LV Thạc sĩ_Understanding Targeted customer behavior toward developing HSBC credit card in vietnam

In terms of customer behaviors, the understanding of these will be helping the bankshave the good strategies to approach the credit card customers and improve thebanking business in the

This thesis is a wonderful combination of diversified sources of information I got from my network My deep gratitude firstly goes to Belgian professors and Vietnamese tutors during my two years’ MBM course

I am heartily thankful to my supervisor, Mr … from National Economics University whose encouragement, guidance and support from the initial to the final level enabled me to develop an understanding of the subject.

My particular thanks go to Mr …., Branch Manager of HSBC- Hanoi Branch; Mr

…, Head of Global Banking Department; Mrs … for their valuable feedback on the questionnaire and final thesis, help in passing out the questionnaire and encouragement in motivating me to complete the thesis

Special thanks also go to my … who are always there and supported me in many ways during my time of studying the course and doing this thesis.

Words fail me to express big thanks to my family, my father and mother, my husband, my younger sister and my lovely son whose dedication, love and persistent confidence in me, have taken the load off my shoulder.

Last but not least, I would like to thank everybody who was important to the successful realization of thesis, as well as expressing my apology that I could not mention personally one by one.

Without all those support, I could not have completed my thesis comprehensively.

EXECUTIVE SUMMARY

Despite the development of non-cash payment instruments such as in developedeconomies in the world recently, Vietnam is lagging behind with high cash payment

ratio over total means of payments However, Vietnam card market, as a main driver

of non-cash payment volume, has seen a rapid growth in recent years which wasdriven by the strong involvement of commercial banks Credit card business isbecoming strategic service section of almost every bank operating in the Vietnammarket

In terms of customer behaviors, the understanding of these will be helping the bankshave the good strategies to approach the credit card customers and improve thebanking business in the Vietnam market

Findings from questionnaires and interviews with representatives from the existingCredit Cards holders are necessary to understand the habit, characteristics andrequirements; targeting at the targeted customers; and following adequate strategies

in Credit Card products sections The analysis provides a picture of credit cardusages of people in Vietnam in the card market and how HSBC VIETNAM bank isdeveloping the credit cards in Vietnam

LIST OF TABLES, CHARTS AND FIGURESTable

Table 1Number of Banks by groups through recent years

Table 2Stages in Family Life Cycle

Table 3Description of VALS types

Chart

Chart 3.1 Resistances to Credit Cards

Chart 3.2 Profile of Credit Card Holders (Age)

Chart 3.3 Profile of Credit Card Holders (Education)

Chart 3.4 Profile of Credit Card Holders (Occupation)

Chart 3.5 Profile of Credit Card Holders (Monthly Income-Mil VND)

Chart 3.6 Number of Credit Cards Owned

Chart 3.7 Typical frequency of using Credit Card

Chart 3.8 Typical frequency of using Credit Card for Internet purchase

Chart 3.9 Factors influencing choice of Credit Card

Chart 3.10 Understanding of credit card information before applying

Figure

Figure 1 Market shares of existing Bank Card Unions by 4/2009

Figure 2 Steps in decision making process

Figure 3 Factors influencing customer behavior

Figure 5 Maslow theory on human motivation

TABLE OF CONTENTS

Acknowledgement

Chapter I Theoretical background

Chapter II Research Findings

HSBC Group which is one of the largest banking and financial servicesorganizations in the world, with well-established businesses in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa HSBC differentiates itsbrand from those of its competitors by describing the unique characteristics whichdistinguish HSBC, summarized by the words 'The world's local bank'.Headquartered in London, the HSBC Group has over 9,500 offices in 86 countriesand territories The Group's total assets were US$ 2,527 billions at 31 December2008.

In Vietnam, HSBC first opened an office in Saigon (now Ho Chi Minh City) in

1870 In August 1995, HSBC opened a full-service branch in Ho Chi Minh City In

2005, HSBC also opened its second branch in Hanoi and established arepresentative office in Cantho On 1 January 2009, HSBC started operating itslocally incorporated entity and became the first foreign bank to incorporate inVietnam The new entity, HSBC Bank (Vietnam) Ltd has a registered capital ofVND3,000 billion and is 100 per cent owned by The Hongkong and ShanghaiBanking Corporation Limited, the founding and principal member of the HSBCGroup

On 29 December 2005, HSBC acquired 10% share capital of VietnamTechnological and Commercial Joint Stock Bank (Techcombank), one of the largestjoint stock commercial banks in Vietnam by equity

In July 2007, HSBC became the first foreign bank to increase its stake inTechcombank to 15% In September 2008, HSBC completed the increase of itsstake in Techcombank to 20%, became the first foreign bank in Vietnam to hold a20% interest in a domestic bank

In September 2007, HSBC acquired 10% share capital of Bao Viet Holdings,becoming the sole foreign strategic partner of Vietnam’s leading insurancecompany

2 Rationale

Vietnam is the developing country with the population of more than 85 millions.Thus, this country is very potential for credit card market According to VisaInternational, only 170,000 of 85mil people in Vietnam (2%) are using Visa creditcards with the transaction turnover of $115mil Meanwhile, the percentages of

populations using Visa cards are much higher in other countries: 68.5% inSingapore, 10.6% in Thailand, 20.3% in Malaysia.

All statistics show a promising future for the credit card market, especially for theentire bank located in Vietnam who knows how to catch the opportunity bydiscovering and developing the high-technology, safety and multiple function creditcards

About HSBC credit card services

HSBC Credit Card has launched on 19 March 2008 The HSBC card promises to

satisfy a high demand for high quality credit card in Vietnam with chip technology, high buying power, especially the home&Away Privilege Programme The

Vietnam’s credit card market is in its young stage and therefore very potential Currently there is only 2% of the Vietnamese population using credit cards Anotherreason for HSBC credit card launch is the favourable research conducted by Nielson

in October and November 2007: almost 90% of the respondents are interested in applying for the HSBC Credit Card and 75% of respondents find that HSBC credit card is “new and different” For details information, please go to

www.hsbc.com.vn.

Business Objectives:

- Provide a product solution which satisfies customer needs

- Increase competitiveness, customer base and market share for our PFS

business

- Generate additional interest and fee income for the bank

What is a Credit Card?

- Credit card is an alternate means for making payment This payment is made

on credit, i.e the cardholder is not required to pay any money immediatelyfor their purchases The credit card issuing bank first pays the merchant forthe purchases and the cardholder settles the transaction amount on or beforethe payment due date

- Cardholders can also withdraw cash from the credit card account (cash

advance) if they wish to

- A credit limit is assigned to each card within which cardholders can spend

and perform cash advance

- A credit card also allows the customer to 'revolve' their balance, i.e not

paying the statement balance as indicated in the credit card monthlystatement in full However, the minimum payment amount stated in the creditcard statement must be paid on or before the due date

- A credit card is different to a debit card in that the former does not remove

money from the cardholder’s deposit account after every purchase or cashwithdrawal

- It is also different from a charge card which requires the balance to be paid in

full each month

Credit card is a popular product in developed countries, but in Vietnam, it is still avery new concept with more than 95% of Vietnamese population According tosome survey, due to local people’s habit of paying in cash, over 90 percent ofamount paid in credit cards in Vietnam was by foreign visitors and Vietnamese cardholders who spent money abroad The forecasts that there will be a major change inboth the number and type of credit card users thanks to international banks and cardorganizations’ current programmes to expand their markets

Catching the opportunity, HSBC with a big ambitious: bring the internationalquality, high-technology, safety and flexible credit card to Vietnamese persons.Besides, the bank wants to expand the number of HSBC credit card users from asmall group at this moment to much Vietnam population in the next following years.Here is some strong point of HSBC credit card compared to other competitors:

• Buy now and pay later Cardholders will have up to 45 days to repay their

purchases without interest charges

• Get fabulous gifts or vouchers from HSBC Rewards Program simply by

earning valuable reward points when making purchases anywhere withyour HSBC Credit Card

• Fast and easy application process Application can be submitted by mail and

the card can be issued within days after receiving the completedapplication form together with the required documents

• Access and manage the HSBC credit card account, and download

e-statement anytime anywhere through HSBC internet banking

• Easy access to cash Withdrawal can be done at over 800,000 HSBC ATMs

and ATMs displaying a Visa/PLUS logo around the world

• Offers better security The HSBC credit card is a chip card which reduces the

chance of being copied for counterfeit purposes

• Make secured online purchase by registering and using Verified By Visa

service

• The HSBC worldwide network The credit card is accepted at over 30

million establishments around the world and 15,000 merchants inVietnam

• Eligibility for HSBC home&Away Privilege Programme This programme

enables cardholders to enjoy great merchant discounts at over 19,000merchants in over 40 countries/territories

However, after launching this product in Vietnam in Mar 2008, HSBC only attractedaround 280000 customers to use this products and this is a very small numbercompared to the expectation Why?

There are many reasons such as problems in promoting the product, customerservices and others, however one of the biggest reasons was taken into account isthat we have not understood well what customers want, what their needs are, whattheir behaviors towards the products are, who are the target customers …

3 Research Problem and Objectives

3.1 Research Problem:

With the development and stable economy, the credit card market inVietnam becomes the very potential and attractive one Subsequently,HSBC’s credit card with the modern and security features will be able

to widen in this market

In fact, after 2 years entering the Vietnam market, HSBC’s credit cardhas not reached their target There are few problems but three mainones can be indicated here that affect the bank’s desire:

• The habit of using cash of Vietnamese people and it’s difficult tochange their perception on the issue in the short time

• The HSBC’s credit card with the modern features is quite new andnot attracted by the Vietnamese customers In addition, themarketing strategies are also not suitable with the Vietnamese’scharacteristics

• The Vietnamese government is quite slow in applying andimplementing the e-commerce systems and investing into theinfrastructures for bank systems, education systems etc

3.2 Objective of this study:

The objective of the thesis is to understand the customer behavior andattitude for using the credit cards The analysis of the factors thataffect to the determination on purchasing credit cards as well as thestrategies for developing the credit card market in Vietnam applied tothe HSBC VIETNAM This also should be beneficial in developingother macro policies to develop the payment industry in Vietnam in amore efficient and modern manner

In order to understand customer behaviors towardscredit cards in Viet Nam, the following researchquestions (specific objectives) are raised:

Question 1: Who are the targeted customers for the

credit card products (income, career, habit, etc)?

Question 2: What are the key factors leading to

customers’ decision to buy this kind of products? (How

to change their view in spending money by cash to bycard)

Question 3: What are the recommendations to HSBC

to develop credit card products, to launch itsuccessfully to Vietnam population in the followingyears

All the theoretical background, secondary data andprimary data in this study were developed and analyzed

to answer these questions

4 Methodology

4.1 Primary Data

A survey data collection method was used Questionnaires weredistributed to randomly selected people offered in companies,universities, hospitals, and public places in Hanoi and several sub-urbans, a large of questions also were distributed through the Internetfor responses Several questions were distributed to the author’scolleagues in the author’s working place (HSBC VIETNAM) to getthe feed back from the persons who directly serve credit card

customers From the total of 250 questionnaires that were distributed,

100 questionnaires were returned from the credit card holders The

survey instrument included questions regarding debit card usage,credit card usage, attitudes toward credit, financial knowledge,demographic characteristics, education and other personal financeattitude and behavior

In this thesis it was hypothesized that credit card possession and usageare most likely influenced by four factors: (a) demographiccharacteristics (e.g., age, gender, marital status); (b) socioeconomicfactors (e.g., income, education, and other indices of socioeconomicstatus); (c) background characteristics (e.g., life events, childhoodexperiences); and (d) psychological characteristics (e.g., locus of

control, self-esteem, materialism) A total of five demographiccharacteristics were examined: Age, gender, ethnic/racial background,marital status, and birth order Age was measured at the interval leveland considered to be a continuous variable

Income, housing situation, employment status, and education wereincluded as socioeconomic factors People personal income wasmeasured with an interval scale, which ranged from less than1,000,000 VND to above 60,000,000 VND Housing situation,employment status, education were classified

The important questions related to the card services information thatcustomers need to know before deciding to buy were focused tounderstand the needs for customer and come up with the appropriatemarketing strategies

The other supporting data are sourced from books, newspapers,internal reports of local banks, State Bank of Vietnam and otherwritings and researches of magazines, journals, internet andorganizations’ websites

4.2 Secondary Data

To get secondary data, the author took advantage of her network from her partners, colleagues in HSBC (who have worked for banking for along time and been trained at banking courses) to friends and friends

of friends who also works in banking sectors

The data will be collected from Banks’ records, banks’ websites,television and radio, times country reports, government publication,finance journals, banking statistics and reports, books, and banks’surveys

Specifically:

To answer the question on the target customers in term of using creditcard, the author asked from a friend of her friend who is working forState Banking of Vietnam to get a very informative material, internalreports of local banks, State Bank of Vietnam The author also got thesupport from internal colleagues to provide some banking statistics,

bank’s survey These help the author to be easier to identify the correcttargeted customer.

To get information for theoretical background section, besides relatedbooks and studies, the author also consults with others relevant theses.Her instructor is also a good source who provided the right books onthe subject such as Marketing Management by Phillips Kotler and anumber of books on Customer Behavior

Internet is also a sharp tool for the author to get definitions ofdifferent terms, English word usage, and updated data on number ofcard users, banks, and other card statistics

5 Scope and Limitation

The author’s intention from the beginning was very ambitious: to design acredit card product market campaign, then to promote all companies as well

as civil servants in Viet Nam to encourage their staffs to apply for, so bydoing this way, the HSBC credit card holders will increase dramatically inthe next 5 years

However, under the limited time frame, she has limited it to understand thecustomer behaviors (targeting at customers who are living in the city andcivil servants) and by doing that design a better credit card product which ismost suitable with them and develop it

Due to limitation of budget and time, we will make a survey with abovecustomer segment and find down the way to bring the product to them at themost convenience way

Chapter I Theoretical background I.1 Customer behavior overview

Customer behavior is comparatively a new field of study which evolvedjust after the Second World War The sellers market has disappeared andbuyers market has come up This led to paradigm shift of themanufacturer’s attention from product to customer and specially focused

on the customer behavior The evaluation of marketing concept frommere selling concept to customer oriented marketing has resulted in buyerbehavior becoming an independent discipline The growth ofcustomerism and customer legislation emphasizes the importance that isgiven to the customer Customer behavior is a study of how individualsmake decision to spend their available resources (time, money and effort)

or consumption related aspects (What they buy? When they buy? Howthey buy? etc.)

The heterogeneity among people makes understanding customer behavior

a challenging task to marketers Hence marketers felt the need to obtain

an in depth knowledge of customers buying behavior Finally thisknowledge acted as an imperative tool in the hands of marketers toforecast the future buying behavior of customers and devise fourmarketing strategies so as to create long term customer relationship

I.1.1 Customer Behavior

It is broadly the study of individuals, or organizations and theprocesses customers use to search, select, use and dispose ofproducts, services, experience, or ideas to satisfy needs and itsimpact on the customer and society

I.1.2 Customers versus Customers

The term ‘customer’ is specific in terms of brand, company, orshop It refers to person who customarily or regularly purchasesparticular brand, purchases particular company’s product, orpurchases from particular shop Thus a person who shops at BataStores or who uses Raymonds clothing is a customer of these

firms Whereas the ‘customer’ is a person who generally engages

in the activities - search, select, use and dispose of products,services, experience, or ideas

I.1.3 Customer Motives

Customer has a motive for purchasing a particular product.Motive is a strong feeling, urge, instinct, desire or emotion thatmakes the buyer to make a decision to buy Buying motives thusare defined as ‘those influences or considerations which providethe impulse to buy, induce action or determine choice in thepurchase of goods or service These motives are generallycontrolled by economic, social, psychological influences etc

I.1.4 Motives which Influence Purchase Decision

Nature of Motive Purchase Decision

Desire for money : Purchasing when price falls down

Vanity : Getting costly Items, to be admired by

othersFear : Purchasing Insurance policy

Fashion : Rural people imitate urbanPossession : Purchasing antiques

Health : Purchasing health foods membership in

health clubs

Comfort : Purchasing micro-oven, washing

machine, mixyLove and affection : Purchasing gift itemsThe buying motives may be classified into two:

of satisfaction:

a Emotional Product Motives

Those impulses which persuade the customer on thebasis of his emotion The buyer does not try to reasonout or logically analyze the need for purchase He makes

a buying to satisfy pride, sense of ego, urge to initiateothers, and his desire to be unique

b Rational Product Motives

Those are defined as those impulses which arise on thebasis of logical analysis and proper evaluation Thebuyer makes rational decision after chief evaluation ofthe purpose, alternatives available, cost benefit, andsuch valid reasons

ii Patronage Motives

Patronage motives may be defined as consideration orimpulses which persuade the buyer to patronage specificshops Just like product motives patronage can also begrouped as emotional and rational

a Emotional Patronage Motives

Those that persuade a customer to buy from specificshops, without any logical reason behind this action Hemay be subjective for shopping in his favorite place

b Rational Patronage Motives

Those which arise when selecting a place depending onthe buyer satisfaction that it offers a wide selection, ithas latest models, offers good after-sales service etc.Knowledge of buyer motives of customers is useful formarketers to anticipate market trends and formulateeffective marketing strategies

I.1.5 Need for Study of Customer Behavior

The study of customer behavior helps everybody as all arecustomers It is essential for marketers to understand customers

to survive and succeed in the competitive marketingenvironment The following reasons highlight the importance ofstudying customer behavior as a discipline

I.1.6 Importance in day to day life

The purpose of studying a discipline is to help oneself to betterappreciate its contributions The reason to study customerbehavior is because of the role it plays in the lives of humans.Most of the free time is spent in the market place, shopping orengaging in other activities The extra time is usually passed inknowing and thinking about products and services, discussingwith friends about them, and watching advertisements related tothem The usage of them significantly reveals our life styles Allthese reasons suggest the need for study However, the purposemay be to attend immediate and tangible reasons

I.1.7 Pertinence to Decision Making

Customer behavior is said to be an applied discipline as somedecisions are significantly affected by their behavior or expectedactions The two perspectives that seek application of itsknowledge are micro and societal perspectives

The micro perspectives involve understanding customer for thepurpose of helping a firm or organization to achieve itsobjectives The people involved in this field try to understandcustomers so as to be more effective at their tasks Whereas thesocietal or macro perspective applies knowledge of customers toaggregate- level faced by mass or society as a whole Thebehavior of customer has significant influence on the quality andlevel of the standard of living.

I.1.8 Organizational Buyer versus Individual Buyer

The obvious difference between industrial or institutionalmarkets and customer markets is that, instead of purchases beingmade for individual consumption industrial markets are made forbusiness use There are several factors that differentiate customermarkets and their buying behavior from organizational marketand their buying behavior The key factors of differentiation are:

a Market Structure and Demand:

The distinguishing factors of market structure and demandare as follows:

• In organizations buyers are more geographicallyconcentrated than customer markets

• Organizational buyers are fewer in number but theyare bulk buyers compared to individual buyers

• Organizational buyer markets are either vertical orhorizontal In vertical structures they cater only one ortwo industries, whereas in horizontal structure thebuyer base is too broad

• Organizational demand is derived from customerdemand The nature of the demand is fluctuational andinelastic

c Decision Process and Buying Patterns

The major differences are as follows:

• In organizational buying lot of formalities likeproposals, quotations, procedures are to be followedunlike customer buying

• Decision process is much complex with high financialrisk, technical aspects, multiple influencing factors etc

• Organizational buying requires more extensivenegotiation over larger time period than customerbuying

I.2 Customer decision making process

The most important environment in which firms operate is their customerenvironment because the basic belief of marketing oriented company –that the customer is the centre around which the business revolves.Therefore, marketing people need to understand the processes that theircustomers go through when making decision

The customer decision making process involves series of related andsequential stages of activities The process begins with the discovery andrecognition of an unsatisfied need or want It becomes a drive Customerbegins search for information This search gives rise to variousalternatives and finally the purchase decision is made Then buyerevaluates the post purchase behavior to know the level of satisfaction.The process is explained below with the help of diagram.

Figure 2: STEPS IN DECISION MAKING PROCESS

I.2.1 Need Recognition

When a person has an unsatisfied need, the buying processbegins to satisfy the needs The need may be activated byinternal or external factors The intensity of the want willindicate the speed with which a person will move to fulfill thewant On the basis of need and its urgency, forms the order ofpriority Marketers should provide required information ofselling points

I.2.2 Information Searching

Identified needs can be satisfied only when desired product isknown and also easily available Different products are available

in the market, but customer must know which product or brandgives him maximum satisfaction And the person has to searchout for relevant information of the product, brand or location.Customers can use many sources e.g., neighbors, friends andfamily

Marketers also provide relevant information throughadvertisements, retailers, dealers, packaging and salespromotion, and window displaying Mass media like newspapers, radio, and television provide information Now a daysinternet has become an important and reliable source ofinformation Marketers are expected to provide latest, reliableand adequate information

I.2.3 Evaluation of Alternatives

This is a critical stage in the process of buying Following areimportant elements in the process of alternatives evaluation

a A product is viewed as a bundle of attributes These attributes

or features are used for evaluating products or brands Forexample, in washing machine customer considers price,capacity, technology, quality, model and size

b Factors like company, brand image, country, distribution

network and after-sales service also become critical inevaluation

c. Marketers should understand the importance of thesefactors to customers of these factors to customers whilemanufacturing and marketing their products

I.2.4 Purchase Decision

Outcome of the evaluation develops likes and dislikes aboutalternative products or brands in customers This attitude towardsthe brand influences a decision as to buy or not to buy Thus theprospective buyer heads towards final selection In addition to allthe above factors, situational factors like finance options, dealerterms, falling prices etc., are also considered

I.2.5 Post- Purchase Behavior

This behavior of customer is more important as for as marketer

is concerned Customer gets brand preference only when thatbrand lives up to his expectation This brand preference naturallyrepeats sales of marketer A satisfied buyer is a silentadvertisement But, if the used brand does not yield desiredsatisfaction, negative feeling will occur and that will lead to theformation of negative attitude towards brand This phenomenon

is called cognitive dissonance Marketers try to use thisphenomenon to attract user of other brands to their brands.Different promotional-mix elements can help marketers to retainhis customers as well as to attract new customers

I.2.6 Customer Decision Rules

These are generally referred to as information processingstrategies These are procedures that help customers to evaluatevarious options and reduce the risk of making complex decisions

by providing the guidelines Decision rules have been broadlyclassified into two categories:

i Compensatory Decision Rules:

Customers evaluate brand or model in terms of eachattribute and compute a weighted score for each brand Thecomputed score reflects the brand’s relative merit as apotential purchase choice The assumption is that customer

will select the brand that scores highest among alternativebrands The unique feature of this rule is that it balances thepositive evaluation of a brand on one attribute to balanceout a negative evaluation on some other attribute Forexample, positive attribute like high fuel efficiency isbalanced with the negative evaluation of high maintenancecost.

ii Non-compensatory Decision Rules:

In contrast to the above rule non-compensatory rules do notallow customers to balance positive evaluation of a brand

on one attribute against negative evaluation on some otherattribute There are three types of non-compensatory rules

(1) Conjunctive Decision Rule:

In conjunctive decision rule the customer establishes adifferent, minimally acceptable level as a cut off point foreach attribute In this the option is eliminated for furtherconsideration if a specific brand or model falls below thecut off point on any attribute

(2) Disjunctive Rule:

It is the ‘mirror image’ of conjunctive rule Here thecustomer establishes a separate minimally acceptable cutoff level for each attribute In this case if an option meets orexceeds the cut off establishes for any one attribute it isaccepted

(3) Lexicographic Decision Rule:

In this rule the customer initially ranks the attributes interms of perceived relevance or importance Later hecompares different alternatives in terms of the singleattribute that is considered most important On this topranked alternative, regardless of the score on any otherattribute, if one option scores sufficiently high it is selectedand the process ends

I.2.7 Levels of Customer Decision Making

The customer decision making process is complex with varyingdegree All purchase decisions do not require extensive effort

On continuum of effort ranging from very high to very low, itcan be distinguished into three specific levels of customerdecision making:

a Extensive Problem Solving (EPS):

When customers buy a new or unfamiliar product it usuallyinvolves the need to obtain substantial information and along time to choose They must form the concept of a newproduct category and determine the criteria to be used inchoosing the product or brand

b Limited Problem Solving (LPS):

Sometimes customers are familiar with both productcategory and various brands in that category, but they havenot fully established brand preferences They search foradditional information helped them to discriminate amongvarious brands

c Routine Problem Solving (RPS):

When customers have already purchased a product orbrand, they require little or no information to choose theproduct Customers involve in habitual and automaticpurchases

I.3 Factors influencing customer behavior

Factors influencing a customer’s behaviors include cultural, social,personal and psychological ones (see Table 3.1 factors influencingcustomer behavior)

I.3.1 Cultural factors

Cultural factors include culture, subculture and social class.Those are three very important factors in buying behavior.

a Culture

Kotler (2003, p.183) describes culture as the fundamentaldeterminant of a person’s wants and behavior He thinksfamily and other surrounding environmental factors form aset of values, perceptions, preferences and behaviors in aperson from his/her childhood to adult A growing child inthe US acquires a number of key elements such asachievement and success, activity, efficiency andpracticality, progress, material comfort, individualism,freedom, external comfort, humanitarianism andyouthfulness

Figure 3: FACTORS INFLUENCING CUSTOMER BEHAVIOR

Source: Combination of theories listed in Kotler, P., Marketing Management (Ed.),

New Jersey: Pearson Education, Inc., 2003, p.183-1999

b Subculture

Second, smaller components of culture includingnationalities, religions, racial groups and geographicalregions are subcultures The author reflects all these details

to discover the Americans’ subcultures influencing tobuying decision in the Personal information section of thequestionnaire

I.3.2 Social factors

Social factors include reference groups, family and social roles and statuses

a Reference groups

These consist of all the groups that have a direct face) or indirect influence on a person’s attitudes orbehaviors Direct groups or membership groups are primarygroups such as family, friends, neighbors and co-workerswith whom the person interacts continuously andinformally People who belong to secondary groups ofreligious, professional, and trade union ones tend to bemore formal and require less continuous interaction

(face-to-Reference groups influence people in different ways:behaviors, lifestyles, attitudes, and self-concept; they createpressures for conformity that may affect actual product andbrand choices People also influenced by groups to whichthey do not belong Aspirational groups are those a personhope to join; dissociative groups are those whose values orbehavior and individual rejects Therefore, the task ofmarketers is to identify target customers’ reference groups.However, level of reference-group influence varies amongproducts and brands Reference groups appear to stronglyinfluence both products and brand choice only in the case ofautomobiles and color televisions; brand choice mainly insuch items as furniture and clothing and product choicemainly in such items as beer and cigarettes

For goods, marketers normally try to find out products andbrands that group influence plays a crucial role to determinehow to approach and influence their opinion leaders Forexample, an opinion leader in baby diaper market is awoman who is respected by many other women in terms ofbaby taking care She will offer advice or information aboutthe diaper suitable, the best one, how a particular productmay be used Demographic and psychographiccharacteristics associated with opinion leadership, themedia read by opinion leaders are the elements marketershave to find out and direct messages at opinion leaders.Another example in the US, the hottest trends in teenagemusic, language and fashion start in America’s inner cities.Clothing companies like Levi Strauss, that hope to appeal tothe fickle and fashion-conscious tough market have made aconcerted effort to monitor urban opinion leaders’ style andbehavior.

b Family

The most important customer-buying organization insocieties This is divided into two types, the family oforientation and the family of procreation The first typeconsists of parents and siblings We can see clearly thatfrom parents during the childhood and growing-up, aperson acquires an orientation towards religion, politics,economics and a sense of personal ambition, self-worth andlove The later one includes one spouse and children E.g.For Vietnamese, the man involves in the decision of anylarge purchases of the family

c Roles and statuses

These are the position of a person in different groups he/shetakes part in Activities a person is expected to perform arehis/her role and each role carries a status

I.3.3 Personal factors

The third factor mentioned by Kotler (2003, p.190)influencing a buyer’s decision is personal characteristicsincluding age and stage in the life cycle, occupation andeconomic circumstances, lifestyles, and personality andself-concept

a Age and stage in the life cycle

For a person’s life from a baby to an old person, goods usedare different from food to clothes, to furniture, etc Hence,many kinds of products shape the consumption by thefamily life cycle Nine stages of family lifestyle listed inTable 3.2 Stages in Family Life Cycle along with thefinancial situation and typical product interest of eachgroup This is interesting to tourism in which we know whoare the target customers by their age and stage

Table 2: Stages in Family Life Cycle

Source: Kotler, P., Marketing Management (Ed.) New Jersey: Pearson Education,

Inc., 2003, p.19

1 Bachelor stage

Young, single, not living at home Fewfinancial burdens Fashion opinionleaders Recreation oriented Buy: basichome equipment, furniture, cars,

2 Newly married couples

Young, no children Highest purchaserate and highest average purchase ofdurables: cars, appliances, furniture,

3 Full nest I

Youngest child under six Homepurchasing at peak Liquid assets low.Interested in new products, advertisedproducts Buy: washers, dryers, TVbaby food, chest rubs and coughmedicines, vitamins, dolls, wagons,sleds, skates

4 Full nest II

Youngest child six or over Financialposition better Less influenced byadvertising Buy large-size packages,multiple-unit deals Buy: many foods,cleaning materials, bicycles, musiclessons, pianos

5 Full nest III

Older married couples with dependentchildren Financial position better Somechildren get jobs Hard to influence withadvertising High average purchase ofdurables: new, more tasteful furniture,auto travel, unnecessary appliances,boats, dental services, magazines

Older married couples, no childrenliving with them, head of household inlabor force Home ownership at peak.Most satisfied with financial positionand money saved Interested in travel,recreation self-education Make giftsand contributions Not interested in new

6 Empty nest I products Buy: vacations, luxuries,

home improvements

7 Empty nest II

Older married No children living athome, head of household retired.Drastic cut in income Keep home Buy:medical appliances, medical-careproducts

8 Solitary survivor In labor force Income still good but

likely to sell home

9 Solitary survivor

Retired Same medical and productneeds and other retired group; drasticcut in income Special need forattention, affection and security

b Occupation and Economic circumstances

Clearly one blue-collar worker and a president’s usage ofclothes, mobile phones, air ticket travel, bank credit cardtypes etc are far different Product choice is greatly affected

by economic circumstances: spendable income (level,stability and time pattern), savings and assets (including thepercentage that is liquid), debts, borrowing power andattitudes toward spending and saving While occupation ofhigher profession prefers more on the culture, the otherones prefer more relax on the beach Some questions havegiven to the interviewees relating to this issue as theAppendix at the end of the thesis

c Life style

Kotler (2003, p.191) defines that life style is a person’spattern of living in the world as expressed in activities,interests and opinions Life style portrays the “whole personinteracting with his or her environment Marketers searchfor relationship between their products and lifestyle groups.

In psychographics – the science using psychology anddemographics to better understand customers, SRIConsulting Business Intelligence’s (SRIC-BI) VALSframework is one of the most popular commerciallyavailable classifications This classifies all US adults intoeight primary groups based on psychological attributes andkey demographics

Figure 4: VALS Framework

Source: http://www.sric-bi.com/VALS/types.shtml

SRI Consulting Business Intelligence, CA, USA

Descriptions of the

Source: http://www.sric-bi.com/VALS/types.shtml, SRI Consulting Business

Intelligence, CA, USA.

sophisticated, take-charge people withhigh self-esteem Because they havesuch abundant resources, they exhibitall three primary motivations invarying degrees They are changeleaders and are the most receptive tonew ideas and technologies.Innovators are very active customers,and their purchases reflect cultivated

tastes for upscale, niche products andservices.

Image is important to Innovators, not

as evidence of status or power but as

an expression of their taste,independence, and personality.Innovators are among the establishedand emerging leaders in business andgovernment, yet they continue to seekchallenges Their lives arecharacterized by variety Theirpossessions and recreation reflect acultivated taste for the finer things inlife

They are mature, satisfied,comfortable, and reflective peoplewho value order, knowledge, andresponsibility They tend to be welleducated and actively seek outinformation in the decision-makingprocess They are well informed aboutworld and national events and are alert

to opportunities to broaden theirknowledge Thinkers have a moderaterespect for the status quo institutions

of authority and social decorum, butare open to consider new ideas.Although their incomes allow themmany choices, Thinkers areconservative, practical customers; theylook for durability, functionality, andvalue in the products they buy

Achievers Motivated by the desire for

achievement, Achievers have goaloriented lifestyles and a deepcommitment to career and family.Their social lives reflect this focus andare structured around family, theirplace of worship, and work Achieverslive conventional lives, are politicallyconservative, and respect authorityand the status quo They valueconsensus, predictability, and stabilityover risk, intimacy, and self-discovery.With many wants and needs,Achievers are active in the customermarket place Image is important toAchievers; they favor established,prestige products and services thatdemonstrate success to their peers.Because of their busy lives, they areoften interested in a variety of time-saving devices

Experiencers Experiencers are motivated by self

expression As young, enthusiastic,

Experiencers quickly becomeenthusiastic about new possibilitiesbut are equally quick to cool Theyseek variety and excitement, savoringthe new, the offbeat, and the risky.Their energy finds an outlet inexercise, sports, outdoor recreation,and social activities Experiencers areavid customers and spend acomparatively high proportion of their

income on fashion, entertainment, andsocializing Their purchases reflect theemphasis they place on looking goodand having "cool" stuff.

motivated by ideals They areconservative, conventional peoplewith concrete beliefs based ontraditional, established codes: family,religion, community, and the nation.Many Believers express moral codesthat are deeply rooted and literallyinterpreted They follow establishedroutines, organized in large partaround home, family, community, andsocial or religious organizations towhich they belong As customers,Believers are predictable; they choosefamiliar products and establishedbrands They favor American productsand are generally loyal customers

Strivers Strivers are trendy and fun loving

Because they are motivated byachievement, Strivers are concernedabout the opinions and approval ofothers Money defines success forStrivers, who don't have enough of it

to meet their desires They favorstylish products that emulate thepurchases of people with greatermaterial wealth

Many see themselves as having a jobrather than a career, and a lack of

skills and focus often prevents themfrom moving ahead Strivers are activecustomers because shopping is both asocial activity and an opportunity todemonstrate to peers their ability tobuy As customers, they are asimpulsive as their financialcircumstance will allow.

motivated by self-expression Theyexpress themselves and experience theworld by working on it building ahouse, raising children, fixing a car, orcanning vegetables-and have enoughskill and energy to carry out theirprojects successfully Makers arepractical people who have constructiveskills and value self-sufficiency Theylive within a traditional context offamily, practical work, and physicalre-creation and have little interest inwhat lies outside that context Makersare suspicious of new ideas and largeinstitutions such as big business Theyare respectful of government authorityand organized labor, but resentful ofgovernment intrusion on individualrights They are unimpressed bymaterial possessions other than thosewith a practical or functional purpose.Because they prefer value to luxury,they buy basic products

With few resources with which to

cope, they often believe that the world

is changing too quickly They arecomfortable with the familiar and areprimarily concerned with safety andsecurity Because they must focus onmeeting needs rather than fulfillingdesires, Survivors do not show astrong primary motivation Survivorsare cautious customers They represent

a very modest market for mostproducts and services They are loyal

to favorite brands, especially if theycan purchase them at a discount

d Personality and self-concept

According to Kotler (2003, 193), each person has his/herown personality characteristics influencing their buyingbehavior These consist of a set of human psychologicaltraits that lead to relatively consistent and enduringresponses to environmental stimuli The traits describingpersonality are self-confidence, dominance, autonomy,deference, sociability, defensiveness and adaptability Thevery interesting information comes out that brands alsohave personalities and customers tend to choose the brandswith personalities matching with their own

Brand personalities, specific mix of human traits, wereresearched by Jefifer Aaker of the following five traits:

i Sincerity (down-to-earth, honest, wholesome and