LV Thạc sĩ_Market Segmentation, targeting and positioning of hanoitourist travel company

Therefore, Hanoi Tourist Travel Company Hanoitourist will be studied as a case ofpositioning in Vietnam tourism market.. From marketing point of view, some recommendations are offered fo

to study and complete my MBM course.

I would like to express special thanks to …., PhD, my thesis supervisor, who provided

valuable advice, guidance and insights, which help to improve the quality of my thesis

I am indebted to all the members of Hanoitourist Travel Compamy especially Mr ….whohave helped me in collecting information and data for my thesis

My thanks also go to my group mates for their continuous encouragements and companyover the two- year course, and shared views on the subject of this study

Finally, I would like to thank my family, especially my mother and my wife for encouragingand giving me comfortable conditions for writing the thesis

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EXECUTIVE SUMARY

Nowadays, positioning is considered as a key to success in the market, it is a bridge linkingthe market with marketing mix plan and to ensure the harmonization and consistence withother strategies of a company To success in positioning, the first steps are segmentation andchoosing the right target customer groups and competitive edges After targeting, thecompany needs to create differentiations and use Marketing mix to implement the positioningstrategy The differentiations are more important and more difficult in tourism travel market.This is a high quality service industry where customers care much about making aninvestment or purchasing decision The differentiation is partly illustrated in what marketperceives the firm or its products different from others- the question of positioning

Hanoitourist Travel Company, a subsidiary of Hanoitourist Corporation - one of the topten leading tourism companies in Vietnam and the biggest one in the North of Vietnam Thecompany has been a member of top ten Travels Company in Vietnam 2001, 2002 2003,and

2004 However, since 2005 up to now, Hanoitourist has lost the position in the top tentourism company in Vietnam although company’s turnover is still rising Almost Company’scustomers never come back again, not a concrete reason – according to report of sales team.Maybe, customers were mistaken between Hanoitourist Travel with other members ofHanoitourist Corporation and sometimes with Mother Company On the other hand,company’s problem maybe is the way they approaches customers There is no differentiationwhich was creased among Hanoitourist and other even the company’s name and logo TheBoard of Director of Hanoitourist have tried also some marketing strategy but have achieved

no results

Therefore, Hanoi Tourist Travel Company (Hanoitourist) will be studied as a case ofpositioning in Vietnam tourism market This study aims at investigating the process ofSegmenting, Targeting and Positioning of Hanoitourist to answer the following questions:How has Hanoitourist Company been executed Segmentation, Targeting and Positioning?What are the problems in Hanoitourist’s marketing mixes which need to be improved? Howdoes Hanoitourist Company should do to gain success in Segmentation, Targeting andPositioning?

This thesis attempts to propose approaches and solutions to position of Hanoitourist in bestaccordance with market circumstances, company’s features and strategies, and targetsegment From marketing point of view, some recommendations are offered for successpositioning of the company, which includes improving the process of positioning, implementpositioning strategy through marketing Mix 7Ps

Finally, this study, through focusing on a particular company and in a specific application ofpositioning, aims to provide a picture of the whole Vietnam tourist travel market In addition,through the research of travelers and other relative subjects, it is hoped to bring additionalinformation for marketing managers and executives in their operations, which is practicallyfeasible

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1 Rationale

Vietnam’s tourism industry has growth rapidly The National Administration of Tourismpredicts that Vietnam will welcome 4.5 millions foreign and 19 million domestic touristsduring 20081 It will be 6 million foreign and 23 million local tourists, earning revenue of 4.5billion USD by 2010

The Vietnamese government has also recognized that the tourism sector is a key pillar foreconomic growth Tourism produces sound employment opportunities for the localpopulation, especially in areas that lack hardcore industrial development Tourism is also agood marketing tool to advertise Vietnam image for all over the world To this end, thegovernment are implementing policies to develop tourism sector such as abolishing touristentry visa for visitors from key tourism market; opening new direct flights to and from othercountries to attach more tourists from Eastern Europe, Japan, Korea… focusing on investing

in infrastructure in popular tourist regions

In the stream of that development, Hanoitourist Travel Company (Hanoitourist) is asubsidiary of Hanoitourist Corporation (a state owned corporation), established since 1998and operates in providing tourism services In recent years, the company’s business hasbecome more difficult due to strong competition among tourism brand names Moreover,after Vietnam become member of WTO, a lot of foreign tourism companies with strongfinancial resource will join Vietnam tourism market To overcome this difficulty, thecompany’s Board of Director is looking for a new business orientation to adapt to marketchange How to gain competition advantage, how to success in positioning are the currentduty of Hanoitourist’s Board of Director It is also the big question for the leaders of travelagents in Vietnam tourism industry

For myself, research on marketing activities in Vietnam tourism market is very interesting It

is an opportunity to apply my gained knowledge during the master course to find out the

feasible solutions for a tourist company (Hanoitourist) That is reason why I chose “Market

Segmentation, Targeting and Positioning of Hanoitourist Travel Company” as the topic for

my graduation thesis

2 Objectives

The major objectives in conducting this research are:

 Identify major factors for attracting tourist attention

 Segment tourism market and identify Hanoitourist’s target customer group

On the basis of this analysis, the research also attempts to:

 Recommend a way to effectively positioning Hanoitourist Travel Company’sproducts and services in Vietnam tourism market by proposing it’s marketing mix

3 Question of study

To achieve the objectives of the thesis, the following question needs to be answered:

 How has Hanoitourist Travel Company executed Segmentation, Targeting andPositioning?

 What are the problems in Hanoitourist’s marketing-mix which need to be improved?

 How does Hanoitourist Travel Company should do to gain the success inSegmentation, Targeting and Positioning?

1 Vietnam National Administration website

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4 Scope of study

To solve the objectives of thesis, scope of research include the marketing activities ofHanoitourist Travel Company and some detail of mother company (HanoitouristCorporation)

Researching deeply on the Business activities of Hanoitourist Travel Company from

2003 – 2007 and their plan from 2008 - 2010

5 Research Methodology

Analytical, comparison and summarization methods are the basic methods applied.Supported for this, field study in collecting and analyzing collected data and desk study inrelated publications made important effects Major model applied in this includes: Marketingmix, Maslow, and SWOT mode Its will give a full picture of market and competition forefficient positioning

In order to answer the questions above, the thesis also have been chosen to carry out surveyand case studies through carrying out in-depth interviews with Hanoi tourist people,distributors and dealers, tourist area receptions; and surveying by sending questionnaire topotential customers in Hanoi, Danang and Hochiminh city

Data for processing comprised of secondary data through publications, internal and externalreports of related tourist services such as newspapers, tourism data and the internet Primarydata on the other hand collected through market survey by questionnaires and interviews onwide range of customers and the managers of Hanoitourist Travel Company

As for the purpose of thesis, both qualitative and quantitative researches were carried out:

Qualitative research

According to Blackstone (1992) a qualitative approach enables to analyze the wholeness ofthe respondent’s reaction, which give rise to a more comprehensive understanding In-depthpersonal interviews are mostly unstructured but direct for gathering information In somecases, deeper questions are put to focus on what the respondent knows best (i.e question tothe boss of resort about travel companies that they contact with) The purpose of an in-depthinterview is also to uncover the underlying motivation of the respondent’s attitude,preferences and behavior

To get qualitative data, in-depth interview were carried out with Hanoitourist personal,customers and managers of tourist areas in Ha noi, Danang and Ho Chi Minh city

Positioning and targeting is even new to almost Hanoitourist and of course there is noquestion direct to targeting and positioning but questions regarding to their customers groups,price strategy, product portfolio, promotion plan… that will enable to analyze their policywhich affect to their market segmentation, targeting and positioning

In-depth interview carried with 20 Hanoitourist personal as they all relating to plan andimplement sale and marketing strategy Ten interview carried with consumers at agencies and

20 managers of resorts in Hanoi, Danang and Hochiminh city

Quantitative research:

Quantitative in nature, and involves research which is concerned with gathering statistics to describe what is happening In this, it is answering questions such as Who?, Where?, When?, and How? Answers to these questions are usually sought through the use of questionnaires.The quantitative methods was used to see “outsider view” about Vietnam tourism, beingevidenced by the result of in-depth interviews and sale figures, it seems that there is a change

in customers perception toward tourist services in the market and may exit a different rankingsystem between consumers and travel agencies in the main important attributes of products

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so a questionnaire was designed to check this assumption One hundred questionnaires havebeen sent to potential customers in Hanoi and Ho Chi Minh city to get information whichused for analysis.

6 The outline

Introduction:

Chapter I: Literature framework will present the knowledge on segmentation,

targeting and positioning framework and also about characteristic of tourism product whichhelp to understanding the theories and the studies of the researchers This enable author toidentify a gap and outstand for topic of study

Chapter II: Hanoitourist Travel Company - reality of Segmentation, Targeting and Positioning: Which will mentions the detailed analysis of Vietnamese business environment,

Hanoitourist’s products and services; customers; and competitors It also focuses on the

marketing execution (Market Segmentation, Targeting and Positioning) and resulted from

survey to bring out achievements and Company business’s problems, which will be solved

CHAPTER I:

LITERATURE FRAMEWORK

This chapter will present the concept of Market Segmentation, Targeting and Positioning (STP), tools and other related concepts as the theoretical foundations for the thesis.

Firstly, the author will present full mode process of Market Segmentation, Targeting and Positioning include 6 steps The chapter then reviews step by step the process that starts first with market segmentation and market targeting steps Various types of positioning strategies

as well as the important steps in building a product positioning strategy are also exhibited in this chapter

Finally the author will review the marketing Mix 4 Ps and 7Ps, the different between two model and also about characteristic of tourism product

I.1 Process of Market Segmentation, Targeting and Positioning

If we assume that everyone’s needs are the same People’s diverse interests and backgroundsdivide them into many different groups with distinct needs and wants This is known as

market fragmentation The implications of market fragmentation are enormous for

marketers Generally, the same product and marketing strategy will not appeal to everyone

Marketers must balance the efficiency of mass marketing 2—marketing to all possiblecustomers in a market, regardless of the differences in their specific needs and wants—withthe effectiveness of offering each individual exactly what he or she wants Marketers mustdecide whether to use more of a shotgun or more of a rifle approach when developing

strategy The rifle approach is called target marketing strategy—dividing the total market

into different segments based on customer characteristics, selecting one or more segments,and developing products to meet the needs of those specific segments

Figure I-1: Step in Market Segmentation, Targeting and Positioning

Source: Philip Kotler, Marketing Management, Prentice Hall, 1994

I.2 Market Segmentation

If a marketer decides to use the target marketing strategy, the overall market must first be

segmented Market segmentation is dividing a market into distinct groups of buyers who

have distinct needs, characteristics, or behavior and who might require separate products or

marketing mixes A market segment consists of a group of consumers who respond in a

similar way to a given set of marketing efforts Segmentation is a way of life for marketers.Since you can’t please all of the people all of the time, you might as well take your best shot.Segmenting the market is often necessary in both consumer and business markets In eachcase, the marketer uses one or more ways or bases to segment the total market intohomogeneous groups, each with different needs and wants

2 Chapter 2 – Consumer behaviors and Marketing Strategies

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I.2.1 Bases for Segmenting Consumer Markets:

a Geographic Segmentation

Geographic segmentation is dividing a market into homogeneous groups based on their

locations or geographical units such as nations, states, regions, counties, cities, orneighborhoods This type of segmentation has been practiced for hundreds of years Manycompanies localize their marketing mix strategy to fit the specific needs of individualregions, cities, and even neighborhoods Firms also target areas with high population density.These companies should monitor census data and migration patterns in order to determinefuture population and shifts in consumer tastes

Residence location within a geographic area is an important segmentation variable Climate

is another important segmentation factor Geographic segmentation provides usefuldistinctions when regional needs or preferences exist The climate has huge effect to tourbusiness in Vietnam tourism market, for example There are two different weather types ofsummer and winter in the Northern Vietnam It is very cold with less than 10ºC in the winter

in the northern Meanwhile, it is 34 ºC - 35ºC in the Southern area at the same time Thedifferent climate characteristics between two parts of Vietnam lead to the different tourismdemand of the two main customers group

b Demographic Segmentation

Demographic segmentation is dividing a market into homogeneous groups based on

demographic variables such as age, gender, family size, family life cycle, income,occupation, education, religion, race, generation, and nationality The most common andpopular way to segment consumer markets is by utilizing demographic factors Consumerneeds, wants, and usage rates often vary closely with demographic variables Demographicvariables are also easier to measure than most other types of variables Even when marketsegments are defined using other bases, their demographic characteristics must be determined

in order to evaluate the size of the target market and to reach it efficiently

Gender

Gender segmentation is dividing a market into different groups based on gender Gender

segmentation has long been used in clothing, cosmetics, toiletries, magazines and also intourist activities Segmenting by gender started at a very early age When segmenting themarket by gender, marketers need to make sure they are targeting correctly Women nowmake up approximately half the potential market for consumer electronics, for example.Some companies market the same product successfully to both genders Other marketers maystart by targeting one gender and later switch to targeting both Catching the development ofdifferent gender demand, some travel firms in Vietnam such as Viettravel tailors Health-Beauty Packages, a special tour for gentle

Income and Social Class

The distribution of wealth is of great interest to marketers because it determines whichgroups have the greatest buying power A common basis for segmenting the consumermarket, therefore, is income Many companies target affluent consumers with luxury goodsand convenience services

Social class is the overall status, rank, or social standing of groups of people within a society

according to the value assigned to such factors as family background, education, occupation,income, and residence location People who are within the same class work in similaroccupations, have similar income levels, and usually share common tastes in clothing,decorating styles, and leisure activities Income is not always a primary determinant Family

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characteristics, such as the occupations and incomes of one or both parents, have been theprimary influences on social class.

Many products and stores are designed to appeal to people in a specific social class.Working-class consumers tend to evaluate products in more utilitarian terms such assturdiness or comfort rather than style or fashionability They are less likely to experimentwith new products or styles because they tend to prefer predictability to novelty People inone social class may aspire to a higher class and therefore exhibit buying behavior common

to that class rather than to their own Luxury goods often serve as status symbols Marketers

need to understand the concept of social class and develop effective product andcommunication strategies that appeal to these different segments

Social class also plays an importance role in tourism market Many travel firms tailor theirproducts in specific social class such as MICE tour, businessman tours Hotel and airlinesalso divide normal class and business class for high income customer

Race and Ethnicity

A consumer’s national origin is often a strong indicator of his preferences for specifictelevision programs or magazines, foods, clothing, and choice of leisure activities It is alsovery important in tourism travel market Customers come from different nationality will havedifferent demand in choosing a tour Almost travel companies segment their foreign marketbase on race and Ethnicity

In Germany for example, specialist travel agencies have sprung up to cater for huge foreigntravel demand created by the “gastarbeiter”3- guest workers from countries such as Turkeyand Yugoslavia – who return home periodically for their holidays

c Psychographic Segmentation

Psychographic segmentation is dividing a market into similar groups based on

psychological characteristics, values, and lifestyles Psychographic data are useful tounderstand differences among consumers who may be statistically similar to one another but

whose needs and wants vary A lifestyle is the pattern of living that determines how people

choose to spend their time, money, and energy and that reflects their values, tastes, andpreferences It is a person’s pattern of living as expressed in his or her activities, interests,and opinions Lifestyle captures something more than the person’s social class or personality

It profiles a person’s whole pattern of acting and interacting in the world Psychographicsegments usually include demographic information such as age or gender, but the richerdescriptions that emerge go well beyond these characteristics Marketers have also usedpersonality variables to segment markets

Some travel companies, for instance, have developed specialist villa holiday catering foryoung professionals (the so-called “yuppies”), while other organizations have packaged tours

“come back old battlefield” for veterans in Vietnam

d Behavioral Segmentation

Behavioral segmentation is dividing a population into homogeneous groups based on how

they act toward, feel about, or use a product People may use the same product for differentreasons, on different occasions, and in different amounts

User Status: One way to segment based on behavior is to divide the market into users and

nonusers of a product This can be expanded to ex-users, potential users, first-time users, andregular users

Benefits Sought: A powerful form of segmentation is to group buyers according to the

different benefits they seek from a product Benefit segmentation requires finding the major

3 J C Hollway * RV Plant, Marketing for Tourism, pages 52

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benefits people look for in the product class, the kinds of people who look for each benefit,and the major brands that deliver each benefit.

Usage Rate: Markets can also be segmented into light, medium, and heavy product users According to the 80/20 rule 4, 20 percent of purchasers account for 80 percent of a product’ssales This means that it makes more sense to focus on the smaller number of people who arereally into a product rather on the larger number who are just casual users

Occasions: Occasion segmentation is dividing a market into homogenous groups based on

occasions when buyers get the idea to buy, actually make their purchase, or use the purchaseditem Occasion segmentation can help firms build up product usage Many products areassociated with specific occasions, whether time of day, holidays, business functions, orcasual get-togethers Many marketers prepare special offers and ads for holiday occasions.Businesses often divide up their markets according to when and how their offerings are indemand Annually, at the end of April, almost of travel firms in Vietnam launch promotionfor thirty day of April and the first day of May These are legal holiday of Vietnamese and thebeginning of summer holiday

Loyalty Status: A market can also be segmented by consumer loyalty Consumers can be

loyal to brands, stores, and companies Buyers can be divided into groups according to theirdegree of loyalty A completely loyal consumer buys one brand all the time By studying itsless loyal buyers, the firm can detect which brands are most competitive with its own Bylooking at customers who are shifting away from its brand, the company can learn about itsmarketing weaknesses Companies may attract non-loyal consumers by putting their products

on sale

e Multiple Segmentation Bases

Marketers rarely limit their segmentation analysis to only one or a few variables They usemultiple segmentation bases in an effort to identify smaller, better-defined target groups

I.2.2 Bases for Segmenting Business Markets:

Like consumer markets, B2B markets have a wide variety of customers and usually requiremarket segmentation The overall process of segmenting business markets resemblesconsumer market segmentation, but it divides the markets using different criteria

a Geographic Segmentation: As noted above, geographic segmentation is dividing a

market into homogeneous groups based on their locations or geographical units such asnations, states, regions, counties, cities, or neighborhoods This type of segmentation hasbeen practiced for hundreds of years and is applicable to business markets as well asconsumer markets

b Demographic Segmentation: As with consumer markets, demographic characteristics

define useful segmentation criteria for business markets Firms can be grouped by size, salesrevenues, or by number of employees

c Customer-Type Segmentation: Customers can be grouped by broad categories such as

manufacturers, service providers, government agencies, not-for-profit organizations,wholesalers, or retailers They can also be divided by industry

d End-Use Application Segmentation: End-use application segmentation focuses on the way

in which a business customer will use a product Each different end use may dictate uniquespecifications for performance, design, and price

e Purchasing Situation Segmentation: Another approach to segmenting business markets

centers on the purchasing situation Organizations use more complicated purchasingprocedures than consumers Firms structure their purchasing functions in specific ways For

4 Pareto’s Priciple – the 80/20 rule; from F.John Reh

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some B2B marketers, this may be the best way to segment the market Some companiesdesignate centralized purchasing departments to serve the entire organization Others alloweach unit or location to handle its own buying A supplier may have to deal with one or withmany different buyers or buying center participants Each of these different situations results

in different buying behavior

I.3 Market Targeting

After various market segments have been identified, one or more target segments or target

markets need to be selected Target markets are market segments on which an organization

focuses its marketing plan and toward which it directs its marketing efforts Members of thetargeted segment share common needs or characteristics that the company decides to serve.The target market is the market segment selected because of the firm’s belief that its offeringsare most suited to winning those customers A company should target segments where it can

have a competitive advantage—the ability to outperform the competition, thereby providing customers with benefits the competition can’t The company should have distinctive competencies that will create a competitive advantage in the minds of these consumers I.3.1 Evaluating Market Segments

Viable target segments should satisfy the following requirements:

1 Members of the segment are similar to each other in their product needs and wantsand different from consumers in other segments

2 The size and purchasing power of the segment can be measured in order to decide iftargeting this segment is worth it

3 The segment is large enough to be profitable now and in the future

4 Marketing communications can reach the segment

5 The organization can adequately serve the needs of the segment The firm has theexpertise and resources to satisfy the segment better than the competition; the firmhas a competitive advantage

I.3.2 Developing Segment Profiles

After evaluating the different segments, the marketer should have identified which ones areviable It is helpful to generate a profile of each one in order to understand the needs of

segment members and to look for business opportunities The segment profile is a

description of the typical customer in the segment The profile might include customerdemographics, location, lifestyle information, and a description of how frequently thecustomer buys the product Saigontourist is very strength in customer information system, bycollecting, storing and analyzing customer’s information, it give a clearly description of thetypical customer in each segment

I.3.3 Choosing a Targeting Strategy

A basic targeting decision is how finely tuned the target should be: Should the company goafter one large segment or focus on meeting the needs of one or more smaller segments?Target marketing can be carried out at several different levels Companies can target verybroadly, very narrowly, or somewhere in between Four targeting strategies are explainedbelow:

Figure I- 2: Different level of Target Marketing

Undifferentiated

(mass) marketing

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An undifferentiated marketing strategy (mass marketing strategy) is appealing to a broad

spectrum of people This strategy focuses on what is common in the needs of consumersrather than on what is different The company designs a product and a marketing programthat will appeal to the largest number of buyers If successful, this strategy can be veryefficient, especially because production, research, and promotion costs benefit fromeconomies of scale When using this strategy, the company is betting that people have similarneeds, or that any differences among them will be so trivial that they will not matter, so thatthe same product and message will appeal to many customers In tourism industry, it isdifficult to create the difference in product feature Some small travel firms in Vietnam such

as Viet Dragon launches “Cheaper tour” aim at mass market (student and low-incomegroups) with cheap price, average quality and easy to booking

b Differentiated Marketing

A differentiated marketing strategy is developing one or more products for each of several

distinct customer groups and making sure these offerings are kept separate in themarketplace The firm decides to target several market segments and designs separate offersfor each A differentiated strategy is appropriate when consumers are choosing among brandsthat are well known in which each has a distinctive image in the marketplace, and in which it

is possible to identify one or more segments that have distinct needs for different types ofproducts By offering product and marketing variations to segments, companies hope forhigher sales and a stronger position within each market segment Developing a strongerposition within several segments creates more total sales than undifferentiated marketingacross all segments It usually use in tourism market Adventure tours are organized foryoung customers meanwhile golf tour focus on businessman Differentiated marketing,however, increases the costs of doing business

c Concentrated Marketing

A concentrated marketing strategy is focusing a firm’s efforts on offering one or more

products to a single or a few segments This strategy is often useful for smaller firms that donot have the resources or the desire to be all things to all people Instead of going after asmall share of a large market, the firm goes after a large share of one or a few segments orniches (Niches are smaller than segments and may attract only one or a few competitors.)Concentrated marketing can be highly profitable; however, it involves higher-than-normalrisks Companies that rely on one or a few segments for all of their business will suffer

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greatly if business for that segment deteriorates or if larger competitors decide to target thesegment

Sinh café travel is a typical example of success in Opentour They are one beginner in thisfield and quite famous with a large coach team everywhere in Vietnam Almost travelerknown about convenience of Sinh café’s Opentour compare with other domestic tour

d Micromarketing

A micromarketing strategy is the practice of tailoring products and marketing programs to

the needs and wants of specific individuals and local customer groups (locations)

Micromarketing includes local marketing and individual marketing.

Local marketing is tailoring brands and promotions to the needs and wants of local

customer groups—cities, neighborhoods, and specific stores Local marketing helps acompany market more effectively considering the pronounced regional and local differences

in demographics and lifestyles It also meets the needs of retailers who prefer fine-tunedproduct assortments Local marketing can drive up manufacturing and marketing costs byreducing economies of scale It can also create logistics problems

Individual marketing (or customized marketing) is tailoring products and marketing

programs to the needs and preferences of individual customers Individual marketing is apractice that has been around for centuries The tailor custom-made suits; the cobblerdesigned shoes for the individual; the cabinetmaker made furniture to order Newtechnologies are allowing many companies to return to customized marketing through the use

of mass customization Mass customization is an approach that modifies a basic product to

meet the needs of an individual Mass customization is the process through which firmsinteract one-to-one with masses of customers to create customer-unique value by designingproducts tailor-made to individual needs

Demand for travel is quite complex, depend on personality or business characteristic,customers have demand for a special tour MICE tour (Meetings, Incentives, Conferences andExhibitions), a strong developing tour in Vietnam is an example Customers want to combinetheir business trip with a tour in Vietnam It become popular and develop more and more.MICE tour is tailored to satisfy it

I.4 Market Positioning

The positioning process starts with a thorough understanding of the target customers and thecompetitors From the analysis of target customers, competitors and identifying itscompetitive advantages, the company can choose a positioning strategy for its product anddeliver the chosen positioning strategy

I.4.1 Understanding Target Customers

Before entering into a selected segment, company should research its target customers tounderstand who are they, what do they need, what is the motivations behind their purchasingdecisions, their preference and priorities

Professor Baeyens mentioned in his lecture that a customer would choose such or such offerunder the impact of two factors being (1) The customer’s ‘personal black box’ and (2) Theexternal incentives The ‘personal black box’ includes factors influencing customers’ needsand wants like geographic factors (location, language, culture, age, sex, family situation,family life cycle ); Socio-economical factors such as income, education, activity… One ofthe most important factors in the consumer’ personal black box that marketer shouldunderstand is their state of needs that illustrated by Maslow’ pyramid model in figure I-3below This psychology theory influences significantly to all marketing activities Maslowdivides the needs of human being in levels ranking (pyramid typology) from the lowest needs

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but it is the most basic and widest-Physical need (food, clothes, means of transportation forliving) as we all need then to the highest need-Self-Actualization This explains differentneeds and requirements to individuals for materials and spirit It even changes from time totime to a specific person It also provides rationales for how people prioritize differentattributes of product At the lower levels, people tend to care about basic characteristic in aproduct like capacity, economy or reliability At the higher level, they will care more boutsymbolic things like external image, product personality, brand name

Figure I-3: Maslow’s hierarchy of needs

As mentioned, customers are also influence by external incentives from the marketers thatinclude marketing and communication stimuli such as advertising, sponsoring, publicrelations, direct marketing…sales promotion and brand activation, point-of-sales material,sampling…

I.4.2 Competition Analysis

In competition analysis, professor Baeyens recommended to follow two steps as visualized inthe Figure I-4 The first step in competition analysis is to identify the current and potential,direct and indirect competitors The second step is to be knowledgeable and understanding ofkey competitors, their reactions and decisions

Figure I-4: Steps in Competition Analysis

Source: Jean-Baeyes, Solvay Business School, Lecture Note, 2006

Direct competitors are determined as those who provide similar products or are going afterthe same product market segment that the company serves Indirect competitors offerdifferent product types but satisfy the same customers’ needs

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Current competitors already exist in the market while potential ones consist of those who arelikely to participate in the market segment Company should have a marketing intelligencesystem that collects and analyze information to recognize the appearance of the potentialcompetitors.

It is important that before participating in a market segment, firms should have a thoroughunderstanding of the competitors, their objectives, decisions and reactions They also need tounderstand the positions of each current competitor in customers’ mind

Perceptual map is a useful technique for analyzing the competitive positioning of competingproducts It visually depicts consumer perceptions on competing products as regard to theproduct attributes that are important to them

The starting point to develop a perceptual map is finding out what criteria buyers take intoconsideration when buying a product and collect the information on how customers perceivethese important attributes of each product then plot them onto the map

After understanding the positions of each current competitor from the customers’ viewpoint

on consumers, firm then can define which position it want to occupy in the segment It canchoose a position next to competitors or find a hole that have not yet filled in by thecompetitors The figure I-5 illustrates an example for customers’ perception map on theVietnam tourism market

Figure I-5: Perceptual Map- an example of tourism market

High Price

Low price

Source: Hanoitourist Internal Information

Assuming the company finds out that dimension of a tour are price and quality, which aretwo important criteria customers think of when choosing a tour After customer survey, theposition of each competitor is presented as in the map Saigontourist (A) is perceived as highprice but having high quality; Huong Giang Travel (C) is considered low price with lowquality, Hanoi Redtour (D) is high quality and low price when Hanoitouris (B) is of average

in all dimensions The firm then may decide which position to occupy on the map ofcustomers’ perception Perceptual Map can be used for many purposes and at different stages

of positioning strategy It can be used to reveal market segment, to analyze strengths andweaknesses of a product in relation to competition, to develop new strategies or reposition

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the products It helps marketer to decide on competitive position that enable the product todistinguish from rival offerings or to track shift in consumer perception.

I.4.3 Identify possible competitive advantages

According to Philip Kotler, the key task of management in competitive markets is to create asustainable differential advantage to attract the customer’s choices A sustainable differentialadvantage is perceived difference that leads customers in the target segment to prefer onecompany’s offer to those of others To obtain a competitive advantage, a company has todetermine the particular ways to differentiate its products in comparison with its competitors

Differentiation is the act of designing a set of meaningful differences to distinguish

the company’s offering from competitor’s offerings5

A company can be differentiated along the line of product, service, personnel, channel, orimage

Figure I-6: Differentiation variables 6

Conformances Installation Credibility Performance Audiovisual

Reliability Customer consulting Responsiveness Atmosphere

a Product Differentiation: a company may differentiate its physical product.

Commonly, companies can differentiate their products based on such attributes as:

Features: the same product category often have the same basic function A

company must make their product differentiation by adding extra features theproducts Today, quick enhancement of product’s features is one of key factors inthe success of many companies, especially in high-tech industry However,innovation of a product must be appropriate with customer’s taste which can gatherthrough market survey In fact, tourism product is really quite a complex one7, since

it can comprise a place (the holiday destination), a service (a tour operator’spackage, incorporating the temporary use of an airline seat, hotel room andsometimes other facilities) and on occasion, certain tangible products such as freespirits to encourage booking It is very difficult to create a differentiation feature forthe same product So that, the need to invest distinctive benefits in a product givesrise to the concept of the Unique Selling Proposition (USP) This is feature orfeatures in a product which offer unique benefits not found in those of itscompetitors

Performance quality: the performance have link to ROI and we can make

differentiate in performance quality to achieve better results Normally, the quality business unit often earns more because their premium quality allowed them

high-to charge a premium price This feature is suitable with high quality high-tours The more

5 Phillip Kotler, Marketing Mangement, Prentice_hall, Upper Saddke River, New Jersey, 1997

6 Phillip Kotler, Marketing Mangement, Prentice_hall, Upper Saddke River, New Jersey, 1997

7 JC Hollway*RV Plant, Marketing For Tourism, Chapter 5

15

luxurious tours quality is the higher customer services are acquired With highquality products/ services, it maintains the customer loyalty and attracts morepotential customers through positive word of mouth However, it does not mean thatall should maximize its highest performance level due to the diminishing return toever-increasing performance Travel companies have tried to distinguish theirproduct by making it cheaper than their rivals, with their marketing emphasis on thereduction of product costs and low promotional expenditure This will reduce unitprofits, but the resultant increase in volume demand created by the attraction of lowprice can be sufficient inducement to adopt such policy in order to establish aleading market share.

Conformance quality: is the degree to which products are produces to meet the promised target specifications If the conformance quality is low, the product will

fail to deliver on its promise to many buyers The travel industry has fallen victim

to the belief that low price is the key to success, and over time, the belief become aself-fulfilling prophecy, since if companies promote low price Their customers willbecome to believe the message and demand low price However, they are notnecessarily willing to forego the other attributes the seek, such as reliability andquality, with the result that overall satisfaction falls

Style and Design: Good design or style can also form the basis of product

differentiation This is perhaps more readily appreciated in physical product, andthe success of companies such as Gucci clothing, Lexus … However, style also has

a role to play in travel, both in term of the physical feature of the travel product andthe image which certain companies have generated The design and décor of hotels,ships and aircraft provide opportunities for companies to personalize their products,

as well as periodically to update them In Vietnam tourism market, ready to service

24/24 is the style Vidotour want to send to partners and their customers

b Service Differentiation: addition to differentiation physical product, a company can

differentiate its services, Services differentiation is often applied when the physicalproduct becomes difficult to differentiate The key to competitive success often lies

on providing more value-added services and improving their quality Companies cangain competitive advantage through8:

Ordering ease: means that the company try to provides customers the easiest way to

place and order with the company In the travel industry, companies can getadvantage competitive when they have more travel agent and travelers are easy tocontact with the company to get information and book tour

Delivery: refers to how well the products or services are delivered to the customer

including the speed, accuracy, and care attending the delivery process

Customer training and consulting: means that the sellers provide training courses to

their customers about products, operation and how to use the vendor’s productsproperly and about efficiently In the travel industry, customers training are alsovery important special in discovery tours A good training will help their customers

to reduce the danger which they can face during the tour

Miscellaneous services: in a package holiday product such as companionable fellow

travelers with common interests; expectation to wide of general knowledge andinterests, pleasant memories of experience

c Personnel Differentiation: Travel and tourism is people business That is to say, the

people who attend to the needs of tourists form an essential ingredient of the product

8 JC Hollway*RV Plant, Marketing For Tourism, Differentiating the Product

16

itself Whether referring to sales staff who are responsible for dealing with customersbehind the counter, resort representatives who cater to their needs when they arrive attheir destination, or any of the hundreds of staff with whom the customer will come incontact – hotel waiters, bar-staff, porters, hotel cleaners, coach drivers, or airlinecabin crew, all play a major role in ensure that the total product satisfied the client

Competence: a good staff in this services sector requires personal skills and

interpersonal or social skill such as: employees must approach customers in afriendly and confident manner It may be self-evident, but it has to be stressed thatservice does not mean servility

Courtesy: this mean being outgoing or friendly in dealing with tourists at all time:

the phrase “customer is always right” applies especially to the business of tourism

Credibility and Reliability: the information about the tours, resort must be

consistent and accurate, the consultant is trustworthy Companies and employeesshould build belief in customer’s mind, that is the reputation of the brand name

Responsiveness: represented in attentiveness to the client’s needs that can be

demonstrated by volunteering an interest in them A resort representative, forinstance, can enquire in passing whether clients are enjoying themselves, or acounter clerk can ask a customer browsing through the brochures “is there anyparticular kind of holiday you have in mind?” to generate a sales sequence

Communication: employees make an effort to understand the customer and

communicate non-verbally as well as verbally The way you walk, sit or standreflects an attitude of mind towards the job When shaking hands, a firm handshakewill convey a sense of confidence and responsibility The tone of voice is importanttoo Voices should be well modulated and soothing, especially when dealing with anirate customer The way we express ourselves on paper when communicating withclients is also an important element in the travel transaction Good writtencommunications call for tact, especially when dealing with complaints, attention todetail and the correct language

d Channel Differentiation: A company can make its differentiation through the way

they shape their distribution channels

Coverage: a travel company can choose a coverage distribution strategy to be its

differentiation However, it should remember, there is difference between medium,large-sized company and small company A medium to large-sized company has afar easier choice of alternatives open to it when planning its distribution strategythan a small company If the larger company sells products appealing to the massmarket, and that market is geographically widely distributed throughout thecompany, it could be anticipated that the company would normally seek tomaximize the number of possible outlets through which its products can bepurchased Sinh café tour, an example set up corporate distribution with almostfamous middle class hotels and and destinations everywhere in Vietnam toimplement their product

Expertise: expertise can be the differentiation in distribution In Vietnam, hotel

receptions and airline agencies can be the good distribution of travel companies

Performance: in travel and tourism market, individual companies with common,

but no competing interests can join together for mutual benefit (consortium) It isprominent in the marketing of tourist attractions, hotel and retail travel agents Thecompanies can market themselves more effectively is through becoming part of a

17

co-operative venture Another hands, an organization can expand its system ofdistribution rapidly is by franchising.

e Image Differentiation: Even when competing offer look the same, buyers may

perceive differently to the company image or brand image so a company should builtits images different from its competitors

Identity versus image: Identity is different with image Identity is the ways that a

company aims to identify itself or position its products while image is buyer’sperception of the company or its products A company designs an identity orpositioning to formulate the public’s image, but other factors can affect to decideeach person’s resulting image Normally, an effective image implies three things for

a product: it conveys a message of product’s character and value proposition; amessage of avoiding to be confused with similar message from competitor; and amessage of emotional power Generally, most of Vietnamese companies do notreally pay attention to building the image of both their companies and their products

so making differentiation in image will be new and attractive customers

Symbols: A strong image must contain one or more symbols that stimulate

company or brand recognition The logo of a company or a brand should bedesigned for instant recognition An impressive and meaningful logo will be theadvantage for customer’s recognition Hanoi Corporation use “Van Mieu image”symbol of Hanoi culture for there logo as a beauty of Hanoi people from thousandsyear

Written and audiovisual media: After having symbol, the must convey it to the

public through advertisements It may be advertised officially through mass mediamean or through other company’s publication such as brochures, catalogues orstationery and business cards

Events: The identity of a company can built through the type of events its sponsors.

Travel companies can participate in specialized exhibitions or be sponsors ofrelative program especially charity programs which are directly broadcast ontelevision

I.4.4 Selecting the right competitive advantages

After the company has discovered several potential competitive advantages, it must choose theones upon which it will build its positioning strategy It must decide how many differences topromote and which ones According to Philip Kotler9, Many marketers think that companiesshould aggressively promote only one benefit to the target market Other marketers think thatcompanies should positions themselves on more than one differentiating factor This may benecessary if two or more firms are claiming to be the best on the same attribute

In addition, not all brand differences are meaningful or worthwhile Each difference has thepotential to create company costs as well as customer benefits Therefore, the company mustcarefully select the ways in which it will distinguish itself from its competitors

9 Phillip Kotler, Principles of Marketing, Prentice Hall, USA, 1999

18

I.4.5 Choosing a positioning strategy

Researchers summarized a number of positioning strategies that an organization can adopt andthese may be used independently or together.10

Positioning in relation to attributes

This involves positioning the product on the basis of very specific attributes such as performance,durability, quality reliability, style and design This type of positioning is very popular in tourismindustry

Positioning in relation to the user/usage

This can involve positioning the product according to the occasions when it is used In thetourism industry, positioning with regard to usage is also common There are a lot of tourismproducts which are building for special occasions

Positioning in relation to competitors

In this case, features which are to some extent directly comparable with those of competitors areemphasized There are two possible options:

Positioning directly against competitors this involves presenting the product as having all ormore of the important features of the competing product at a comparable or lower price This ispotentially an aggressive and risky positioning strategy, since it involves challenging the

competition head-on, but if successful it can offer considerable benefits in terms of improved

sales and profits The effective implementation of such a positioning strategy is dependent onproduction efficiencies and innovative marketing Positioning away from competitors Thisinvolves positioning the product as having quite distinct or different features but fulfilling thesame consumer requirements An example comes from the soft drinks market The manufacturers

of 7-Up could not compete directly with Coca-Cola and Pepsi, the market leaders, so theypositioned 7-Up as the 'un-cola' drink The product satisfied consumer requirements, but alsooffered something different The campaign was a success and 7-Up became the number 3 bestselling soft drink

I.4.6 Communicate positioning via marketing mix

Once the company has developed a clear positioning strategy, it must communicate thatpositioning effectively via the marketing mix According to Kotler, the marketing mix is

defined as: “The mixture of controllable marketing variables that the firm uses to pursue the sought level of sales in the target market”

These variables are numerous, but can be conveniently grouped together into four categories,popularly known as four P’s – Product, price, place and promotion

Figure I-7: Maketing mix 4P’s model

10 Modular MBA Marketing, The University of Nottinggham; www.nottingham,ac.nk

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Within the product category, that is the combination of design, quality, range of products,

brand name and feature In the travel market, the manager may choose to focus on two newdestinations to be add to the summer sun program, and to change some of the hotels usedcurrently in the programme in order to provide a better overall standard of product and pushthe program up-market slightly

In price category, those are list of price, discounts, commissions, surcharges and extras The

operator able to offer a no surcharge guarantee for all holidays booked and paid for prior to

30 April, agree new extended payment terms for holidays in a new credit scheme, andintroduce (for the fist time) reductions of 30% for children on all holidays booked for the firstweek of September onwards

Place are combination of distribution channels, methods of distribution, coverage and

location In tourism industry, distribution channels can be direct channels, corporatechannels, etc An operator, for example, decides to encourage more direct sell, setting a target

of 20% direct bookings for next summer’s packages, while simultaneously providing extrasupport for key agents Agency sales calls are to reduced, and the company’s representativeswill no longer call on agents providing less than ten booking in any one year

Promotion is the forth in 4P’s, which are advertising, sales promotion, salesmanship and

publicity A travel firm for example, allocates VND 500 millions from the budget to be spent

on selective television and national press advertising campaigns, and introduce a co-operativeadvertising scheme with travel agents, whereby it is agreed to pay 40% towards the cost ofjoint advertising in local papers Fifty selected agents are to be taken on educational studytrips to the company’s recently launched destinations, and 20 travel writers and journalistswill be invited on another educational visit to the company resorts in Southern centralVietnam

However, tourism product is really quite complex one, since it can comprise a place, aservice, on occasion, certain tangible products of something When consumers buy products,they are buying features of a perceived standard of quality and style which reflects theproduct’s design So, marketing mix of tourism travel firms has some difference by adding

three factors: Process; People; and Physical evidence It is called Marketing mix 7P’s

which will be presented more clearly after here

Physical evidence is the material part of a service Strictly speaking there are no physical

attributes to a service, so a consumer tends to rely on material cues There are manyexamples of physical evidence, including: Packaging; Internet/web pages; Paperwork;Brochures; Furnishings; Signage (such as those on aircraft and vehicles); Uniforms; Businesscards; The building itself (such as prestigious offices or scenic headquarters); Mailboxes andmany others

A sporting event is packed full of physical evidence Your tickets have your team's logosprinted on them, and players are wearing uniforms The stadium itself could be impressiveand have an electrifying atmosphere You traveled there and parked quickly nearby, and yourseats are comfortable and close to restrooms and store All you need now is for your team towin

Some organizations depend heavily upon physical evidence as a means of marketingcommunications, for example tourism attractions and resorts (e.g Disney World), parcel andmail services (e.g UPS trucks), and large banks and insurance companies

People

People are the most important element of any service or experience Services tend to beproduced and consumed at the same moment, and aspects of the customer experience arealtered to meet the 'individual needs' of the person consuming it Most of us can think of a

20

situation where the personal service offered by individuals has made or tainted a tour,vacation or restaurant meal Remember, people buy from people that they like, so theattitude, skills and appearance of all staff need to be first class Here are some ways in whichpeople add value to an experience, as part of the marketing mix - training, personal sellingand customer service.

Process is another element of the extended marketing mix, or 7P's.There are a number of

perceptions of the concept of process within the business and marketing literature Some seeprocesses as a means to achieve an outcome, for example - to achieve a 30% market share acompany implements a marketing planning process

Another view is that marketing has a number of processes that integrate together to create anoverall marketing process, for example - telemarketing and Internet marketing can beintegrated A further view is that marketing processes are used to control the marketing mix,i.e processes that measure the achievement marketing objectives All views areunderstandable, but not particularly customer focused

For the purposes of the marketing mix, process is an element of service that sees thecustomer experiencing an organisation's offering It's best viewed as something that yourcustomer participates in at different points in time Here are some examples to help yourbuild a picture of marketing process, from the customer's point of view

Going on a cruise - from the moment that you arrive at the dockside, you are greeted; yourbaggage is taken to your room You have two weeks of services from restaurants and eveningentertainment, to casinos and shopping Finally, you arrive at your destination, and yourbaggage is delivered to you This is a highly focused marketing process

I.5 Characteristic of tourism product

In this respect, the field under consideration is tourism – a service industry Most of thoseinvolved in the tourism business can genuinely believe that the product they are selling isbeneficial to their clients So, it have a lot of points that are different from other products by

4 main points hereafter.11

I.5.1 Intangible products

They cannot be inspected or sampled in advance of their purchase; therefore an element ofrisk is involved on the part of the purchaser This is a critically important aspect of thetransaction From one perspective, this makes marketing services much easier None of theusual problems of physical distribution are encountered, and there is no question of having tostore the product in warehouses prior to its delivery to the customer However, intangibleproducts have many drawbacks The fact that Tourist Companies do not have to purchase theproducts before selling them to clients reduces both their commitment to the sale and theirloyalty particular brands In place of s distribution system, the travel industry must deal withreservations system, which is simply a method of matching demand with supply

Tourism marketers must attempt to overcome the drawbacks posed by an intangible product,and there are a number of imaginative ways in which this has been achieved in practice Thedevelopment of Television, which product a more faithful and more favorable image of theholiday product than can be obtained with holiday brochure, is one way in which travel can

be effectively communicated to consumers

I.5.2 Heterogeneity of products

If you buy a tangible product (a table, a TV set ) mass product methods can go along way toensuring that each article produced is homogeneous, that is standardized with each unitsharing identical characteristics With good quality control ‘lemons’ occur very infrequently

11 J C Hollway * R V Plant, Marketing For Tourism

21

and customers can be assured of a product of certain uniformity and quality This is not casewith a service Although the package tour concept combination of flight, hotel room andtransfer, has gone a long way to help the standardization of the travel product, there areelements of the product over which the manufacturer, the tour product operator can have nocontrol A holiday taken in a week of continuous rainfall is totally different product from onetaken in glorious sunshine The operator might offer to their customer a consolation of aninsurance against bad weather.

I.5.3 Highly perishable one

If the TV set in the showroom is not sold today, it can be sold tomorrow; if necessary, at areduced price Or it can be stored and offered at a later date But an airline seat or hotel roomnot sold to day is lost forever This fact is of great importance for marketing, particularlywhen determining pricing The heavy discounts on rooms sold after 6 pm and the ‘standby’fares offered by airlines to fill empty seats reflect this need to off-load products before theirsale potential is lost The occasion tours such as April 30th and May 1st can be sold on the dayafter of this year

be very different Whatever the quality of the food, however attractive the decor, service is somuch an integral part of the product that it would be unlikely that we should be prepared topurchase from a poor representative The travel agent who sells us our holiday, the airlinesteward who caters to our needs en route, the resort representative who greets us on arrival,-all are elements in the product we are purchasing, and their social skills in dealing with us are

an essential part of the product It is for this reason that training becomes so vital for thesuccessful marketing of travel and tourism

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CHAPTER II:

HANOITOURIST TRAVEL COMPANY – REALITY OF

SEGMENTATION, TARGETING AND POSITIONING

The chapter will firstly describe the environment of the Vietnam economy and Tourism market in order to understand the characteristics, the present situation, and the trend of the market that have great impact on Hanoitourist business.

Secondly, the chapter will provide an overview on Hanoitourist’s history, company’s marketing activities in order to understand the way Hanoitourist running their business especial their marketing activities include Market segmentation, Targeting and Positioning

Competitor analysis and the difference of tourism product also presented

in this chapter.

The last and most important part of this chapter will present the actual company images in customers’ mind, which helps the author to provide discussions on the problems of Hanoitourist in their Market segmentation, Targeting and Positioning.

II.1 Vietnam Business Environment and Tourist Market Environment

II.1.1 Vietnam Business Environment

Location

Located in the center of the Southeast Asia, Vietnam is shaped like the letter "S"12 Thecountry lies in the eastern part of the Indochina peninsula, bordered by China to the north,Laos and Cambodia to the west, and the East Sea and Pacific Ocean to the southeast.Vietnam's coast line is 3,260 km long and its inland border measures 4,510 km Among them,many are valuable for tourist assets that create also of famous tourist resorts in the Vietnamcoastal and marine areas, the two of those-Ha Long Bay and former Hue ancient capital-havebeen recognized as the world natural and cultural heritages by UNESCO

The country's total length, from the northernmost point to the southernmost point, is 1,650

km Its width, stretching from east to west, is 600 km at the widest point in the north, 400 km

in the south, and 50 km at the narrowest part in the Quang Binh province on the central coast.Vietnam is also a transport junction from the Indian Ocean to the Pacific Ocean

Based on the geographical, historical and economic conditions of the Vietnam coastal and seaareas, a plan for tourism development of the coastal and sea have been studied and adequated

to other marine economic sectors to recommend a larger construction structure to changeplanning scale from 5-10 km to hundreds of km The current large scale of marine tourismenvironment is very easy to be destroyed by modern geographic process and the impact ofhuman activities The high density of tourists, concentrated in only few resorts has created anunacceptable stress, which can destroy the natural value of these areas To develop themarine tourism in Vietnam, it is necessary to focus on the land fund and sea environmentprotection that will bring benefits to the tourist construction land for invalid purposes.Regrettably that up to date in Vietnam the encroachment of valid land for tourism is stillhappening for other purposes such as building the separated houses, lumpish architectures,stores, ports at coastal areas of Quang Ninh, Hai Phong, Thanh Hoa, Vung Tau

Climate

12 Vietnam National Administration of Tourism, Introduction, http://www.vietnamtourism.com/e-pages

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Located in both a tropical and a temperate zone It is characterized by strong monsooninfluences, but has a considerable amount of sun, a high rate of rainfall, and high humidity.Regions located near the tropics and in the mountainous regions are endowed with atemperate climate.

The annual average temperature ranges from 22ºC to 27ºC The average temperature is 23ºC

in Hanoi, 26oC in Ho Chi Minh city and 25oC in Hue

There are two distinguishable seasons The cold season occurs from November to April andthe hot season from May to October The difference in temperature between the two seasons

in southern Vietnam is almost unnoticeable, averaging 3ºC The most noticeable variationsare found in the Northern provinces where differences of 12ºC have been observed There areessentially four distinct seasons, which are most evident in the Northern provinces

Traditional Festivals

Festivals have long been considered the traditional cultural activity of the Vietnamese people.They are attractive to all social classes and have become a necessary part of people's lives formany centuries Festivals are the crystallization of cultural, spiritual, and physical activitiesthat have been chosen, maintained, and improved over many generations Festivals are theliving cultural museums of the way people live

Festivals are a place to enjoy and learn about the people's crafts For example, the MasterPagoda Festival (HaTay) has puppet shows and the Hung Temple Festival (Vinh Phu) has the

"Xoan" folk songs The Phu Giay Festival has "Chau Van" folk songs The Lim Festival has

"Quan Ho" folk songs The drum beats that are mixed with traditional musical songs anddances create an never ending energy during the festivals

Festivals are also a place to enjoy interesting games There are many festival contests such aswrestling, rowing, rice cooking, rope pulling, rope climbing, and chess playing There arealso competitions between trained animals such as cock fights, buffalo fights, and pigeonraces Festivals are an occasion to remember national heroes, the manifestation of religiousfreedom, and religious ceremonies

Festivals are also a place where different people can show their own customs and habits.Festival days are usually days where one can find social encounters, relationships, and love.Many loving relationships have originated from tournaments, competitions, or during a fewlines of singing

Holidays

Saturday and Sunday are holidays

There are also 9 other holidays in a year:

January 1 : New Year's Day, one-day holiday

April 30 : Saigon Liberation Day, one-day holiday

May 1 : International Labour Day, one-day holiday

September 2 : National Day of the Socialist Republic of Vietnam, one-day holidayVietnam traditional Lunar New Year Festival (Tet Nguyen Dan): four days holiday.This holiday begins on the Eve and the first three days of a Lunar New Year (Among January and February of solar year)

Hung King’s festival day (10/3 lunar year)

Economy Situation

GDP (2006): $61 billion.13

Real growth rate (2007): 8.3%

Per capita income (2006): $726

13 http://www.state.gov/r/pa/ei/bgn/4130.htm

24

Inflation rate (2006): 7.5%.

External debt (2006): 34.9% of GDP, $18.2 billion

Natural resources: Coal, crude oil, zinc, copper, silver, gold, manganese, iron

Agriculture and forestry (20.4% of GDP, 2006): Principal products rice, maize, sweet potato, peanut, soya bean, cotton, coffee, cashews Cultivated land 12.2 million hectares Land use 21% arable; 28% forest and woodland; 51% other.

Industry and construction (41.5% of GDP, 2006): Principal types mining and quarrying,

manufacturing, electricity, gas, water supply, cement, phosphate, and steel

Services (38.1% of GDP, 2006): Principal types wholesale and retail, repair of vehicles and

personal goods, hotel and restaurant, transport storage, telecommunications, tourism

Trade (2006): Exports $39.6 billion Principal exports garments/textiles, crude oil,

footwear, rice (second-largest exporter in world), sea products, coffee, rubber, handicrafts

II.1.2 Vietnam Tourism Market

Vietnam reached a milestone in 2007: over 4.1 million international arrivals, reflecting animpressive 16% year-on-year gain Taking a look at “The Year of the Pig,” industry statisticsfrom the World Travel and Tourism Council and the Vietnam National Administration ofTourism paint a bright picture for Vietnam’s tourism economy14 China remains the largestsource market, accounting for over 500,000 international arrivals, or 13.4% of the annualtotal South Korea, Japan and the United States follow closely, each contributing well over400,000 inbound arrivals The Lunar New Year attracted 380,000 foreign visitors in themonth of February, and the average monthly mean for arrivals to Vietnam’s shores exceeded345,000 throughout 2007

Figure II-1: Number International arrivals Vietnam

Sources: Vietnam hardhat report pages 4, February 2008

Total demand, domestic and foreign, created US$12.195 billion in economic activity, a10.1% increase from 2006, contributing US $2.11 billion, or 3.1%, of the country’s GrossDomestic Product (GDP) As an industry indicator, total demand accounts for theconsumption of durables, non-durables and services as well as government expenditures,capital investments and non-visitor exports used by travel and tourism providers Amongstthe Association of Southeast Asian Nations (ASEAN), Vietnam’s total demand is the sixthhighest and is expected to grow at a steady pace of 7.5% per annum from 2008 to 2017,exceeding the average annualized gain of 6.3% projected for the entire ASEAN market.Vietnam’s projected annual growth rate makes it the front runner of the 10 nations thatcomprise the ASEAN market and sixth worldwide in terms of increases in total demand.While a boost in international arrivals will bolster this rate, growth in tourism receipts as adirect result of an increase in revenue per individual traveler is more valuable A recently

14 Blackwellmedia, Vietnam Hardhat Report Developments in Travel & Tourism

25

released report from Research and Markets entitled, “Opportunities in Vietnam’s TourismIndustry 2007-2009,” projected that the average tourist expenditure will reach US$976.26 perhead by 2011 This industry prediction is supported by the government’s targeted goals of sixmillion international arrivals by 2010 and an increase of gross revenues by 50% Establishingevidence of Vietnam’s emerging consumer-class, domestic residents accounted for the largestshare of direct consumption (lodging, transportation, food & beverage, entertainment,financial services, etc.), spending US$3.9 billion Combined, visitor exports (expenditures byforeign travelers on goods and services within the country) and non-visitor exports (the sale

of consumer or capital goods to be used abroad by travelers or tourism suppliers) accountedfor over 9% of all exports, contributing US$4.869 billion to Vietnam’s foreign trade, whichreached US$48 billion in 2007 If Vietnam’s explosive economy continues at pace, thecountry’s travel and tourism industry will generate US $28.69 billion in economic activity in

2017 and will provide 1,047,000 industry-specific jobs by that time

Between 2008 and 2017, global totals for travel and tourism demand will grow 4.3% perannum, and employment within the worldwide industry will average at 1 out of every 12jobs15 These statistics indicate that Vietnam’s tourism industry is beating out global averagesfor employment percentages and growth of total demand As the economy has liberalized andinvestment restrictions for foreigners have relaxed, the nation’s real estate market has seenconsiderable attention Figures given by industry analyst’s estimate that over US$5 billionwas invested in the real estate market in 2007, and some predict that this will grow by 30% in

2008 In turn, the travel and tourism economy, which received US$1.95 billions or 8.3% ofall capital investments in 2007 is expected to grow in nominal terms to US$4.18 billion by2017

Doi moi, as the era of free-market reforms in Vietnam is called, roughly translates torenovation or renewal The country’s economic liberalization has certainly breathed apalpable sense of renewal into the nation, and the years to come are incredibly vital toVietnam’s maturity as a top-tier tourism destination With high growth rates, escalatingrevenues and large capital investments, tourism is one of the nation’s strongest economicengines and will be a defining element in its socioeconomic culture Investments into thenation’s infrastructure will create a framework for economic development, and the tourismindustry will both influence and take its form from decisions that affect the builtenvironment

II.1.3 State Governance of Tourism Sector

Vietnam has not a Tourism Ministry with the aim to promote tourism and developcompetitiveness to spearhead tourist related economic development The Vietnam NationalAdministration for Tourism (VNAT) is not a state management agency but a department thathelps the government to carry out its management activities in this field VNAT is notauthorized to issue any legal documents, leading to difficulties for effective tourismmanagement, given that there are 64 provinces and each with their own Tourism Department– each of which is fighting each other for investment That the reason why, Vietnam tourismpolicies is less synchronous and less effectiveness in tourism investment If Vietnam does not

a change it will not be able to narrow the gap with other competitor regional countries likeThailand, Malaysia and Singapore

From beginning of 2007, a lot of Government policies aim to tourism industry to improve thesituation and take full advantage when the unstable politics is happening in some countries ofASEAN Government encourages provinces and companies to develop infrastructure which

15 Statistic documents of Vietnam National of Tourism, January 2008

26

help to make a good condition to attack traveler Government invests expenditure to edit andbroadcast TV clips to advertise Vietnam tourist such as: Advertising Halong bay on CNN.Due to the interest of Government, The program vote 7 new wonder marked first success of Vietnam when the 3 tourist area of Vietnam (Halong Bay, Phong Nha cave and Hoi An) won three first position.

The Government and the Administration of Tourism also aim to develop tourist infrastructureand create job for the people As an economic sector, tourism has its own features which arethe linkages with various sectors, localities and a large number of stakeholders and therequirements for a high standard of quality of services provided Therefore, development ofhuman resources in tourism is of great importance, especially the contingent of tourmanagers, hotel managers, tour guides, receptionists, chefs, bar tenders, room service staffs,waiters and waitresses At present, apart from universities, higher education institutions andsecondary vocational training institutions which provide training in tourism under themanagement of Ministry of Education and Training and other relevant ministries, theNational Administration of Tourism has its own training system specialized in tourismtraining from vocational to higher education levels, capable of satisfying all the needs forabove-mentioned high class services The National Administration of Tourism has made gooduse of the assistance of World Tourism Organization, of ATF, ASIANTA, PATA, etc andTechnical Assistance projects of the EU, Belgium, Luxembourg to invite foreign experts toprovide training for human resource development Over the past period, experts of the WorldTourism Organization have helped The National Administration of Tourism to draft theTourism Law With the assistance of Belgium experts, two training courses in touristmanagement have been organized in Vietnam and two others in Belgium for personnel of thetourism sector of Vietnam In addition, The National Administration of Tourism hasorganized regular annual training courses All this manifests that the National Administration

of Tourism has attached utmost importance to human resource development which is anindispensable factor for development

II.2 Company’s overview

II.2.1 Company development

Hanoitourist Travel Company, a subsidiary of Hanoitourist Corporation - one of the top

ten leading tourist companies in Vietnam and the biggest one in the North of Vietnam Thecompany award title “top ten international travel companies” in 2000, 2001, 2003, 2004

In 1998, Hanoitourist established Hanoitourist center, which business specially travel Since

2005 the center was change to Hanoitourist Travel Company16

At present, total member (leader broad and staffs) of Hanoitourist is 80 people, include: 62people in head office, 10 people in Ho Chi Minh Branch and 8 people in Central branch.Hanoitourist is specializing in inbound, outbound, domestic tourism It successfully organizesspecial kinds of Indochina tours, providing all kinds of package tours for groups andindividual including business tours, technical visit and M.I.C.E services(organize meetings, incentive trips or conferences, as well as group travel in Vietnam or overseas) Also,Hanoitourist offer private tours upon request and services supplement such as: hotelreservation, tour guide, business interpreter, and air ticket booking service, airport transfer,car rental and others related to tourism field

II.2.2 Company’s objectives

16 Internal Document of Hanoitourist Travel Company; or Website: http://.Hanoitourist-travel.com.vn

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For years, Hanoitourist has been striving to be better in quality The slogan “combining forcesand heart for the customer’s satisfaction” is the most regularly seen on the company’s officewalls The business strategy of Hanoitourist stresses on:

o Delivering great products and services: Company undertook introducing to the marketgreat products with great quality and great performance

o Reach to growth rate 20% turnover per annum from 2007 – 2010

o Becoming the leaders in customer satisfaction and quality Improve customersatisfaction on sales and after sales service Improve the quality and minimize themistake on process

o Increase the number of foreign travel agents; try to achieve the company’s target: grow20% customer’s volume especially in foreign group

o Become member of top 5 of tourism travel company in Vietnam market

II.2.3 Hanoitourist’s Sales Results

Figure II-2: Turnover from 2003 – 2007 (divided by customer groups)

Source: Hanoitourist Internal document

Vietnamese Revenue growth with the development of the national economic Vietnamesespend more for leisure, entertainment But the number figured on the table 1 show a verymodest growth of domestic customer (5%) in comparing other According to the statistic ofVietnam National Administration of Tourism, Vietnamese customer for the domestic marketraises 17% annual from 2003 to 2007 Hanoitourist has to worry about it

Figure II- 3: sales percentage base on customer’s nationality

(not included domestic customer)

Source: Hanoitourist Internal document

In general, customer from different country comes more and more But the bird-flu inVietnam causes a decrease in all destinations from 2005 to 2007

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See the figure II-2 and the figure II-3, we find that company’s turnover still growth even the

% of foreign tourist decreases That mean the domestic customer travel more TheVietnamese with high revenue spend more for holiday and travel in other country Byappearance, Hanoitourist can happy for this result But if compare with market growth, it is17% (2003-2006) and specially 19% (2006-2007) Hanoitourist must worry about somearticles talk that Hanoitourist is out of list of top ten international travel company in Vietnammarket

II.3 Company's Marketing Execution (Segmentation, Targeting and Positioning) II.3.1 Segmental execution

Hanoitourist is currently using some segmentation variables base on some mix of

characteristics such as: Region and Income; Nationality and Social class; Purchasing and use application

Region and income segmentation:

For the Vietnamese customer - said customer for outbound and domestic tours, region and income segmentation is used to determine and to classify the market in to three main

segment In each segment will divide to three sub-segments

Northern market: Customers are people live, work at North area Due to be affected

by culture, they are careful customers in choosing, more caring about price Theyalso pay attention to behave of tour guides Their choosing is affected by family andfriends They have more information and easy to change However, this group ishighest loyalty

Central market: Those are small group and have lowest income They are customerswho live and work at central area They have little information and usually choosetour of local travel firm However, High income customer in this group also choosereputation firms to have high quality services

Southern market: This is the biggest market which high income (HoChiMinh cityand other city) can pay high for luxury or special product This group is also have alot of information and easy to look for other travel firm Because Southern is apotential market and have many travel firms set head office in south area, thecompetitive pressure in this area very high

In each main segment such as Southern market there are three sub-groups:

High-income group: they earn per month over VND 7 millions (450US $).Customers in this segment usually use outbound tour with high quality services.The tour offer to this group must be special tour and they ready pay more to getmore satisfaction They little care about price but the price must be sensible becausethey have more information and multi-choice Quality and security are their firstinterest They always look for a new feeling and less loyalty

Average-income group: they earn per month around VND 4 millions (± 2millions)equivalents 150USD – 400USD They are biggest group in domestic tour marketwith average of product knowledge and average willingness to pay for a tour This

is the fastest growing segment tends to go upper segment with more demand aboutproduct characteristics Vietnam is developing day by day, average income groupwill be the potential group for every tourism travel firm

Low-income group: they earn per month lower than VND 2 millions They just takepart tour at special occasion such as: summer holiday, company tour… They usedmainly domestic tours That are cheaper tours, short day and less accompanyservices Due to a little staff and focus on high-income group and foreign traveler,

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Hanoitourist gives up the group to smaller companies which are members ofHanoitourist Corporation.

Due to the difference in habit of consumption in three part of Vietnam, this segmental wayhelps the company has a depth of view about their customers

Nationality and social class segmentation:

International sales department of Hanoitourist have responsible to take care foreigncustomers Because customers come from different country use different language Toimplement well the job, the department divides the foreign market into some main groupswhich have similar product need and language; the group size is large enough to be profit andmarketing communications can reach, those are: Chinese and Taiwan customers; Russiancustomers, Korean customers; Japanese customer; American and countries using English;Germany customers; Thailand…etc

In the same language groups Hanoitourist divide it to three sub-groups that are:

Middle class: Those are higher and middle managerial, administrative or professional;Supervisory or clerical, junior managerial This group is evaluated highest because theircharacter of their work can get higher income than others

Working class includes skilled manual workers, semi-skilled and unskilled manual worker Insome foreign countries, this group also gets more money from their work However theirhave different life style to middle class

Others and lowest level are pensioner, unemployed, casual or lowest grade workers It is notpaid attention by large travel firms

Purchasing and use application segmentation:

This segment base on the purpose customer purchase and use the products It also the waythey purchase products and services, which are:

The purchaser also the user: it can be called direct customer Hanoitourist get booking direct

from customer and get feed back from them about the products and services This group gainsmall percentage in all tourism market

The purchaser on behalf of their organization and other people: They are admin staffs in

organization and lead who have responsibility in book tour for the company or a grouppeople They may be or not be user

Individual or organizations who purchase and sell this products to others: they are agencies,

included or not included in the distribution system of Hanoitourist

II.3.2 Targeting

Base on the theory, the first step is Evaluating Market Segments, that include: 1.Members

of the segment are similar to each other in their product needs and wants and different fromconsumers in other segments; 2.The size and purchasing power of the segment can bemeasured in order to decide if targeting this segment is worth it; 3.The segment is largeenough to be profitable now and in the future; 4.Marketing communications can reach thesegment; 5.The organization can adequately serve the needs of the segment

The second step is developing Segment Profiles The segment profile is a description of the typical customer in the segment The final is choosing a Targeting Strategy.

However, Hanoitourist do not follow this method They choose the target customer base ontheir strength that is very good relations at government level with others countries and therelationship among senior leaders of large corporations in Vietnam

Owing to the clear-headed of leaders, Hanoitourist just is a subsidiary of HanoitouristCorporation, still get high support from Vietnam Government and others departments So

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they were high appreciating in Vietnam and International market Almost company’s partnersthank to the business trips follow government’s diplomatic mission Over 80% customers up

to now come from their relations Therefore, Hanoitourist target base on their advantage –good relationship at government level include:

In foreign market, Hanoitourist focus on middle class of Russian, French, Germany,Hungarian, Japan, Taiwan businessman, U.S customers group

In domestic market, Hanoitourist focus on high income group who work at head ofcompanies and big companies, bank system, post and communication They aim at leadersand admin staffs who have responsible in booking tour for their organizations Hanoitouristoffers different high quality product depends on requirement of customer

II.3.3 Positioning

Understanding target customers, the first on positioning activities, the next steps arecompetitor analysis to look for their advantage competitive Finally implementingpositioning strategy through marketing mix 4P’s or 7Ps’

Hanoitourist believes they know clearly about their customers because of 10 years experience

in travel market Hanoitourist differentiates were offered to their competitors by promotinghigh quality tours, good services with competitive prices

Due to the company is a subsidiary of Hanoitourist Corporation, Hanoitourist get costadvantage when combine with others member of Hanoi Corp such as Hanoi Sofitel, HanoiDien Bien Hotel, Thuy Tien Hotel, Thang Long Opera… in supplying services to travelers.However to affirm their quality of product, Hanoitourist set their price higher than directcompetitors

On the other hand, Hanoitourist have good relationship with Vietnam government so theyhave tremendous impact at government level to foreign partner They also have goodrelations with foreign embassies in Vietnam So Hanoitourist are easy in making Visaprocedure for customers At the beginning of 21st century, when Visa procedure still verydifficulty in Vietnam, Hanoitourist can supply outbound tour to Japan and United State,which is a difficulty to others competitors Due to influence of Government, Hanoitourist getthe good co-operations form foreign partners in implement outbound and inbound tours.From the analysis above, Hanoitourist do not worry to customer source Their task justcreates a differentiation or a unique with kept the loyalty of their customers It attractscustomers re-using their product and services

From their competitive advantage, Hanoitourist choose positioning philosophy - company value greater than competitor’s value The greater value thanks to their product quality and

superiority of services

Figure II- 4: Perception map (price & quality)

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Even having some more advantage in government relation which facilitate visa process but

we can see through the schema why Hanoitourist losses its position In comparison withother international travel companies supply inbound service, Hanoitourist is in position ofhigh price – same rang with Exxotissimo, a big foreign company whose has reputation inover the world For the quality, Hanoitourist provide service that quality is higher just thanViettravel, one domestic company and lower than all these other like Redtour, Vidotour,Saigontourist meanwhile the price higher than Saigontourist, a famous travel firm in Vietnamtourism market

Ccommunicate positioning through marketing mix:

Product strategy:

Realistically what Hanoitourist sell to customer is no different from what their competitorsoffer They only advantage is related to service and the way they implement tours They musttherefore ensure that their product knowledge, customer care and products’ quality have beencontrolled

Hanoitourist implements product differentiation base on the quality of product Due totourism product is really quite a complex one, product quality and superiority of serviceswere represented through all elements of tourism product:

Destination: It is very difficult to create a de a differentiation feature for the samedestination Hanoitourist try to give to their customers more and dept informationwhich help travelers to understand clearly about the beauty of the destination.Airport, airline and Coach Transfers: the better in this part were express byunwasteful time of customer to waiting, safety airlines firms and comfortable planeset, good quality of vehicles and funny, intelligent driver

Hotel: due to have good relationship, over ten year experience and the relationsbetween members of Hanoitourist Corporation, Hanoitourist usually get better hotelroom at the same price That is a advantage competition of the company againstcompetitors

Resort representatives: Hanoitourist have long-time relations with supplier (resortarea) They believe their travelers always having the most favorable conditions.Tour guiders have responsible in playing intermediary role to contact travelerdemand and resort reception Hanoitourist is try to negotiate with suppliers whichbring the best conditions to their customers

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Tour operator: Tourism is person industry, Hanoitourist always improve the quality

of tour guiders team by training and coaching The quality of product was affirmed

by the company’s principle are: every one in every position try as much as possible for the satisfactions of their customers.

Hanoitourist not only try to reduce complaints and improve customer satisfaction, but also try

to launching more and more services to satisfy customer’s demand

Price strategy:

There are several important factors impacting the pricing strategy of a company Therefactors are specific firm level in the country, product, market and other environmentalfactors Base on the results of various studies at corporate level conducted by third parties,Hanoitourist recognized in some case they get better price from suppliers such as airlinesticket, hotel rooms… due to preferential policies come from Hanoitourist Corporation

In consideration of its position and differentiated product features, Hanoitourist sets theiraverage price at 105% against direct competitors with the same and higher quality ofproducts That is to reflect the image of quality and the unique status of their product

Hanoitourist has a price only lower than one reputation foreign company Exxotissimo Withits price, the customer may feel to have a service – type provided by foreign company This is

a two-edge sword, for the foreign customer and also for domestic customer For the foreigncustomer and the domestic customer with high income, if they use maybe one timeExxotissimo’s service and compare with Hanoitourist, they will see that the service qualityprovided by Exxitissimo is better They will use for next time, certainly Exxotissimo’sservice And for domestic or foreign customers wigh lower income, they will look for theother travel company like Vidotour, Redtour, Viettravel or Saigontourist

Figure II- 5: Price comparison in tourism market Source: Survey result

Place (Distribution)

Distribution channeling shows the ways Hanoitourist’s product accessed and desiredinformation pushed to its customers This is a significant section of this study due to a simplereason that controlling over distribution channels is one of the most powerful drivers ofsuccess in any industry, especially in the case in Tourism travel business

There are various channels possible in tourism market: direct to travelers, corporate, andintermediate channels such as travel agents, Hotel, Resort and tourism area, foreignpartners, Direct channels bring the advantage that no mark-up or commission have to bepaid Meanwhile, the most concerned channels are intermediaries with commission and otherrelated rewards having dominant impact on their decisions In any channel where

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intermediaries are involved, Hanoitourist try to ensure that they are in a position to haveproper control over the rewards received by these channels.

Figure II- 6:Hanoitourist’s distribution network

Source: Hanoitourist internal document

*Direct channels:

At present, direct channel still main channel to approach domestic customers Telephone tool;repeatedly send mails or advertising campaigns with huge budget, which were used byHanoitourist to cover their current and potential customers In Vietnam, Hanoitourist headoffice and two branch in Da Nang and Ho Chi Minh are three main address where customercan purchase a tour and feed back the complain with the company Over half sales volume ofHanoitourist comes from this direct channel In recent time, Hanoitourist opens a newtransaction office at No3 Hai Ba Trung street, Hanoi

*Corporate channels:

Corporate channel of Hanoitourist includes: Hotel, tourism area, airlines agents They playintermediate role combine Hanoitourist and travelers Those supports can be corporatediscount, commissions, bonus etc However, Hanoitourist is a state owners company andinfluenced by limited policies, so their promotion and commission is less attractive Theeffection of this channel bring to Hanoitourist is not high Just over 10% turnover come fromcorporate channels

Meanwhile, competitors have appeared aggressive to penetrate corporate network With highpercentage commission and bonus, corporate channels not only a effect distributions but also

a good advertising tool to spread companies’ image

*Foreign agencies channels:

That is bilateral co operations between the company and foreign agencies They bring foreigntravelers to Vietnam and get Vietnamese tourist from Hanoitourist Competitors havedeveloped this channel and achieved great success such as Vidotour with more than 300foreign partners Together with old relations, Hanoitourist is trying to enlarge this systemmore and more This becomes a main mission of the company

Promotion strategy

An extremely good product, not be known by customers is no meaning A product has reallyvalue when it is recognized by customers, therefore marketing communication plays veryimportant role for success or failure of a company

Hanoitourist Travel Company

Resorts Travel agents

Foreign agents’ network

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