understanding vietnamese consumer behavior for toyota yaris and recommendation for promotion activities of toyota motor vietnam

------DANG THI VINH HA UNDERSTANDING VIETNAMESE CONSUMER BEHAVIOR FOR TOYOTA YARIS AND RECOMMENDATION FOR PROMOTION ACTIVITIES OF TOYOTA MOTOR VIETNAM MASTER OF BUSINESS ADMINISTRATI

- -DANG THI VINH HA

UNDERSTANDING VIETNAMESE CONSUMER

BEHAVIOR FOR TOYOTA YARIS AND RECOMMENDATION FOR PROMOTION ACTIVITIES OF

TOYOTA MOTOR VIETNAM

MASTER OF BUSINESS ADMINISTRATION THESIS

SUPERVISOR: Dr LE THI MY LINH

HANOI-2013

TABLE OF CONTENT

TABLE OF CONTENT i

LIST OF TABLES v

LIST OF FIGURES vi

LIST OF CHARTS vii

ACKNOWLEDGEMENT 1

ABBREVIATIONS 2

EXECUTIVE SUMMARY 3

CHAPTER 1 INTRODUCTION 6

1.1.Background 6

1.2 Rational 7

1.3 Research objective 8

1.3.1 Overall objectives: 8

1.3.2 Specific objectives: 8

1.4 Research questions: 8

1.5 Research methodology 9

1.5.1 Research process 9

1.5.2 Research approach 10

1.5.3 Data resources 10

1.5.4 Data processing: 14

1.5.5 Research scope 14

CHAPTER 2 THEORETICAL BACKGROUND ON CONSUMER BEHAVIOR 15

2.1 Definition of consumer behavior 15

2.2 The importance of study consumer behavior 16

2.3 Model of consumer behavior 17

2.4 Factors influencing consumer behavior 19

2.4.1 External influences 19

2.4.2 Internal factors 23

2.5 Consumer buying process 27

2.5.1 Problem recognition 28

2.5.2 Information search 29

2.5.3 Evaluation of alternatives 30

2.5.4 Product choice 30

2.5.5 Post purchase 32

2.6 Promotion mix 32

2.6.1 Advertising 33

2.6.2 Personal Selling 34

2.6.3 Sales Promotion 34

2.6.4 Public Relations 35

2.6.5 Choice of promotion mix 35

CHAPTER 3 OVERVIEW OF VIETNAM AUTOMOTIVE MARKET AND YARIS MARKET 37

3.1 Overview of Vietnamese automobile market 37

3.2 Competitive environment 40

3.3 External environment analysis 42

3.2.1 Economic environment 42

3.2.2 Demographic environment 42

3.2.3 Social and cultural environment 43

3.2.4 Political and legal environment 43

3.3 TMV overview 44

3.3.1 TMV development history 44

3.3.2 TMV outstanding achievements 46

3.3.3 TMV-SWOT analysis 49

3.4 Toyota Yaris market in Vietnam 52

3.4.1 Overview of Small- car market in Vietnam 52

3.4.2 Development history of Yaris in Vietnam market 53

3.4.2 Competitors of Yaris in Vietnam market 54

CHAPTER 4 FINDINGS ON YARIS CONSUMER BEHAVIOR AND CURRENT MARKETING MIX 57

4.1 Characters of respondents 57

4.1.1 Demographics 57

4.1.2 Life style and media habit 60

4.2 Car ownership 61

4.3 Problem recognition 62

4.4 Information searching and importance of Car Purchase Decision 64

4.4.1 Information searching 64

4.4.2 Importance of Car purchase decision 66

4.4.3 Role of making buying decision 68

4.5 Alternatives evaluation 69

4.5.1 Other alternative cars 69

4.5.2 Evaluation criteria for car purchase 70

4.6 Consumer choice 72

4.6.1 Reasons for consumers to buy Yaris 72

4.6.2 Reasons to choose dealer to buy Yaris 74

4.6.3 Factors affecting consumers’ final decision 75

4.7 Consumer post purchase 76

4.8 Summary of the findings on Yaris consumer behavior 78

4.8.1 Consumer profile 78

4.8.2 Need recognition 79

4.8.3 Information search 80

4.8.4 Alternative evaluation 81

4.8.5 Consumers’ Yaris evaluation 82

4.9 Findings on current marketing activities for Toyota Yaris 83

4.9.1 Product 83

4.9.2 Price 84

4.9.3 Promotion 85

4.9.4 Distribution 86

4.10 The gaps between current marketing mix and Yaris consumers’ expectation 87

4.10.1 Product 87

4.10.2 Price 87

4.10.3 Promotion 87

4.10.4 Distribution 89

CHAPTER 5 RECOMMMENDATIONS FOR TMV PROMOTION ACTIVITIES 90

5.1 Defining target market 90

5.2 Setting the promotional objectives 91

5.3 Improving promotion activities 91

5.3.1 Clear message conveying 91

5.3.2 Means of promotion mix 91

5.4 Improving other marketing mix 95

5.4.1 Product 96

5.4.2 Price 99

CONCLUSION 100

REFERENCES 101

APPENDIX 1 TOYOTA YARIS CONSUMERS’S SURVEY 103

APPENDIX 2 GUIDANCE FOR SALE MANAGER IN_DEPTH INTERVIEW 112

LIST OF TABLES

Table 3.1: Sales volumes of Vietnamese hatchback segment 55

Table 4.1: Demographic information of the respondents 57

Table 4.2: Table of average monthly income of the respondents 58

Table 4.3: Table of education and Career information of the respondents 58

Table 4.4: Table of household size type of the respondents 59

Table 4.5: The respondents’ habit 60

Table 4.6: Main users of the vehicles 61

Table 4.7: The usage of your current car 64

Table 4.8: the Length of time from initial Decision to buy to placing order 66

Table 4.9: The importance of car purchasing decision 67

Table 4.10: The participation of each activity 68

Table 4.11: Importance of car purchase criteria 70

Table 4.12: Satisfaction about Yaris’s features 77

Table 4.13: Difference between TMV Yaris and PI Yaris 83

Table 4.14: Core contents for Yaris advertisement 84

Table 4.15: Yaris TMV price quotation basing on Yaris imported from overseas 85

Table 4.16: TMV marketing schedule for Yaris 88

Table 5.1: Consumer expectation for some option upgrade 98

LIST OF FIGURES

Figure 1.1 Research process 9

Figure 2.1: model of consumer decision making 17

Figure 2.2: Maslow’s hierarchy of needs 25

Figure 2.3: Flowchart of the consumer decision process 28

Figure 2.4: Factors break buying decisions 31

Figure 2.5: when elements of promotion are most useful 36

Figure 3.1: The stages of automotive and auto parts industry in the world 37

Figure 3.2: TMV dealer system 46

Figure 3.3: TMV Production line 48

Figure 4.1: Consumer profiles 79

Figure 4.2: Motivations to buy 80

Figure 4.3: The information sources 81

Figure 4.4: Image of Yaris advertisement 88

Figure 5.1: Upgrading features in new Yaris 97

Figure 5.2: Positioning Yaris price 99

LIST OF CHARTS

Chart 3.1: Vehicle distribution/1000 people 39

Chart 3.2: Vietnam automotive market from 2006-2012 39

Chart 3.3.: TMV market share in 2010 41

Chart 3.4: Hatchback market share 44

Chart 3.5: TMV performance from 2007 to 2012 47

Chart 3.6: Market shares in hatchback segment 55

Chart 3.7: Yaris market share in Medium compact segment 56

Chart 4.1: Types of car purchase 62

Chart 4.2: Motivations of car purchase 63

Chart 4.3: Information sources 65

Chart 4.4: Relationship between the importance of the decision and the length of time 67 Chart 4.5: Competitors 69

Chart 4.6: Car purchase criteria 71

Chart 4.7: Reason to choose Yaris 73

Chart 4.8: Reasons to choose the dealer 74

Chart 4.9: Overall satisfaction about your current car 76

Chart 4.10: Respondents’ satisfactions about Yaris’s features 78

This report is the result of my master thesis at Business School of NationalEconomics Universtiy with name “Understanding Vietnamese consumer behaviorfor Toyota Yaris and recommendations for promotion activities of Toyota MotorVietnam”, implemented with a great deal of support from teachers and consumersand sale persons, sales managers in some Toyota dealers in Hanoi I am grateful to anumber of people who have helped me in the Writing of this research

Firstly, I would like to express my gratitude to Dr Le Thi My Linh, whoguided me all her heart during the process I wrote the assignment It can be sure thatwithout her help, this thesis hardly has this shape and content Furthermore, I wouldalso like to thank the lecturers who taught me others subjects in BSNEU and createdgood conditions for me to study and write this assignment

Secondly, I would like to thank all consumers, sales persons and salesmanagers in Toyota Lang Ha Limited and some other Toyota dealers in Hanoi whohelped me to answer the survey, the interviews and collect information aboutToyota Yaris in particular and Vietnamese automotive market in general during thewhole process of my study

Last is my special thanks given to my big family, who have shared all with meand help me to overcome many difficulties in study and in ordinary life tosuccessfully complete this thesis

With high appreciation

Dang Thi Vinh Ha

EMBA 9A

ASEAN: Association of Southest Asian Nations

CBU: Completed Built Unit

CEO: Chief Executive Officer

CKD: Completely Knocked Down

CV: Commercial Vehicle

EMS: Express Mail Service

FDI: Foreign Direct Investment

GDP: Gross Domestic Profit

MPV: Multi-purpose Vehicle

SCT: Special Consumption Tax

SUV: Sport Utility Vehicle

PC: Passenger Car

PI: Parallel Importer

PR: Public Relations

HCM: Ho Chi Minh City

TMC: Toyota Motor Corporation of Japan

TMV: Toyota Motor Vietnam Company Limited

VAMA: Vietnam Automobile Manufacturers Association

VAT: Value Added Tax

VEAM: Vietnam Engine and Agriculture Machinery Corporation

VMC: Vietnam Motor Corporation

WTO: World Trade Organization

EXECUTIVE SUMMARY

With the dramatic development of Vietnam economy in recent years, theautomobile industry has seen significant increase in terms of market size, number ofmanufactures as well as revenues Toyota Motor Vietnam Co., Ltd (TMV) is anautomobile Join Venture founded on September 1995 Being the first FDIautomaker in Vietnam since 1995, TMV has developed with impressive businessachievements during 16 years In 1999, Toyota launched Yaris, a global strategicvehicle based on the concept of the car that creates a new sense of values to thecompact car Appeared in Vietnam firstly as an imported model in 2007, Yaris hasimmediately become a very favorite model of young and successful people with theaccumulated sales of more than 6,000 units (as of 2010) When the competitiveness

in the market is becoming more severe, there should be a focus on studyingconsumer’s behavior to prepare for the development of new CKD Yaris in the nearfuture With this issue, it is crucial that TMV develop the right marketing strategiesthat suit with consumes’ behavior and needs to expand Yaris market share in thenext period Therefore, in the study, I hoped to analyze Yaris consumer’s behavior

to identify factors affecting their buying decision Then some recommendationswere given to help TMV improve their promotion activities to better approach Yaristarget consumers

To achieve the research objectives, the author had combined both qualitativeand quantitative methods In the quantitative methods, questionnaire survey wasconducted with 180 consumers who bought Yaris within the year of 2011 & 2012.Through the survey, consumers’ attitudes, perception and expectations toward Yaris

of TMV were identified In the qualitative method, in-depth interviews wereconducted with 5 sales managers in 5 Toyota dealers in Hanoi Through theinterviews, their opinions and perceptions about Yaris consumers and TMVmarketing policy as well were explained

After collecting and analyzing data, the main findings were figured out asfollowing:

Consumers used Yaris as transportation mean to serve basic needs such assafety, convenience, avoiding bad influence of environment and weather Apartfrom that, using the car also helped consumers to reflect their belonging to socialupper class

Car purchasing decision was an important decision for most of Yarisconsumers Consumers got information from different channels, car sales staff,internet, family/friend (word of mouth), car shows etc, but with the rapiddevelopment of internet, such a lot of consumers start to use internet to get carinformation that internet has become the second wisely used channel to getinformation in my study

Yaris consumers took “Durability” as the most important characteristic andtook “Safety” as the second most important and “price” as the third importantcharacteristic as purchasing a car The consumers did not pay much attention to

“riding comfort” or “power” because they might either not have much knowledge orthey were driven by other features The consumers also considered “exterior” moreimportant than “interior” It indicated that they were status-seeking and theypreferred to choose a car with a good appearance to show their good social statusand want to get respects from others

Consumers chose to buy Yaris because of its traditional features like all otherToyota models such as brand name, fuel efficiency, and durability Besides, Yarisalso could create unique features itself They were overall design and “easy todrive” which were very preferred by women

However, most of consumers evaluated that current Yaris still had many specsunder their expectations or weak competiveness in comparison with its rivals,especially with Ford Fiesta with many modern and high-tech options

Through in-depth interview with several sales managers, current marketingactivities for Yaris by TMV were figured out to have some weakness such ascompetitive weakness of product with other competitors, long time of delivery, notcomprehensive advertisement activities or promotion Thus Yaris has not showed itsunique features besides of its Toyota traditional ones.

Basing on the findings, the author proposed some recommendations for TMVwhen introducing the new CKD Yaris as follows: (1) Implementing advertisementand media activities to focus directly on the target consumers (2) Improvingknowledge of Yaris specifications and accessories in order to persuade consumers

in comparison with other rivals (3) Building up Yaris image of a feminine andfamily car through PR activities such as Yaris Festivals, Car care clinics, etc (4)Applying some sales promotion activities such as engine oil changing free coupon,spa and massage coupons, service discount coupons, etc (5) Beside of promotionactivities TMV could improve some other marketing activities to be successful inhatchback segment like: Remaining the price in order to remain Yaris in the highclass segment; Equipping some more options so that the discrepancy between Yarisvalues and pricing compared to other competitors can be balanced; Decreasing thewaiting time to receive vehicles

The author really hopes that this research can bring some valuable things to TMVand positive results can be obtained by applying implications given in this thesis

CHAPTER 1 INTRODUCTION 1.1.Background

Vietnam is a developing country with a population of about 88.78 million asthe end of 2012, an increase of 1.06 percent over last year, reported by the VietnamGeneral Statistics Office in 2012 Vietnam is an attractive market in the ASEANregion Vietnam has a thousand year history, with an originally traditional culturevariety of relics The culture, society, politics are always stable In recent years,along with the development of economy, the incomes of Vietnamese people areincreasing day by day According to World Bank report, between 1990 and 2010,Vietnam’s economy has grown at an annual average rate of 7.3 percent, and the percapita income almost quintupled

Accompanied with the rapid expansion of the economy, the automobileindustry has seen significant increase in terms of market size, number ofmanufactures as well as revenues Since the first beginning in 1991 with two FDIcompanies- Mekong Auto and Vietnam Motors Corporation (VMC), now Vietnamautomobile industry has total of 100 enterprises, including 17 assemblers and nearly

80 suppliers with 112,224 units sold in 2012

The rapid development of the economy has helped to change Vietnamesepeople’s lifestyle and purchasing attitudes strongly With the rate of car ownershipwas 10.5 cars per 1,000 population, ranking 50th among 52 car manufacturingcountries Vietnam will be one of the potential markets for auto investors andToyota as well It is expected that Vietnam will see a boom in car use by 2020 asforecasted at a seminar held by the Heavy Industry Department of the ministry ofIndustry and Trade The seminar held that 2020 will begin a booming period for thecountry’s car demand with a rate of 38 cars per 1,000 populations that will increase

to over 50 cars per 1,000 populations by 2025

TMV is an automobile Joint Venture founded on September 1995 Being thefirst FDI automaker in Vietnam since 1995, TMV has developed with impressivebusiness achievements during 16 years In 1999, Toyota launched Yaris, a globalstrategic vehicle based on the concept of the car that creates a new sense of values

to the compact car Appeared in Vietnam firstly as an imported model in 2007,Yaris has immediately become a very favorite model of young and successfulpeople with the accumulated sales of more than 6,000 units (as of 2010) Since thegovernment changed Special Consumption Tax (SCT) from April 2009, passengercar (PC) sales volume increases considerably from 2009 On the basis of thisopportunity, TMV has considered to expand their PC segment Yaris hatch belongs

to this segment and thus is considered one of their projects In Mar 2011, TMVofficially introduced Yaris imported from Thai land in Viet Nam It can be seen as atrial of TMV for a completely new market segment- hatchback before officiallyassembling Yaris in Viet Nam

1.2 Rational

In general, for most Vietnamese people, purchasing a car is the second mostimportant and expensive investment, next to purchase of a house Thus, it requestsconsumers to highly involve in purchase process

Like all automotive consumers, Yaris consumers undertake complex buyingbehavior when they are highly involved in a purchase and perceive significantdifferences among brands They will pass through a learning process, first developingbeliefs about the product, then attitudes, and then making a thoughtful purchasechoice Because Yaris was first time officially introduced in Vietnam market, thereare not so many studies regarding Yaris purchasing behavior which have been done

so far Therefore, in order to develop Yaris share successfully in Vietnam market,TMV must understand the information-gathering and evaluation behavior of Yarisconsumers so that we can have suitable marketing activities Marketing is such a

“wide knowledge” term that it is very hard to mention within the scope of this study

So in my study, I limited my recommendations mainly to promotion activities

Besides, I proposed some supporting marketing activities in order to more effectivelyattract the target consumers That is the reason why I chose the subject for my thesis:

“Understanding Vietnamese consumer behavior for Toyota Yaris andrecommendation for promotion activities of Toyota Motor Vietnam”

1.3 Research objective

1.3.1 Overall objectives:

The aim of this research is to analyze the consumer behavior to identifyfactors affect consumer decision process in buying Yaris The finding can helpTMV to improve effective marketing activities to better reach to their targetconsumers in this market segment

1.3.2 Specific objectives:

In order to solve the research problem, the thesis focused on some specificobjectives as followings:

- To understand decision making process of the Toyota Yaris consumers

- To analysis factors influencing buying behavior of Toyota Yaris consumers

- What are the factors influencing Yaris consumers’ buying process?

- Who involves in the decision making stages of the Yaris consumers?

- How does the current TMV marketing match with consumption patterns andconsumers’ characteristics in Yaris segment?

- What are recommendations for TMV in Toyota Yaris promotion activities?

1.5 Research methodology

1.5.1 Research process

In my study, I started with searching the consumer behavior theories related tothe subject, and then I designed a survey questionnaire and an in-depth interview forcollecting data to analyze and interpret them At last, a conclusion was given out torecommend effective promotion activities for TMV on the basis of the analysis

Figure 1.1 Research process

Source: Designed by author

1.5.2 Research approach

There are two main research approaches in business research, quantitativeand qualitative Quantitative researchers are more concerned about issues of design,measurement, and sampling because their deductive approach emphasized detailedplanning prior to date collection and analysis Qualitative researchers are moreconcerned about issues of the richness, texture and feeling of raw data because theirinductive approach emphasize developing insights and generalizations out of thedata collected (W.lawrence et al (2000), p122)

In my study, both qualitative and quantitative approaches were used

I used questionnaire for Yaris consumers to make generalization about Yarisconsumers’ buying behavior characteristics That is the quantitative approach

The qualitative approach was used by designing in-depth interview forToyota dealer leaders in order to generalize about the performance of currentToyota Viet Nam’s marketing activities

Once data is obtained, and then it will be analyzed, it becomes the basis forconclusions and decision-making for marketers

Secondary data was necessary and applied right from the beginning andduring the research implementation In secondary data collection, information was

collected through synthesizing and reviewing secondary data, included (but notlimited) theories on consumer behavior and secondary data on Vietnam automobilemarket in general and TMV’s market share in particular In this step, content ofsurvey tools for next stage was designed based on collected information.

In this research, secondary data was collected from published sources:Annually performance report of TMV, annually market share of VAMA, reports onconsumers’ features so that I could learn about the business situation of TMV.1.5.3.2 Primary data

The primary data was collected both through qualitative method (in-depthinterview) and quantitative method (consumer survey) about the practicalperformance of TMV’s marketing activities and its consumers in Yaris segment.For consumer survey, questionnaires were designed and distributed to respondentsmainly through emails and mails as well For in-depth interview, face to face or on-phone talks were organized

1.5.3.2.1 Consumer survey

Questionnaire design

When designing the questionnaire, I started to find out questions related to

my purpose of study such as possible factors that could influence car purchasebehavior, then after evaluating I chose the most relevant ones to form myquestionnaire

The questionnaire comprised of two parts

The first part was the main part of the questionnaire It included 21questions; it aimed to find out the respondents’ opinions and decisions of carpurchasing and factors which affect their purchasing decisions Most of thequestions were multiple-choice questions because they were easy to answer, tookless time to answer, had less potential to error, and made comparison, tabulation andanalysis easier (Aaker,D.A et al (2004),p 316-317) I used 5-point Likert scaledquestions on which the respondents were asked to measure their satisfaction

towards current cars and the importance of each factor in their car purchasing Thescale used in our research is that “1” means “very dissatisfied” and “5” means “verysatisfied” and “1” means “very unimportant” and 5 means “very important” Liker-type scale statements were chosen to evaluate consumers’ attitude in our studybecause the Likert-type scale had been used by persuasion researchers for over threedecades greatly The original scale of this type was developed by Rensis Likert andwas explained in his article, “A technique for the Measurement of Attitudes, “inAchieves of Psychology (1932) He reported very satisfactory reliability data for thescales developed with his procedure.

The second part was the demographic part, by which the author asked therespondents about gender, age, income, household size, education level, occupationand habit

Sampling methods:

For the data collection, I mainly collected the primary data by sendingquestionnaires through EMS There were some ways of collecting data for researchsuch as: through mail, email, face to face meeting, handing questionnaire in publicplaces, etc However, I chosen sending EMS mail method because of the followingreasons:

1) It saves time because the questionnaire can easily be sent to respondents

in different places and I don’t have to meet them face to face

2) It is convenient for respondents because sending mail is still one of themost popular information transfers in Viet Nam Respondent will feed more relaxand easier to answer sincerely when they write down on paper

However, mailing method also has one disadvantage That was it had noinstant feedback from respondents The address may be not correct andquestionnaires may not reach to the right respondents In case, respondents do notwant to answer the survey or give us lack information, I cannot know even until Ifinished the survey already In other words, I did not have feedback for each case of

respondents quickly I could not control and follow up the response rates as inemailing method.

Sample size

I sent total of 200 questionnaires to our Yaris consumers who bought Yariswithin the year of 2011 & 2012 and received 190 questionnaires back Of which, Igot 5 incomplete questionnaires and 5 wrong address As I mentioned in thedisadvantages of this method in the above part, I could not follow up the incompletequestionnaires to get the missing answers back In the end, I got only 180 validquestionnaires

The survey can be summarized as below:

Sample size Data collection

Type ofinformation

180 consumers who bought

Yaris within the year of 2011

& 2012

Quantitativemethod

Questionnaire

Consumerbuying behaviorinformation

1.5.3.2.1 In-depth interview of some Toyota Sales Managers.

The interview was to find out current Toyota marketing activities for Yarisproduct and their influence to consumption under the assessment of each manager.This was the base for finding out the gaps between TMV marketing performanceand consumer expectation Respondents also helped to explain more detail for someanswers of the questionnaire survey

Sample size:

Total of interviewees conducted for data collection were 5 dealer managers

Data collection method:

Due to time and budget limitation of the research, phone or face- to- faceinterviews conducted in interviewees ‘offices were carried out

The interview data collection was described as below:

Sample size Data collection

1.5.4 Data processing:

I used Microsoft Excel to design the questionnaire, and then I used Excel to analyzethe data I mainly use descriptive statistics to identify the main factors affecting theconsumer behavior

- Survey was carried out in the North of Viet Nam

- 05 Toyota dealer sale managers in Hanoi

CHAPTER 2 THEORETICAL BACKGROUND ON CONSUMER

BEHAVIOR

2.1 Definition of consumer behavior

An important part of the marketing process is to understand why a consumer

or buyer makes a purchase Without such an understanding, businesses find it hard

to respond to the consumer's needs and want to offer the right product to the rightconsumer Understanding consumer behavior plays an importance role for thecompany’s business strategy

According to the point of view of John C Movenand Micheal Minor

“Consumer behavior is defined as the study of buying units and the exchangeprocesses involved in acquiring, consuming and disposing of goods, service,experiences, and ideas” (John C Mowen and Micheal Minor (1998), pp7)

Consumer behavior is the study “of the processes involved when individuals

or groups select, purchase, use, or dispose of products, services, ideas, or experiences

to satisfy needs and desires” (Micheal Solomon 1995, 7) In the marketing context,the term “consumer refers not only to the act of purchase itself, but also to patterns ofaggregate buying which include pre-purchase and post-purchase activities Pre-purchase activity might consist of the growing awareness of a need or want, and asearch for and evaluation of information about the products and brands that mightsatisfy it Post-purchase activities include the evaluation of the purchased item in useand the reduction of any anxiety which accompanies the purchase of expensive andinfrequently- booth items Each of these has implications for purchase and repurchaseand they are amenable in differing degrees to marketer influence

Consumer is on the one end of the exchange process in which resources aretransfer between two parties This process focuses on analyzing consumer buyingbehavior only Organizations buying behaviors will not be discussed within this study

According to Kotler (1994), consumer behavior is the study of how peoplebuy, what they buy, when they buy and why they buy It is a subcategory ofmarketing that blends elements from psychology, sociology, socio psychology,anthropology and economics It attempts to understand the buyer decision makingprocess, both individually and in groups It studies characteristics of individualconsumers such as demographics, psychographics, and behavioral variables in anattempt to understand people needs It also tries to assess influences on theconsumer from group such as family friends, reference groups, and society ingeneral Every family member doesn’t have the same opinion to buy the sameproduct; different family members have different choice to buy the product So, inone family consumer behavior is different.

Researching consumer behavior helps researcher to understand clearly thefollowing matters:

Who is the consumer? The answer for this question describes the profile ofthe consumer including: age, gender, residence, profession…

Why does the consumer want to buy? Consumers concern the benefits of theproducts that company offers They want to have the gets (Quality, satisfaction,specific benefits)

What does the consumer want to buy? Consumers will select the products thebest meet their requirement and expectation

How do consumers buy? The question relates to the way consumers decide

to buy products: place of buying, time of buying, influential factors of buying, etc

Which kinds of features make consumers satisfied or dissatisfied withproducts? Understanding consumer means that company should know thatconsumer satisfied and what consumer dissatisfied

2.2 The importance of study consumer behavior

The product purchase decision is not always done by the user The buyernecessarily purchases the product Marketers must decide at whom to direct their

promotional efforts, the buyer or the user They must identify the person who ismost likely to influence the decision If the marketers understand consumerbehavior, they are able to predict how consumers are likely to react to variousinformational and environmental cues, and are able to shape their marketingstrategies accordingly (Kotler, 1994).

Therefore, consumer behavior research that is looking for answers toquestion “how do consumers respond to the marketing effort the company mightuse?” From that we can understand consumer deeply to attract consumers and createproducts satisfying them best

2.3 Model of consumer behavior

Figure 2.1: model of consumer decision making

Source: Del I.Hawkins- Roger J.Best- Kenneth A.coney (2004), p3,

The above model gives us a general view on structure of consumer behavior.Each of us has a different characteristics, opinion and life-style with others Thereason is that our self-concept and lifestyle are affected distinguish by internalfactors such as perception, learning, memory, personality and by external factorssuch as culture, age, family, career… Self-concept and life-style of each person willhave great influence on his/her daily needs and demands Her decision makingprocess obviously originates from this lifestyle, needs and demands

This decision making process helps the person to learn and achieve a lot ofexperience which vice versa affects to change the factors influencing her lifestyle.Thus people’s behavior and custom are always changeable chronologically.

Consumers are facing with buying decision almost every day Wants areunlimited and the resources to satisfy these wants are limited So the consumersthink rationally before buying any product and they cannot treat the same with alldecisions Some decisions are more complex than others and thus require moreeffort by the consumer Buying toothpaste is totally different from buying a luxurycar The more expensive the good is the more complicated and difficult forconsumer to make buying decision The more difficult to make decision, the moreinformation is required by the consumer There are four types of consumer buyingbehavior on the basis of buyer involvement while purchasing any product: complexbuying behavior, dissonance- reducing buying behavior, habitual buying behaviorand variety- seeking buying behavior

Consumers have complex buying behavior when they have high level ofinvolvement in the buying scenarios with significant amount of perceiveddifferences between brands Involvement refers to actions the consumer must take

to understand the product or service they are motivated to buy

High involvement tends to be associated with products that are moreexpensive, infrequently purchased, technologically advanced, and highly expressive

of the buyer’s personality profile Car is an expensive property to Vietnameseconsumers following a house, so buying a car requires a complex buying behaviorwith very high involvement When high involvement is necessary, the consumerdoes whatever they can to learn: research, read reviews, talk to others, and “testdrive” different models at retail locations

Marketers of high- involvement products like cars need to have anunderstanding of consumers’ behavior, information collection and productassessment as well It is also their job to establish activities to help the consumerslearn about their products, distinguish valued the products bring about, and create

messaging that influences the buyers’ beliefs and attitudes about competitor’sproducts Marketers should make consumers to know the prominent characteristics

of the product in comparison with its competitors such as driving comfort withBMW, wide-space with Mercedes-Benz, or fuel-saving with Toyota)

While it is beyond the scope of this study to provide an in-depth review ofconsumer behavior, it is important to have a basic understanding of the consumer’sdecision-making process, factors that impact this process, and the ways in whichsuch knowledge is utilized in the development of promotional strategies In theremainder of this part, some of the internal and external factors that have beenshown to influence consumer behaviors are examined and then a model of thedecision-making process is considered to make the base for the author to developpromotion activities in the next chapter

2.4 Factors influencing consumer behavior

Consumer behavior includes a wide variety of human activity Consumers indifferent parts of the world lead very different life Organizations stay in business

by attracting and retaining consumers Model of consumer behavior is thefundamental factor on which the companies base to draft out business plans andproduct sales Moreover, by listening carefully to consumers and remaining marketfocused, a company can develop products that are fundamentally different fromthose of its competitors, which can results in increased profit margin

A consumer’s buying behavior has been affected by internal and external factors

2.4.1 External influences

2.4.1.1 Culture

Culture is defined as the patterns of behavior and social relationsthat characterize a society and separate it from others Culture conveys values, ideals, and attitudes that help individuals communicate with each other

and evaluate situations An individual’s culture provides a frame of reference concerningacceptable behaviors, and as such, culture is a learned set of arbitrary values.

Culture is the first and basic factor which controls people’s behavior ingeneral and people’s buying behavior in particular People in different culture willhave different consuming behavior For example consumers in the North ofVietnam usually pay more attention to design oriented to satisfy their need on self-esteem when they buy cars while consumers in the South usually pay more attention

to design oriented for multi-purposes

Marketers should aware of culture difference and changes in order to designfitting products with consumer’s culture

2.4.1.2 Sub-culture

Subculture is segment of the whole culture which has its distinguishcharacteristics with other subcultures Each cultural consists of smaller subculturesthat provide more specific identification and socialization for their members.Subcultures create important market segments which marketers should designproducts and marketing activities on the base of its market’s needs Members of thesubculture also belong to the general culture, but they only share attitudes, beliefsand opinions with others in their subculture

2.4.1.3 Social class

Almost every society has some form of social structures; social classes aresociety’s relatively permanent and ordered divisions whose members share similarvalues, interests and behavior, lifestyle

A person’s social class is defined basing on several factors such asoccupation, income, education… And social class of a person can be changed upand down through his lifetime Marketers have to understand social class of theirconsumers in order to build up a suitable image for their products

For automotive industry, consumers of luxury models use vehicles as a mean

to show their upper class, while consumers in middle class only pay attention tobasic specs of a car such as: safe, time saving, an investment…

2.4.1.4 Family factor

Family is the most important consuming component in a society Almost ofexpensive products such as houses, cars are consumed by households instead ofindividuals Members in a family is the most important reference group which hasgreat influence on buying decision making of every its member

2.4.1.5 Demographics

Demographics are the norm to describe about the population such aspopulation size, structure (age, sex, income, education, occupation…), andallocation (rural and urban) These factors obviously affect people’s culture andthen their buying behavior

Consumer will change their buying behavior through her lifetime according

to their ages Buying behavior also changes in different periods of a family’slifetime In each period, a family will have different needs, financial ability andtastes which lead to suitable buying decisions

Occupation has great influence on buying behavior Consumers withdifferent occupation have different buying behavior A worker will buy safetyworking clothing, cheap lunch while a director will buy luxury suits, having lunch

in restaurant… Marketers have to analyze influence of occupation to product choice

in order to specialize their products for each unique occupation group

Income and economic situation is the prerequisite condition for consumers tobuy goods and services Depending on their own financial ability, consumes canhave different product choice

Education also has influence on buying decision making because it partlyaffects consumer’s occupation and income Consumers with high educationunusually have high income and stable occupation Thus they tend to have modernbuying behavior which pays more attention to products’ appearance and quality.They usually spend more time and effort to search information about the productsbefore making buy decision

2.4.1.6 Reference group

Reference groups of a consumer include all groups which have directly orindirectly influence on his attitudes or behavior There are 3 types of referencegroups:

- Primary groups: are family, friends, neighbors and co-workers, withwhom individuals interact continuously and informally These groups have directaffect on consumer’s behavior

- Idol groups: are groups which consumer wants to become a member

- Anti groups: are groups which consumer doesn’t like and agree with theirattitudes and behaviors

Before making a buying decision, consumer usually wants to have advice,recommendation from members in his primary groups, especially friends, family…The more expensive product is (like cars, house,) with a lot of alternatives, the moreinfluence the consumer has from reference groups In lower value goods andservices, influence level of reference groups is lower correspondently

2.4.1.7 Marketing activities

Marketing activities have rather great influence on consumer behavior.Before making a buying decision, consumer need to search all necessaryinformation for alternative assessment before making final choice, especially whenbuying high valued products with difference between brands In this case, it is veryuseful for company to build and develop consumer’s belief through deliveringinformation, advertising product’s image… Besides sales promoting activities,marketers should pay attention to after sales service as well in order to understandconsumer’s attitude towards the product Consumers always choose to buy productswhich can make them satisfied In case consumers may not feel satisfied with theproduct after buying, business should search to supply the consumer with additionalservices in order to retain their trust toward the product such as insurance, free

repairing, changing Making consumers satisfied with products and service is themost effective advertisement way for every business.

2.4.2 Internal factors

2.4.2.1 Perception

Perception means the adaption of reality Perception is one of the keypsychological factors that influence consumer behavior People’s perception ofsomething can vary greatly from person to person, with each one forming anindividual opinion about the stimuli (agents, action or conditions that elicit aresponse) being received Individuals are continually receiving “messages” throughthe five senses: touch, taste, smell, sight and sound Successful marketers use thosesenses to stimulate consumers to examine a product

Perception includes three main steps: selective exposure, selective distortionand selective retention

- Selective exposure: Everyday, people are facing with a lot of inputs to beexposed to our awareness (for example thousand of advertisement daily) Obviouslypeople cannot remember these stimulus In general they only can keep in their mindthe inputs relating to their current needs and wants For example, a person wants tobuy a computer will pay attention to computer’s advertisement

- Selective distortion: Each person will perceive differently with the samethings and adjust his perception according to his existing experience He may distortcurrent received information, inconsistent with beliefs For example, when a group

of people talk about advantages and disadvantages of Toyota brand, a person wholikes Toyota obviously minimize Toyota mistakes to defend for his Toyota buyingdecision

- Selected memory: People usually forget a lot of what they learnt which

do not support their beliefs and attitudes, but they keep in their mind those that do.For example, a person likes Toyota brand surely remembers all good rumorinformation about the brand and forget the good ones about the other brands

Marketers must distinguish their message from their competitors’ to grabconsumers’ attention People are often willing to pay for a more expensive productover its less- expensive but identical counterpart just because they perceive it to be a

“better” product

2.4.2.2 Learning

Different theorists have different views about learning According to Kotler,learning involves changes in an individual’s behavior arising experience Inlifetime, people learn a lot of experience through positive and active informationsources They can receive these information from their before experience, family,friends, multimedia, colleagues…This learning process causes people to havedifferent perceptions with output stimulus and then have distinct buying behavior.2.4.2.3 Memory

Memory is the combination of gathering information, retaining it in storageover a length of time, to be retrieved and used when a need arises Consumers applythe information they have in memory when making purchase decisions

Marketers have to ensure that consumers have right brand knowledge andexperiences are maintained in memory They should use components stimulatingmemory of consumers such as slogan, brand symbol, unique working image…which have such strong impression on consumer’s mind that they can rememberthem permanently

2.4.2.4 Motives

Motivation describes the reason behind behavior It is caused by a desire tosatisfy a need when it is aroused Motivation can be described in relation to the strength(the level of pull) or direction (the way consumer tries to fill the motivation need)

Maslow’s given the hierarchy needs for consumer behavior, before starting aboutthe consumer behavior, it is important to understand consumer needs Every consumerusually has some hierarchy needs The human needs are arranged in a hierarchy, from

the most pressing to the least pressing They are: self actualization needs, esteem needs,belonging needs, safety and security needs and psychological needs.

Figure 2.2: Maslow’s hierarchy of needs

Source: Kotler (1999), p247

At the beginning, people search to fulfill their basic needs such as food,clothing, shelter… Once physiological needs become gratified, the safety, orsecurity, needs become predominant These needs are essentially the need to be free

of the fear of physical danger and deprivation of the basic physiological needs.Once physiological and safety needs are fairly well satisfied, social or affiliationwill emerge as dominant in the need structure Since people are social beings, theyhave a need to belong and to be accepted by various groups After individuals begin

to satisfy their need to belong, they generally want to be more than just a member oftheir group They then feel the need for esteem- both self-esteem and recognitionfrom others Once esteem needs begin to be adequately satisfied, the self-actualization needs become more pre potent Self actualization is the need tomaximize one's potential, whatever it may be

In summary, people will try to satisfy their most important needs first, whenthey succeed then they will move to the next most important need

In the context of marketing, this theory assists marketers to understand how

to introduce products into the plans, goals, and lives of consumers An individualwill be motivated to satisfy the most pressing need first and be receptive tomarketing messages that address it Understanding consumers’ needs can helpmarketer to have suitable marketing activities such as promotion campaign,advertising which approach to consumers’ need and create motivation forpurchasing product

2.4.2.5 Personality

Personality is created by inner characteristics and by behavior This makes aperson unique Personal characteristics influence the way how people behave ingeneral and how they behave in purchase something in particular

Each person has distinct and unique characteristics such as careful, confident,conservative, aggressive, active, positive… These characteristics have great influence

on buying behavior For example, careful and conservative people are rarely willing

to trial new products while active and creative people usually trend to do

Understanding consumer’s characteristics can help marketers to set upeffective marketing activities to positioning the product and brand name inconsumer’s belief

2.4.2.6 Feelings

Feelings of consumers somehow have influence on their buying decision.When buying, comfortable and stimulus feeling causes consumers to have buyingmotivation, to be more willing to buy and then to easily come to buying decision.Vice versa, the dissatisfaction feeling may block the buying decision For example,

as visiting a beautiful market with comfortable atmosphere of music, consumersmay feel eager to look for and buy goods

Marketers should understand this feeling factor to look after their productdisplays place in order to push up their sales performance

2.5 Consumer buying process

As discussed in the previous parts, there are different points of view toapproach consumer-buying behavior The study of consumer knows as consumerdecision making is the tradition and most popular one In this study consumerbehavior of Yaris also is viewed on the base of this approach

Consumers have to make different kinds of decisions everyday according totheir different needs The most used model could be found in most of marketingtextbook includes five stages: problem recognition, information search, evaluation

of alternatives, purchase decisions and outcomes The below figure 2.3 provides anoverview of the decision-making process

Figure 2.3: Flowchart of the consumer decision process

Source: Michael R.Solomon, p199

2.5.1 Problem recognition

The consumer decision making is triggered by the recognition of a problem

or arousal of a need The need can be caused by internal or external stimulusfactors Marketers should find out circumstances creating consumer’s needs

For example, in the problem recognition phase, the consumer X sees a bigdifference of her current stage and ideal stage The consumer realizes there is aproblem which needs to be solved In our case, consumer X realizes that she

Consumer X realizes that she needs a car for daily use

She uses different sources to find information about cars

She compares several models in terms of design, prices, specifications…

She chooses Toyota Yaris due to its design suitable for her usage.

She drives home the car and enjoys her purchase.

wants a car for her daily transportation The reasons are probably she has justrecruited in a new company in the suburb area and she needs driving the car fromhome to her new office or probably she is not satisfied with driving by motorbikebecause she is proposed a high position in the new company and it requires her

to show her status

Thus by collecting information from consumers, marketers can definestimulus which cause consumer’s need so that they can build suitable marketingactivities such as promotion campaign, advertising which approach to consumers’need and create motivation for purchasing product

2.5.2 Information search

Once a problem is recognized, the consumer enters into the informationsearch phase Consumers need right information to help him/her environment forright data to make a reasonable decision (Michael R.Solomon (2003), p202).Information sources include two types: internal search and external search

- Internal search involves a scan of information stored in memory to recallpast experiences or knowledge regarding purchase alternatives In this kind ofsearch, personal and psychological factors have great influence and it requirescertain low involvement Thus it is very important that marketing programs shouldachieve ‘top of mind” awareness of consumers

- External search involves going outside sources to acquire informationsuch as public sources, marketers’ sources, friends, relative…In this kind ofinformation search, cultural and social factors have great influence on consumerpurchase decision Thus, firms must invest in supplying information available to theconsumer in need through websites, brochures, advertising, and promotion

For high involvement products like car, consumers are likely to use anexternal search In my study, the internal search refers to the different car models inthe consumer’s mind For the external search, it may include the car advertisements,car makers’ websites, dealers’ introduction, friends and relative

2.5.3 Evaluation of alternatives

The third stage is the evaluation of alternatives stage After searchinginformation, consumers are faced with different options and they have to assessthese options to choose the most suitable one for their needs Consumers set up arange of criteria with priority ranks so that they can assess all alternatives such aswhich store to visit, which brand to buy including selection, price, quantity, service,value and convenience (Boone and Kurtz, 2006) Thus, marketers must know whichattributes consumers consider and the importance the consumers place on them inorder to make appropriate marketing activities

Each consumer pays different attention to different products And eachgroup of consumer has distinct evaluation criteria for each product One criterionmay be important for this kind of consumer group, but may be not for the other.Consumer’s belief and attitudes of product also have great influence on theirevaluation Consumer trends to establish his belief in product’s brand and this beliefcan be changed basing on his experience and perception Once he believes in onebrand, he will choose to buy it the next time Thus, it is very important formarketers to build a strong brand name

For example, in my study, Consumer X probably didn’t know much aboutcars, especially the technical aspects of cars, so she may had only considered a fewmajor Japanese brands in her memory because he thinks Japanese brands representsvalue for money and good quality If a company’s product is not included in the list

of alternatives or if information about the product is not available to the consumer,there is no opportunity to compete actively for the potential business (Murray, J andO’Driscoll, A (1996)) Therefore the key to good marketing, according to Murrayand O’Driscoll (1996), is to understand the evaluation criteria used by the consumer

as well as the strengths and weaknesses of the competitors

2.5.4 Product choice

After evaluating the related alternatives, consumer usually develops hisdesire of one alternative which he evaluated and liked best Based on the decision,

the consumer will thereafter make the purchase decision and actually buy theproduct (Kotler, P., Armstrong, G., Saunders, J & Wong, V (2001)

However, there are two factors which can break the link between buying intentionand buying decision They are other people’s attitudes and unexpected factors

Alternatives

evaluation Buyingintention

Other people's attitudes

Unexpected influences

Buying Decision

Figure 2.4: Factors break buying decisions

Source: Philiip Kotler (1999), p258

For example, in my study, consumer X narrowed down his choices byconsidering a list of criteria which may be the most important for her When makingcomparison, Consumer X could choose cars with small size which was easier forher to run on crowded streets and look for parking place Small and convenient size

is considered as evaluative criteria Cars without these attributes will not be onConsumer X choices’ list Another important point is that criteria on which productsdiffer from one another carry more weight in the decision process than those wherethe alternative are similar If all brands being considered rate equally well on oneattribute, consumers have to find other reasons to choose one over another Theattributes actually used to differentiate among choices are determinant attributes(Michael R Solomon (2003), p212) Consumer X probably has considered FordFiesta and Toyota Yaris because these two models are both small and convenient.However, Toyota Yaris has another option consumer X thinks maybe important,fuel-saving So finally consumer X takes Toyota Yaris as her final choice

2.5.5 Post purchase

Finally, there is a post-purchase stage where consumer evaluates the productand its usefulness based on their expectations of the product (Kotler, P., Armstrong,G., Saunders, J &Wong, V (2001)) After purchasing the product, the consumerwill be satisfied or dissatisfied and will be engaged in post purchase behavior Asatisfied consumer sends positive messages or talks favorably to his/her friends orfamily members about the product/service The satisfied consumer will purchaseother products from that company or have repeated purchasing in the future

Because buying Toyota Yaris is a high-involvement process which they exert

a greater purchasing effort in terms of time and search, they usually experiencesome level of discomfort after the purchase That is, they experience some doubtthat they made the right choice This situation is called 'cognitive dissonance'(thinking disharmony) It is necessary to consider the implications of post purchasebehavior for the marketing activities Marketers could understand how to buildbrand loyalty and how to encourage favorable word-of-mouth communication bylearning the post-purchase stage

In summary, consumer decision process- a sequence from recognition of aneed through consumption of a product to satisfy this need is a useful frameworkwithin which to comprehend consumer behavior This kind of information willprovide the company with the basic knowledge required to make marketingdecisions that are both relevant to the consumer and competitively superior(Murray, J and O’Driscoll, A (1996 )

2.6 Promotion mix

According to George E.Belch and Machael A.Belch (1990) definedpromotion as “the coordination of all seller initiated efforts to set up channels ofinformation and persuasion to sell goods and services or promote an idea.” (George

E.Belch and Machael A.Belch (1990), pp 6) Promotion is best viewed as the

communications function of marketing