Principles to build customer loyalty in Vietnam card industry

61 CHAPTER 4 RECOMMENDATIONS TO BUILD CUSTOMER LOYALTY IN VIETNAM CARD INDUSTRY .... LIST OF TABLE Table 3.1 - Vietnam Card Market Size Table 3.2 - Vietnam Card Related Products Table

ĐẠI HỌC QUỐC GIA HÀ NỘI

TRƯỜNG ĐẠI HỌC KINH TẾ

PHÙNG NGỌC HẠNH

IN VIETNAM CARD INDUSTRY

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: TS Vũ Huy Thông Th.S Nguyễn Việt Anh

Hà Nội – 2005

ĐẠI HỌC QUỐC GIA HÀ NỘI

TRƯỜNG ĐẠI HỌC KINH TẾ

PHÙNG NGỌC HẠNH

IN VIETNAM CARD INDUSTRY

Chuyên ngành: Quản trị kinh doanh

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: TS Vũ Huy Thông Th.S Nguyễn Việt Anh

Hà Nội – 2005

TABLE OF CONTENT

CHAPTER 1 INTRODUCTION 1

1.1 NECESSITY OF THE THESIS 1

1.2 PURPOSE 2

1.3 KEY RESEARCH AREA 2

1.4 METHODOLOGY 3

1.5 CONTRIBUTIONS OF THE THESIS 4

1.6 OUTLINE 4

CHAPTER 2 CUSTOMER LOYATY LITERATURE REVIEW 6

2.1 WHAT IS CUSTOMER LOYALTY 6

2.1.1 Customer development process 6

2.1.2 What is customer loyalty ? 8

2.1.3 Customer loyalty and customer satisfaction 8

2.1.4 Customer loyalty is a journey 10

2.2 THE BENEFITS OF CUSTOMER LOYALTY 10

2.2.1 The value of Predictability 11

2.2.2 No price of attraction 12

2.2.3 The ease of doing business 12

2.2.4 Word of mouth marketing 13

2.3 FIVE PRINCIPLES TO BUILD CUSTOMER LOYALTY 14

2.3.1 People do business with people 15

2.3.2 Differentiation 22

2.3.3 Value and Assurance 26

2.3.4 Effective communication 30

2.3.5 Focus 33

CHAPTER 3 RESEARCH ON CUSTOMER LOYALTY IN VIETNAM CARD INDUSTRY 37

3.1 VIETNAM CARD MARKET OVERVIEW 37

3.1.1 Vietnam card market 37

3.1.2 Export opportunities 44

3.2 RESEARCH ON CUSTOMER LOYALTY IN VIETNAM CARD INDUSTRY 45

3.2.1 Objectives of the research 45

3.2.2 Research methodology 45

3.2.3 Data analysis and results 48

3.2.5 CONCLUSION 61

CHAPTER 4 RECOMMENDATIONS TO BUILD CUSTOMER LOYALTY IN VIETNAM CARD INDUSTRY 63

4.1 DEVELOPE ACTIVITIES THAT SUPPORT PEOPLE DOING BUSINESS WITH PEOPLE 64

4.1.1 Test yourself how well you deal with your customers 64

4.1.2 Understand and effectively use the tool KUHL 65

4.1.3 Take the initiative visiting your customers 68

4.2 DEVELOPE ACTIVITIES THAT SUPPORT DIFFERENTIATION 68

4.2.1 Test yourself about your differentiation 68

4.2.1 Always think of something different 69

4.3 DEVELOPE ACTIVITIES THAT SUPPORT VALUE AND ASSURANCE 75

4.3.1 Test yourself about your value preposition and assurance 75

4.3.2 Create value preposition for every product line 76

4.3.3 Stand in your customer’s shoes to prepare value preposition 76

4.3.4 Be flexible in delivering values 77

4.3.5 Ensure promises are kept 78

4.4 DEVELOPE ACTIVITIES THAT SUPPORT EFFECTIVE COMMUNICATION 78

4.4.1 Take a test of your effective communication 78

4.4.2 Prepare well before you meet with your customer 79

4.4.3 Being dedicated during the meet 80

4.4.4 Send thank you note to your customer 81

4.4.5 Create a newsletter 82

4.4.6 Survey about customer satisfaction regularly 84

4.5 DEVELOPE ACTIVITIES THAT SUPPORT FOCUS 87

4.5.1 Examine your focus 87

4.5.2 Do not apply more favor offer to new customer 87

4.5.3 Focus your resources on current customers 88

CONCLUSION 89

REFERENCES 90

Appendix A – Questionnaire for Vietnam card companies 91

Appendix B - Questionnaire for Vietnam Card Customers 95

Appendix C – Sample of Product Installation 101

Appendix D – List of card vendors participated the survey 102

Appendix E – List of card customer 103

LIST OF TABLE

Table 3.1 - Vietnam Card Market Size

Table 3.2 - Vietnam Card Related Products

Table 3.3 - Samples Profiles

Table 3.4 – Satisfaction of Performance

Table 3.5 – Time of business relationship

Table 3.6 – Likelihood of repurchase current card vendor’s products and services Table 3.7–Likelihood of switching to another competing brands when experience poor services

Table 3.8 – Likelihood of recommend current card vendor to others

Table 3.9 – Relation between customer loyalty building and loyalty rate

Table 4.1 – Examine how well you know about your customer

Table 4.2 – Understand your customer by asking questions

Table 4.3 – Examine your difference

Table 4.4 – Examine your value preposition and assurance

Table 4.5 - Examine your effective communication

Table 4.6 – Examine your focus

CHAPTER 1 INTRODUCTION

1.1 NECESSITY OF THE THESIS

Getting customers to come back again and again is the most important endeavor of every business No business can be successful by continually dealing with new customers Repeat customers are the source of all profit

It is estimated that “acquiring new customers can cost five times more than the cost of satisfying and retaining current customers” *Philip Kotler, 2001+ Loyalty means profitability When customers stay longer, they are easier to predict, likely to create emotional bond and recommend us to others Meanwhile, serving cost reduce as we had experience and knowledge about our customers Advertising expense is saved as customers already know about us, our products and services Profit tends to increase and losing customer, especially old one means losing profit

However, many companies in Vietnamese card industry suffer from high customer churn - they gain new customers only to lose many of them A statistic research in MK Technology Group, a well-known brand in Vietnamese card industry showed that, “on average, retention rate of a Vietnamese card company is 45% after 5 years.” The number is low According to International Card Manufacturing Association, average retention rate in 25 leading card

companies is 70% For companies who pay great focus and efforts on building customer loyalty, this rate may reach 80%

Surveys have shown that, Vietnam card companies generally aware the cost

of losing customers, the benefits as well as the necessity of building customer loyalty However, activities to earn customer loyalty are currently poorly conducted and how to build it effectively is still a question

1.2 PURPOSE

The thesis has provided Vietnam card companies with an overview of customer loyalty theory, the necessity and the benefits of building customer loyalty A survey was also conducted to help card companies have some ideas about current loyalty rate in Vietnam card market The most essential part suggests some recommendation, guidelines to help Vietnam card companies effectively achieve customer loyalty

1.3 KEY RESEARCH AREA

The thesis studies customer loyalty theory, opinions and experiences from different researchers and industries leaders How to customize the theory to successfully apply in Vietnam card industry Chapter two of the thesis is a research on Vietnam card industry with two main objectives:

1 To assess customer loyalty building activities

2 To assess current customer loyalty

1.4 METHODOLOGY

Related documents on customer loyalty were gathered, compared, analyzed and customized for Vietnam card market Various sources of information were combined for use: books, internet, media, direct talks with marketing experts In chapter two, author has conducted 2 surveys with objectives as mentioned above

Population and Sample

For the first survey, author assesses customer loyalty building activities in

card industry The population is all Vietnamese card companies, which is estimated at 19 companies As most companies are based in Hanoi and Ho Chi Minh City (HCMC), we will take the sample of 6 companies in Hanoi and 6 others in HCMC These 12 companies account for about 90% Vietnamese card market share This sample is typical enough to withdraw conclusions about Vietnam card industry The questionnaires are delivered

to key person in each company

The second survey is to identify how loyal customers are in Vietnam card

industry This is a B2B commerce, card customers usually are organizations

Of course customer loyalty varies from company to company However, we would like to have a general view of current loyalty rate Author has taken a sample of 40 organizations that issuing cards The sample is taken randomly,

25 in Hanoi and 15 in HCMC (see Table 3.3 for Sample profile)

Data collections methods

Many data collection methods were considered Because of constraints in terms of time, costs and human resources, a random sample from the whole population of card companies could not be obtained in this research Author has approached 12 most well known card companies in Hanoi and HCMC for the survey

For the first survey, a total of 12 questionnaires were sent via email Notice phone calls were made in prior and follow up All 12 completed usable questionnaire were collected For the second survey, a total 40 questionnaires were distributed and 33 are completed usable Secondary data provided by card companies, media, Internet was used in compliment

1.5 CONTRIBUTIONS OF THE THESIS

The thesis has systematically helped Vietnam card companies see what customer loyalty is, the benefits and principles to effectively create customer loyalty Most important, the thesis has developed specific activities, tips to guide Vietnam card companies in creating their loyal customers

This chapter will provide us with the literature review of customer loyalty

We will together study what customer loyalty is, the benefits and five principles to create customer loyalty The content has been customized specifically for card industry

 Chapter 3: Research on Customer Loyalty in Vietnam Card Industry

The chapter is divided into two sections Through the first section, we will have a broad overview about Vietnam card industry: products, demand, trend, competition and export opportunities The second section is a research about current customer loyalty in Vietnam card industry Brief findings are presented by the end of the section

 Chapter 4: Recommendations to Build Customer Loyalty in Vietnam Card

Industry

Based on the literature in chapter 2 and the fact of customer loyalty in Vietnam card industry, chapter 4 gives instructions toward Vietnam card companies to create customer loyalty

CHAPTER 2 CUSTOMER LOYATY LITERATURE REVIEW

In chapter two, we will study what customer loyalty is, the benefits or why

we should build customer loyalty and how to build it effectively The literature on customer loyalty has been customized specifically for card industry During discussion, several cases and simulations of Vietnam card companies were introduced as well

2.1 WHAT IS CUSTOMER LOYALTY

There are several truths around customer loyalty For a better understand,

we will review the customer development process Then we come to the definition of customer loyalty As often there is a misunderstanding between customer loyalty and customer satisfaction, we will discuss the difference between these two terms as well as the relevance between them

2.1.1 Customer development process

Philip Kotler has summarized customer development process which involved in attracting and keeping customers Figure 2.1 shows main steps of the process

The starting point is Suspects – anyone who may buy our card product We

can collect customer database by segments: Banking (All banks are suspects for card programs, card issuing system, card acceptance devices); Telecom

(All telecom companies for internet card, mobiphone card); Hospitality (All restaurants, hotels, shops, bar clubs for loyalty programs); Enterprise (All enterprise may issue employee cards, universities, for student card, supermarket for customer card); Government (for National Identity Card, Security Card, Driving License), etc

Figure 2.1 - Customer development process

Second step is Prospect – accounts who have strong potential interest and

ability to deploy card programs

Prospects are then converted to First time customer When first time customer comes back, he becomes Repeat customer Repeat customer may become Client

– people whom the company treats specially Now the card company know more about its clients, it may deliver faster card service, more favorable payment conditions

Then clients may turn into advocates: Buying on repeat basis and recommend

the company and its offerings to others The ultimate challenges is to turn

advocates into Partners, where the customer and the company work together

actively Telecom partners, for example, may work with R&D department of

a card company for months to develop new smart card technology for their product Partners are someone deeply involved in your business, you work together for mutual interest

2.1.2 What is customer loyalty ?

Customer loyalty is an activity of coming back again and again When customers buy from you again and again and tell the world why everyone else should buy from you, they are demonstrating loyalty Customer loyalty

is the specific activity of buying from you or recommending you to others on

a repeat basis

2.1.3 Customer loyalty and customer satisfaction

Some people are may confused between customer satisfaction and customer loyalty However, there is a clear distinction between the two terms

Customer satisfaction is a mental status of being satisfied It is one person’s

feelings of pleasure or disappointment resulting from comparing your products and services perceived performance (or outcome) in relation to his

or her expectations If your card, machine, services’ performance falls short

of expectations, the customer is dissatisfied If the performance matches

expectations, the customer is satisfied If it exceeds expectations, the customer is highly satisfied or delighted

Customer loyalty is an activity of buying again and again, and

recommending you to others

Customers can be satisfied with your cards quality, your services, yet be willing to switch to another provider who offers the next card feature, the next price reduction A loyal customer makes a business judgment - a value

determination – and concludes: I would choose company X again A loyal

customer makes a brand decision; a satisfied customer makes a products

decision

However, customer satisfaction is a needed factor to create customer loyalty

It is hard to convince a dissatisfied customer to stay with you, while your competitors are providing compelling products and services A highly satisfied customer stays loyal longer, buys more, talks favorably about your company and your products, pays less attention to competitors, is less price-sensitive, offers product or service ideas, and costs less to serve than new customers because transactions are routinised

In high tech industry like card, customer satisfaction in first deals is extremely important and can create or destroy customer loyalty If your cards disappoint customers in first deals, they may never come back The

next order customers immediately switch to other vendors It may forgivable

if both parties already have strong relationship But it is hard to change early perception So keeping customers satisfied in first contracts is important

2.1.4 Customer loyalty is a journey

“Having loyal customers is not a goal, it is a journey – a continuous process.” [Arthur M Hughes, 2003] Customers do not sign an oath stating their intention to buy card products from you again and again Card companies must forever commit to the activities that create loyalty This commitment is

a process, an on going journey When you commit to the process of creating customer loyalty, you are committing to developing and refining the activities that create loyalty The activities to create customer loyalty will be more discussed in section 1.3

2.2 THE BENEFITS OF CUSTOMER LOYALTY

There are several benefits resulted from customer loyalty Loyal customers are easier to predicted They already know where you are located, and what service and products your business provides so you do not have the expense

of advertising in order to attract them These repeat customers are easier to

do business with because of what you know about each other Time and money are saved and you earn more profit

2.2.1 The value of Predictability

Predictability is an important benefit of having loyal customers Predictability allows your card company to maximize its resources today and plan for the future When you can predict your customer’s buying habits, taste, customization requirements, quantity per order, time of order, payment term, you are also able to predict staffing, inventory, and every other aspects of your business This helps your business run more effective

MK JSC with Banking Customers

MK is a big player in Vietnamese card industry The company joined card industry in 1999 and its customers are most big banks in Vietnam After six years of operation, the company now has learnt a lot in how to serve its customers For example, most banks implement their purchasing plans by the end of year (Q04) Then in this period, MK is well prepared for bidding participation It makes more aggressive sale efforts, invites foreign partners for customers tours, prepares marketing materials ready and sent to key decision makers, holds road-show, etc Aggressive activities in purchasing seasons results better outcomes

MK also finds easier to predict what specific products an old customer is looking for For example Vietcombank is using a card issuing system bought from MK They buy $10,000 of supplies from MK every two months Then on the one hand, MK can plan for most economic inventory and save storing cost; on the other hand, most properly serve VCB with right time, right quantity and raise customer satisfaction

2.2.2 No price of attraction

Predictability is only one advantage of having loyal customers In card industry, the cost to attract new customer is a large expense that is affected

by customer loyalty Advertising, signs, promotions and special sales are just

a few of the additional expense of attracting new customers

I was a sale executive in a card company For new customers, it takes time, money and energy to gain contracts I should travel for meetings, do presentations, bring demo products, invite them for firm tour, sending marketing materials to introduce about my company, products and services All these incur expense and some may not buy my products

For loyal customer, they already know who I am, where I am located, what is

my business, how to work with our company We do not have to spend thousands of USD to attract them And when demand for card occurs, our name is automatically taken into consideration

2.2.3 The ease of doing business

Predictability and a reduction in costs to attract new customers are not the only advantages to having loyal customers There is third advantage that helps reduce cost in dealing with customers New customers have to learn how to buy from you, and teaching them takes time You also have to learn how to serve new customers, it takes time as well

New customers may have bad credit habits, high returns and millions other

problems that need to be overcome before you can figure out how to best work with them, and over coming these problems takes time You must learn what card specifications these new customers use: what card materials they want, how many cards per order, how these new customers are going to pay You have to spend weeks or months to work out the final card designs Customers describe the card they want and your card designers have to come back times after times to come to an agreement For old customers, they already made the designs with you and all you have to do is manufacturing the old products

You also must learn what new customers’ delivery requirements might be? What are products selection they prefer? How demanding they are of services? How responsiveness are these new customers to special sales or promotion? Who are their key decision makers? How to handle each member

in purchasing board?

Only after you learn about them, you will be able to deal with these new customers effectively All this extra time cost you money and all of your potential profit is spent on learning how to deal with these new customers

2.2.4 Word of mouth marketing

Attracting and learning how to serve new customers can cost a substantial amount of money and can be very time consuming Meanwhile, your loyal

customer want to do this work for you at no charge Once customers become loyal, they are willing to tell others why everyone should buy from you, and they do not want a single penny for their effort

Everyone, every organization like good deals A good deal might be a better price, a special selection, an excellence service (very important in card industry), a dedicated salesman or any number of other things When a customer feels happy with his purchase, he is willing to tell other about you and your products

This word of mouth advertising is very important in card industry and is the most effective way to attract new customers In card industry, normally contracts’ values are high For high capacity card issuance system, total value can come up to millions USD Then good references are critically important

Most of us are risk adverse New customers often look at old customers who have already bought from you, asking for their experiences, how they were served by your staff, how they evaluate your services, etc And because their recommendation is more credible, it is more valuable than any advertisement you could possibly buy

2.3 FIVE PRINCIPLES TO BUILD CUSTOMER LOYALTY

The five principles to build customer loyalty we will discuss below are

summarized by Manzie R Lawfer who has spent 25 years researching on customer spending habits and loyal Manzie has discovered these principles through thousands of interviews with customers, captains of industries, and business leaders These principles were built on two facts that: i) people will

do business with people who they like and who like them, who show their importance, and ii) they are delighted with their purchases

Through my research over Manzie’s work and from my experience in card industry, I found these five principles are useful and powerful These principles were scattered in hundreds of books and articles as well They are based on the actual buying habits and experiences of loyal customers Any one of the five principles will increase loyalty, but when all five principles are put to use, the results are astounding

Below we will together review the five principles During discussion, I have done some customization for better apply into Vietnam card industry

2.3.1 People do business with people

People doing business with people is the cornerstone principle of creating customer loyalty in not only card but every other industries as well All of the principles that create loyalty are based on the interaction of people

“Loyalty is a response to these interaction People are the heart and soul of all deals – not buildings, products, patents, or anything else.” *Manzie

R.Lawfer, 2004] People doing business with people is all about how you create and maintain your customer relationship, the way you deal and how you handle your customer

Card features, machine specifications, price, services, all things being equal, people want to do business with people they like and who like them All things being unequal, people still would rather do business with people they like and that like them

Card companies traditionally compete on issues such as price, product advantages, selection and services The best competitive tool is not any of

these things The best competitive tool is genuinely caring about people and

making them feel important People are motivated by the need to be important

Customers love to find card companies that recognizes them by name, and gladly welcomes them when they come through the door Customers will pay more money, spend more time and buy your products if you make them feel important Of course you better have cards, machines and services they want if you sincerely believe they are important Now we will discuss a tool

to make our customers feel their importance, it is KUHL

KUHL

All customers want the same thing: they will buy cards, equipments with

people who know and understand them, who confirm their importance The customer’s importance is demonstrated by:

Knowing can be as simple as knowing your customer’s name or remembering your last card types, equipments sold to them If you do not know a new customer’s name, his company when he comes into your business, make sure you ask and memorize it for the next time They will repay your effort by coming back to order cards from you again and again

Understand ME

All customers want to be understood The more you understand their needs,

the more adequate the proposal you offer, in consequence, the more possible you win the contracts

In card industry, requirements for product specifications varies from customer to customer Vietcombank may want ATM machines with premium brand because they want to position VCB as the number one bank

in Vietnam Meanwhile, VIBank may want middle-end ATM To them, investing in ATM network must be cost effective They want to have a large ATM network to bring more convenience to ATM cardholders, and by this to gain competitiveness By understanding all these different needs, you can propose right products to right customers When customers see you deeply understand their situation, their needs, they trust you more

Customers want to be understood so that you can lead, help and serve them A customer will not accept your leadership unless they believe you understand them, which is why understanding is the mutual starting point in purchasing decisions for many contracts

[Manzie R.Lawfer, 2004]

Like in the case mentioned above, if you understand what kind of ATM customers are looking for, you can lead them You cannot help your customer plan their card issuing program, choose an ATM, buy a terminal or make any other purchasing decision until you understand them and what they want and their specification

Understanding your customers

When card companies track the activities of their professional sales team, they find most often that a sale is made only after the prospect has been called or visited on five or more times This is a testimonial to the importance

of understanding the customer Customers are reassured that you really understand them only after you have taken time to visit them and learn about their issues and concerns

When writing a proposal to a bank, a very important part is Demand Analysis,

in which you analyze current demand of your customer Normally, Vietnamese card companies when sending proposal to their customers only stating what products they have: what cards they have, what machine, equipment are available, their unique selling points, etc But customers will value your

proposal much higher if in that proposal, you show your understanding toward

customers’ current situation For instance, you should analyze: what system they

are having, their strengths and weaknesses, why do they need your products, what coming trends in card payment industry are, how customers should react toward those trends, etc By these, customers know that you understand them, and your solutions become more reliable

Help ME

Card is a high tech industry New technologies are born everyday, new

trends, changes are occurring around the world It is you, the solutions provider, who is responsible for assisting customers to make their purchasing decisions

Most customers do not have much experience in card industry To them, card

is just a tool for marketing activity (loyalty card program), or part of their business (banking, telecom) Card companies often have more knowledge, information, experiences than customers And their tasks is to share their knowledge as to take the most appropriate products

“Customers react favorably when they see that you are providing alternatives and aids in helping them Through your help and leadership, your customers will know you sincerely like them.” *Mike Faulkner, 2003+

Your help your customers when you offer to see your own products and services through the customers’ eyes Your explanation of products applications, uses, benefits, alternatives and other relevant information are a demonstration of help

Lead ME

“People will welcome your leadership when they trust that you know and understand them.” *Manzie R.Lawfer, 2004+ To lead your customers, you must show that you are knowledgeable in your field, and your advice are reliable Customers recognize whether you know your products or not This

is why I strongly believe that sale people must deeply understand his products, especially in card industry where products are identified with lots

of technical term You cannot convince, consult your banking customers effectively about buying an ATM brand unless you deeply understand how

an ATM works, what its applications are, how the ATM networks connect to each other, how an ATM transaction is made, what regulations on ATM industry are, what future trends in ATM industry are, etc

Everyone would like to know an expert in every product category that could guide and lead them to the best products and best buys The position of expert is available to you if you know and understand your customer If you do not demonstrate that you understand their wants and needs, you are just another seller trying to get the customer

to part with his money

[Manzie R.Lawfer, 2004]

Knowing, Understanding, Helping and Leading (KUHL) can only be

accomplished by people doing business with people You can know, understand your customers only when you spend time approaching, talking, working with them People want to be heard first and then understood A customer’s desire for you to be KUHL is satisfied by one set ears listening to that customer’s wants, problems, challenges, and triumphs

When you are KUHL, you are serving your customers People are naturally skeptical of being sold, but skepticism vanishes when your customers believe you are serving them

2.3.2 Differentiation

The different in location, color, product selection, service, style and a million other things are all differentiator in products and services These differences provide superior value and cause someone to trade with the people they do

[James C.Anderson and James A.Narus, 2003]

The logic of this part is: there is competition for every sale In order to win,

to create loyalty, you must have something different Years ago, when product quality is still a matter, you can make a difference by improving your product quality However, thanks to modern manufacturing, new technology, global distribution, quality has become a commodity, which means most products meet standard quality It takes more effort to create differences Besides price, there are 5 main variables on which card companies can create differences: product, service, personnel, channel and image And the last, but not less important, is that your differences should have value to customers

There is competition for every sale

There is an element of competition for every purchase and sale In card industry, competition is becoming tougher since there are more and more players are joining the market The situation is more fierce under the attack

of Chinese vendors: same product, acceptable quality with very low price

In order to win, you have to not only illuminate what makes your solutions

or product most appealing, but also make the competing product or service adverse, not as attractive or risky This process of competition and the buyer’s final decision is always based on differentiators

Differentiators in Commerce

When there is no appreciable difference in a product or service, it becomes a commodity Commodities are ultimately sold based solely on price Price can not create loyalty When competitors offer lower prices, customers are willing to switch

Differentiators are unique feature in your offerings that make it stand out, make it

special, make it anything but a commodity Through differentiation, you are

demonstrating why your customers should do business with you instead of your competitors If there is no difference between you and the competition, your customers have no reason to choose you over the other guy

There are hundreds of variables on which you can make a difference: Product (Form, Features, Performance, Conformance, Durability, Reliability, Reparability, Style, Design); Services (Ordering Ease, Delivery, Installation, Customer Training, Customer Consulting, Maintenance and Repair); Personnel (Competence, Courtesy, Credibility, Reliability, Responsiveness); Channel (Coverage, Performance) or Image (Symbols, Atmosphere, Events)

I believe all business is the work of differentiation Otherwise, you do not have the strength to compete For instance, you are selling POS terminal brand X It is no doubt when you convince a customer about your terminal, you have to tell him what your unique selling points are, what make POS X superior from brand Y, Z or any other else The differentiator might be X is the number 1 brand in POS industry, or it is the only POS allow thermal print technology, or it has the fastest speed, etc Give customers some reasons why they should buy from you If you have no differences, you have

to accept to sell it as a commodity And then the only competing tool you have is price

Quality is a Commodity

“Modern manufacturing techniques and global distribution of products and information has changed the value of quality Customer now take quality for granted – it is expected.” *James C.Anderson and James A.Narus, 2003+ Whether a card printer costs $5,000 or $15,000, it can print 20,000 cards without major repair Whether an ATM machine comes from China or USA,

it must meet some certain security standard set by ATM industry Whether a terminal provided by MK or by FPT, it must has cash/sale applications Today, quality is the minimum requirement to enter card market

MK’ Cards – Super Quality

MK once dominated the card manufacturing industry 6 years ago All most 90% card manufacturing contracts came to MK since it was only of few players in Vietnamese card market MK card’s quality is good and has won customer’s satisfaction But for the last 2 years, many small and medium manufacturers have penetrated this market Same product, lower price MK has lost some market share When we ask customer, they said: “What is the difference? They are all good” Now what MK should do is to make a win is that creating uniqueness for their products or services

Differentiators must have value

Your differentiator needs to distinguish you from your competitors but must

also be a specific benefit to your customer It is no use you show uniqueness

that customers do not value

Differentiators of no value

I was once provider of POS terminal brand Z One of my unique selling point

is that “Brand Z was recommended by Visa in Visa Program” When I mentioned this to my bank customers, normally they did not show much interest, saying that besides Visa, they issued many other cards like Master, Dinner Club, etc And that “Recommended by Visa” is not very appealing It

is better if my product offer them: fastest dialing speed, most colorful display, the only brand with backup battery option, customer references who already use this brand Customers value these differences higher

2.3.3 Value and Assurance

Value

Preparing value proposition is an indispensable work in marketing strategy for any new product Through this, marketers try to summarize a package of value for the product, convey to their customers This value proposition is generally telling customers why they should buy from you arm them with a message to tell other potential customers

[Tom Stevenson, 2003]

How a customer perceives the value of your product or service can be described as your value proposition “A value proposition goes beyond just a description of the product or service A value proposition encompasses the true usefulness or specific benefits the product or service provides.” *James C.Anderson and James A.Narus, 2003]

For instance, when we launch new ATM brand into the market, we can

position one brand as: “US Quality – Competitive Price – Standardized Services”; for other brand, value proposition might be “Premium ATM – Multi

Applications – International Services”, etc

Value proposition depends a lot on which market segment you are in And your value proposition should conform with your target market Customers in different segments heighten different values VCB may seek for “Premium – Number 1 Brand” but Techcombank may want “Reliable Quality – Competitive Price”

One more important thing is that you can continuously add new value to your solution package For instance, instead of selling ATM to banks, you can offer them an option of leasing You permit banks to lease your ATM system in 3 to 5 years with annual payment This allows banks to quickly expand their ATM network without a big deficit of investing capital I am sure banks value this option The creative possibilities in developing a value proposition are endless

Assurance

When your customers return to do business with you again and again, they are demonstrating loyalty The size of their initial purchase does not determine loyalty The level of satisfaction with their initial purchase does not demonstrate loyalty It is only when they return to buy from you a second, third, or fourth time that they are demonstrating loyalty “The only incentive people have to do business with you on a repeat basis is the assurance you give them that their next purchase will provide as good a value as the last purchase.” *Tom Stevenson, 2003+ Assurance is the attraction to return If a customer does not think they will receive the same value on repeat transactions, they have no incentive to return

Assuring your customers about your value preposition

Value and assurance are linked together A great value is only a one-time

deal unless it is accompanied by an assurance This time you provide customer with beautiful cards, fast delivery, experienced consulting service You should provide customer with same value for their next purchase Customer have no reason to stay if they know all these great values are just one time deal “Assuring your customers that your value proposition is a constant gives them the confidence to return and to buy from you again and again.” *Tom Stevenson, 2003+

Ensure promises are kept

“Everything you say to your customers is an assurance When you do not do the things you say you will do, you negate the value of your product or service.”

“Doing what you say you will do when you say you will do it is the best way

to assure your customers they should continue doing business with you.” [Manzie R Lawfer] When you promise to call the customer back in an hour,

you are building the customer’s expectation and creating an opportunity to assure the customer When you promise to send him the card sample, you are building the customer’s expectation and creating an opportunity to assure the customer Every time you make a promise and then fulfill the promise, you are building a stronger bond with the customer Eventually, the customer believes you will fulfill every promise you make This assurance you have given confirms to the customer that they are making the right decision in doing business with you The customer will want to return to you

on a repeat basis, and you have empowered the customer to refer business for you

“The more promises you make, the more opportunities you have to build customer loyalty.” *Manzie R Lawfer+ You may say: “I will get the information on that equipment back to you in an hour” The importance part

is you keep your words Even if you call to say you do not have the information but you are still working on the customer’s request, calling the customer within the hour builds assurance It builds confidence in the

customer that you will always do what you say when you say you will do it

Do not promise what you can not do Do not promise to deliver 10,000 cards

in 3 days if you are not capable to do it Do not promise to provide nation wide ATM maintenance service if your human resource are limited The unaccomplishment will disappointed your customers It is better you explain

why you can not fulfill their requirements in a sincere way Customers will accept reasonable explanation If you promise, you should do it Otherwise, people will not trust you and do not want to do business with you in the long run

Assurance is making promises and keeping them Assurance is always being accountable to your customer Offering assurance and being accountable to your customers provokes an emotional response from your customers People make emotional decisions for logical reasons, and the most logical reasons for your customers to do business with you is that you are accountable and do what you say you will do [Robert Solomon, 2002]

2.3.4 Effective communication

From the beginning, we have agreed that it is people do business with people

that create loyalty For a good relationship between people, a very important factor is communication Through communication, you show your personal skills, being KUHL, being different, and create loyalty

We will be discussing some specific techniques of how to best communicate with your customers More important than these specific techniques is that you have a strategy for how you will effectively communicate with your customers

Proactive communicate with customers on a regular and frequent basis

A solid long-term relationship requires ongoing dialogue You can never

have a relationship with a person if you do not even talk to them To look at

it from a more personal perspective, your best friend are people you can trust, and you build that trust over time, through interactions, through listening, through sharing, and you share things about your future, they shared things that you listened to That combination of two-way communication and an open environment builds trust, builds relationship The stronger the relationship, the better chance you have of having the right card products and services going forward, the better the chance you have of keeping those customers happy

Frequent communication is very important toward customer loyalty By this, card companies can:

 Remind customers about their business, introduce new products and services, certificates, contracts, achievements, etc

 Maintain and strengthen the relationship

 Understand and update with customers situation: new demand, new success as well as new problems; base on that propose solutions

 Receive customers’ feedback on the company’s product and services Take customers’ recommendation as improvement guidelines

 Showing that they care for their customers, and how important customers are to them

Meeting, Phone calls, Newsletter, Flyers, Email, and Personalized Letters are great ways to continue communicating with your customers In general terms, the purpose of your continuing communication is to reinforce and repeat your value proposition, offer assurance, and most importantly, demonstrate your customers’ importance

Many business are focused solely on the immediate sale Once a sale is concluded, these businesses do not do anything to maintain contact with their customers This is a huge mistake Any effort you expend in maintaining contact will be noticed because most business do not make any attempt

Learn about customer in your discussion

We comes back to the KUHL tool during discussion with customers Knowing, Understanding, Helping, and Leading are linked together You can not help or lead your customers unless you know what they want You can not propose a card issuance solutions unless you know what type of cards customers are issuing, what they intend to issue, what specific

requirements for each card type, what card organizations they are in When

customer feel the only thing you know about them is the purchase they are

considering, there is no sense of loyalty They rightfully believe that you only

recognize them or care about them as a sale Their is no relationship that encourages their return

“When you know the customer and understand how your products or services can benefit them, you are in a position to help and lead them.” *Jame C.Anderson and James A Narus 2003] Knowing and understanding your customer begins and ends with listening, questioning, and learning with all your heart and soul This is not something you do once Every time you are talking with your customer, you should use the opportunity to learn as much about them as possible

2.3.5 Focus

“Focus is the object of your attention All of your thoughts and actions are directed buy your focus.” *Mike Faulkner, 2003+ If you are most interested in new customers, then that is where your company’s attention will be focused

If you are most interested in creating loyalty, your attention must be focused

on existing customers The outcome of your effort is always a reflection of your focus Focus affects customer loyalty in 2 ways:

 How you think about your customers

 How your customers think about you

How you think about your customers

When you focus on how to build customer loyalty, you think of your current customers as a high priority, most of your time and efforts are spend on the strive for retaining customer

When card companies make these principles a part of their deepest motives, they will use infinite power to serve these purposes That focus on one thing will make you do it best Focusing your attention to other things diverts you from accomplishment

The ability to focus on the relationship rather than on making a sale is critical

in developing customer loyalty We want our clients and customers to be loyal If we want our customers to buy from us on a repeat basis and to freely encourage others to buy from us, we must take the first step and believe in them and treat them as loyal customers

How customers think about you

“Loyalty is the cumulative result and response to specific interpersonal activities Immediate benefits can be demonstrated from the application of any of these activities, but the best results come from your customers’ long-term continuing relationship with you.” [Manzie R Lawfer, 2003]

This relationship is based in part on your customers’ belief of their importance to you, to your card company When your activities move from your loyal customers to acquiring new customers, your focus has shifted Your loyal customers are no longer your most important asset Your focus is

on new customers and loyal customers soon aware this

Every card company wants new customers because new customers are how a