

Figure 1-1: Decision making process 6

Figure 1-2 Information sources for Purchase Decision 8

Figure 1-3: Customer delivered value 14

Figure 1-4: Levels of product 20

Figure 1-5: The tangible-intangible continuum of goods and services 21

Figure 1-6: Steps in new product development process 23

Figure 1-7: Vertical marketing system model 36

Figure 2-1: Sales volume of ILA Vietnam in Hanoi since 2007 56

LIST OF TABLE

Table 2-1: Number of visitor from 2008 to2010 45

Table 2-2: Sources of information that customer knew ILA from 45

Table 2-3: Programme, schedule and fee of English course in ILA Hanoi 48

Table 2-4: Programme, schedule and fee of English course in Apollo Centre 50

Table 2-5: Programme, schedule and fee of English course in Language Link 51

Table 2-6: Book using analysis 54

Table 2-7: The number of new sales volume 55

Table 2-8: Re-enrolment in ILA Hanoi 57

Table 2-9: The role of advertising is more critical in Hanoi 59

Table 2-10: Types of advertising and frequency 59

Table 2-11: Student statement by district and areas 64

INTRODUCTION

1 Research Problem

ILA Vietnam in Hochiminh City is a very famous English Training Centre

Everyone can recommend friends and relatives to ILA to study when they are asked There are six training centres in HCMC, one in Vung Tau, one in Da Nang and one in Hanoi

The centre in Hanoi was established in 2007 This centre has a big problem with the market share development Although Hanoi Training centre has more than three years running, it now still has negative profit

The problem is that ILA Hanoi has to compete with many big competitors such as Apollo, Language Link, ACET and British Council Hanoians are familiar with these centres and know little about ILA Vietnam Besides, ILA still uses one marketing strategy for both northern and southern area

With those research problems, the thesis will be conducted with the purpose to improve the market share then to get more profit for ILA Vietnam in Hanoi for the period of 2011-2016 The objectives will include: Study the comments of customers in Hanoi about ILA‟s products and marketing activities; analyse business performance of ILA in Hanoi; find out the problems occurring in the Hanoi Centre;

and give the recommendations to develop the market share based on applying the suitable marketing mix to Hanoi market

2 Objective and aim of thesis

Those research problems will be discovered with the purpose to improve the market share then to get more profit for ILA Vietnam in Hanoi for the period of 2011-2016

The objectives will conclude:

- Study about marketing performance of ILA Hanoi

- Find out the problem occur in the ILA Language training centre in Hanoi

- Study comments of customers in Hanoi about ILA products and marketing activities then build up the suitable marketing program to increase market share

- Give the recommendations to develop the market share

3 Scope and scale of thesis

This research will be conducted based on some major objects are:

- Current customers of ILA Vietnam in Hanoi

- Visit customers, students of University, secondary and high schools, parents

as the sales number, the number of visitors and number of students The existing students were asked for their satisfaction on courses, customer services, books, teachers, teaching assistants and if they would recommend their friends and relatives The comments of customers were used to measure the effectiveness of marketing activities of ILA in Hanoi The more suitable marketing strategy could help ILA to attract more customers and expand its market share

5 Data resources

The primary data was gathered from direct interviews and discussions with the customers, students, visitors, parents of students, staffs and managers of ILA The

second sources of the thesis was secondary data such as books, newspapers, internal and external reports and the Internet

CHAPTER 1: LITERATURE REVIEW

The literature included theory of market share, ways to increase market share, information search and building customer loyalty, marketing mix This section will start off by explaining the market share concepts

1.1 Market share

1.1.1 Definition

There were some definitions of market share as the following:

"Market share is the percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity."

By Farris, Paul W.; Neil T Bendle; Phillip E Pfeifer; David J Reibstein (2010)

Marketing Metrics: The Definitive Guide to Measuring Marketing Performance

Another author of investopedia said that market share was the percentage of an industry or market's total sales that was earned by a particular company over a specified time period According to this author, market share was calculated by taking the company's sales over the period and dividing it by the total sales of the industry over the same period This metric was used to give a general idea of the size of a company to its market and its competitors

“Market share is the percentage of a company‟s sales of a particular product or service in a given area It can be calculated in terms of revenue or of units sold.”

By Author(s) from Penetrating.net

“In very simple terms, market share is the number of loyal customers your business

or company has been able to retain over a long period of time” by Tito Philip, Jnr

It was quite different from other definition when mentioning the loyal customers

This author thought that no one else but loyal customers were the real market share

of the companies

Base on this definition, the author of the current thesis find out that to study consumer behaviour to make them become loyal customers is one of the good way

to increase the market share And it is the main content that the current thesis focus

on

All these definition had different calculation but all had a same idea of the “pie” of

this “pie”

1.1.2 Ways to increase market share

There were some ways to increase the market share as the following:

- Try to sell more to existing customer: encourage customer to buy more product and higher frequency

- Get old customer back: find the reasons why customer left: they did not need this product anymore, the price was too expensive, customers were not satisfied, customers changed to company‟s competitors…

- Try to sell effectively to similar customer by using data to telesales, send mail, advertising, word-of-mouth…

- Use other channels to sell: direct sales, whole sales, online sales or commerce

e Find the new market: at other province, other country

- Develop the new product for same market There was risky and costly in some ways as the expansion required more capital and staffs It was reasonable for trying to understand existing customers in the same market and let them to be loyal ones then try to sell them more For this group of customers, the company already had contact and relationship so it easier to find out their sastifaction and how to make them be loyal Even developing a new product for the old market was still easier and less cost than for the new market

In order to developing the market share for the company in the safer way, the marketer had to study the customer need and customer buying process

1.2 Consumer decision making process

Consumer decision making process had some states that presented in the figure 1-2 below There were problems (need) recognition, information search, alternative evaluation and selection, outlet selection and purchase and post-purchase processes

The lowest level of purchase involvement was represented by nominal decisions: a problem was recognized, long-term memory provides a single preferred brand, that brand was purchased, and only limited post purchase evaluation occurs As one move from limited decision making toward extended decision making, information search increases, alternative evaluation becomes more extensive and complex, post purchase evaluation becomes more thorough

Figure 1-1: Decision making process

In this thesis, the author would like using the theory of information search in analysing the promotion mix so it was only information search stage focused

1.2.1 Information search

After problems recognized, people often used internal and external search for information that related to product or service The internal search was included long-term memory of satisfactory solutions, characteristics of potential solutions

The external search were a price range, familiar manufactures, performance criteria,

Problems (need) recognition

Information search

Alternative evaluation and selection

Outlet selection and purchase

Postpurchase processes

For example, the fan of Ms Lan was broken down She had to by a new fan for summer using Because the old fan was used for ten years so Ms Lan did not want

to change or find another brand She went straight to Thong Nhat company to buy a new fan with the same brand In this case, the satisfaction of old product influenced the decision of buying the new product without any search

There were two example of source of information that consumer used in making decision The first example, one person had demand of toothpaste and she saw a new product in the super market that had an attached tooth-brush This person bought the new product without searching for more new products because of the added value That decision was made by limited information search The second one was the case of a mother who wanted to by a new formula milk powder for her child She had to search for information of nutrition, the price, the samples of children using the same product… the final decision was the product that had cheaper price with the same nutrition The mother of this example used external information that included:

- The opinions, attitudes, behaviors, and feelings of friends, neighbours, relatives, and increasingly strangers contacted on the internet

- Professional information that was provided in articles, books, websites, and personal contacts

- Direct experiences with the product through inspection, trial, or observation

- Marketer-generated information presented in advertisements, websites, and displays and by sales personnel

Deliberate external search also occurs in the absence of problem recognition

Ongoing search is done both to acquire information for possible later use and

because the process itself is pleasurable For example, individuals highly involved with an activity such as tennis are apt to seek information about tennis-related products on a going basis without a recognized problem with their existing tennis equipment This search could involve reading ads in tennis magazines, visiting

tennis equipment shop, observing professionals on television, or taking with and observing fellow players and local professionals These activities would provide the individual both pleasure and information for future use

1.2.2 Source of information

There were two main types of information sources: the internal and external In some example above, the source of information that the mother used was external and the fan-buying-woman used internal information source The source of information could be:

- Memory of past searches, personal experiences, and low-involvement learning

- Personal sources, such as friends, family, and other

- Independent sources, such as magazines, consumer groups, and government agencies

- Marketing sources, such as sales personnel, websites, and advertising

- Experiential sources, such as inspection or product trial

These sources were shown in Figure 1-4 Consumers decided how many and which sources of information to use

Figure 1-2 Information sources for Purchase Decision

Information sources

Internal Information

Actively acquired

Past Searches

Personal Experience

Passively acquired

Low-involvement learning

External Information

Actively acquired

Independent groups

Personal contacts

Marketer information Experiential

Consumers used internal information most of the time what was the primary source

The internal information included past search and personal experience that actively acquired Beside of using internal source, customers also used information from an external source, such as direct product experience, friends, or low-involvement learning, marketer information or personal contacts

Marketing messages were only one of five potential information sources, but these activities influenced all sources because the characteristics and the distribution of the products were available in the market The customers received information from non-marketing source because of the continuously marketing activities

1.2.3 Information search on the Internet

The internet was a new consumer information search in the communication era In the nineteen century, one expert had a prediction that:

“The new is very good for consumers, not so good for companies and investors

Within the near future, extraordinarily powerful price-and-quality search engines and services are likely to have a significant impact on decision making process For

a modest annual membership fee, Internet price-search services will be able to identify the cheapest delivered large-dollar-ticket products or services available in the word In such product markets the readily informed consumer will be king, at the click of a button.”

And bellows were some facts and figures about using the Internet and email, as well

as the social networks that Pingdom used many sources in the online world to write the analysis A lot of questions were made everyday such as how many sites have been opened, how many people uses the internet or email etc…bellows are some fact and figures that Pingdom.com had found:

 Email

107 trillion – Emails were sent in 2010

294 billion – Emails were sent a day, on the average

1.88 billion – the number of people using email all over the world

480 million – New email users counted from 2009 89.1% – Junk emails

262 billion – junk emails per day (suppose 89% emails were junk mail)

2.9 billion – Email accounts over the world 25% – Email accounts were organizational or company‟s one

 Website

255 million – websites up to December 2010

21.4 million – new website in 2010

 The Internet users 1.97 billion – over the world (up to June, 2010)

14% – higher than 2009

825.1million – the Internet users in Asia

475.1 million – the internet users in Europe

266.2 million– The internet users in North American 204.7 million – the number of users in Latin America/ Caribbean 110.9 million – the number of users in Africa

63.2 million – the number of users in Mid-East 21.3 million – the number of users in Oceania countries

 The social network

152 million – blogs (source: BlogPulse)

25 billion – “tweet” on Twitter in 2010

100 million – new Twitter accounts in 2010

175 million – new Twitter users in 9, 2010

7.7 million – followers @ladygaga (Lady Gaga, Twitter)

600 million – Facebook‟s users in 2010

250 million – new Facebook accounts in 2010

30 billion – number of sharing (link, note, pictures…) on Facebook each month 70% – Facebook users out of American‟s border

20 million – Facebook‟s applicant had been set up each day

 Video

2 billion – watched videos on Youtube each day

35 hours – duration of uploaded videos in one minute

186 –average number of online videos online watched by one person (in the USA) 84% – internet users who watched video online (in the USA)

14% – internet users uploaded videos (in the USA) More than 2 billion –watched videos on Facebook each month

20 million – Video uploaded on Facebook each month

 Image and picture

5 billion – on Flickr (up to 9, 2010)

More than 3000 – pictures that uploaded on Flickr each minute

130 million – picture uploaded on Flickr each month

30 billion – uploaded pictures on Facebook each month

36 million – pictures was uploaded on Facebook each year

According to the above statistic, Asia had the highest number of the internet users and the speed of development was more than 14% Asia was a potential market for doing business online On the other hand, the social networks like Facebook or twitter were developed quickly Advertising on these websites was easier and more often as company could have its own account Vietnam had a highest growth rate, according to a research of Cimego Company:

“With in key Asian countries, three different levels of internet penetration were found In developed Asian countries (South Korea, Japan, Singapore, Hong Kong, Taiwan and Malaysia), internet usage is at 60-80%, with a slight year-to-year increase In Asian emerging markets (China, Vietnam, Philippines and Thailand), internet penetration is around 20-30%, however internet growth rates per year are much higher In developing markets (Lao, Cambodia) or populous countries with a large rural population (Indonesia, India), internet penetration is typically below 10% According to official sources, there are currently 27 million internet users in

Vietnam, which is more than in Thailand and Malaysia…Vietnam takes a unique position in this respect Vietnam is the fastest growing internet country in the region and amongst the countries with the highest growth rates in the world Since the year

2000, the number of internet users in Vietnam has multiplied by about 120 Ten years ago, internet penetration in Vietnam lied far behind most other Asian countries In the meantime, Vietnam has caught up an internet usage has reached the level of other key emerging markets”

Source: Cimigo, Vietnam NetCitizen Report, 2011

According to the research, Vietnam had the big jump in the internet using growth rate Many of big corporations found Vietnam as a profitable market Facebook and google were the famous examples

In general, internet search had become an important source of information in the decision making process

A home page or Internet presence site was a website developed and maintained by a firm or another organization or individual that provides product and company data

or independent data from government and private sources Based on a research of a company on its home page there were 90% of people seeking product information, and 88% of seeking company information, 30% of seeking for getting coupons or discounts, and 23% of seeking for buying product

How people knew the company website was also important Consumers frequently visited a company website because they saw it mentioned in traditional media:

Percentage visiting a website because they saw it mentioned in:

The data above showed that ads were factors that affected to rate of website visiting times For example, Apollo organised the English Olympic competition for Hanoi‟s students These advertisings of the company guided attendants to visit website for the terms and conditions before registrations The visiting rate of its website increased 30 times than before the ads

Consumers also met ads on the Internet while visiting general information, search, and entertainment sites These were banner ads that could take the consumer to the company or product‟s home page or to a special advertisement i.e in the same Apollo‟s competition above, the company hired banner ad columns on the online newspaper such as Hoahoctro online, Vnexpress.net, dantri.com etc … people saw these ads could click on them to see more information

The Internet also contains personal sources of information in chat rooms, forums or

in the brand review features associated with some shopping services The very famous shopping website Amazone.com had huge amount of personal source of information

In general, searching and using information from the Internet was going rapidly

The consumers had a efficiency tool of searching information and they had more chances to reach suitable product with better price On the other hand, firms and organizations had more channel to deliver advertisings and information to customers

1.3 Customer Value, Satisfaction, and Loyalty

Customer should be the top of the company and they were profit centre of every company It was not the manager who was most powerful but the customer

Therefore, the company must find what customer value was, how to satisfy them, how to make them become loyal

1.3.1 Customer Value

In the era of communication and digital, consumers were more educated and informed than ever, and they had the tools to verify some companies at the same time and find out the best choice Customers used to be value-maximizers, within some criteria as product cost, using value Customers would estimate which offer could deliver the most value to choose it Philip Kotler defined total customer delivered value as the figure 1-3 bellow:

Figure 1-3: Customer delivered value

and image values )

psychic costs)

As showed on the figure 1-3 customer delivered value was the difference between the total customer value of all the benefits and all the costs of a product and service that included not only money but also time, energy and psychic costs For example, customers who chose an education service like kindergarten or primary school had

to consider very much about choosing a good school with best service and suitable price However, good school was often had high school fee and low school fee meant average service quality The parents had to spend not only time but psychic cost to find out the suitable one

Total customer value was defined as the perceived monetary value of the package of economic, functional, and psychological benefits customers expect from a product

Totala customer cost was defined as the total of costs customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering, including monetary, time, energy, and psychic costs

So, customer delivered value was based on the difference between what the customer received and what were given for other different choices The customer received benefits and estimated costs In order to have more customer received value, the marketer could increase functional or emotional benefits and/or reduce one or more of the various types of costs

Value concepts could be applied on decision-making theory to gain success in selling to customers Companies could improve the offer in three ways First, they could increase total customer value by improving product, services, personnel, and/or image benefits Second, it could reduce the nonmonetary costs by reducing the time, energy, and psychic costs Third, it could reduce its product's monetary cost to the buyer

There was an example of buying washing machine that could explain the theory

Vietnamese consumers used to familiar with Hitachi washing machine since the nineteen century when the second-hand ones were used They were also familiar with Elextrolux washing machine due to the good quality and long term used The house wife wanted to buy a washing machine to replace the broken one What brand Hitachi or Elextrolux Elextrolux had higher brand image benefit, long-term using duration, less repair fee, higher evaluated quality and more sensitive of clothes caring that Hitachi How ever, the price of Hitachi machine was cheaper and the functional modes were easier Sales person of Elextrolux in the shopping mall tried

to persuade the house wife that their machine would deliver more value to her because she could use the machine for longer time with less electricity and repair costs She could also call to hotline customer service for support for 24/7 The customer recognized that Elextrolux‟s machine had more advantage than Hitachi‟s one However, she chose Hitachi washing machine as she compared the two prices

and the difference was higher than the total extra value that she could receive from Elextrolux

Assumed that customer evaluated Elextrolux‟s price was 15 million dong and the cost to produce and sell was 10 million dong It meant the difference between price and cost could be 5 million dong, so Elextrolux needed to charge a price between 15 and 10 million dong If the company charged less than 10 million dong, it won't cover its costs If the company charged more than 15 million dong, it could price itself out of the market In order to gain the sales, Elextrolux could price the product that created more customer value than the competitor ones Other wise, the sales person of Elextrolux could explain to buyer in some potential options

- If the wanted to buy at the lowest price The sales person tasks were to convince the buyer's manager that buying on price alone would result in lower long-term profits

- The salesperson's task was to convince other people in the customer family that Elextrolux‟s product could deliver greater customer value

- The other product operation needed higher water level and electricity cost

Through this example, the conclusion was that consumers made choices that gave more weight to their personal benefit than to the company's benefit in some occations

Customer received value was a useful framework that applied to many situations

There were steps for sales person to apply this framework: first, the sales person must explore how the customer perceived value and cost, including all the competitors proposals Second, after receiving the result of measurement and the product or service was at the disadvantage position, the salesman had two alternatives: to increase total customer value or to decrease total customer cost

They could increase total customer value by strengthening offer's product, services, personnel, and image benefits If increase value did not work, they could find the

company support in reducing the buyer's costs by lowew the price, simplifying the ordering and delivery process, or offering a warranty

Consumers had many level of loyalty to specific brands, stores, and companies For example, people in the north of Vietnam were loyal to Honda motorbike The reason was the high customer value Motorbikes of Honda were popular in Vietnam due to easy using, cheaper replacements of broken parts, long-time using duration easy reselling etc… the company built a strong competitive advantage in comparing with later competitors by their high customer value

1.3.2 Total Customer Satisfaction

Philip Kotler and his colledges built a theory of customer satisfaction In this theory, these authors defined that the buyer‟s satisfaction after purchase depended

on the offer's performance in relation to the buyer's expectations They said that:

“In general, satisfaction was a person's feelings of pleasure or disappointment resulting from comparing a product's perceived performance (or outcome) in relation to his or her expectations If the performance falls short of expectations, the customer is dissatisfied If the performance matches the expectations, the customer

is satisfied If the performance exceeds expectations, the customer is highly satisfied

or delighted.”

The companies had to face trade-off when trying to create higher customer satisfaction because if the company increased customer satisfaction by lowering its price or increasing its services, the result might be lower profits Most of companies chose increasing profit by earnings than satisfaction Because companies has many stakeholders, including employees, dealers, suppliers, and stockholders, they might prefer increasing their value than customers‟s satisfaction Thus, most of the cases, the company chose a suitable level than high level of customer satisfaction

1.3.2.1 Customer expectation

Customers‟ expectations were the most important factor in customer‟s satisfaction

Customers often used their experience buying in the past, the advices from their friend and relatives and promises from marketers and competitors to build their expectations In case the marketers raised expectations too high, the buyer could be disappointed In the contrast, if the company set low expectations than the competitors, it won't attract enough buyers The company had to raise expectations and then deliver good performances to match and gain success

1.3.2.2 Measuring Satisfaction

Measuring customer satisfaction were important to business and needed to maintain regularly Customer satisfaction servey had to be done regularly once a month or once per year, depend on the product and service that supplied It was the way to keep customer to be loyal with the company The higher level of satisfaction, the longer customer staying with the brand or company Since the customer satisfied with brand, they could buy more, upgrade products, spread out the good comments about brand, careless about price etc… However, it happened differently on each level of satisfaction The lowest level of satisfaction, the least level of loyalty customer This group of customer might change to use other brand The middle level of satisfaction customer was loyal than the first one but still changed if they could receive higher value The highest satisfied customers were most loyal and said good word of mounth about company and brand

By doing servey of customer satisfaction, companies could investigate the competitor‟s sittuation by calling stop customers who had bought others products

For customer satisfaction surveys, it was important that companies asked the right questions One important question was: "Would you recommend this product or service to a friend?" The servey questions could focus on brand image, pricing, and product features that could be controlled and measured

In order to have good word of mouth, the company had to put customer in the centre of every goal and customer satisfaction had to the goal and the marketing tool There was no other way than had good product and service quality to get customer satisfaction Quality was the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs

The comsumer analysis of satisfaction and expectation was aimed to build a strong marketing mix for companies The author would discuss about three important factors of marketing mix to the company in the next part

1.4.Marketing mix 1.4.1 The product

Product was the first and the important element of marketing mix It defined what company was doing or selling In the book “Principles of Marketing” Kortler and his colleagues pointed out the concept of “product” and the relevant theory about it

In this thesis, the author chose some criteria that needed for the company to apply in analysis In the book, Kortler said that:

“Product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need It includes physical objects, services, persons, places, organisations and ideas.”

In this definition, he mentioned not only tangible goods but also the services or intangible things like ideas

Services were considered as a special product They were activities, benefits or satisfactions that were offered for sale Services were essentially intangible and do not result in the ownership of any thing, he wrote

In order to understand why customers were buying products, the companies had to know well about three level of product They were:

were really buying when they obtain a product

 Actual products: could have as many as five characteristics: a quality level, product and service features, styling, a brand name and packaging

offering additional consumer services and benefits

Figure 1-4: Levels of product

According to the writers, the most basic level was the core product The core product stood at the centre of the total product It consisted of the core, problem-solving benefits that consumers seeked At the second level, product planners must turn the core benefit into an actual product Finally, the product planner must build

an augmented product around the core and actual products by offering additional consumer services and benefits

Delivery and credit

Quality

Brand name

Packaging

Features

Styling

After- sale Service

Warranty

Core benefit

or service

Actual product Core product

Because of the field of case study was in service industry so the author would like

to have an overview about the theory of service in the next part

Characteristics of service

“Service is any activity or benefit that one party can offer to another which is essentially intangible and does not result in the ownership of anything.”

He gave some examples of activities such as renting a hotel room, depositing money in a bank, travelling on a ferry or an aeroplane, visiting a doctor, getting a haircut, having a car repaired, watching a professional sport, seeing a movie, having clothes cleaned at a dry cleaner and getting advice from a solicitor all involve buying a service

Figure 1-5: The tangible-intangible continuum of goods and services

The figure showed the example of tangible products as soap or car to most intangible service as consulting and teaching Between the tangible and intangible service, the mix products combined goods and supplement service

There were five characteristic of service: intangibility, inseparability, variability, perishability and lack of ownership The thesis would like to discuss about each of those characteristics

1 Intangibility

Soap drinksoft detergent car cosmetic food fast agencyad airline financial service consulting teaching

This was the major characteristic of service Services could not be readily displayed, so they could not be seen, tasted, felt, heard or smelt before they were bought A buyer could not know the result of haircut service until finishing

Because the service was intangible, the result was uncertainty Customers could only estimate service quality through some signals such as place, people, equipment, communication material and price that they could see Because of these customer‟s searching tools, the service provider had to “manage the evidence” and

“tangibilise the service”

of these factors, service quality was difficult to control

4 Perishability This was a major characteristic of service Perishability was that services could not

be stored for later sale or use The very common example was public transportation

in the rush-hour or holidays The demand of travelling in this period of time was increased sharply that coursed the transportation companies had to arrange vehicles

to serve customers (short time) but it would not be used in the normal time (almost the time of the year)

5 Lack of ownership When buying a good such as computer or car, people owned this and could sell it if they wished to However, buying a service, customer only used this in a limited time and no quality ownerships

Because the market did not stand still and neither the customer‟s need was The company had to develop the new products to meet the customer‟s need and to replace the denied products The author would like to study about the new product development

New product development

When mentioning about new product development, people thought about the new inventions However, according to Philip Kortler, an invention was a new technology or product that may or may not deliver benefits to customer and the new product development was an act of innovation which entailed a process of identifying, creating and delivering new-product values or benefits that were not offered before in the marketplace There were two ways in obtaining a new product

One was through acquisition – by buying a whole company, a patent or a licence to produce someone else‟s product Many large companies had decided to acquire existing brands rather than to create new ones because of the rising costs of developing and introducing major new products The other way to obtaining new products was through new-product development in the company‟s own research-and-development department And the new products were defined as original products, product improvements, product modifications and new brands that the company develops through its own research-and-development efforts

Because of the purpose of the thesis, author focused only in the second way of developing a new product and how to create and market new products

New-product development process

The new-product development process for finding and growing new products consists of nine main steps

Figure 1-6: Steps in new product development process

1 New-product strategy The company needed having a strategy for developing a new product because a well-definded strategy would guide staffs how to implement, what to focus on and what the managers wanted

2 Idea generation

In order to find a few good ideas, the company had to generate from thousands ones which came from many sources such as internal sources, customers, competitors, distributors and suppliers

- The force of internal source could be executives, scientists, engineers, designers, manufacturing and salespeople Toyota was a good example of benefited from its internal ideas

CommercialisationTest marketingProduct developmentBusiness analysisMarketing strategy developmentConcept development and testing

Idea screeningIdea generation New product strategy

- Customers could bring lots of good idea by answering what they wanted and what they needed The only thing that the company could do was listening and watching their customers

- Competitors tested their products and the company could see how they were going then learn from them What customers said about the competitors also was a good thing to consider

- Distributors, suppliers were close to the market, they knew what customers wanted and what could be changed

3 Idea screening

This step would reduce the number of ideas, keeping good ones, clearing bad ones The committee of new product would write description of the product, the target market and the competition, and makes some rough estimates of market size, product price, development time and costs, manufacturing costs and rate of return The committee then evaluates the idea against a set of general criteria

4 Concept development and testing

Attractive ideas must be developed into product concepts It was important to distinguish between a product idea, a product concept and a product image A product idea was an idea for a possible product that the company could see itself offering to the market A product concept was a detailed version of the idea stated in meaningful consumer terms A product image was the way consumers perceive an actual or potential product

After developing some concepts for product, the company could test them with a group of target customers to find out that whether the concept had a strong consumer appeal

5 Marketing strategy development Marketing strategy was the marketing logic by which the business unit hopes to achieve its marketing objectives In this step, the marketing strategy statement had three parts It was:

- The first part described the target market, the planned product positioning, and the sales, market share and profit goals for the first few years

- The second part of the marketing strategy statement outlines the product‟s planned price, distribution and marketing budget for the first year

- The third part of the marketing strategy statement describes the planned run sales, profit goals and marketing mix strategy

long-6 Business analysis

In this step, after management had decided on its product concept and marketing strategy, it could evaluate the business attractiveness of the proposal

Business analysis involved a review of the sales, costs and profit projections for

a new product to find out whether they satisfy the company‟s objectives If they did, the product proceeded to the product development stage To estimate sales, the company looked at the sales history of similar products and conducts surveys of market opinion It then estimates minimum and maximum sales to assess the range of risk After preparing the sales forecast, management could estimate the expected costs and profits for the product, including marketing, R&D, manufacturing, accounting and finance costs The company then used the sales and costs figures to analyse the new product‟s financial attractiveness

7 Product development

The product development was developing the product concept into a physical product in order to ensure that the product idea could be turned into a workable product This step was conducted by R&D department of the company These ideas would be turned into workable products based on tested concepts After that, the sample would be test in the lab and field conditions to see how this going The company also had to consider about producing system after the test

8 Test marketing

Test marketing was the stage of new-product development where the product and marketing programme were tested in more realistic market settings

The market test gave the company experiences before the official introduction and a good test market provided a wealth of information about the potential success of the product and marketing programme The test marketing also applied to new service products In the book, Philip Kotler introduced an example of airline‟s electronic ticket He also gave the audiences three ways to test market: standard test markets, controlled test markets and simulated test markets

9 Commercialization

This was step of introducing product to the market after test marketing It cost the company a lot of money in the first year for advertising, sales promotion and other marketing effort If the company failed in this step, competitors might have chance of replacement The company had to answer some questions in this step such as when, where, whom and how the new product could be introduced

Products in general and new product development were the most important elements in marketing mix because they decided whether other marketing strategies were used or how to be implemented It was the fact that, these curent companies‟s products would be replace by other newer ones But the new product was also failed The company had to use and focus on the nine steps of the new product

1.4.2 Promotion mix

The Promotion mix was the specific mix of advertising, personal selling, sales promotion and public relations that a company used to pursue its advertising and marketing objectives, Kotler wrote It also was the very important element of marketing mix If the company had good products and services but they did not had good promotion strategy, people could not know who they were, what products were and of course, they could be failed That was the reason why every company must used at least one of below promotion mix:

 Advertising Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor

of making sales and building customer relationships

 Sales promotion Short-term incentives to encourage the purchase or sale of a product or service

obtaining favourable publicity, building up a good „corporate image‟, and handling or heading off unfavourable rumours, stories and events

consumers both to obtain an immediate response and to cultivate lasting customer relationships – the use of telephone, mail, fax, email, the Internet and other tools to communicate directly with specific consumers

Because of the case study was a specific service so the author would like to choose three out of five elements in the promotion mix to use They were advertising, sales promotion, and public relations

The company had to answer some questions related to advertising such as: what is it for, how much money would be spent, how to implement and in what way… after answering these questions, the company would know their advertising campaign

Bellows were some steps in making a advertising plan

- Set advertising objectives: this was the first step in advertising and it depended

on the specific target audience during the specific period of time Three main purpose of advertising were to inform, persuade or remind and they depended

on the product life-cycle

- Setting the budget: the budget for advertising was depended on not only objectives but also on stage of the product life-cycle, market share, competition and clutter, advertising frequency, and product differentiation It was not easy to set advertising budget The overspend firms believed in this “insurance” against other not spending enough Many companies relied on their sales forces to bring

in orders and this would affect companies‟ image

- Developing advertising strategy: included creating the advertising messages and selecting the advertising media

o Creating the advertising messages: in this modern life, people received thousand of ads everyday To gain and hold the attention of viewers, advertising messages must be well planned, more imaginative, more innovative, more entertaining and more rewarding to consumers First of all, marketers must defined the target customer benefits that could be used as advertising appeals

Message strategy statements tend to be plain, straightforward outlines of benefits and positioning points that the advertiser wanted to stress The advertising must be a compelling creative concept or big ideal Advertising message should have three characteristics: meaningful, believable and distinctive The way of saying message was also important To execute the message, people must choose the best style, tone, words and format There were some style to choose such as slice of life, lifestyle, fantasy, mood or image, musical, personality symbol, technical expertise, scientific evidence, testimonial evidence

o Selecting advertising media: there were some main steps as deciding on reach, frequency and impact; choosing among chief media types, selecting specific media vehicles; and deciding on media timing First of all, the company must

decide how many percentage of the target market to be reached and how often

The more percentage and frequency, the more money spending for ad budget

The second was the types of media and timing on this chose ones Some types

of media were newspapers, television, direct mail, radio, magazines, outdoor and the Internet Table below showed the advantages and limitations of each type of media

acceptance; high believability

Short life; poor reproduction

audience

cost per exposure; combines

appealing to the senses

High absolute cost; high clutter;

fleeting exposure; less audience selectivity

selectivity; low cost

Audio presentation only; low

high-good pass-along readership

Long ad purchase lead time; high cost; some waste circulation; no guarantee of position

flexibility; no ad competition within the same media; allows personalization

Relatively high cost per exposure;

“junk mail” image

audience controls exposure

In the same type of selected media, marketers had to decide specific name of channel or magazine For example, VTV3 got more rate of audiences than HTV2 or motor magazine for men and beauty magazine for women etc… it must be balanced between cost and audience quality

- Evaluating advertising: there were some ways to measure the advertising such

as compare past sales with past advertising expenditures or use the same marketing effort in different areas then see the differences in sales etc…

- Decision in centralization or decentralization: one company had business in over the country or over the world had to think about using different marketing and advertising strategies The company had to care about some factors such as corporate and marketing objectives, product uniformity, product appeal, cultural sensitivities, and legal constraints For example, a picture of beautiful woman wearing underwear of Victoria Secret may not allow in some countries because

a product or service, sales promotion offered reasons that would achieve immediate sales

Sales promotion included a wide variety of promotion tools designed to stimulate earlier or stronger market response Consumer promotions included money-off, coupons, premiums, contests and others Trade promotions range from special discounts, free goods and loyalty bonuses to training Business promotions include many of the same tools used for consumer or trade promotions such as conventions and trade shows, as well as sales contests Sales force promotions include bonuses, commissions, free gifts and competitions

The company had to set sales promotion objectives Each type of promotion had its own objective such as consumer promotions often used to increase short-term sales

or to hold and reward loyal customers Otherwise, trade promotions often used to motivate retailers to carry new items and more stock etc Objectives should be measurable and should be consumer relationship building The company should not only use promotion to increase short-term sales volume or temporary brand switching, they should be used to help reinforcing the product‟s position and build long-term relationships with customers

There were some major sales promotion tools as the following:

- Consumer promotion tools: The main consumer promotion tools include samples, coupons, cash refunds, price packs, premiums, advertising specialities, patronage rewards, point-of-purchase displays and demonstrations, and contests, sweepstakes and games

- Trade promotion tools: Trade promotions used to persuade wholesalers to carry

a brand, give it shelf space, promote it in advertising and push it to consumers

There were some trade promotion tools such as contest, premiums, displays, straight discount off, allowance, free goods, or incentive

- Business promotion tools often used to industrial customers The company used

to spend huge of money to generate business leads, stimulate purchase, reward customer and motivate sales people There were many similar tools with trade promotion and consumer promotion but there were two main business promotion tools: conventions and trade shows, and sales contests

After having an objective and some tools to use, the company could develop the sales promotion programme

Developing the sales promotion programme

In order to have a success sales promotion campaign, the company must decide carefully some very important decisions otherwise; the campaign could be backfire and damage its reputation and brand image These decisions included:

- Size of incentive: it should be minimum to success, a larger incentive had more

- Conditions for participation: everyone or select group; date of starting and closing, proof of purchase, it should be clear

- The length of the promotion: not too short and not too long for customer to buy

- Response mechanism: immediate reward such as price reduction often had a higher response If the incentive requires further action to be taken by the consumer the rate of response could be reduced

- Pre-test to find out if these tools were appropriate and if the incentive size was right Pre-test could be implemented in a selected location

- Lead-time: time to prepare before launching the programme

- Sell-off time: time from launching to programme ends

- Evaluation: the most common evaluation method was to compare sales before, during and after promotion

In general, sales promotion played an important role in the promotion mix In order to use it well, the company had to defind clear objectives, select the best tools, design the sales promotion programme and evaluate the results It should

be coordinating with others promotion mix as public relation

1.4.2.3 Public relation

Public relation (PR) was very popular in the modern life This was a very important technique of mass-promotion that had a strong impact on bublic awareness and was much lower cost than advertising Public relation used to build brand not advertising

Public relation had some several tools as news, speeches, special events, written materials, audiovisual materials, corporate-identity materials, public service activities, company website and sponsorship For example, Dutch lady, a brand name of Frisland Campina Vietnam, raised a fund name “Den dom dom” (Fire-fly light) for poor students The company used mix PR tools such as news, speeches, events and public service activities Of cause, the website of the company had full

of the programme information

The most important task in doing PR was making decision about what message and how to implement the PR plan to meet the company‟s objective The message was often depend on the objective of PR and the most chose tools in PR was event

However, implementing PR was not easy because it needed to have good relationship with media editors These editors decided to use or not the company‟s stories

It was hard to measure PR impact because it used to go with other marketing activities Sales and profit impact was the best way to measure but the brand or product awareness, knowledge and attitude were also types of measure factors For the Dutch lady example, the brand awareness rise 10% and sales rise 2% were the impact of PR activities

In general, firms used PR to gain favourable publicity and to build up a good

“image” The company used many tools in doing PR to communicate with consumer and publicity PR was used in accompany with other tools of marketing

as advertising and sales promotion

1.4.3 Place

Place was one of the marketing mix element and was very important for not only firms that produced goods but also services In this part, the author wanted to mention to distribution channel for service industry

The traditional theory about managing marketing channels for products included supply chains and value delivery networks; channel behaviour and organisation, channel design decisions, logistics and supply chain management and channel trends However, managing marketing channel for service was different It had some but not all content of the general marketing channel The author just wanted to mention some element that useful for the analysis later on

Firms could sell their goods and services directly to customers or through the distributors Marketing channel or distribution channel was a set of interdependent