LV Thạc sỹ_Marketing mix for debit card service at Vietcombank

LIST OF TABLES AND FIGURESTable 3.1 :Financial highlights of Vietcombank 2005 – 2009...36 Table 3.2: Debit card issuance of Vietcombank...42 Table 3.3: Payment turnover of debit card iss

LIST OF ABBREVIATIONS 1

LIST OF TABLES AND FIGURES 2

EXECUTIVE SUMMARY 3

CHAPTER 1: INTRODUCTION 5

1.1 RATIONALE 5

1.2 RESEARCH OBJECTIVES 6

1.3 RESEARCH QUESTIONS 6

1.4 RESEARCH METHODOLOGY 7

1.4.1 Research process 7

1.4.2 Data collection 7

1.4.3 Data analysis 9

1.5 SCOPE OF THE THESIS 10

1.6 STRUCTURE OF THE THESIS 10

CHAPTER 2: THEORETICAL BACKGROUND ON DEBIT CARD SERVICE AND MARKETING MIX FOR DEBIT CARD SERVICE 11

2.1 COMMERCIAL BANKS AND DEBIT CARD SERVICE 11

2.1.1 Commercial banks 11

2.1.2 Debit card service 11

2.2 MARKETING MIX FOR DEBIT CARD SERVICE 15

2.2.1 Marketing and marketing mix 15

2.2.2 Marketing mix for debit card service 17

2.2.3 Factors impacting marketing mix 29

CHAPTER 3: CURRENT MARKETING MIX ACTIVITIES OF DEBIT CARD SERVICE AT VIETCOMBANK 32

3.1 OVERVIEW OF VIETCOMBANK 32

3.1.1 Establishment and development 32

3.1.2 Vietcombank’s performance results to date 34

3.2 DEBIT CARD SERVICE AT VIETCOMBANK 37

3.2.1 The establishment and development of debit card service 37

3.2.3 Debit card payment 43

3.2.4 Development of ATM and POS network 44

3.2.5 Revenue and investment in debit card 45

3.3 CURRENT MARKETING MIX ACTIVITIES OF DEBIT CARD SERVICE AT VIETCOMBANK 46

3.3.1 Target customers 46

3.3.2 Marketing mix analysis 47

3.3.3 Summary of problems and causes of problems 76

CHAPTER 4: SOLUTIONS TO IMPROVE MARKETING MIX FOR DEBIT CARD SERVICE AT VIETCOMBANK 80

4.1 ORIENTATION OF DEVELOPING DEBIT CARD SERVICE AT VIETCOMBANK TO 2020 80

4.2 OPPORTUNITIES AND THREATS TO DEVELOP DEBIT CARD TO 2020 81

4.2.1 Opportunities 81

4.2.2 Threats 84

4.3 RECOMMENDATIONS TO IMPROVE MARKETING MIX FOR DEBIT CARD AT VIETCOMBANK 85

4.3.1 Implementing systematic market research 85

4.3.2 Diversifying debit card product types 87

4.3.3 Collecting suitable fee to compensate the expenses 90

4.3.4 Exploiting the distribution channel more effectively 91

4.3.4 Establishing consistent promotional policies 95

4.3.5 Developing human resource capacity and competency 97

4.3.6 Improving service processes 98

4.3.7 Paying more attention on physical evidence maintenance 100

4.3.8 Other recommendations 101

CONCLUSION 103

LIST OF REFERENCES 104

APPENDICES 106

Electronic Data CaptureEastern Aisan BankMilitary BankPoint of Sale or point of serviceReturn on average equity

Return on average assetsSouth East Asia BankBank for Foreign Trade of VietnamMilitary Telecommunication CorporationVietnam Industrial and Commercial BankVietnam Post and Telecommunications Corporation

LIST OF TABLES AND FIGURES

Table 3.1 :Financial highlights of Vietcombank 2005 – 2009 36

Table 3.2: Debit card issuance of Vietcombank 42

Table 3.3: Payment turnover of debit card issued by Vietcombank 44

Table 3.4: Development of ATM and POS network of Vietcombank 45

Table 3.5: Statement of revenue of Vietcombank’s debit card service 46

Table 3.6: Domestic debit card use limit of Vietcombank and others 49

Table 3.7: International debit card use limit of Vietcombank and others 51

Table 3.8: Debit card service of Vietcombank and others 52

Table 3.9: Fee table of Domestic debit card of Vietcombank and others 56

Table 3.10: Fee table of International debit card of Vietcombank and others 57

Table 3.11: The capacity of ATMs and POSs service providers 60

Table 3.12: Number of Websites accepted Connect24 for online payment 61

Figure Page

Page Error! No table of figures entries found. Figure 1 1: Research process 7

Figure 3 1: Survey result about product of Vietcombank’ debit card service 55

Figure 3 2: Distribution of Vietombank debit card service 61

Figure 3 3: The survey result about palce in Vietcombank’ debit card service 64

Figure 3 4: Card issuance process 71

Figure 3 5: Survey result about process of Vietcombank’ debit card service 74

EXECUTIVE SUMMARY

Nowadays, bank card service plays more and more important role in thecommercial banks’ business activities Developing bank card service not onlycreate good image of the modern bank but also help the bank minimize the riskand increase income Recently, Vietnamese card market has strongly developedwith participation of both foreign and domestic banks

Vietcombank was the first and leading bank in bank card service but because ofpoor marketing mix its leading position is threatened under fierce competition.The objective of the thesis “Marketing mix for debit card service atVietcombank' is to evaluate the current Vietcombank’s marketing mix for debitcard service and propose solutions to improve it

Based on the theory on marketing mix theory together with primary data (survey

120 customers, interview 5 managers and 10 staffs and observation) andsecondary (publications, reports, articles, etc.), the author has analyzed the eachelement of marketing mix (Product, price, promotion, place, people, process andphysical evidence) for Vietcombank’s debit card service and compare it withcompetitors and customers’ expectation Key findings are:

 Product is poor in function and type

 Follow low price strategy for all customers too long

 Large distribution channel has not been exploited effectively

 Unclear promotion strategy

 Human recourse does not meet demand of growth rate

 Process has not been introduced fully to customers

 Backward and deterioration in Physical evidence

Rely on opportunities and threats to develop debit bank card as well as theorientation of developing card service at Vietcombank, the author has proposerecommendations for Vietcombank to improve marketing mix for debit cardservice such as:

 Carrying out market research and analyze market target

 Diversifying debit card service

 Collecting some suitable fee to compensate the expenses

 Exploiting the ATMs, POSs and Websites more effectively

 Building a consistent promotion policies

 Developing human resource

 Improving and completing processes

 Paying more attention on physical evidence maintenance

The author hopes that these recommendations will help Vietcombank to keep itsmarket share and increase profit from this service

CHAPTER 1 INTRODUCTION1.1 RATIONALE

Banking industry is playing an increasingly important role in the economy,especially in a developing country like Vietnam When Vietnam joins WTO,Vietnam’s banks have to innovate their operation, enhance their finance abilityand speed up the application of advanced and modern technology as well asdiversify product and service to meet multiform and plentiful demand of theeconomy

One of the services that most of Vietnamese banks nowadays concern is cardservice Bank card is not only a safe means of payment without cash but also aneffective mean of executing the State’s monetary policy It helps restrict thecirculation of cash, attract the people’s unused deposit as well as other economiccomponents in the economy to accelerate capital rotation speed in the economy.Card business attracts the banks because this is both a modern, advanced,civilized tool of payment which is suitable with the age’s development trend and

a main source of revenue of the banks

Bank card has been popular long time ago in the world In Vietnam, bank cardwas first known in 1996 and has just used widely over the last five years.Recently, with participation of foreign banks that are masters in retail bankingservice and domestic banks that have invested a lot in card service, Vietnamesecard market has strongly developed and but under a fierce competition

Vietcombank was the first bank in Vietnam to provide card service and it wasthe leading bank in this service in the number of card issuing, the number ofATM machine and merchant turnover for many years However, undercompetition, card market share of Vietcombank decreased continuously for thepast few years, particular debit card service According to latest statisticsannounced by Vietnam card association, in 2009 Vietcombank ranges the third

in debit card issuing and the second in the number of ATM machine Themerchant turnover of Vietcombank is still the biggest but it has fallen from morethan 50% in 2005 to 30,7 % in 2009 of total market On the other hand, thequality of growth is not good Although Vietcombank has determined a largetarget market, it cannot take advantage and exploit the market fully There aremany reasons for above situations but the main reasons being defined is thatVietcombank haven’t paid enough attention on marketing mix activities.Meanwhile, other banks spend a lot of money on marketing mix for debit cardservice and get expected results

Therefore, this dissertation’s aim is to give some solutions for improvingMarketing mix of Vietcombank debit card service, to improve quality of growthand keep its market share The author hopes that the result of this study will alsocan help Vietcombank exploit large Vietnamese potential card market andincrease profit from this service

1.2 RESEARCH OBJECTIVES

This research aims to achieve the following objectives

- To systematize fundamental theories related to bank debit card and marketing mix

- To evaluate the current Vietcombank’s marketing mix for debit card service;

- To propose solutions to improve Vietcombank’s marketing mix for debit cardservice

1.3 RESEARCH QUESTIONS

This research is designed to answer the following questions:

1 What is the marketing mix and it's characteristic in debit card service?

2 What is the current situation of debit card service business and marketing mix

in debit card service at Vietcombank?

3 How to improve Vietcombank’s marketing mix in debit card service?

Current situationa of Marketing mix for Debit card service at Vietcombank

Survey

Recommendations to improve Marketing mix for Debit card

- Annual reports on cards of Vietcombank

- Information from newspaper, magazines, reports,

- Textbooks related to banking, marketing, strategy etc

- Related websites

2 Primary data

Both in-depth interview and customer survey are used to collect primary data

- The author conducted in- depth interviews with about 5 managers and 10 staffs(the detail in the table below) of Card department of Vietcombank on issuesrelated to marketing mix in debit card service The purpose of this interview is tolearn about current situation of marketing mix in Vietcombank’s debit cardservice

+ In-depth interview 05 managers

Deputy manager Card Center – Head Office

3 Mr Nguyen Vu Hai Deputy manager Card Center – Head Office

4 Mrs Thu Ba Deputy manager Card department-Hanoi

branch

5 Mr Trinh Phuong Thuc Manager Card department- HCM

Branch

+ In-depth interview 10 staffs

Order Quantity Job title Working place

number ( Vietcombank)

1 02 Staffs of marketing Card Center – Head Office

2 01 Staff of complaint settlement Card Center – Head Office

3 01 Staff of technique Card Center – Head office

4 01 Staff of research &

development

Card Center – Head office

5 01 Staff of ATM Card Center – Head office

6 01 Staff of card service Card department - HCM Branch

7 01 Staff of card service Card department - HCM Branch

8 01 Staff of card service Card department – Hanoi branch

9 01 Staff of card service Card department – Hanoi branch

- The author also did a survey on 120 customers, in which 80 customers areusing Vietcombank debit card service and 40 people are using debit card ofcompetitors The purpose of this survey is to understand what customers thinkabout quality of Vietcombank’s card service and how they want it changes orwhy they use competitors’ debit card service Appendix 1 and appendix 2 showssurvey questionnaires

1.4.3 Data analysis

After needed information was collected, I analyzed interview data by contentanalysis method and quantitative data by SPSS to find out the results andweakness of marketing mix for card service at Vietcombank

1.5 SCOPE OF THE THESIS

-The thesis is about marketing mix in debit card service at Vietcombank,

consisting of Vietcombank Head office and two biggest branch ( Hanoi andHCM city) where are actually carried out marketing mix related to card servicefor all Vietcombank system

- Secondary data is within five years (2005 – 2009) and primary data wascollected in the last two quarters of 2010 Because of limitation of time andbudget, the survey was collected from customers using Vietcombank’s cardservice and non-Vietcombank customers in Hanoi and in-depth interview willonly conducted at Vietcombank’s head office Card Center and the two biggestbranches in Hanoi and HCM city.

1.6 STRUCTURE OF THE THESIS

The main body of the thesis consists of 4 chapters as follows:

CHAPTER 2 THEORETICAL BACKGROUND ON DEBIT CARD SERVICE AND MARKETING MIX FOR DEBIT CARD SERVICE

2.1 COMMERCIAL BANKS AND DEBIT CARD SERVICE

2.1.1 Commercial banks

According to Dictionary of Financial Terms “ Commercial banks are banks offer

a full range of retail banking products and services, such as checking and savingsaccounts, loans, credit cards, and lines of credit to individuals and businesses.Most commercial banks also sell certain investments and many offer fullbrokerage and financial planning services”

Today most commercial banks are universal bank providing a big range orservices to varied individual and business customers Its activities include:

- Mobilizing fund from individuals, organization and business

- Lending to individuals and business borrowers in the form overdraft, loan orother means

- Investing in the stocks, forex and securities trading

- Services such as payment by way of telegraphic transfer, internet banking, orother means, financial consultation, and card service…

2.1.2 Debit card service

2.1.2.1 Debit card overview

Bank card is a method of paying without using cash, which cardholder can use towithdraw cash at ATM or to pay for goods, service at the points of sales.Depending on the nature of payment, bank card can be divided by four types:Cash card, prepaid card, credit card and debit card

Debit card is one type of bank card, therefore, a method of payment withoutusing cash Any customer has account opening at the bank can issue debit card.Debit card allows customers to access their fund in their account through directconnection system to pay for goods, service at merchants or do othertransactions on their account at ATM Whenever a card holder withdraws moneyfrom an ATM or uses the debit card for making payments, his/her account

balance is automatically reduced For debit card, there will not have process ofloan between the bank and the customers, there is no classification of customer

in order to supply credit limit But cardholder can only spend within the balance

in his/her account The bank plays role in providing service for cardholder andcharges for service

Based on the scope of using, debit card can be classified by two types: domestic

debit card and international debit card Domestic card is the card issued by

domestic bank and financial companies It is used to pay for goods, service atpoint of sales (POS) inland and to withdraw cash at ATM inland These types ofcard are used for the activity of organizations and individual working and living

within the country International card is the card issued by international

organizations such as Visa card organization, Master Card organization…,domestic banks play part of issue agent International card is used to withdrawcash from ATMs and to pay for goods and services whenever in the World

2.1.2.2 The role of debit card service to the bank

Card service has an important role in payment activities of a bank; it reduces thecost for money circulation, including costs for transport, counting and storage ofmoney

Card service has a significant impact on fund mobilization by requiring acardholder open account and maintain a certain balance at the bank Thosedeposits are only at lower interest as of current account Therefore, the cost offunds for the bank is low In addition, developing card service help the bank todiversify types of service so that the bank can reduce risks in business

Having a card also means that a cardholder has an account, so it can have accessand use other services of the banks Card service also creates a chance for a bank

to collect fees such as issuance, annual, payment and other fees

Card business activities also contribute to promote the bank’s image, brand;name, and position The better quality of the card service is, the more modern it

shows technical and technology qualification, the bigger the ability of the bank

in meeting customer’s satisfaction Nodaway, prestige is the most importantfactors to decide the success of banks

2.1.2.3 The role of debit card service to customers

Debit card service brings safety and convenience to cardholder The card reducesthe amount of cash that the customer must take with him or her, from thatavoiding the risk of being stolen, dropped In the case of being stolen of lost,customer can go to the bank and request for another one

When using debit card service, cardholder can pay for goods and service at anypoint of sales Debit card service also allows cardholder to do followingtransactions at ATM:

- Withdrawing money from the account;

- Checking the balance of the account;

- Transferring from one account to another;

- Print the statement of the account;

- Paying service bill such as electric, telephone, water, and healthcare,insurance

2.1.2.4 Members participating in debit card service

The activity of issuance and paying by bank card consists of participation of 5basic components: bank of issuing card, bank of payment card, cardholder, andpoint of sales and international card organization Each of party has differentimportant role:

Issuance Bank: issue bank is the bank being allowed to issue card The name of

issue bank is printed on the card in order to show that card is the product of their

bank and issued by that bank Issue bank brings out regulations of term, cardusing conditions that cardholder must comply with.

Bank of issue has the right to sign agency contract with the third party In thiscase, the bank of issue will take full advantage of the third party in aspect ofexperience, ability of penetrating market as well as preeminence of geographyposition However the issue bank will take some risk because at this time, thethird party is operating under the name of issue bank only The third party whosigns agency contract with issued bank is called issue correspondent bank Ifcorrespondent bank’s name is appeared on customer’s card, it means that thecorrespondent bank is the official member of card organization

Cardholder: Cardholder is individual or authorizer ( in case authorization of

company) being issued card by the bank with name and age relief printed on thecard and use card according to the terms regulated by issue bank

Payment bank: Payment bank is the bank accepting card as a method of payment

through signing accepting card contract with the points supplying goods, service

in the area In this contract, payment bank commits to:

- Allowing these partners to participating in bank card payment system

- Supplying these partners automatic card reading equipment enclosinginstructions for use

- Training staff to operate and maintain card reading equipment

- Managing the transactions using card in these partners

Normally, payment bank collect fee from these partners The fee level isdepended on each bank and on relationship between bank and different partners

Point of sales: The unit supplying goods, service sign the contract of accepting

card as a mean of payment is called point of sales (POS) In order to becomepoint of sales for a certain type of bank card, they must meet bank’s requirement

on financial situation and business capacity The bank often sign contract ofaccepting card with effective business units having ability of attracting a lot oftransactions using card.

International card organization: International card organization is the

nerve-centre managing all activities of issuing card and payment card This is theassociation of big financial and credit organizations with large activity network,which achieve fame with brand name and series of diversified products such asVisa card organization, Master card organization, American Express cardcompany, JCB card company, Diners Club company, Mondex company…International card organization brings out basic regulations of issue activity, carduse and paying by card They play intermediary role between organizations andmember companies in operating and balancing the amount of money paidbetween companies

2.2 MARKETING MIX FOR DEBIT CARD SERVICE

2.2.1 Marketing and marketing mix

The American Marketing Association offers the following definition: Marketing

is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals

There are five competing concepts under which organizations conduct marketingactivities: production concept, product concept, selling concept, marketingconcept, and societal marketing concept Today marketing concept is adoptedwidely

After World War II, the variety of products increased and hard selling no longercould be relied upon to generate sales With increased discretionary income,customers could afford to be selective and buy only those products that preciselymet their changing needs, and these needs were not immediately obvious The

job was not to find the right customers for your product, but the right product foryour customers The key questions became:

 What do customers want?

 Can we develop it while they still want it?

 How can we keep our customers satisfied?

In response to these discerning customers, firms began to adopt the marketing

concept, which involves:

 Focusing on customer needs before developing the product

 Aligning all functions of the company to focus on those needs

 Realizing a profit by successfully satisfying customer needs over thelong-term

The marketing concept is the philosophy that firms should analyze the needs oftheir customers and then make decisions to satisfy those needs, better than thecompetition The marketing concept takes an outside-in perspective It startswith a well-defined market, focuses on customer’s needs, coordinates all theactivities that will affect customers, and producer’s profits by satisfyingcustomers The marketing concept rests on four pillars: target market, customerneeds, integrated marketing, and profitability

The marketing concept relies upon marketing research to define marketsegments, their size, and their needs To satisfy those needs, the marketing teammakes decisions about the controllable parameters of the marketing mix

2.2.2 Marketing mix for debit card service

The marketing mix is the combination of marketing activities that anorganization engages in so as to best meet the needs of its targeted market.Traditionally the marketing mix consisted of just 4 Ps (Product, Price, Place, and

Promotion) Getting the mix of these elements right enables the organization tomeet its marketing objectives and to satisfy the requirement of customers

In addition to the traditional four Ps it is now added some more Ps to the mix togive us 7 Ps The additional Ps have been added because today marketing is farmore customer oriented than ever before These extra Ps are People, Process andPhysical Evidence The marketing mix with 7 Ps is highly appropriate towardsbusinesses who offer services Successful services marketing calls not only forexternal marketing, but also for internal marketing to motivate employees andinteractive marketing to emphasize both “high-tech” and “high-touch” elements.Because services are generally high in experience and credence qualities, there ismore risk in their purchase The service organization therefore faces three tasks

in marketing: (1) It must differentiate its offer, delivery, or image; (2) it mustmanage service quality in order to meet or exceed customers’ expectations; and(3) it must manage worker productivity by getting its employees to work moreskillfully, increasing the quantity of service by surrendering some quality,industrializing the service, inventing new product solutions, designing moreeffective services, presenting customers with incentives to substitute their ownlabor for company labor, or using technology to save time and money Evenproduct-based companies must provide support services for their customers Toprovide the best support, a manufacturer must identify and prioritize the servicesthat customers value most The service mix includes both presale services (such

as facilitating services and value-augmenting services) and post sale services(customer service departments, repair and maintenance services)

2.2.2.1 Product

Product is a key element in the marketing offering A product is anything thatcan be offered to a market to satisfy a want or need Products that are marketing

include physical goods, services, experiences, events, persons, places, properties,organizations, information, and ideas

Product unit consists of three levels The most fundamental level is the core benefit: the fundamental service of benefit that the customer is really buying In

debit card service, cardholders are buying more than just a card they are buying

payment service of the bank The second level is actual product The strategy at

this level involves organizations branding, adding features and benefits to ensurethat their product offers a differential advantage from their competitors Toselling payment service, the bank sells the customer a physical card that able to

do transactions at ATMs, POSs The last product level is augmented product.

It usually consists of lots of added value, for which you may or may not pay apremium When using debit card service, customers may be provided some moreadded value by the banks such us quick card issue, home delivery, birthdaypresent Today’s competitions essentially take place at the product-augmentation level (In less developed countries, competition takes place mostly

at the actual product level)

Products generally are classified as either goods or services A good is primarilytangible and that has definite physical features Customers can see, touch, and

sometimes smell, hear or taste goods A service is any act or performance that

one party can offer to another that is essentially intangible and does not result inthe ownership of anything Its production may or may not be tied to a physicalproduct ( Philip Kotler) A service is intangible, variable, and perishableproducts As the result, they normally require more quality control, suppliercredibility, and adaptability In some case, there is no clear distinction between a

“pure” tangible product and a service Most products contain some of both Acomputer, for example, is a tangible product, but it often comes with a warrantyand software updates Five categories of an offering’s service mix can bedistinguished:

- Pure tangible good : The offering is a tangible good such as soap; no services

accompany the product

-Tangible good with accompanying services: The offering consists of a tangible

good accompanied by one or more services General Motors, for example, offersrepairs, maintenance, warranty fulfillment, and other services along with its carsand trucks

- Hybrid : The offering consists of equal parts of goods and services For

example, people patronize restaurants for both food and service

- Major Service with accompanying minor goods and services: The offering

consists of a major service along with additional services or supporting goods.card service is an example of this category When a person or organization buyscard service of a bank, it actually means that they buy payment service of thatbank, but they also get physical card as well

- Pure service : The offering consists primarily of a service Examples includebaby-setting, massage

Like other services, debit card service has four main characteristics that affectthe design of marketing programs: intangibility, inseparability, perishability, andvariability

- Intangible - and cannot have a real, physical presence as does a product Bank

card is physical, but the card service itself cannot be touched i.e it is intangible.Unlike physical products, they cannot be seen, tasted, felt, heard, or smelledbefore they are bought The person who is using card service cannot see theexact results before the purchase To reduce uncertainty, buyers will look forsigns or evidence of the service quality They will draw inferences about qualityfrom the place, people, equipment, communication material, symbols, and pricethat they see Therefore, the service provider’s task is to “manage the evidence,”

to “tangibilize the intangible” Bank need tangibilize its debit card service by

managing evidence such as ATMs, physical card, EDC machines, branches aswell as staffs who contact directly with customers

Inseparable - from the point where it is consumed, and from the provider of the

service Services are typically produced and consumed simultaneously, unlikephysical goods, which are manufactured, put into inventory, distributed throughresellers, and consumed later If a person renders the service, then the provider ispart of the service Because the client is also present as the service is produced,provider-client interaction is a special feature of services marketing—bothprovider and client affect the outcome When doing a payment by card, thecardholders will interact with cashiers at counters, POSs or ATMs The quality

of debit card service will be depended on both customer and cashier or ATMs

Perishable – Most goods can be produced in large, economical quantities and

then stored until they are needed for sale and consumption Thus, the supply ofgoods offered for sale can often be balanced to meet the demand However,services can not be stored For example, bank can not print a large amount ofcard, keep them in storehouse and sell them later to customers, because eachcustomer has different information

Perishability is not a problem when demand for a service is steady, butfluctuating demand can cause problems ATMs of the bank is always overload inholiday as an example

Variability - that no two services will be completely identical For example,returning to the same bank and the same time again for a card service you mightsee different levels of customer satisfaction, or speediness of work Becausedebit card services depend on who provides them and when and where they areprovided, they are highly variable Knowing this, banks can take three stepstoward quality control

- The first is recruiting the right service employees and providing them withexcellent training about debit card service This is crucial regardless of whetheremployees are highly skilled professionals or low-skilled workers.

- The second step is standardizing the debit card service-providing processthroughout the all branches Bank can do this by preparing a flowchart thatdepicts every service event and process Using this flowchart, management canidentify potential fail points and then plan improvements

- The third step is monitoring customer satisfaction through suggestion andcomplaint systems, customer surveys, and comparison shopping

2.2.2.2 Price

Price is the one element of the marketing mix that produces revenue, the otherelements produce costs Prices are easiest marketing – mix element to adjust;product features, channels, and even promotion take more time Whether the

price is called rent (for an apartment), tuition (for education), fare (for travel), or

interest (for borrowed money), the concept is the same In the debit card servicethe price is fee Cardholder must pay the issuing bank fee when they apply forissuing card In addition, cardholders have to pay fee when they do transactionssuch as withdraw money, printing statement, transfer at ATMs Some banksrequire their customers pay annual fee

The firm must set its price in relation to the value delivered and perceived by thecustomer If the price is higher than the value received, the company will misspotential profits, if the price is lower than the value received, the firm will fail toget potential profits

The firm has to consider many factors in setting its pricing policy In setting aproduct’s price, marketers follow a six-step procedure:

(1) Select the pricing objective: A pricing objective is a goal that a companywants to achieve when pricing a product A bank’s pricing objectives provide

much of the foundation for other pricing – related decisions In turn, pricingobjectives are based on the overall goals and objectives of the bank Forexample, if a bank’s goal is to provide the best debit card service in the market,the bank’s service fees may have to higher than those of competitors to cover thegreater operating expenses incurred by providing a higher level of service.

(2) Determine demand: Each price will lead to a different level of demand andtherefore have a different impact on a bank’s marketing objective In normalcase, demand and price are inversely related When the price increases, demanddecreases and price decreases, demand increases

(3) Estimate costs: Demand sets a ceiling on the price the company can chargefor its product Costs set the floor The company wants to charge a price thatcovers its cost of producing, distributing, and selling the service, including for itseffort and risk In debit card service, major costs include:

- Fixed cost: Investments on ATMs, EDC machines, Card printing machinesand other fixed assets

- Variable cost: Payments to employees, machines maintenance, card printing,data link, general administrative costs…

(4) Analyze competitors’ costs, prices, and offers: within the range of possibledetermined by market demand and company costs, the firm must take thecompetitor’s costs, prices, and possible price reactions into account

(5) Select a pricing method: Costs set the floor to the price; Competitors’ pricesand the price of substitutes provide an orienting point Customer’s assessment ofunique product feature establishes the ceiling price Companies select a pricingmethod that one or more of these three considerations There are seven pricingmethod: markup pricing; target-return pricing, perceived- value pricing, going-rate pricing, auction-type pricing and group pricing

(6) Select the final price: Pricing methods narrow the range from which thecompany must select its final price In selecting that price, the company mustconsider additional factors, including psychological pricing, gain and risksharing pricing, the influence of other marketing-mix elements on price,company price policies, and the impact of price on other parties

Companies do not usually set a single price, but rather a pricing structure thatreflects variations in geographical demand and costs, market-segmentrequirements, purchase timing, order levels, and other factors After settingpricing, firms often face situations in which they need to change prices byinitiating price cuts or price increases In these situations, companies need toconsider how stakeholders will react to price changes In addition, marketersmust develop strategies for responding to competitors’ price changes The firm’sstrategy often depends on whether it is producing homogeneous or nohomogeneous products Market leaders who are attacked by lower-pricedcompetitors can choose to maintain price, raise the perceived quality of theirproduct, reduce price, increase price and improve quality, or launch a low-pricefighter line

2.2.2.3 Place

Place is also known as channel, distribution, or intermediary It is the mechanismthrough which goods and/or services are moved from the manufacturer/ serviceprovider to the user or consumer The concept of marketing channels is notlimited to the distribution of physical goods; producers of services like debit cardservice also face the problem of making their output available and accessible totarget market

The firm may distribute its product direct or indirect to customers A directdistribution describes movement of the product from the producer to the userwithout intermediaries However, most producers do not sell their goods directly

to final users Between producers and final users stands one or more marketingchannels, a set of marketing intermediaries performing a variety of functions

Companies use intermediaries when they lack the financial resources to carry outdirect marketing, when direct marketing is not feasible, and when they can earnmore by going through intermediaries The bank can provide its debit cardservice directly at its branches and ATMs or indirectly at POSs and onlinepayment Websites Using POSs and Websites as an intermediaries help the bankproviding debit card service to customers more effectively and less costly.

Deciding which type(s) of channel to use calls for analyzing customer needs,establishing channel objectives, and identifying and evaluating the majoralternatives In debit card service, effective channel management calls forselecting POSs and websites owners, then training and motivating them To thedirect channel, the bank can widen the branches as well as locate more theATMs All these channels must be placed reasonably so that cardholders canaccess card service easily and they need be evaluated periodically againstpreestablished standards, and overall channel arrangements may need to bemodified over time

All marketing channels have the potential for conflict and competition resultingfrom such sources as goal incompatibility, poorly defined roles and rights,perceptual differences, and interdependent relationships Banks can manageconflict striving for superordinate goals, exchanging people among two or morechannel levels, coopting the support of leaders in different parts of the channel,and through diplomacy, mediation, or arbitration to resolve chronic or acuteconflict

2.2.2.4 Promotion

Promotion is one of the seven elements of marketing mix It is thecommunication link between sellers and buyers for the purpose of influencing,informing, or persuading a potential buyer's purchasing The bank can use fivepromotion tools to help them convey their messages about debit card service tocustomers: advertising, sales promotion, public relations and publicity, personalselling, and direct marketing Each tool has its strengths and weaknesses

Advertising : Advertising can be used to build up a long-term image for a product

or trigger quick sales Advertising can reach geographically dispersed buyersefficiently The banks can advertise its card service on TV that typically require

a large budget, or do it in other forms (newspaper, brochures and bookletsadvertising) on a smaller budget

Sale promotion: Sales promotion consists of a collective of incentive tools,

mostly short term, designed to stimulate quicker and greater purchase ofparticular product or services by consumers Although sales-promotion tools—coupons, contests, premiums, and the like—are highly diverse, they offer threedistinctive benefits: (1) communication (they gain attention and usually provideinformation that may lead the consumer to the product); (2) incentive (theyincorporate some concession or inducement that gives value to the consumer);and (3) invitation (they include a distinct invitation to engage in the transactionnow) The banks use sale promotional tools such us free of card issuance charges

or discount card transaction fee to draw a stronger and quicker customer'sresponse Sales promotion can be used by banks for short-run effects such asdramatizing product offers and boosting sales

Public Relations and Publicity: Public relations include a variety of programs to

promote or protect a company’s image or individual products The appeal ofpublic relations and publicity is based on three distinctive qualities: (1) highcredibility (news stories and features are more authentic and credible than ads);(2) ability to catch buyers off guard (reach prospects who prefer to avoidsalespeople and advertisements); and (3) dramatization (the potential fordramatizing a company or product) There are many ways that can be used bybanks to promote debit card service such us seminars on debit card utilization,press conference to launching new debit card

Personal selling : Personal selling is the most effective tool at later stages of the

buying process, particularly in building up buyer preference, conviction andaction Personal selling has three distinctive qualities: (1) personal confrontation

(it involves an immediate and interactive relationship between two or morepersons); (2) cultivation (it permits all kinds of relationships to spring up,ranging from a matter-of-fact selling relationship to a deep personal friendship);and (3) response (it makes the buyer feel under some obligation for havinglistened to the sales talk) When debit card service is quite similar among banks,personal selling is very useful in locating the customers who have demand oncard service and develop them into cardholders Personal selling can be carriedout by transaction staffs at the counter or marketing staffs at the enterpriselocation.

Direct marketing : Direct marketing is the use of consumer-direct channels to

reach and deliver debit card service to customers without marketing middlemen.For example, the banks use direct marketing to provide debit card information

by sending cardholders the address of ATMs, POSs or update fee service table.All forms of direct marketing—direct mail, telemarketing, Internet marketing,mobile devices—share four distinctive characteristics: They are (1) nonpublic(the message is normally addressed to a specific person); (2) customized (themessage can be prepared to appeal to the addressed individual); (3) up-to-date (amessage can be prepared very quickly); and (4) interactive (the message can bechanged depending on the person’s response)

Develop effective promotion involves eight steps: (1) Identify the targetaudience, (2) determine the communication objectives, (3) design the message,(4) select the communication channels, (5) establish the total communicationsbudget, (6) decide on the communications mix, (7) measure thecommunications’ results, and (8) manage the integrated marketing targetmarkets, including annual reports, brochures, articles, printed and on-linenewsletters and magazines, and audiovisual materials

2.2.2.5 People

All people directly or indirectly involved in the consumption of a service are animportant part of the extended marketing mix Technical workers, Transaction

staffs, Management offices of the Bank and Consumers often add significantvalue to the total debit card service The role of employee is to deliver theservice, and companies should find the right people to give the service to itscustomers The customers themselves as an important part of the final service.For example, the more specific the customers explain what he/she wants fromdebit card service, the better the bank can provide its service Understanding thecustomer allows to design appropriate products.

An essential ingredient to debit card service provision is the use of appropriatestaff and people Recruiting the right staff and training, and motivation themappropriately in the delivery of their service is essential if the organization wants

to obtain a form of competitive advantage The expertise and skills of the peoplewho work for Bank can be used to set you apart from competitors Consumersmake judgments and deliver perceptions of the debit card service based on thebank staff they interact with Staff should have the appropriate interpersonalskills, attitude, and service knowledge to provide the service that consumers arepaying for Customers buy from Bank that they like, so the attitude, skills andappearance of all staff need to be first class Ideally, service employees shouldexhibit competence, a caring attitude, responsiveness, initiative, problem-solvingability, and goodwill

Like other service, people are considered the most important element in debitcard service It heavily affects other elements of marketing mix.

2.2.2.6 Process

Process defines the way things are actually done and steps taken in servicedelivery to achieve the desired results ( Woodruffe 1995) Procedure,mechanisms and flow of activities by which debit card services are consumed(customer management processes) are an essential element of the marketingstrategy

Since debit card services are intangible and variability, companies have to bereally clear in defining the service process The processes involved in delivering

services to the customer have an impact the way which your customers perceiveyou Imagine that Banks could send out Debit Cards automatically when theircustomers’ old one has expired require an efficient process to identify expirydates and renewal The customers will wonder what was the process that allowedthem to obtain an efficient service delivery? An efficient service that replacesold debit cards will foster consumer loyalty and confidence in the company Associated with customer service are a number of processes involved in makingmarketing effective in an organization e.g processes for handling customercomplaints, processes for identifying customer needs and requirements,processes for handling order etc

In debit card service – main processes includes issuance process, paymentprocess and complaint settlement process

of the service Woodruffe (1995) sees physical evidence as a tool to supportcorporate image and identify Lovelock and Wirtz ( 2007) say that physicalevidence plays a vital role in creating a particular corporate identity and shapingthe nature of the experience of the customers, together with the tasks performed

by customer –contact personnel

When doing transactions at ATMs or POSs, customers can see whetherequipments of the bank are modern or not If bank’s ATMs look new andprocess card quickly, cardholder will think well about bank’s card service.Consider a customer visiting the bank to apply for card service The customerssee nice physical environments consisting of a building, interior, equipments,

and furniture She/ he will have good impression and believe on bank’s cardservice quality

2.2.3 Factors impacting marketing mix

Marketing activities of firms in market are different from firm to firm It iscombination of 7 P factors in each different circumstance The combination ofthose 7 factors will be depended on macro environment and micro environment

of firm

2.2.3.1 External Enviroment

- Marcro enviroment: Macro environment consists of Political and legal

environment, Economic environment, Social and culture environment,Technology and science environment

+ Political and legal environment

Political and legal factors such as tax policies, trade tariffs, policy of currency,export-import, economic will influence to business of bank For example importrate of card equiqments will effect fee of card service or regulations onpromotion will sure impact promotion activities

+Economic environment

Economic environment include elements that affect to purchasing power andconsumption structure, it includes macro-factors as GDP growth rate, inflationrate, unemployment rate, income and so on Economy developing will makeincome of people higher, and through it demand for bank service will go up andnumber of debit card service user increase

+ Social and culture environment

In each society, different people have different life style, custom and culture,will Social and culture environment also includes cultural standards of people

Those elements directly affects to consumer's behaviour and of course influence

to firm's activities

Social factors also include population element, population structure andpopulation element will decide scale and structure of market

+Technology and science environment

Development of science and technology helps to create new products, raisefunctions, and quality of products Development of science and technology alsomake product life-cycle shorter and this will affect to marketing strategy of firm

- Target Customers

It is described as market of outputs Customers are persons using debit cardservice of bank but at same time using service of competitors, therefore, bankmust to know what consumer needs to serve them better Customers arediversified; they could be individual, organization, domestic or foreign customer

In order to serve well each kind of customer, bank have to make research deeplyeach kind Besides that, consuming taste of customer always change, thereforefirm have to forecast factors that leading to those changes to serve customertimely

- Competitors

Banks do business in an environment with different competitors Competitorscould be competitors in other business filed or in same field Competitiveenvironment will affect directly to plan marketing activities of bank, affect todecision of production, pricing, sales policies,and promotion methods Forexample, bank will be fail if it provides lower quality debit card service withhigher fees than competitors

- Suppliers

They supply the bank and also competitors input of production or businessprocess as machines, materials, fuel, labour, finance Choosing a supplier will

affect to production cost, product quality, Therefore, the firm should selectsuppliers having prestige and some different suppliers to avoid risk when onlydepending on only supplier The bank should make good relation with suppliers

to be able support 'each other in difficult time

2.2.3.2 Internal Enviroment

- Company objective and strategy

- Human resource: Human resource has a vey important role in success of firm

and affects to result of marketing activities Bank will not operate its marketingmix activites effectively if it does not have good human resource

- Financial resource: Finance involves to capital source and using capital to

implement marketing activities Bank can not carry out a marketing plan wellwithout enough money for activities If the bank want cardholders to be ablewithdraw cash anywhere they have to have money to buy more ATMs

- Production technology: Production is an operation to create product for firm.

Production technology will decide quality and price of debit card service Base

on quality and production cost of service, bank will decide fee for service

- Others:other factor such as bank culture, leadership support, cooperation

between department and market segment of bank also impact marketing mix

CHAPTER 3 CURRENT MARKETING MIX ACTIVITIES OF DEBIT CARD

SERVICE AT VIETCOMBANK

3.1 OVERVIEW OF VIETCOMBANK

3.1.1 Establishment and development

On April 1st, 1963 the Bank for Foreign Trade of Vietnam (Vietcombank) wasfound under the Decision 115/CP dated October 30th, 1962 by separating fromthe Foreign Exchange Management Department of the Central Bank (now StateBank) The Bank operated under the direct management of the State Bank withthe functions of the only bank to serve external economic affairs and export-import lending for the whole country

During the period 1964-1975 Vietcombank implemented very well two majorduties that were serving economic development course in the Socialist Northernregion and contributing a very important part to the struggle to liberate theSouthern region by meeting all money transfer needs for buying weapons,bullets, medicines as well as foodstuff for the South

On November 14th, 1990 the Ministerial Committee issued Instruction 403/CT

to change the Bank for Foreign Trade of Vietnam into the State-ownedCommercial Bank named The Bank for Foreign Trade of Vietnam(Vietcombank) Vietcombank stepped out from the autonomy role for forexdealing into free competitive environment joined by other commercial banksincluding foreign banks’ branches and joint venture banks

The Joint-Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)was established after the equalization of the former Bank for Foreign Trade ofVietnam by its Initial Public Offering (IPO) on 26 December 2007 on Ho ChiMinh City Stock Exchange

Over 45 years of continuous development, Vietcombank has projected itself asthe leading bank in Vietnam in various segments such as treasury, internationalsettlement and trade finance, card service, banking technologies, etc A home of

highly experienced and skillful staff who possess professional working attitude,Vietcombank is proud to be a prime choice for top local and foreign corporationsand enterprises as well as individual customers Originally established as aspecialized bank serving external economic activities, Vietcombank today hasgrown into a universal bank with presence in all major cities and provinces ofthroughout the country A wide range of diversified products are offered so as tomaximize customers’ satisfaction By the end of 2009, Vietcombank networkcomprised:

- 01 Operations Center, more than 70 branches and 209 transaction officesnationwide;

- 1 overseas subsidiary: Vietnam Finance Company – Vinafico Hongkong

- 2 representative offices in Singapore and Paris

- 3 joint venture companies:

Vietcombank Fund Management Company (VCBF)ShinhanVina Joint Venture Bank

Vietcombank – Bonday - Ben Thanh Joint Venture Company The customer service network is also further extended and diversified with1,244 ATMs and 7,800 POS across the country The Bank’s operation issupported by its relationship with more than 1,300 correspondent banks inapproximately 100 countries and territories Year 2008 marked a significantmilestone in Vietcombank’s history with its transformation into a joint stockcommercial bank that has the largest chartered capital and total assets inVietnam With an integrated advanced technology system connecting allproducts and services of the Bank, Vietcombank are able to provide ourcustomers with the modern and high quality products and services they demand.Thanks to advanced corporate governance instruments, the Bank for Foreign

Trade of Vietnam has been taking long and firm steps in its development tobecome a universal banking and financial group internationally

3.1.2 Vietcombank’s performance results to date

Under guideline of the Government and with will power of the management andmore than 10,000 staff members, Vietcombank has strengthened itself as “Theleading bank for a prosperous Vietnam” with major achievements as follows:-Being the oldest commercial bank for external affairs in Vietnam

-Being the first bank in Vietnam having centralized capital managementstructure

-Being interbank forex payment center for over 100 domestic banks and foreignbanks’ branches operating in Vietnam

- Being the first commercial bank in Viet Nam to deal foreign currencies, alwaystakes the largest market share in the interbank forex market

-Being full member of: Vietnam Bankers Association; Asia BankersAssociation; SWIFT; Visa, MasterCard

-Being the first commercial bank to issue and pay international credit card Visaand MasterCard and being the largest agent for card payment in Vietnam: Visa,American Express, MasterCard, JCB

-Being the largest payment agent in Vietnam for Money Gram - the globalexpress money transfer company

- Taking largest potion in export-import payment and guarantee in Vietnam.-Being the only bank in Vietnam to handle automatically 95% of swift messagesmeeting the American standards

- Being recognised for 8 consecutive years (1996, 1997, 1998, 1999, 2000, 2001,

2002 and 2003) as the bank having the best service quality in terms ofinternationally standardized Swift payment

- Being selected as a major bank to manage and serving the Government’s loansand aids and many ODA projects in Vietnam.

- Being the leading commercial bank in trade finance, international payment,forex dealings, advanced Banking - IT implementation in Vietnam

-Being awarded by the “Asian Money” – the famous magazine in Asia – as thefirst bank in Vietnam in 1995

-The year 2005 also marked the successful completion of the Bank’s 5-yearRestructuring program Accordingly, the Bank has become one of the mostmodern banking institutions in Vietnam

-In 2006, Vietcombank Chief Executive Officer was elected ABA ViceChairman and Co-Chairman of the Vietnam- Eu Business Forum

-In the 2007, Vietcombank was assigned the rating of BB/B by Standard &Poor’s Ratings Services, with stable outlook and intrinsic strength of D, thehighest rating by S&P for a Vietnamese financial institution

-Vietcombank is among the top ten Trademarks in Vietnam 2008 by VietnamUnion of Science and Technology Associations Golden award for “Prestigiousticker symbol” and “Leading joint-stock company in Vietnam” in 2008

- In the 2009, Vietcombank was awarded “Best local trade bank in Vietnam2009” by trade magazine Best domestic provider of FX service in Vietnamvoted by cooperates

-On June 30, 2009, Vietcombank’s shares were officially listed on Ho Chi Minh

City Stock Exchange.

-The Bank also actively participated in community activities to enhance itsposition in domestic market Vietcombank set aside over VND 100 billion toimplement many social and charitable activities, which represents the bank’sresponsibilities to society, such as Gratitude Fund, Fund for the Poor, Children’sFund etc

Table 3.1 :Financial highlights of Vietcombank 2005 – 2009

( Source: annual financial report of Vietcombank)

3.2 DEBIT CARD SERVICE AT VIETCOMBANK