Some recommendations to develop the market share, the case of ILA vietnam in hanoi

- Study comments of customers in Hanoi about ILA products and marketing activities then build up the suitable marketing program to increase market share.- Give the recommendations to dev

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

Tran Thuy Linh

SOME RECOMMENDATIONS TO DEVELOP THE MARKET SHARE, THE CASE OF ILA VIETNAM

IN HANOI

MASTER OF BUSINESS ADMINISTRATION THESIS

Hanoi - 2011

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

Tran Thuy Linh

SOME RECOMMENDATIONS TO DEVELOP THE MARKET SHARE, THE CASE OF ILA VIETNAM IN HANOI

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr Nguyen Thi Phi Nga

Hanoi - 2011

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i

ABSTRACT ii

TÓM TẮT iv

TABLE OF CONTENTS vi

LIST OF FIGURE viii

LIST OF TABLE ix

INTRODUCTION 1

1 Research Problem 1

2 Objective and aim of thesis 1

3 Scope and scale of thesis 2

4 Methodology 2

5 Data resources 2

CHAPTER 1: LITERATURE REVIEW 4

1.1 Market share 4

1.1.1 Definition 4

1.1.2 Ways to increase market share 5

1.2 Consumer decision making process 6

1.2.1 Information search 6

1.2.2 Source of information 8

1.2.3 Information search on the Internet 9

1.3 Customer Value, Satisfaction, and Loyalty 13

1.3.1 Customer Value 14

1.3.2 Total Customer Satisfaction 17

1.3.2.1 Customer expectation 18

1.3.2.2 Measuring Satisfaction 18

1.4.Marketing mix 19

1.4.1 The product 19

1.4.2 Promotion mix 27

1.4.2.1 Advertising 28

1.4.2.2 Sales promotion 31

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1.4.2.3 Public relation 33

1.4.3 Place 34

1.4.4 Price 39

CHAPTER 2: THE CASE OF ILA VIETNAM IN HANOI 41

2.1 Introduction 41

2.2 Business analysis 44

2.2.1 Analysis of visitor and sources of information channel 44

2.2.3 Product analysis and comparison 47

2.2.3 New sales analysis 55

2.2.4 Re-enrolment and customers‟ loyalty analysis 57

2.2.5 Promotion mix analysis 58

2.2.6 Place 63

CHAPTER 3: CONCLUSION AND RECOMMENDATIONS 67

3.1 Conclusion 67

3.2 Recommendations 69

3.2.1 The information search on the Internet 69

3.2.2 Building Customer Value, Satisfaction, and Loyalty 70

3.2.3 Marketing mix 73

3.1 Product 73

3.2 Promotion mix 77

3.3 Place 81

REFERENCES 83

Appendix 85

LIST OF FIGURE

Figure 1-1: Decision making process 6

Figure 1-2 Information sources for Purchase Decision 8

Figure 1-3: Customer delivered value 14

Figure 1-4: Levels of product 20

Figure 1-5: The tangible-intangible continuum of goods and services 21

Figure 1-6: Steps in new product development process 23

Figure 1-7: Vertical marketing system model 36

Figure 2-1: Sales volume of ILA Vietnam in Hanoi since 2007 56

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LIST OF TABLE

Table 2-1: Number of visitor from 2008 to2010 45

Table 2-2: Sources of information that customer knew ILA from 45

Table 2-3: Programme, schedule and fee of English course in ILA Hanoi 48

Table 2-4: Programme, schedule and fee of English course in Apollo Centre 50

Table 2-5: Programme, schedule and fee of English course in Language Link 51

Table 2-6: Book using analysis 54

Table 2-7: The number of new sales volume 55

Table 2-8: Re-enrolment in ILA Hanoi 57

Table 2-9: The role of advertising is more critical in Hanoi 59

Table 2-10: Types of advertising and frequency 59

Table 2-11: Student statement by district and areas 64

1 Research Problem

ILA Vietnam in Hochiminh City is a very famous English Training Centre.Everyone can recommend friends and relatives to ILA to study when they areasked There are six training centres in HCMC, one in Vung Tau, one in Da Nangand one in Hanoi

The centre in Hanoi was established in 2007 This centre has a big problem with themarket share development Although Hanoi Training centre has more than threeyears running, it now still has negative profit

The problem is that ILA Hanoi has to compete with many big competitors such asApollo, Language Link, ACET and British Council Hanoians are familiar withthese centres and know little about ILA Vietnam Besides, ILA still uses onemarketing strategy for both northern and southern area

With those research problems, the thesis will be conducted with the purpose toimprove the market share then to get more profit for ILA Vietnam in Hanoi for theperiod of 2011-2016 The objectives will include: Study the comments of customers

in Hanoi about ILA‟s products and marketing activities; analyse businessperformance of ILA in Hanoi; find out the problems occurring in the Hanoi Centre;and give the recommendations to develop the market share based on applying thesuitable marketing mix to Hanoi market

2 Objective and aim of thesis

Those research problems will be discovered with the purpose to improve the marketshare then to get more profit for ILA Vietnam in Hanoi for the period of 2011-2016.The objectives will conclude:

- Study about marketing performance of ILA Hanoi

- Find out the problem occur in the ILA Language training centre in Hanoi

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- Study comments of customers in Hanoi about ILA products and marketing activities then build up the suitable marketing program to increase market share.

- Give the recommendations to develop the market share

3 Scope and scale of thesis

This research will be conducted based on some major objects are:

- Current customers of ILA Vietnam in Hanoi

- Visit customers, students of University, secondary and high schools, parents

as the sales number, the number of visitors and number of students The existingstudents were asked for their satisfaction on courses, customer services, books,teachers, teaching assistants and if they would recommend their friends andrelatives The comments of customers were used to measure the effectiveness ofmarketing activities of ILA in Hanoi The more suitable marketing strategy couldhelp ILA to attract more customers and expand its market share

5 Data resources

The primary data was gathered from direct interviews and discussions with thecustomers, students, visitors, parents of students, staffs and managers of ILA The

second sources of the thesis was secondary data such as books, newspapers, internaland external reports and the Internet

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CHAPTER 1: LITERATURE REVIEW

The literature included theory of market share, ways to increase market share,information search and building customer loyalty, marketing mix This section willstart off by explaining the market share concepts

1.1 Market share

1.1.1 Definition

There were some definitions of market share as the following:

"Market share is the percentage of a market (defined in terms of either units orrevenue) accounted for by a specific entity."

By Farris, Paul W.; Neil T Bendle; Phillip E Pfeifer; David J Reibstein (2010)

Marketing Metrics: The Definitive Guide to Measuring Marketing Performance.

Another author of investopedia said that market share was the percentage of anindustry or market's total sales that was earned by a particular company over aspecified time period According to this author, market share was calculated bytaking the company's sales over the period and dividing it by the total sales of theindustry over the same period This metric was used to give a general idea of thesize of a company to its market and its competitors

“Market share is the percentage of a company‟s sales of a particular product orservice in a given area It can be calculated in terms of revenue or of units sold.”

By Author(s) from Penetrating.net

“In very simple terms, market share is the number of loyal customers your business

or company has been able to retain over a long period of time” by Tito Philip, Jnr It

was quite different from other definition when mentioning the loyal customers Thisauthor thought that no one else but loyal customers were the real market share of thecompanies

Base on this definition, the author of the current thesis find out that to studyconsumer behaviour to make them become loyal customers is one of the good way

to increase the market share And it is the main content that the current thesis focuson

All these definition had different calculation but all had a same idea of the “pie” ofthe maket “cake” that the company owned The more important is how to increasethis “pie”

1.1.2 Ways to increase market share

There were some ways to increase the market share as the following:

- Try to sell more to existing customer: encourage customer to buy more product and higher frequency

- Get old customer back: find the reasons why customer left: they did not needthis product anymore, the price was too expensive, customers were not satisfied,customers changed to company‟s competitors…

- Try to sell effectively to similar customer by using data to telesales, send mail, advertising, word-of-mouth…

- Use other channels to sell: direct sales, whole sales, online sales or

e-commerce

- Find the new market: at other province, other country

- Develop the new product for same market

There was risky and costly in some ways as the expansion required more capital andstaffs It was reasonable for trying to understand existing customers in the samemarket and let them to be loyal ones then try to sell them more For this group ofcustomers, the company already had contact and relationship so it easier to find outtheir sastifaction and how to make them be loyal Even developing a new productfor the old market was still easier and less cost than for the new market

In order to developing the market share for the company in the safer way, themarketer had to study the customer need and customer buying process

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1.2 Consumer decision making process

Consumer decision making process had some states that presented in the figure 1-2

below There were problems (need) recognition, information search, alternative

evaluation and selection, outlet selection and purchase and post-purchase processes

The lowest level of purchase involvement was represented by nominal decisions: a

problem was recognized, long-term memory provides a single preferred brand, that

brand was purchased, and only limited post purchase evaluation occurs As one

move from limited decision making toward extended decision making, information

search increases, alternative evaluation becomes more extensive and complex, post

purchase evaluation becomes more thorough

Figure 1-1: Decision making process

Problems

Information Alternative Outlet Postpurchase

In this thesis, the author would like using the theory of information search in

analysing the promotion mix so it was only information search stage focused

1.2.1 Information search

After problems recognized, people often used internal and external search for

information that related to product or service The internal search was included

long-term memory of satisfactory solutions, characteristics of potential solutions

The external search were a price range, familiar manufactures, performance criteria,

etc…that could be limited because of one or two criteria

For example, the fan of Ms Lan was broken down She had to by a new fan forsummer using Because the old fan was used for ten years so Ms Lan did not want

to change or find another brand She went straight to Thong Nhat company to buy anew fan with the same brand In this case, the satisfaction of old product influencedthe decision of buying the new product without any search

There were two example of source of information that consumer used in makingdecision The first example, one person had demand of toothpaste and she saw anew product in the super market that had an attached tooth-brush This personbought the new product without searching for more new products because of theadded value That decision was made by limited information search The second onewas the case of a mother who wanted to by a new formula milk powder for herchild She had to search for information of nutrition, the price, the samples ofchildren using the same product… the final decision was the product that hadcheaper price with the same nutrition The mother of this example used externalinformation that included:

- The opinions, attitudes, behaviors, and feelings of friends, neighbours,

relatives, and increasingly strangers contacted on the internet

- Professional information that was provided in articles, books, websites, and personal contacts

- Direct experiences with the product through inspection, trial, or observation

- Marketer-generated information presented in advertisements, websites, and displays and by sales personnel

Deliberate external search also occurs in the absence of problem recognition

Ongoing search is done both to acquire information for possible later use and

because the process itself is pleasurable For example, individuals highly involvedwith an activity such as tennis are apt to seek information about tennis-relatedproducts on a going basis without a recognized problem with their existing tennisequipment This search could involve reading ads in tennis magazines, visiting

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tennis equipment shop, observing professionals on television, or taking with andobserving fellow players and local professionals These activities would provide theindividual both pleasure and information for future use.

1.2.2 Source of information

There were two main types of information sources: the internal and external Insome example above, the source of information that the mother used was externaland the fan-buying-woman used internal information source The source ofinformation could be:

- Memory of past searches, personal experiences, and low-involvement

learning

- Personal sources, such as friends, family, and other

- Independent sources, such as magazines, consumer groups, and government

agencies

- Marketing sources, such as sales personnel, websites, and advertising

- Experiential sources, such as inspection or product trial

These sources were shown in Figure 1-4 Consumers decided how many and which

sources of information to use

Figure 1-2 Information sources for Purchase Decision

Information sources

Information Information

Actively Passively Actively acquired acquired acquired

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Consumers used internal information most of the time what was the primary source.The internal information included past search and personal experience that activelyacquired Beside of using internal source, customers also used information from anexternal source, such as direct product experience, friends, or low-involvementlearning, marketer information or personal contacts.

Marketing messages were only one of five potential information sources, but theseactivities influenced all sources because the characteristics and the distribution ofthe products were available in the market The customers received information fromnon-marketing source because of the continuously marketing activities

1.2.3 Information search on the Internet

The internet was a new consumer information search in the communication era Inthe nineteen century, one expert had a prediction that:

“The new is very good for consumers, not so good for companies and investors.Within the near future, extraordinarily powerful price-and-quality search enginesand services are likely to have a significant impact on decision making process For

a modest annual membership fee, Internet price-search services will be able toidentify the cheapest delivered large-dollar-ticket products or services available inthe word In such product markets the readily informed consumer will be king, atthe click of a button.”

And bellows were some facts and figures about using the Internet and email, as well

as the social networks that Pingdom used many sources in the online world to writethe analysis A lot of questions were made everyday such as how many sites havebeen opened, how many people uses the internet or email etc…bellows are somefact and figures that Pingdom.com had found:

107 trillion – Emails were sent in 2010

294 billion – Emails were sent a day, on the average

1.88 billion – the number of people using email all over the world

480 million – New email users counted from 2009

89.1% – Junk emails

262 billion – junk emails per day (suppose 89% emails were junk mail)

2.9 billion – Email accounts over the world

25% – Email accounts were organizational or company‟s one

255 million – websites up to December 2010

21.4 million – new website in 2010

 The Internet users

1.97 billion – over the world (up to June, 2010)

14% – higher than 2009

825.1million – the Internet users in Asia

475.1 million – the internet users in Europe

266.2 million– The internet users in North American

204.7 million – the number of users in Latin America/ Caribbean

110.9 million – the number of users in Africa

63.2 million – the number of users in Mid-East

21.3 million – the number of users in Oceania countries

 The social network

152 million – blogs (source: BlogPulse)

25 billion – “tweet” on Twitter in 2010

100 million – new Twitter accounts in 2010

175 million – new Twitter users in 9, 2010

7.7 million – followers @ladygaga (Lady Gaga, Twitter)

600 million – Facebook‟s users in 2010

250 million – new Facebook accounts in 2010

30 billion – number of sharing (link, note, pictures…) on Facebook each month70% – Facebook users out of American‟s border

20 million – Facebook‟s applicant had been set up each day

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 Video

2 billion – watched videos on Youtube each day

35 hours – duration of uploaded videos in one minute

186 –average number of online videos online watched by one person (in the USA)84% – internet users who watched video online (in the USA)

14% – internet users uploaded videos (in the USA)

More than 2 billion –watched videos on Facebook each month

20 million – Video uploaded on Facebook each month

5 billion – on Flickr (up to 9, 2010)

More than 3000 – pictures that uploaded on Flickr each minute

130 million – picture uploaded on Flickr each month 30 billion

– uploaded pictures on Facebook each month

36 million – pictures was uploaded on Facebook each year

Source: www.genk.vn

According to the above statistic, Asia had the highest number of the internet usersand the speed of development was more than 14% Asia was a potential market fordoing business online On the other hand, the social networks like Facebook ortwitter were developed quickly Advertising on these websites was easier and moreoften as company could have its own account Vietnam had a highest growth rate,according to a research of Cimego Company:

“With in key Asian countries, three different levels of internet penetration werefound In developed Asian countries (South Korea, Japan, Singapore, Hong Kong,Taiwan and Malaysia), internet usage is at 60-80%, with a slight year-to-yearincrease In Asian emerging markets (China, Vietnam, Philippines and Thailand),internet penetration is around 20-30%, however internet growth rates per year aremuch higher In developing markets (Lao, Cambodia) or populous countries with alarge rural population (Indonesia, India), internet penetration is typically below10% According to official sources, there are currently 27 million internet users in

Vietnam, which is more than in Thailand and Malaysia…Vietnam takes a uniqueposition in this respect Vietnam is the fastest growing internet country in the regionand amongst the countries with the highest growth rates in the world Since the year

2000, the number of internet users in Vietnam has multiplied by about 120 Tenyears ago, internet penetration in Vietnam lied far behind most other Asiancountries In the meantime, Vietnam has caught up an internet usage has reached thelevel of other key emerging markets”

Source: Cimigo, Vietnam NetCitizen Report, 2011

According to the research, Vietnam had the big jump in the internet using growthrate Many of big corporations found Vietnam as a profitable market Facebook andgoogle were the famous examples

In general, internet search had become an important source of information in thedecision making process

A home page or Internet presence site was a website developed and maintained by afirm or another organization or individual that provides product and company data

or independent data from government and private sources Based on a research of acompany on its home page there were 90% of people seeking product information,and 88% of seeking company information, 30% of seeking for getting coupons ordiscounts, and 23% of seeking for buying product

How people knew the company website was also important Consumers frequentlyvisited a company website because they saw it mentioned in traditional media:

Percentage visiting a website because they saw it mentioned in:

The data above showed that ads were factors that affected to rate of website visitingtimes For example, Apollo organised the English Olympic competition for Hanoi‟sstudents These advertisings of the company guided attendants to visit website forthe terms and conditions before registrations The visiting rate of its websiteincreased 30 times than before the ads.

Consumers also met ads on the Internet while visiting general information, search,and entertainment sites These were banner ads that could take the consumer to thecompany or product‟s home page or to a special advertisement i.e in the sameApollo‟s competition above, the company hired banner ad columns on the onlinenewspaper such as Hoahoctro online, Vnexpress.net, dantri.com etc … people sawthese ads could click on them to see more information

The Internet also contains personal sources of information in chat rooms, forums or

in the brand review features associated with some shopping services The veryfamous shopping website Amazone.com had huge amount of personal source ofinformation

In general, searching and using information from the Internet was going rapidly.The consumers had a efficiency tool of searching information and they had morechances to reach suitable product with better price On the other hand, firms andorganizations had more channel to deliver advertisings and information tocustomers

1.3 Customer Value, Satisfaction, and Loyalty

Customer should be the top of the company and they were profit centre of everycompany It was not the manager who was most powerful but the customer.Therefore, the company must find what customer value was, how to satisfy them,how to make them become loyal

1.3.1 Customer Value

In the era of communication and digital, consumers were more educated and

informed than ever, and they had the tools to verify some companies at the same

time and find out the best choice Customers used to be value-maximizers, within

some criteria as product cost, using value Customers would estimate which offer

could deliver the most value to choose it Philip Kotler defined total customer

delivered value as the figure 1-3 bellow:

Figure 1-3: Customer delivered value

Total customer value (Product, service, personal

and image values )Minus Total customer cost (Money, time, energy and

psychic costs)

equals Customer delivered value (Profit to the customer)

As showed on the figure 1-3 customer delivered value was the difference between

the total customer value of all the benefits and all the costs of a product and service

that included not only money but also time, energy and psychic costs For example,

customers who chose an education service like kindergarten or primary school had

to consider very much about choosing a good school with best service and suitable

price However, good school was often had high school fee and low school fee

meant average service quality The parents had to spend not only time but psychic

cost to find out the suitable one

Total customer value was defined as the perceived monetary value of the package of

economic, functional, and psychological benefits customers expect from a product

and service

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Totala customer cost was defined as the total of costs customers expect to incur inevaluating, obtaining, using, and disposing of the given market offering, includingmonetary, time, energy, and psychic costs.

So, customer delivered value was based on the difference between what thecustomer received and what were given for other different choices The customerreceived benefits and estimated costs In order to have more customer receivedvalue, the marketer could increase functional or emotional benefits and/or reduceone or more of the various types of costs

Value concepts could be applied on decision-making theory to gain success inselling to customers Companies could improve the offer in three ways First, theycould increase total customer value by improving product, services, personnel, and/

or image benefits Second, it could reduce the nonmonetary costs by reducing thetime, energy, and psychic costs Third, it could reduce its product's monetary cost tothe buyer

There was an example of buying washing machine that could explain the theory.Vietnamese consumers used to familiar with Hitachi washing machine since thenineteen century when the second-hand ones were used They were also familiarwith Elextrolux washing machine due to the good quality and long term used Thehouse wife wanted to buy a washing machine to replace the broken one What brandHitachi or Elextrolux Elextrolux had higher brand image benefit, long-term usingduration, less repair fee, higher evaluated quality and more sensitive of clothescaring that Hitachi How ever, the price of Hitachi machine was cheaper and thefunctional modes were easier Sales person of Elextrolux in the shopping mall tried

to persuade the house wife that their machine would deliver more value to herbecause she could use the machine for longer time with less electricity and repaircosts She could also call to hotline customer service for support for 24/7 Thecustomer recognized that Elextrolux‟s machine had more advantage than Hitachi‟sone However, she chose Hitachi washing machine as she compared the two prices

and the difference was higher than the total extra value that she could receive fromElextrolux.

Assumed that customer evaluated Elextrolux‟s price was 15 million dong and thecost to produce and sell was 10 million dong It meant the difference between priceand cost could be 5 million dong, so Elextrolux needed to charge a price between 15and 10 million dong If the company charged less than 10 million dong, it won'tcover its costs If the company charged more than 15 million dong, it could priceitself out of the market In order to gain the sales, Elextrolux could price the productthat created more customer value than the competitor ones Other wise, the salesperson of Elextrolux could explain to buyer in some potential options

- If the wanted to buy at the lowest price The sales person tasks were to convincethe buyer's manager that buying on price alone would result in lower long-term profits

- The salesperson's task was to convince other people in the customer family thatElextrolux‟s product could deliver greater customer value

- The other product operation needed higher water level and electricity cost

Through this example, the conclusion was that consumers made choices that gavemore weight to their personal benefit than to the company's benefit in someoccations

Customer received value was a useful framework that applied to many situations.There were steps for sales person to apply this framework: first, the sales personmust explore how the customer perceived value and cost, including all thecompetitors proposals Second, after receiving the result of measurement and theproduct or service was at the disadvantage position, the salesman had twoalternatives: to increase total customer value or to decrease total customer cost.They could increase total customer value by strengthening offer's product, services,personnel, and image benefits If increase value did not work, they could find the

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company support in reducing the buyer's costs by lowew the price, simplifying theordering and delivery process, or offering a warranty.

Consumers had many level of loyalty to specific brands, stores, and companies Forexample, people in the north of Vietnam were loyal to Honda motorbike The reasonwas the high customer value Motorbikes of Honda were popular in Vietnam due toeasy using, cheaper replacements of broken parts, long-time using duration easyreselling etc… the company built a strong competitive advantage in comparing withlater competitors by their high customer value

1.3.2 Total Customer Satisfaction

Philip Kotler and his colledges built a theory of customer satisfaction In this theory,these authors defined that the buyer‟s satisfaction after purchase depended on theoffer's performance in relation to the buyer's expectations They said that:

“In general, satisfaction was a person's feelings of pleasure or disappointmentresulting from comparing a product's perceived performance (or outcome) inrelation to his or her expectations If the performance falls short of expectations, thecustomer is dissatisfied If the performance matches the expectations, the customer

is satisfied If the performance exceeds expectations, the customer is highly satisfied

or delighted.”

The companies had to face trade-off when trying to create higher customersatisfaction because if the company increased customer satisfaction by lowering itsprice or increasing its services, the result might be lower profits Most of companieschose increasing profit by earnings than satisfaction Because companies has manystakeholders, including employees, dealers, suppliers, and stockholders, they mightprefer increasing their value than customers‟s satisfaction Thus, most of the cases,the company chose a suitable level than high level of customer satisfaction

1.3.2.1 Customer expectation

Customers‟ expectations were the most important factor in customer‟s satisfaction.Customers often used their experience buying in the past, the advices from theirfriend and relatives and promises from marketers and competitors to build theirexpectations In case the marketers raised expectations too high, the buyer could bedisappointed In the contrast, if the company set low expectations than thecompetitors, it won't attract enough buyers The company had to raise expectationsand then deliver good performances to match and gain success

1.3.2.2 Measuring Satisfaction

Measuring customer satisfaction were important to business and needed to maintainregularly Customer satisfaction servey had to be done regularly once a month oronce per year, depend on the product and service that supplied It was the way tokeep customer to be loyal with the company The higher level of satisfaction, thelonger customer staying with the brand or company Since the customer satisfiedwith brand, they could buy more, upgrade products, spread out the good commentsabout brand, careless about price etc… However, it happened differently on eachlevel of satisfaction The lowest level of satisfaction, the least level of loyaltycustomer This group of customer might change to use other brand The middlelevel of satisfaction customer was loyal than the first one but still changed if theycould receive higher value The highest satisfied customers were most loyal and saidgood word of mounth about company and brand

By doing servey of customer satisfaction, companies could investigate thecompetitor‟s sittuation by calling stop customers who had bought others products.For customer satisfaction surveys, it was important that companies asked the rightquestions One important question was: "Would you recommend this product orservice to a friend?" The servey questions could focus on brand image, pricing, andproduct features that could be controlled and measured

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In order to have good word of mouth, the company had to put customer in the centre

of every goal and customer satisfaction had to the goal and the marketing tool.There was no other way than had good product and service quality to get customersatisfaction Quality was the totality of features and characteristics of a product orservice that bear on its ability to satisfy stated or implied needs

The comsumer analysis of satisfaction and expectation was aimed to build a strongmarketing mix for companies The author would discuss about three importantfactors of marketing mix to the company in the next part

1.4.Marketing mix

1.4.1 The product

Product was the first and the important element of marketing mix It defined whatcompany was doing or selling In the book “Principles of Marketing” Kortler andhis colleagues pointed out the concept of “product” and the relevant theory about it

In this thesis, the author chose some criteria that needed for the company to apply inanalysis In the book, Kortler said that:

“Product is anything that can be offered to a market for attention, acquisition, use orconsumption that might satisfy a want or need It includes physical objects,services, persons, places, organisations and ideas.”

In this definition, he mentioned not only tangible goods but also the services orintangible things like ideas

Services were considered as a special product They were activities, benefits orsatisfactions that were offered for sale Services were essentially intangible and donot result in the ownership of any thing, he wrote

In order to understand why customers were buying products, the companies had toknow well about three level of product They were:

 Core product: The problem-solving services or core benefits that consumers were really buying when they obtain a product

 Actual products: could have as many as five characteristics: a quality level,

product and service features, styling, a brand name and packaging

 Augmented product: were build around the core and actual products by offering

additional consumer services and benefits

Figure 1-4: Levels of product

Features

Core product name

Delivery

Core

According to the writers, the most basic level was the core product The core

product stood at the centre of the total product It consisted of the core,

problem-solving benefits that consumers seeked At the second level, product planners must

turn the core benefit into an actual product Finally, the product planner must build

an augmented product around the core and actual products by offering additional

consumer services and benefits

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Because of the field of case study was in service industry so the author would like

to have an overview about the theory of service in the next part

Characteristics of service

“Service is any activity or benefit that one party can offer to another which is

essentially intangible and does not result in the ownership of anything.”

Philip Kotler, Principles of Marketing, 4th edition

He gave some examples of activities such as renting a hotel room, depositing

money in a bank, travelling on a ferry or an aeroplane, visiting a doctor, getting a

haircut, having a car repaired, watching a professional sport, seeing a movie, having

clothes cleaned at a dry cleaner and getting advice from a solicitor all involve

Figure 1-5: The tangible-intangible continuum of goods and services

The figure showed the example of tangible products as soap or car to most

intangible service as consulting and teaching Between the tangible and intangible

service, the mix products combined goods and supplement service

There were five characteristic of service: intangibility, inseparability, variability,

perishability and lack of ownership The thesis would like to discuss about each of

those characteristics

1 Intangibility

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This was the major characteristic of service Services could not be readily displayed,

so they could not be seen, tasted, felt, heard or smelt before they were bought Abuyer could not know the result of haircut service until finishing Because theservice was intangible, the result was uncertainty Customers could only estimateservice quality through some signals such as place, people, equipment,communication material and price that they could see Because of these customer‟ssearching tools, the service provider had to “manage the evidence” and “tangibilisethe service”

2 Inseparability

In contrast of goods, could be store and consumed later, services could not beseparated from their providers; they were produced and consumed at the same time.During the time that customers using services, they also involved in process

3 Variability

Because people involved in productions and consumption, there were potential forvariability This characteristic proved that that the quality of services depended onwho provides them, as well as when, where and how they were provided Because

of these factors, service quality was difficult to control

4 Perishability

This was a major characteristic of service Perishability was that services could not

be stored for later sale or use The very common example was public transportation

in the rush-hour or holidays The demand of travelling in this period of time wasincreased sharply that coursed the transportation companies had to arrange vehicles

to serve customers (short time) but it would not be used in the normal time (almostthe time of the year)

5 Lack of ownership

When buying a good such as computer or car, people owned this and could sell it ifthey wished to However, buying a service, customer only used this in a limitedtime and no quality ownerships

Because the market did not stand still and neither the customer‟s need was Thecompany had to develop the new products to meet the customer‟s need and toreplace the denied products The author would like to study about the new productdevelopment.

New product development

When mentioning about new product development, people thought about the newinventions However, according to Philip Kortler, an invention was a newtechnology or product that may or may not deliver benefits to customer and the newproduct development was an act of innovation which entailed a process ofidentifying, creating and delivering new-product values or benefits that were notoffered before in the marketplace There were two ways in obtaining a new product.One was through acquisition – by buying a whole company, a patent or a licence toproduce someone else‟s product Many large companies had decided to acquireexisting brands rather than to create new ones because of the rising costs ofdeveloping and introducing major new products The other way to obtaining newproducts was through new-product development in the company‟s own research-and-development department And the new products were defined as originalproducts, product improvements, product modifications and new brands that thecompany develops through its own research-and-development efforts

Because of the purpose of the thesis, author focused only in the second way ofdeveloping a new product and how to create and market new products

New-product development process

The new-product development process for finding and growing new productsconsists of nine main steps

Figure 1-6: Steps in new product development process

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New product strategyIdea generationIdea screeningConcept development and testingMarketing strategy development

Business analysisProduct developmentTest marketingCommercialisation

1 New-product strategy

The company needed having a strategy for developing a new product because awell-definded strategy would guide staffs how to implement, what to focus onand what the managers wanted

2 Idea generation

In order to find a few good ideas, the company had to generate fromthousands ones which came from many sources such as internal sources,customers, competitors, distributors and suppliers

- The force of internal source could be executives, scientists, engineers,designers, manufacturing and salespeople Toyota was a good example of benefited fromits internal ideas

- Customers could bring lots of good idea by answering what they wanted andwhat they needed The only thing that the company could do was listening and watchingtheir customers.

- Competitors tested their products and the company could see how they weregoing then learn from them What customers said about the competitors also was a goodthing to consider

- Distributors, suppliers were close to the market, they knew what customers wanted and what could be changed

3 Idea screening

This step would reduce the number of ideas, keeping good ones, clearingbad ones The committee of new product would write description of theproduct, the target market and the competition, and makes some roughestimates of market size, product price, development time and costs,manufacturing costs and rate of return The committee then evaluates the ideaagainst a set of general criteria

4 Concept development and testing

Attractive ideas must be developed into product concepts It wasimportant to distinguish between a product idea, a product concept and aproduct image A product idea was an idea for a possible product that thecompany could see itself offering to the market A product concept was adetailed version of the idea stated in meaningful consumer terms A productimage was the way consumers perceive an actual or potential product

After developing some concepts for product, the company could testthem with a group of target customers to find out that whether the concept had astrong consumer appeal

5 Marketing strategy development

Marketing strategy was the marketing logic by which the business unit hopes toachieve its marketing objectives In this step, the marketing strategy statementhad three parts It was:

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- The first part described the target market, the planned product positioning, and the sales, market share and profit goals for the first few years.

- The second part of the marketing strategy statement outlines the product‟s planned price, distribution and marketing budget for the first year

- The third part of the marketing strategy statement describes the planned run sales, profit goals and marketing mix strategy

long-6 Business analysis

In this step, after management had decided on its product concept andmarketing strategy, it could evaluate the business attractiveness of the proposal.Business analysis involved a review of the sales, costs and profit projections for

a new product to find out whether they satisfy the company‟s objectives If theydid, the product proceeded to the product development stage To estimate sales,the company looked at the sales history of similar products and conductssurveys of market opinion It then estimates minimum and maximum sales toassess the range of risk After preparing the sales forecast, management couldestimate the expected costs and profits for the product, including marketing,R&D, manufacturing, accounting and finance costs The company then used thesales and costs figures to analyse the new product‟s financial attractiveness

7 Product development

The product development was developing the product concept into aphysical product in order to ensure that the product idea could be turned into aworkable product This step was conducted by R&D department of thecompany These ideas would be turned into workable products based on testedconcepts After that, the sample would be test in the lab and field conditions tosee how this going The company also had to consider about producing systemafter the test

8 Test marketing

Test marketing was the stage of new-product development where theproduct and marketing programme were tested in more realistic market settings

The market test gave the company experiences before the official introductionand a good test market provided a wealth of information about the potentialsuccess of the product and marketing programme The test marketing alsoapplied to new service products In the book, Philip Kotler introduced anexample of airline‟s electronic ticket He also gave the audiences three ways totest market: standard test markets, controlled test markets and simulated testmarkets.

9 Commercialization

This was step of introducing product to the market after test marketing Itcost the company a lot of money in the first year for advertising, salespromotion and other marketing effort If the company failed in this step,competitors might have chance of replacement The company had to answersome questions in this step such as when, where, whom and how the newproduct could be introduced

Products in general and new product development were the most important elements

in marketing mix because they decided whether other marketing strategies wereused or how to be implemented It was the fact that, these curent companies‟sproducts would be replace by other newer ones But the new product was alsofailed The company had to use and focus on the nine steps of the new product

1.4.2 Promotion mix

The Promotion mix was the specific mix of advertising, personal selling, salespromotion and public relations that a company used to pursue its advertising andmarketing objectives, Kotler wrote It also was the very important element ofmarketing mix If the company had good products and services but they did not hadgood promotion strategy, people could not know who they were, what productswere and of course, they could be failed That was the reason why every companymust used at least one of below promotion mix:

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 Advertising Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor.

 Personal selling Personal presentation by the firm‟s sales force for the purpose

of making sales and building customer relationships

 Sales promotion Short-term incentives to encourage the purchase or sale of a product or service

 Public relations Building good relations with the company‟s various publics byobtaining favourable publicity, building up a good „corporate image‟, and handling orheading off unfavourable rumours, stories and events

 Direct marketing Direct connections with carefully targeted individualconsumers both to obtain an immediate response and to cultivate lasting customerrelationships – the use of telephone, mail, fax, email, the Internet and other tools tocommunicate directly with specific consumers

Because of the case study was a specific service so the author would like to choosethree out of five elements in the promotion mix to use They were advertising, salespromotion, and public relations

1.4.2.1 Advertising

Advertising was not only used by firms but it was also used by others such as socialagencies non-profit organisations to communicate to various target publics.Advertising was the good way to inform and persuade Philip Kotler definedadvertising as any paid form of non-personal presentation and promotion of ideas,goods or services through mass media such as newspapers, magzines, television orradio by an identified sponsor

The company had to answer some questions related to advertising such as: what is itfor, how much money would be spent, how to implement and in what way… afteranswering these questions, the company would know their advertising campaign.Bellows were some steps in making a advertising plan

- Set advertising objectives: this was the first step in advertising and it depended

on the specific target audience during the specific period of time Three main purpose ofadvertising were to inform, persuade or remind and they depended on the product life-cycle

- Setting the budget: the budget for advertising was depended on not onlyobjectives but also on stage of the product life-cycle, market share, competition andclutter, advertising frequency, and product differentiation It was not easy to setadvertising budget The overspend firms believed in this “insurance” against other notspending enough Many companies relied on their sales forces to bring in orders and thiswould affect companies‟ image

- Developing advertising strategy: included creating the advertising messages and

selecting the advertising media

o Creating the advertising messages: in this modern life, people received thousand

of ads everyday To gain and hold the attention of viewers, advertisingmessages must be well planned, more imaginative, more innovative, moreentertaining and more rewarding to consumers First of all, marketers mustdefined the target customer benefits that could be used as advertising appeals.Message strategy statements tend to be plain, straightforward outlines ofbenefits and positioning points that the advertiser wanted to stress Theadvertising must be a compelling creative concept or big ideal Advertisingmessage should have three characteristics: meaningful, believable anddistinctive The way of saying message was also important To execute themessage, people must choose the best style, tone, words and format There weresome style to choose such as slice of life, lifestyle, fantasy, mood or image,musical, personality symbol, technical expertise, scientific evidence, testimonialevidence

o Selecting advertising media: there were some main steps as deciding on reach,frequency and impact; choosing among chief media types, selecting specific mediavehicles; and deciding on media timing First of all, the company must

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decide how many percentage of the target market to be reached and how often.The more percentage and frequency, the more money spending for ad budget.The second was the types of media and timing on this chose ones Some types

of media were newspapers, television, direct mail, radio, magazines, outdoorand the Internet Table below showed the advantages and limitations of eachtype of media

Newspapers Flexibility; timeliness; local Short life; poor reproduction

market coverage; broad quality; small pass-alongacceptance; high believability audience

Television Good mass-market coverage; low High absolute cost; high clutter;

cost per exposure; combines fleeting exposure; less audiencesight, sound and motion; selectivity

appealing to the sensesRadio Good local acceptance; high Audio presentation only; low

geographic and demographic attention; fleeting exposure,selectivity; low cost fragmented audience

Magazines High geographic and Long ad purchase lead time; high

demographic selectivity, cost; some waste circulation; nocredibility and prestige; high- guarantee of position

quality reproduction; long life;

good pass-along readershipDirect mail High audience selectivity, Relatively high cost per exposure;

flexibility; no ad competition “junk mail” imagewithin the same media; allows

personalizationOutdoor Flexibility; high repeat exposure; No audience selectivity, creative

low cost; low message limitationscompetition; good positional

selectivityInternet High selectivity, low cost; Small, demographically skewed

immediacy; interactive audience; relatively low impact;capabilities audience controls exposure

In the same type of selected media, marketers had to decide specific name ofchannel or magazine For example, VTV3 got more rate of audiences than HTV2 ormotor magazine for men and beauty magazine for women etc… it must be balancedbetween cost and audience quality

- Evaluating advertising: there were some ways to measure the advertising such

as compare past sales with past advertising expenditures or use the same marketing effort

in different areas then see the differences in sales etc…

- Decision in centralization or decentralization: one company had business inover the country or over the world had to think about using different marketing andadvertising strategies The company had to care about some factors such as corporate andmarketing objectives, product uniformity, product appeal, cultural sensitivities, and legalconstraints For example, a picture of beautiful woman wearing underwear of VictoriaSecret may not allow in some countries because of the religion

In general, the company and marketing departments had to choose carefully theadvertising strategy to gain success and it also coordinate with other promotion mix

as sales promotion and public relation

1.4.2.2 Sales promotion

According to the writer, sales promotion consisted of short-term incentives, inaddition to the basic benefit offered by the product or service, to encourage thepurchase or sale of a product or service Whereas advertising offered reasons to buy

a product or service, sales promotion offered reasons that would achieve immediatesales

Sales promotion included a wide variety of promotion tools designed to stimulateearlier or stronger market response Consumer promotions included money-off,coupons, premiums, contests and others Trade promotions range from specialdiscounts, free goods and loyalty bonuses to training Business promotions includemany of the same tools used for consumer or trade promotions such as conventionsand trade shows, as well as sales contests Sales force promotions include bonuses,commissions, free gifts and competitions

The company had to set sales promotion objectives Each type of promotion had itsown objective such as consumer promotions often used to increase short-term sales

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or to hold and reward loyal customers Otherwise, trade promotions often used tomotivate retailers to carry new items and more stock etc Objectives should bemeasurable and should be consumer relationship building The company should notonly use promotion to increase short-term sales volume or temporary brandswitching, they should be used to help reinforcing the product‟s position and buildlong-term relationships with customers.

There were some major sales promotion tools as the following:

- Consumer promotion tools: The main consumer promotion tools includesamples, coupons, cash refunds, price packs, premiums, advertising specialities,patronage rewards, point-of-purchase displays and demonstrations, and contests,sweepstakes and games

- Trade promotion tools: Trade promotions used to persuade wholesalers to carry

a brand, give it shelf space, promote it in advertising and push it to consumers Therewere some trade promotion tools such as contest, premiums, displays, straight discountoff, allowance, free goods, or incentive

- Business promotion tools often used to industrial customers The company used

to spend huge of money to generate business leads, stimulate purchase, reward customerand motivate sales people There were many similar tools with trade promotion andconsumer promotion but there were two main business promotion tools: conventions andtrade shows, and sales contests

After having an objective and some tools to use, the company could develop thesales promotion programme

Developing the sales promotion programme

In order to have a success sales promotion campaign, the company must decidecarefully some very important decisions otherwise; the campaign could be backfireand damage its reputation and brand image These decisions included:

- Size of incentive: it should be minimum to success, a larger incentive had more sales response