Partnership marketing program for increasing sales of vpbank’s unsecred personal loan upl

5 Chapter 1: Introduction | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE Abstract This is the internship report on Partnership program to increase sales of unsecured personal

Year 2016 – 2018

MASTER OF MARKETING AND PROSPECTIVE

INTERNSHIP REPORT

PARTNERSHIP MARKETING PROGRAM FOR INCREASING SALES

OF VPBANK’S UNSECRED PERSONAL LOAN (UPL)

6/20/2018

By: LE DIEU TRANG

Supervisor: PhD PHAM THI LIEN

1 Chapter 1: Introduction | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

Acknowledgement

This report has been prepared for the internship that has been done in Viet Nam Prosperity Joint stock Commercial Bank in order to study the practical aspect of the course and implementation of the theory in the real field with the purpose of fulfilling the requirement of the course of ISVN (Master of Marketing)

All aspect of the report that has been prepared have been work-shopped with VPBank’s marketing team members who have provided extensive input and supportive participation

I would like to pay gratitude, and want to give especial thanks to our respected superviser Dr Pham Thi Lien It was her encouragement, patience, and valuable feedback that enabled me to complete this work

I am also deeply indebted to my academic supervisor, Mr Sandeep Deobakta, Head of retail Banking Division at VPBank The support that he provided motivated me to think more broadly about associated concepts and helped expand my understanding of product as well as consumers’ insight Invaluable discussions we held stimulated my enthusiasm and imagination in the research process

Research has been carried out with the support, cooperation and assistance of VPBank’s customers that have been asked to participate in the study They have spent a significant amount of time and resources on providing input

This project would not have been possible without the kind support and help of many individuals I would like to extend my sincere thanks to all of them

2 Chapter 1: Introduction | Year 2016 – 2018

MASTER OF MARKETING AND PROSPECTIVE Contents 1 Chapter 1: Introduction 7

1.1 Background of the study 7

1.2 General objectives of the study 8

1.3 Methodology of the study 8

1.4 Scope and Limitation of the study 8

1.5 Thesis outline 9

1.6 Contribution and future study 9

2 Chapter II: Overview of unsecured personal loan product and partnership program 11

2.1 Bank and it activities 11

2.2 Unsecured lending market 11

2.2.1 Unsecured personal loan 11

2.2.2 Unsecured lending market 11

2.3 Partnership in marketing strategy 13

2.3.1 General view 13

2.3.2 Partnership approach 14

Partnership approaches can be broken into three levels of collaboration 14

3 Chapter 3: Overview of VPBank 16

3.1 Historical background of VPBank 16

3.2 Mission, Vision, Development Strategy and Core value of VPBank 17

3.3 Organogram of VPBank 19

3.4 Organogram of Retail Banking Division and Sales distribution 20

3.5 Financial performance of VPBank (Retail Banking Division) in 2017 21

3.6 VPBank’s UPL current situation and problems 23

3.6.1 SWOT analysis of VPBank’s UPL 23

3.6.2 Competition situation in unsecured lending market 24

4 Chapter 4: Qualitative and Quantitative study 28

4.1 Objectives of qualitative and quantitative study 28

4.2 Qualitative study 28

4.2.1 Sample of the study 28

4.2.2 Data collection method 28

4.2.3 Model of interview guide: Annex 1 28

4.2.4 List of respondents: Annex 2 28

4.2.5 Findings 28

3 Chapter 1: Introduction | Year 2016 – 2018

MASTER OF MARKETING AND PROSPECTIVE 4.2.6 Summary findings from qualitative study 33

4.3 Quantitative study 35

4.3.1 Model of questionnaire: Annex 3 35

4.3.2 Research objectives recall 35

4.3.3 Data analysis 35

5 Chapter 5: Recommendation and partnership plan 45

5.1 Recommendations: 45

5.1.1 Step 1: Product strategy 45

5.1.2 Step 2: Target partner identify 47

5.1.3 Step 3: Partnership program Development 49

a) Sales forces 49

b) Product 50

c) Process 50

d) Marketing and promotion 50

6 Chapter 6: Implementation and result 58

6.1 Implementation of the partnership program 58

6.1.1 Partner collaboration channel 58

6.2 Number of partners that VPBank collaborate in pilot time 59

6.3 UPL disbursement through parnership channels 61

6.4 Lesson learns 63

6.4.1 Key challenges 63

6.4.2 Key lessons 64

7 Chapter 7: Overall conclusion 65

Reference list 66

4 Chapter 1: Introduction | Year 2016 – 2018

MASTER OF MARKETING AND PROSPECTIVE Table of Figures Figure 2-1 Partnership pyramid 14

Figure 2-2 Partnership approach 15

Figure 3-1 VPBank branches allocation 16

Figure 3-2 VPBank organization chart 19

Figure 3-3 VPBank Retail Banking Division organization chart 20

Figure 3-4 Business Regions of Retail Banking Division 21

Figure 4-1 UPL customers’s loan purposes 35

Figure 4-2 House construction and decoration – specific purposes 36

Figure 4-3 Design consultancy service using 36

Figure 4-4 Suppliers chosen by customers for furnitures 36

Figure 4-5 Channel for finding information about suppliers 37

Figure 4-6 Electronics market share in 2016 38

Figure 4-7 Specific loan’s purposes among customers borrowed for their business 40

Figure 4-8 Source for input materials 40

Figure 4-9 Age of customers who borrowed money for personal hobbies 41

Figure 4-10 Customers’ personal hobbies 42

Figure 4-11 Suppliers for technology devices 42

Figure 4-12 Age of UPL customers 43

Figure 4-13 Income of UPL customers 43

Figure 4-14 Income of high income UPL customers 43

Figure 4-15 Age of high value customers 43

Figure 4-16 Loan’s purposes of high value customers 44

Figure 5-1 Benchmark of speed, loan condition and interest rate for UPL customers 46

Figure 5-2 List of partner for each fields 48

Figure 5-3 Target partner for business 48

Figure 5-4 Target partners for technology devices 48

Figure 5-5 Target partners for motorbike 49

Figure 5-6 Target partners for spa, beauty, cosmetic 49

Figure 5-7 Target partners for education 49

Figure 5-8 Example about promotional merchandise 51

Figure 5-9 Collaboration tools for each level of partnership 52

Figure 5-10 Partnership marketing plan 53

Figure 5-11 KPIs of partnership development (number of partners) 54

Figure 5-12 KPIs of partnership development (UPL disbursed through partnership channel) 55

Figure 5-13 Timeline for partnership development program 56

Figure 5-14 Projected cost for parnership development program in 2018 57

Figure 6-1 Number of partners after 3 months implementation 60

Figure 6-2 Number of partners compared to target 61

Figure 6-3: UPL disbursement through partnership channel (Unit: Billion VND) 61

Figure 6-4 UPL disbursement, channels breakdown (Unit: Billion VND) 62

Figure 6-5 UPL new customers over 3 months – channels breakdown (Unit: number) 63

5 Chapter 1: Introduction | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

Abstract

This is the internship report on Partnership program to increase sales of unsecured personal loan product (UPL) in VPBank The objectives of the study are to study consumers’s loan using behavior, to identify potential partner and the opportunity and seasonality to collborate with them Both primary and secondary data are used to prepare this report

Companies across many industries are finding that more value comes from strategic partnerships, where two companies have a vested interest in and commitment to creating a mutually beneficial relationship that returns value to both the end customer and to the partners themselves Strategic partnerships extend beyond the initial deal and establish a culture of sharing between partners McDonald’s building global co-promotions with Coca-Cola and Walt Disney to Nike building trainers that talk to your iPhone But alliances can bring significant benefits for small firms too, as Andrew Armour explains Laptops that are bundled with anti-virus software The local gym membership giving you discount vouchers for a sports store when you join And more simply, the pub working with the local sports clubs so that the after-match drink is always held in the right bar

A collaborative culture takes time and effort to develop, but it works — and the numbers prove it Understanding this trend among market, I spent my 3 months of internship at VPBank to do researches, broaden my knowledge and get advices from professors to develope a partnership program for one strategic product of VPBank - UPL

Before drawing any conclusion based on this report it may be noted that the report was prepared in a very short term and there is lack in data But still the report may be useful for designing any further study to build much more potential and effective partnership program for VPBank and for other products of the Bank

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Abbreviation and Elaboration

VPBank/Bank Vietnam Prosperity Joint Stock Commercial Bank

UPL Unsecured personal loan

Retail Banking Division

Division of activities which deal with individual customers Banking services which are regarded as retail include provision of savings and transactional accounts, mortgages, personal loans, debit cards, and credit cards

Bancassurance A product of collaboration between bank and insurance

company

Loan amount The amount the borrower promises to repay, as set forth

in the loan contract

Loan tenor Period from the date of disbursement of loan to the date

of the last payment or the date of closure of loan POSM Point of sales Materials

PBT Profit before tax

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1 Chapter 1: Introduction

1.1 Background of the study

This report has been prepared as a mandatory requirement of the Master of Marketing and perspective program under International School, Vietnam National University, Ha Noi and Nantes’ University This report is entitled “Partnership program for increasing sales performance of VPBank’s unsecured personal loan (UPL)” The internship supervisor was Dr Pham Thi Lien – Professor of International School, Vietnam national University, Ha Noi Over the past decade, VPBank has always sought to become the leading retail banking in the Vietnamese Banking sector With that ambition, VPBank’s resources are focused on the following strategic segments: Individual customers, small and medium enterprise customers, small business customers, consumer loans For each of these segments, VPBank has the corresponding sales channels to provide products and exploit customers

Among strategic products of VPBank in the period from 2012 to 2017 and from 2017 to 2022, unsecured personal loan (UPL) is considered to be the most important product This explains why VPBank has different kind of sales channels for this product In 2016, FE credit, a subsidiary company of VPBank operating in parallel with retail banking Division of VPBank

in Unsecured personal lending sector, officially compete each other

In the year 2017, VPBank had outstanding growth in consumer credit, however the growth came mainly from FE – credit (a subsidiary company) which made a big contribution to the bank total earning and account for more than 48% market share of consumer finance companies1 With consumer loans, VPBank’s Retail Banking Division has slower growth rate, not competitive enough to financial institutes and other Bank in the market.2

The experts in this fields believed that the challenge in 2018 will be greater as more and more banks come into this sector Despite of great potential for growth in Vietnamese market, customers for this segment is no longer plenty because of customers seeking and stalking activities of financial institutes

In addition, banking industry has changed in the last 10 years, especially in the mindset about the position of bank and its customers If in the past, customers have to humbly ask for their loan from bank, nowadays, bank must rush to invite customer to borrow money

1 VPBank’s report made by CEO in 2018 Annual General Meeting of Shareholders tham-vong-gi-voi-tin-dung-tieu-dung/c/25327796.epi

https://baomoi.com/vpbank-2 [MW Special Report] Vietnamese consumer finance market room-growth-remains-vietnamese-consumer-finance-market/

https://thelowdown.momentum.asia/plenty-8 Chapter 1: Introduction | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

For seeking customers and optimizing selling opportunities and positioning Unsecured consumption loan - UPL product in consumer lending market, Retail Banking division – VPBank believe that it is important to understand customers and offer outstanding value proposition of the product Specifically, cooperation with partners, enterprises, brands to reach customers, sell product is a way to increase resource, reduce costs

As such, this marketing task is aimed at studying opportunities and pointing out plans for cooperation and developing relationships with partners to boost sales of consumer credit products through partner network

1.2 General objectives of the study

The study has been undertaken with the following objectives:

• To build and implement PARTNERSHIP strategy (one P of marketing mix) to increase sales performance of VPBank’s unsecured personal loan (UPL), therefore evaluate the efficiencies of the plan and adjust it for a better application on a large scale

1.3 Methodology of the study

Both primary data and secondary data were used in order to make the report Based on prior research report, author proposes a marketing mix plan Then the practical experiences and observations from the project work for during internship will be compared with literature Finally, quantitative research and customers’ awareness point at the end will lead us to the answer

(a) Primary resource

• Qualitative study: In – depth Interview with customers of VPBank

• Quantitative study: Surveys via email or phone

• Observing the effectiveness of marketing mix strategy on sales performance of the bank in

a period

• From prior research reports

• Journal and article related to banking industry and the similar topics

• Bank’s monthly reports

• Website information

1.4 Scope and Limitation of the study

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This study focuses on UPL product of VPBank Market analysis has been carried out in

VPBank’s business Region, where VPBank’s branches are located

Although the research has reached its aims, there were some unadvoidable limitations

First, because of the time limit, this research was conducted only on a small size of population who once had UPL loan with VPBank Therefore, to generalize the result for larger groups,

the study should have involved more participants

Secondly, due to limitation of finance resource and loan seems to be a sensitive issue to

customers, they are not totally willing to answer all of the question Some of them did not tell the truth or reject answering

Thirdly, partnership is a take – time – strategy, so with only 3 months of implementation and evaluation, the result migh not reflect 100% the effectiveness of the strategy

1.5 Thesis outline

This report is divided into six chapters

Chapter 1: The first chapter of this study deals with introduction that presents the objectives,

methodology, and scope of limitation of the study

Chapter 2: In order to understand the Bank on which the study is carried on, the second

chapter of the study deals with some theoretical concept about profile of Vietnam Prosperity Joint Stock Commercial Bank (VPBank)

Chapter 3: The third chapther is about the conceptual framework of UPL product and UPL

sales situation in VPBank, the issue that leads me to this study and the opportunity of partnership in the mission of increasing UPL sales

Chapter 4: The fourth chapter is about different types of analysis and finding on customers’

behavior and potential partnership for VPBank

Chapter 5: The fifth chapter is about conclusion and recomendation for partnership program

which are drawn by analysis of whole study

Chapter 6: The final chapter, the implementation of partnership program in pilot phase, the

initial result and conclusion which is the base for partnership program in VPBank for the next phase will be presented

1.6 Contribution and future study

1.6.1 Contribution to VPBank

• The study contributes to identify potential goods/services suppliers based on

10 Chapter 1: Introduction | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

customers behaviors

Behavior segmentation is defined as the act of grouping customers based specifically on how they act as consumers when making purchase decisions Behavior segmentation is the most difficult but effective type of segmentation Behavioral segmentation helps understand how different groups of customers should be targeted with different offers, at the most appropriate time through their preferred channels Researcher can use historical behavioral patterns to predict and influence future customer behavior Moreover, smarter decisions will be made on how to best allocate time, budget and resource by identify high value customer segment, high purchase season with initiatives with the greatest potential business impact These benefits will be shown in this study, in scope of partnership marketing strategy

Specifically, VPBank can through this study narrow the most commonly suppliers for customers purchase demand to identify potential partner for partnership program; Understanding purchase season to make partner link plan to optimize resource and save costs; And finally predict customer purchase in the future to offer suitable financial support on time

• Examine effectiveness of the partnership marketing strategy and make adjustment if any There are so many factors influence sales’ decreases or increase such as: Sales staff incentives, product policy, law, credit regulation, market, competitor, etc Putting partnership program in a separate study to examine sales through this channel is the only way to exactly evaluate the effectiveness of the plan

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2 Chapter II: Overview of unsecured personal loan product and partnership program

2.1 Bank and it activities

• Bank is a financial institution authorized by a government to accept deposit, pays interest, clears check, makes loans, acts as intermediary financial transactions and provides other financial services to customers.3 Bank plays an essential role in the growth of an economy of

a country

• Bank operates by borrowing funds – usually by accepting deposits or by borrowing in money markets Bank borrows from individuals, businesses, financial institutions, and governments with surplus funds (savings) Bank then uses those deposits and borrowed funds (liabilities of the bank) to make loans or to purchase securities (asset of the bank) Bank makes these loans to businesses, other financial institutions, governments (that need the funds for investment or other purposes) Interest rate provides the price signals for borrowers, lenders, and banks

2.2 Unsecured lending market

2.2.1 Unsecured personal loan

UPL is one of the lending products that are approved without the need for collateral Instead

of pledging assets borrowers qualify based on their credit history and income Bank does not have the right to take physical assets (such as home or vehicle) if borrowers stop making payment on unsecured loans

- Customers promise to pay but they do not have to back up that promise by pledging collateral

- Customers can apply for an unsecured personal loan when they need cash for: Wedding, travelling, education, shopping, etc

- Customers’ credit limit can be different with different banks However, they can absolutely borrow up to hundred millions as long as your profile meets the bank’s requirements

2.2.2 Unsecured lending market

Unsecured lending market starts to grow strongly in recent 3 years, take its source from the change in consumers’ behavior and high demand on installment plan among medium income consumers In which, the habit of borrowing from relatives, friends or black market gradually

3 Definition by http://www.businessdictionary.com

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switch to borrow from financial institutes

“Golden population” period, in 2016, Vietnam has approximately 55 million of people who aged from 20 to 594 This segment does not have need for big loans; focus mainly on personal consumption, household goods and vehicles Income growth with average speed each year is about 13.2%, especially in urban areas, stimulate customers to spend a lot for valuable products and be capable of accepting interest rate up to 30-40% for not big scale - unsecured loans High interest rate is still the matter of concern for consumption lending activity, but cannot be an obstacle to the indispensable development of this financial product because of its benefit – to satisfy consumers’ personal demands before they can be able to pay by their income

With the market share of only 5-10% of total outstanding loans, the balance of market for consumer credit in Vietnam is still very large This rate in developed country

Stoxplus Company has studied and surveyed more than 2,000 consumers in 12 provinces/ cities The result show that while many people have psychological anxiety when dealing with the service of financial institution; but a part of consumers, especially young people are in increasing demand for this service

62.4% of respondents said that they had not used consumer loans The reasons are they do not want to owe debt and worry about the condition of loan

But 47.8% of those who never used consumer loan in the survey responded that they were willing or willing to borrow for consumption if they needed it 5

For those who have used consumer loan, the factors that influence customers’ choice toward financial institutions include: Loan policies (Clear, transparent, easy to understand); factors that create the sense of friendliness (incentives, attitude of sales staff), convenience of service (flexible loan, quick transaction)

In addition, the desire for lower interest rate and simpler loan procedure are also the factors that borrowers expect The report also noted the fact that people still keep the habit of thinking to relatives in priority

4 CIA World Factbook - This page was last updated on January 20, 2018

5 Report on consumption loan market in Viet Nam by TPBank

13 Chapter II: Overview of unsecured personal loan product and partnership program | Year

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2.3 Partnership in marketing strategy

2.3.1 General view

According to Mike Burnette – the Founder and President of Partnership Source: “Pure

partnership marketing is a symbiotic relationship between two or more marketing entities It's not a relationship where one party is purely selling goods or services to the other but a relationship where parties are utilizing their own assets to assist the marketing efforts of each other.”

In today's competitive world of brand marketing, using the power of partnership marketing to gain marketing exposure and utilize new distribution channels is not only smart but also an essential marketing tool for businesses who want to remain competitive in today's constantly changing marketplace As corporate and marketing budgets are always an issue, partnership brand marketing programs provide a way to grow business and acquire new customers and reach new market segments

Partnership brand marketing brings two companies and brands together—each with its own brand equity and its own distribution strength Whether teaming a fast food restaurant with a movie, pairing cereal with toys, or aligning a car manufacturer with a theme park to capture the family segment, partnership brand marketing creates strategic alliances for companies that reach areas in which they may not normally compete—providing more marketing exposure and ultimately gaining new customers.6

True partnership brand marketing programs are more than just promotions When carried out

at a strategic level, partnership marketing can be expansive and deliver its full potential Strategies can involve all elements of the marketing mix and thus have an impact on a company's overall marketing message, its advertising programs, as well as product packaging and merchandising Partnership marketing programs can also create joint sales and distribution opportunities, broader in-store merchandising, more compelling packaging and marketing material and overall offer stronger value to the consumer

Creating strong, relevant and effective partnership brand marketing programs can be a cornerstone of every company's marketing plan Partnership brand marketing can actually

6 According to “How strategic partnership brand marketing can boost business” by Leeanne Rambin

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Partnership approaches can be broken into three levels of collaboration

Figure 2-1 Partnership pyramid

Low collaboration:

Simple transactional

Medium collaboration:

o Information is deep and broad about

o Salespeople are trained to

understand and fulfill customers’

needs

o Customers have complete, bundled solution available from one provider

o Partners selling company’s solutions are

15 Chapter II: Overview of unsecured personal loan product and partnership program | Year

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banking and consuming products

o More confident because suppliers are verified by bank in advanced

o Credit approval based on

transaction history record at suppliers database

experts in the offerings and deliver high quality

o Share profit and cost

to provide customers lower price products

o Customer satisfaction studies conducted with partners’

customers

o Partners are mutually invested and partnerships are mutually beneficial

o Partnerships jointly deliver solutions

o Partners pull each other into deals to better serve customers

o Co-marketing efforts driven by partners

Figure 2-2 Partnership approach

Note that: depending on each supplier we decide the level of collaboration Not necessary the partner must go from low to high They may immediately be in high collaboration with VPBank

16 Chapter 3: Overview of VPBank | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

3 Chapter 3: Overview of VPBank

3.1 Historical background of VPBank 7

Vietnam Prosperity Joint-Stock Commercial Bank (formerly known as Vietnam Joint-Stock

Commercial Bank for Private Enterprises) was established on August 12th 1993 In 25 years

of operations, VPBank has increased its charter capital to VND 15,706 billion, expanded the

number of transaction points to over 219, and grown its workforce to more than 24,000

employees

Figure 3-1 VPBank branches allocation

VPBank is taking steps to reaffirm its reputation as a dynamic, financially stable bank which

is responsible to the community 2017 marked the end of VPBank’s five-year journey to

become one of the leading commercial joint-stock banks in Vietnam, with splendid results in

terms of both scale and profit VPBank also reached a historic milestone, listing nearly 1.5

billion shares on the Ho Chi Minh City Stock Exchange (HOSE), which grabbed significant

7 According to History of VPBank on http://www.vpbank.com.vn/

17 Chapter 3: Overview of VPBank | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

attention from both domestic and foreign investors

VPBank’s remarkable growth is vividly illustrated by the expansion of its branch and

transaction office network and the diversity of sales and distribution channels

With the motto “all for customers”, the layout, service model, and amenities of transaction

points have been completely restructured, and VPBank’s products and services have been

continually improved and combined with numerous tools to increase customer benefits This

has contributed both to satisfying existing customers and attracting new customers, thereby

rapidly expanding VPBank’s customer base

The Bank has always been the market leader in applying advanced information technology to

its products, services, and operational systems Along with building a strong and effective

corporate culture, core human resources management systems have been developed and

implemented at VPBank, and the Bank has taken steps to develop an independent, centralized,

and specialized risk management system which meets international standards and aligns with

the its business strategy While complying with international best practices in corporate

governance, VPBank has also refined its organizational structure according to a clear and

transparent corporate governance policy

With constant efforts, VPBank’s brand has become increasingly strong, which has been

affirmed by the receipt of many prestigious awards In 2017 alone, VPBank was presented

with 20 such awards

Brand Finance, the top independent branded business valuation consultancy, valued the

VPBank brand as one of four most valuable bank brands, and the 22th most valuable

enterprise brand in Vietnam

These awards once again demonstrate VPBank’s prestige and the quality of its products and

services in Vietnam’s banking and financial markets, as well as reaffirming its development

strategy VPBank will continue to focus on rejuvenating its products and services to bring

outstanding benefits to customers and improve quality to meet international standards

3.2 Mission, Vision, Development Strategy and Core value of VPBank

As one of the earliest-established Joint-stock Commercial banks in Vietnam, VPBank has

achieved steady development throughout its history Especially since 2010, VPBank has

grown dramatically with the development and implementation of the strategic transformation

program diligently with support from one of the world’s leading consulting companies

Following this strategy, VPBank aims to become one of the 5 leading joint-stock commercial

18 Chapter 3: Overview of VPBank | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

banks and one of the 3 leading retail joint-stock commercial banks in Vietnam by 2017 This

vision is realized through the two-pronged strategy as follows:

• Aggressive organic growth, focusing on personal and SME customers, and exploiting

opportunities in the segment of large business customers and consumer credit

• Building strong foundation systems in terms of organization, human resources, technology,

operation, etc

The support for the implementation of the above strategy is the VPBank corporate culture

which is nurtured and built on six core values:

• Make the Difference

The achievements of this transition period have determined the right strategy, with the

positive changes of image, service quality, professionalism, etc The trust of customers for

VPBank has also strengthened by the constantly increasing number of new customers and

capital mobilization More importantly, VPBank is becoming a desirable destination for talent

in the banking and finance industry This key element has been, and will become VPBank’s

strategic weapons in the journey towards becoming one of the 5 leading joint-stock

commercial banks, and one of the 3 leading retail joint-stock commercial banks in Vietnam by

2017

VPBank believes that its above-mentioned vision and strategy will help the Bank to achieve

its mission to maximize customers’ benefits, attach special importance to the interests of

employees and shareholders, build a strong corporate culture, and contribute effectively to

community development.8

8 According to Mission, Vision, Development Strategy and Core value of VPBank on

http://www.vpbank.com.vn/

19 Chapter 3: Overview of VPBank | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

20 Chapter 3: Overview of VPBank | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

3.4 Organogram of Retail Banking Division and Sales distribution

Figure 3-3 VPBank Retail Banking Division organization chart

21 Chapter 3: Overview of VPBank | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

Red River Delta

South Central Coast

(South East) and Central Highlands

Mekong Delta

Figure 3-4 Business Regions of Retail Banking Division

3.5 Financial performance of VPBank (Retail Banking Division) in 2017

At the end of its strategic five-year period, VPBank has become one of the five largest retail

joint stock commercial banks in Vietnam by revenue and profit, of which the Retail Banking

Division accounted for 50% Following the successes of previous years, the income from

retail banking in 2017 was on target and up 66% year-on-year VPBank has also developed

business strategies and product policies for optimal profitability using a Single Account

Profitability model As a result, PBT grew impressively by over 100% year-on-year In 2017,

the Bank launched successive initiatives to make products more suitable and attractive to

customers, resulting in the customer base increasing significantly to more than 2.7 million,

and producing 83% growth in loan balances Together with credit growth, the Bank also

launched several community-oriented projects and products to promote sustainable

development for customers and society

22 Chapter 3: Overview of VPBank | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

2017 saw significant growth in credit cards, in both number of cards issued and card

spending VPBank rose from fifth position in 2016 to third by the number of cards issued and

to second in card spending By year-end, 198,000 cards had been issued – 132% year-on-year

growth – while card spending continued to hit new milestones and surpassed VND 2 trillion

per month The ‘One million cards by the end of 2019’ project was launched and VPBank is

confident of reaching this target One of the key drivers of this success is proper, customer

centric design and the presentation of credit cards with an understanding of the characteristics

and spending habits of each customer segment Besides affluent and middle-class customers,

the Bank has also designed credit cards for low-income customers, especially workers, giving

all customers the opportunity to experience simple and convenient payments with plenty of

special offers As a result, VPBank received the ‘Best Customer Segment in Asia Pacific

2017’ award from MasterCard Similar to credit cards, VPBank wants to approach every

segment and offer financial solutions to low-income customers A wide range of unsecured

loan products dedicated to teachers, hospital staff, and low-income workers were launched

and received wide positive feedback from customers In December 2017, the Bank was given

the ‘Best Consumer Finance Product’ award by The Asian Banker for the second time In

addition, the Bank’s networks of real estate partners and auto dealers have continued to

expand to provide customers with comprehensive and easily accessible offers and

experiences Deposit and fee-based products also brought success, with a 15% increase in

deposit balance compared with the start of the period Payroll stimulation strategies began to

produce positive results with the number of current accounts increasing by 260,000

year-on-year, cross-sales contracts nearly doubling, and the mean number of products held by each

customer increasing from 1.48 to 1.63 With remarkable bancassurance achievements driven

by a change in the bancassurance sales model, AIA Vietnam decided to enter into a 15-year

exclusive bancassurance partnership with VPBank on October 23, 2017 – the largest deal of

the year in the market Besides life insurance, VPBank now also offers customers health

insurance products from other partners, notably terminal illness insurance To lead the digital

banking trend, the Bank launched several projects to digitalize key products, including credit

cards, UPLs, and deposits The highlight is the ‘Dream’ project, an application that allows

customers to manage personal finances and creates a savings roadmap with support from the

Bank to help them realize their dreams as quickly as possible VPBank has also developed a

partner ecosystem, in which the Bank is a link between customers and suppliers, helping to

meet customers’ varied needs Focusing on the affluent segment has been one of the Bank’s

23 Chapter 3: Overview of VPBank | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

key strategies In 2017, the Affluent Banking project was implemented with advice from

Arete The Bank also offers professional services such as wealth management to this segment,

in addition to deposits VPBank is proud to be the first bank to have a VIP lounge at Noi Bai

International Airport for affluent customers, which tentatively will be put into operation in

early 2018 VPBank believes that these activities will open up the opportunity to unlock great

potential from affluent customers In addition, the organizational structuring and redesign of

the alternative channel model (now Direct Sales), which started in September 2017, has begun

to produce 66%5 INCOME GROWTH IN 2017 21 positive results The number of credit

cards issued was up 50%, the number of payroll accounts doubled, and credit card sales

productivity increased by 60% In 2018, VPBank will implement an ‘Alphabet Strategy’ for

retail banking with five components: Affluent (focus on affluent customers), Bancassurance

(promote the growth of exclusive bancassurance products), Cards (promote the growth of

credit cards, Digital (continue to speed up the digitalization process), and Ecosystem (develop

a diverse partner ecosystem).10

3.6 VPBank’s UPL current situation and problems

3.6.1 SWOT analysis of VPBank’s UPL

(1) Wide distribution network

With more than 200 transaction units, 5000

sales staff in 40 cities and provinces of Viet

Nam, opportunity to develope a wide

partnership network is great

(2) Diversified products

VPBank – Retail Banking has a porfolio of

more than 30 different types of products

(saving, insurance, account, credit, loan,

bond, etc.)

(3) Open risk appetite

The diffrence that VPBank is following is

(1) Ability of bad bank management

Along with high risk segment targeted, bad bank proportion of VPBank is alway stay at a high level How to reduce bad bank firgure is always a matter of concern of VPBank

(2) Lack of customers resource

Previously, VPBank targeted to individuals who are located near VPBank branches, they have low income, needing a mortgage for consumption needs But the resources is now running low and the Bank need to find the new one

10 VPBank annual report - 2017

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“business taste” targeting high – risk

segements with high return Unsecured

lending is a high risk product, and focus on

it is going in the right direction of VPBank

(1) Unsecured lending market is

projected to growth rapidly in the next

few years

The consumer lending market, especially the

unsecured loans of less than VND100

million for life purpose in Vietnam, is very

potential and has plenty of room for

development in Vietnam

Consumer finance is expected to play a

central role in Vietnam's transition to a more

growth-based economy Consumer lending

should be encouraged as it ensures access to

credit, especially for middle-income earners

and plays an important role in improving the

quality of life increased financial

understanding

(1) New circular “Regulation on consumer

loans for financial enterprises”: bring more new name to comsumption finance market

The regulation also tighten the rules in lending and debt management

(2) Competitors:

More and more banking and financial institutions join unsecured lending market make it more competitive

3.6.2 Competition situation in unsecured lending market

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In 2015, Personal lending of 11 banks which was studied reached 640,866 billion VND,

account for 27,5% total lending of 11 banks Compared with the largest customer loan size in

the system (598,4 trillion VND), BIDV has the highest personal unsecured loan balance,

reaching 137,9 trillion VND VIB had a small loan size, (47,8 trillion VND), but has the

outstanding balance among 11 surveyed banks (60,7%)

In the period from 2013 – 2015, 10/11 surveyed banks witnessed an increase in personal

unsecured loan Of which, Lienvietpost Bank has the largest increase rate, reaching 13% By

2017, like many banks aim to become the number 1 retailer: Vietcombank, Viettinbank

b) Finance Companies

There are currently 7 finance companies run effectively in personal unsecured lending market

The total loan balance of 7 companies reach about 38 trillion VND by 2015, account for 7,6%

total lending balance of the market Among them, FE Credit is the lead with lending balance

achieve 20,208 billion VND, account for 53% total lending balance of finance companies

Next up is Home Credit (16%), Prudential (11%)

c) Fin-tech Companies: Mobivi; Loanvi; DoctorDong

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In 2017, the market share of unsecured lending of competitor groups is divided as following:

Bank group accounts for 87% total unsecured consumer lending; finance company group

accounts for 12% and Fin-tech company group is 1% The large gap in market share between

banks and the others two groups is due to the fact that the banks’ lending portfolio is mainly

high value items such as home loans, car loan while the financial company group is targeting

low value loans (phone, motorbike, electric devices, etc)

However, compared to 2015, the market share of bank group has narrowed to 87% from 91%

The market share of financial company and other group rose to 13% from 9% The reason is

that sales services of financial companies are more prominent such as: fast approval time,

application of 0% interest rate installment in the key fields as house hold appliances, access to

all customer segments (including non-income students, low-income workers), flexible

customer approach (at counters, online, mobile finance advisory)

VPBank’s UPL sale has to face with a lot of difficulties and challenges both form outside and

inside since second half of 2017

- Depletion of customer reource

- Bad information on the financial market: about high interest rate

- Tightenning regulation from State bank for consumption loan and unsecured loan

- Competitive market

This leads to a drammatic fall in both sales result and number of new customers From July to

Dec 2017, sales of UPL keeps down to around 30- 40% vs target The paid off amount was

big but new disbursement did not improve

In this situation, Marketing team and Product team have to sit together and find immediately

the solution for it After evaluate all the strength, weakness, threaten and opportunities of

UPL, we decided that, a partnership program can possible be the key to a new chance for

UPL

Companies across many industries are finding that more value comes from strategic

partnerships, where two companies have a vested interest in and commitment to creating a

mutually beneficial relationship that returns value to both the end customer and to the partners

themselves The combination of two companies not only helps them to reach each other's

customers, but also leverages each other's strengths, such as distribution networks,

infrastructure, or brands The two stand alone enterprises will only be able to use their own

However, with the limitation of time, human and finacial resource, and in order to make the plan more effective, VPBank need to know, which partners are potnetial to collaborate, in which time and by which way?

With that orientation, I with support from my colleagues at VPBank conducted a research, at first, to understand customers and their buying behaviors From the research, necessary information can be gathered for propose partnership development plan

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4 Chapter 4: Qualitative and Quantitative study

4.1 Objectives of qualitative and quantitative study

- Objectives 1: To understand the loan’s purposes that are most commonly seen among UPL’s

customers

- Objectives 2: To find out the source of information customers often find when they need a

supplier for their purchases to build effective partnership programs and marketing campaigns

- Objectives 3: To understand the consumption seasonality to launch suitable promotion,

marketing campaign

4.2 Qualitative study

4.2.1 Sample of the study

- Sample: Customers holding a UPL loan in customers data base of VPBank

- Sample size: 20 customers

- Age: From 18 to 60 (allowed to borrow money under VPBank’s regulation)

- Location: 10 in Ha Noi and 10 in Ho Chi Minh

4.2.2 Data collection method

- 10 UPL customers of VPBank selected from customers database Customers were chosen

within specific parameters to sample participant characteristics (age, salary, occupation, etc.)

so as to provide a view of broadest range of customers

- The duration of interviews vary from 60 to 90 minutes All interviews were recorded, with the

permission of the customers being interviewed

- After the interviews, the recordings were transcribed into computer files Care was taken by

researcher team to assure that the respondents that they and the place of their work would not

be identified in any sub-sequent report Once the final report was written, the tapes from the

interviews will be destroyed

4.2.3 Model of interview guide: Annex 1

4.2.4 List of respondents: Annex 2

4.2.5 Findings

4.2.5.1 Loan’s purposes that are most commonly seen among UPL’s customers

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- Top 3 purposes that are mentioned by respondents in order are: For business,

houses fixing and motorbike

- Of the 20 clients surveyed in both Hanoi and Ho Chi Minh City, up to 7

customers borrowed for business purposes, 4 for home repairs, 3 for travelling,

2 for motorbike, 1 for cosmetic surgery, 1 for personal hobbies, 1 for wedding and 1 borrower to buy TV

- Not all the customers provided real purposes of the loan to the Bank Note that,

before booking the interview with any customers, researcher did have a look at the database and referred information from the branch who is managing that customers’ loan However, after interviewing, we noticed that many of the customers, at the beginning they tell us about the purpose that they reported to VPBank, but later disclosed further about the other using purposes of the fund that bank provided them

“Actually, I cannot remember for what I spent those money A little for each, I spent them for my game machine, clothes, cosmetic, a new television, etc.” – Hang – a PG whose loan’s purpose in database is for house fixing

- Customer may not use the loan for themselves In other words, they use their

identity to borrow money from bank for a 3rd party who does not meet the bank’s requirement for a loan This leads to some risks for the bank in terms of loan’s purpose, ability to repay debt, source of repayment as well as the ability

to recover debt once bad debt incurred

“I am not using the money I borrow them for my friend He needs money to compensate for buying a taxi”- Thong – a taxi driver

4.2.5.2 Source of information customers often find while needing suppliers

- Customers who want to buy high value products tent to choose shopping

center, or big stores which has high reputation Name and reputation of one supplier seem to be the first factor that customers search for when they want to find a place to buy things costly, more than about 10 million VND For the same type of goods but less value or stability, customers have more flexible choices such as: shop near house, online website, Facebook, etc

“I love gentle style for my house, so I went to Nha Xinh, one of the biggest and most famous interior stores in Ha Noi to find the suitable ones I cannot

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believe in the quality of retail shop” – Thanh – business man

- For business purpose

In this area, customers who need a UPL for retail business are for the purpose

of supplementing working capital They need a certain amount of capital in a short amount of time To these customers, loan amount is more important than loan term because they usually repay quickly

“I have ability to repay the loan after 2 years of borrowing However, the loan term in my contract is 7 years and early repayment charge is rather high so I have not paid off this debt”

- With additional working capital, customers often choose wholesale market,

trade village for their input

“Friends in this field, they buy where I buy there They go ahead, have experience, they know where to buy with low cost but good quality”

- For the purpose of repairing the house, customer who hires Design agency will

buy furniture of that company

Furniture that Agency uses in their design is not easy to be found in the market

or may be found but incomplete Further, the design will be free if customer buy interior at the company As such, most customers who come to find design agency have identified using a full package service

“I ask my friend for consult and go shopping to find the right or so It is more beautiful if hire a design agency but I will have to buy all the interiors from them if I want it that beautiful Cost for a full package like that is rather expensive”

- Customers with high position in company, high income prefer to be served a

full package service They can work with only one person from design agency and do nothing until their house is filled with all interior that they need

“I do not have much time so I find a design agency to do all that for me”

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- For the purpose of purchasing a motorbike

Customers who want to buy motorbike are young and have low income Value

of a motorbike is usually in range from 40 – 100 million VND The brand that

is mostly chosen is Honda

Customers went straight to the showroom to find the motorbike they want because:

“There is no difference in price or quality between motorbike showrooms If there is a factor affecting my choice of the showroom, it is this showroom has promotion program while the others do not”

- Other purposes In addition to the above mentioned purposes, customers also

use UPL for shopping technology devices, cosmetic surgery, dental clinic, travel, school fee, for repaying other loan or re – lending to friend

- In terms of travel, customers prefer self – sufficient travel for short trip in the

country Overseas trip, a tour supplied by travel agency will be select more

Some customers with higher living standard, they hire Travel Company to design a private tour for them not going with other customers like common tour

“I used a travel agency; however, I ask them to design a program for me and

my family So I have to pay a little bit more fee but I have nothing to worry about in return”

- Key words for tourism: Tour from…to…, reputable tourism company, low

cost tour

- Key words for technology devices: low cost technology/electric devices,

Amazon, shop online

4.2.5.3 About seasonality of customers’ consumption demands

- Business customers in entertainment or service sectors often need large capital

at the beginning of each school year, when students return to major cities

During summer vacation, the demand for those service decrease significantly

- New purchases for personal or for family are often made in Quarter 4 This is

the time customers receive their salary or bonus and prepare for Tet holiday

Because in VietNam, it is believed that borrowing at the beginning of the new month or year is unlucky Therefore, purchase power at the end of Lunar year

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is always strong Customer revealed that they borrow before Tet but wait until after Tet to go shopping

4.2.5.4 About UPL and the Bank

- Most of customers decided to borrow the entire loan limitation although the

initial demand may not be that large Then, they still use the whole loan for some other reasons

“I used up that entire loan Of which about 70% was spent for the main purpose, the rest I bought some other household items”

“I only need 30 million to cover the missing part to buy a motorbike However,

I got a loan of 100 million VN The remaining 70 million, I do not remember for what I paid”

- All customers just remember the amount of money they have to pay every

month, not exactly the interest rate of the loan

“Each month, I pay 2.4 million VND for principal and interest This amount is reasonable compared to my income After paying the debt, I still have enough monthly expenses”

- And interest rate is not the first reason for them to choose a Bank Among the

respondents, loan term and loan procedure are more frequently mentioned

“I see interest rate among banks is not much different I also do not consult much I chose VPBank because your invitation come in right time and your lending procedures is quick”

- Not all of the respondents know clearly about other products of VPBank

12 out of respondents have been advised by VPBank about VPBank credit card 3 of 20 respondents knew about the over draft Of which only one customer use regularly both UPL and credit card of VPBank Some others are advised to open the card but did not use or closed

“I have VPBank credit card right here But I do not understand how to use so I never used”

- Many of the customers interviewed revealed they had other financial needs,

such as buying home, car, insurance However, these need have not been grasped by the sales staff to advise the products

“My wedding loan has been 3 years I will pay off my debt in June I need to

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borrow more and finding information to buy a new small car”

- Almost all customers know about VPBank through friend’s referral

“My friend introduced VPBank to me He had a UPL of VPBank too I have seen VPBank’s ads but not really impressed me I decided to choose VPBank because of my friend’s referral.”

- Customers provided information through VPBank’s marketing programs

However, after a few months, even a year later, a consultant called to ask about the loan demand of long time ago

“Your sales staff asked me for my phone number and promise to call back to introduce me about your UPL At that time, I need a small amount of money to prepare for my wife for giving birth But months later, one man call back, and

my baby was 4 months at that time”

Leads collection and in-depth consultancy has not been implemented uniformly Customer identification skill is not good This leads to missing potential customers and give advice in a wrong moment

4.2.6 Summary findings from qualitative study

Loan’s purpose:

(1) Purpose of the loan that customers declared to the Bank may be not true

Therefore, monitoring the loan after disbursement and taking care of the next

financial demand of customer may not be effective

(2) The fact that customers use their identities to borrow money and then lend

again to the 3rd party who do not meet the Bank’s requirement causes a lot risk

to the Bank However, with the orientation of expanding customer base and

actively increase the number of loan contract as VPBank has been done recent

years, controlling this problem is not easy to implement

Where do customers find information about suppliers

(3) Among all source of information, referrals from friends, relatives, colleagues

are considered as the most trusted source Therefore, in order to develop

partnership effectively, Bank needs to go deep in to each industry, knowing the

suppliers are trusted and appreciated by the people in each profession Quality

of the suppliers should be focused, avoid doing partnership in a general way

(4) We cannot deny that big brand, famous store still attract a large number of

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customers Therefore, partnership link cannot ignore these names

(5) Search engines like Google, forums, groups on Facebook are also trusted by

many customers when they do not have much information about the provider

Advertising and partnership link in advertisement through these channel also

need to be invested

Seasonality of customers’ demand

(6) For borrowers for business purposes, depending on each industry, there is a

different need for additional capital VPBank needs to distinguish clearly

between sectors, avoid loan consultancy in low season, the demand for loan

will be low This cost money and marketing resources but not much

effectiveness is brought back

Customers’ choice toward bank and banking products:

(7) As the way customers choose supplier, how they choose a bank is similar

Customers tend to believe in their friends’ experience than any advertisement

from bank and sales staff This shows that leaving good impression in the

customer by good service, quality products; fast and simple process is a very

important factor, much more important than advertising rampant in the media

(8) Customers who are in need of a UPL often do not care much about interest

rate Their top of mind is quick and high speed procedures This is probably

because UPLs are usually small size loan and customers need this type of loan

usually because they are short of funds need to be covered in a short of period

(9) Although the loan amount that customers need is small, few customers deny

borrowing to the maximum credit limit that they are approved by the Bank

And then, almost all customers use the entire loan amount

(10) Cross sell and up sell to existing customers have not been done thoroughly,

especially with lending customers The number of customers who know about

VPBank’s credit card or overdraft – alternative products of UPL in some cases

– is less; or even customers have demand but not consulted

(11) Marketing programs to collect leads with the exploit system after that do not

have good combination This makes a problem that leads have to wait for a

long time until they are exploited, sell opportunities are over

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4.3 Quantitative study

In the quantitative study, we used “Monkey survey” as a tool and chose sending email as a

method to collect ideas We sent email with link of questionnaire to 3000 UPL customers As

a result, we received 2046 responses and of these, there are 1842 responses are valuable, 204

are missing value We collected 1842 responses as our data to analyze

4.3.1 Model of questionnaire: Annex 3

4.3.2 Research objectives recall

- Objectives 1: To understand the loan’s purposes that are most commonly seen

among UPL’s customers

- Objectives 2: To find out the source of information customers often find when

they need a supplier for their purchases to build effective partnership programs and marketing campaigns

- Objectives 3: To understand the consumption seasonality to launch suitable

promotion, marketing campaign

4.3.3 Data analysis

4.3.3.1 Loan’s purposes

Figure 4-1 UPL customers’s loan purposes

Of the total participants in the survey, around 35% use their loan amount for “house

construction and decoration” “Business” purposes rank second with 31.1% and “personal

hobbies” is far less with 17.6%

Only 2.4% of respondents chose other purposes, they are: education, real estate investment,

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Figure 4-2 House construction and decoration – specific purposes

The shown table data give information about the number of customers in 5 categories in term

of house construction and decoration purposes A high number of customers use their loan for

house hold item, account for 67.5% Follow up is painting purpose with 120 customers ~

19.1%

Approximately 20% of customers use design consultancy service (in whole or in part)

Figure 4-3 Design consultancy service using

Furniture buyers tend to choose super market, electronic center, or show room near their

houses to find the house hold item they want

Street specialize in selling furniture/household

Figure 4-4 Suppliers chosen by customers for furnitures

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Nearly one-third of respondents choose super market or famous show room as the first place

to come if they need household items or electric devices Slightly less than “super market and

showroom” is “near house retail shop” which gains 31% of customers’ choice Not much

customers buy from design consultancy company or handicraft village with 5% and 4%

Figure 4-5 Channel for finding information about suppliers

The majority of respondents ~ around 41% are priority to go to super market, big center for

house’s interiors These are prestigious locations for service and cost With this purpose,

friend referral is not really important This can be explained by the fact that in Vietnamese

market, super market or electric centers have a certain place in customers’ mind Their

effective marketing strategy and discount policy make them attractive toward customers

Some outstanding name should be mentioned are: Dien May Xanh, Nguyen Kim, Media mart,

Dien May cho lon, Nha Xinh, Uma, etc

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Figure 4-6 Electronics market share in 2016 11

Of the report made by The Gioi Di Dong Company, in 2016, on the market of genuine

electronics, the brand name of Nguyen Kim is leading the market with 12%, behind is Dien

May xanh More than a half of the market share belongs to retail shop

ð Conclusion: Combining customers’ feedback and reporting on the market share of

electrical center or furniture showroom on the market, we can temporarily conclude

that VPBank should focus on strategic partnerships with big names and retail stores

in densely populated areas, by using parallelism both whole country and local scale

partnership programs Specifically:

- With big centers/showrooms:

§ Implement partnership programs, share profits to reduce the

price and provide loan to customers

§ Set up booth sale for UPL consultancy at super market,

showroom to advise customers loan packages dedicated to home furnishing

§ Associate with other partners to provide with the loan some

discount or voucher for purchasing related to house construction such as: Paint discount voucher, wall decal, and Japanese home furniture purchase voucher, blanket

11 The gioi di dong annual report 2016

39 Chapter 4: Qualitative and Quantitative study | Year 2016 – 2018 MASTER OF MARKETING AND PROSPECTIVE

purchase voucher, etc

- With retail stores:

§ Organize partnership program in local scale and every

branches of VPBank has the right and responsibility to link partner with shops or showroom in local

§ Design local partnership policy to offer profits to retail

shops, showroom if they join partnership program

- For business purposes

Types of business of all the customers who use VPBank’s UPL for business purposes are

diversified with nearly 30 different types