Successful Promotion of Consumer Goods in Vietnam

TABLE OF CONTENTS

LIST OF FIGURES

LIST OF TABLES

LIST OF ABBREVIATIONS

ACKNOWLEDGEMENTS

1. INTRODUCTION
1.1 Background
1.2 Problem Formulation
1.3 Purpose
1.4 Research Questions
1.5 Structure

2. THEORETICAL FOUNDATIONS
2.1 Disambiguation
2.1.1 Promotion
2.1.2 Consumers and Consumer Goods
2.1.3 Culture
2.2 Introduction to Promotion Theory
2.2.1 Role of Promotion
2.2.1.1 Overview
2.2.1.2 Impacts on other Marketing Mix Elements
2.2.1.3 Impacts on Marketing Strategies
2.2.2 Communication Process
2.2.3 Promotion Mix
2.2.4 Integrated Marketing Communications

3. COUNTRY OVERVIEW
3.1 Key Data
3.1.1 History
3.1.1.1 Overview
3.1.1.2 Pre-colonial and Colonial History
3.1.1.3 Development of the Socialist Republic of Vietnam
3.1.1.4 Doi Moi Policy and Recent Milestones
3.1.2 Geography and Climate
3.2 Promotion Environment
3.2.1 Overview
3.2.2 Politics and Administration
3.2.3 Economy
3.2.3.1 Key Economic Ratios
3.2.3.2 Economic Structure
3.2.4 Legal Environment
3.3 Selected Industries
3.3.1 Consumer Goods Producing Industry
3.3.2 Promotion Industry
3.3.3 Retail Industry
3.3.3.1 Overview
3.3.3.2 Traditional Retail
3.3.3.3 Modern Retail
3.3.3.4 Other Formats

4. CONSUMERS
4.1 Population and Employment
4.2 Living Conditions
4.2.1 Overview
4.2.2 Income
4.2.3 Working Conditions
4.2.4 Housing Conditions
4.2.5 Health Care
4.2.6 Other Factors
4.3 Shopping Behaviour
4.3.1 Influences on Outlet Selection
4.3.2 Characteristics of Traditional and Modern Trade
4.4 Female population
4.5 North South Differences

5. CULTURE
5.1 Cultural Influences
5.2 Categorizing Vietnam’s Culture
5.2.1 Core Cultural Dimension Models
5.2.2 Hofstede’s Five Dimensions of Culture
5.2.2.1 Overview
5.2.2.2 Power Distance
5.2.2.3 Individualism
5.2.2.4 Masculinity
5.2.2.5 Uncertainty Avoidance
5.2.2.6 Long-Term Orientation
5.2.3 Lewis Three Culture Categories
5.3 Elements of Culture
5.3.1 Overview
5.3.2 Education
5.3.3 Communication and Language
5.3.4 Social Organizations
5.3.5 Religion
5.3.6 Values and Attitudes
5.3.7 Aesthetics
5.3.8 Other Cultural Elements

6. RESEARCH DESIGN
6.1 Overview
6.2 Secondary Research
6.3 Primary Research
6.3.1 Overview
6.3.2 Expert Interviews
6.3.3 Focus Groups
6.3.4 Observation
6.4 Research Constraints

7. DISCUSSION OF FINDINGS
7.1 Target Consumer Groups
7.2 Promotion Mix
7.2.1 Advertising
7.2.1.1 Overview
7.2.1.2 Role of Advertising in Vietnam
7.2.2 Sales Promotion
7.2.2.1 Overview
7.2.2.2 Role of Sales Promotion in Vietnam
7.2.3 Public Relations
7.2.3.1 Overview
7.2.3.2 Role of Public Relations in Vietnam
7.2.4 Personal Selling
7.2.4.1 Overview
7.2.4.2 Role of Personal Selling in Vietnam
7.3 Message
7.3.1 Message Content
7.3.2 Message Execution
7.4 Media
7.4.1 Overview
7.4.2 Television
7.4.3 Print
7.4.4 Outdoor
7.4.5 Internet
7.4.6 Radio
7.4.7 Others
7.5 Taboos
7.6 Outlook
7.6.1 Consumer Trends
7.6.1.1 Overview
7.6.1.2 Health Consciousness
7.6.1.3 Brand Consciousness
7.6.1.4 Confidence and Sophistication
7.6.1.5 Personal Appearance
7.6.1.6 Changing Shopping Preferences
7.6.1.7 Cultural Influences
7.6.1.8 Convenience
7.6.1.9 Scepticism towards Promotion
7.6.1.10 Other Consumer Trends
7.6.2 Future Challenges and Opportunities
7.6.2.1 Overview
7.6.2.2 Challenges
7.6.2.3 Opportunities

8. IMPLICATIONS
9. CONCLUSIONS
9.1 Addressing the Research Questions
9.2 Limitations
9.3 Further Research

APPENDIX A: Project Description

APPENDIX B: Interview Introduction

APPENDIX C: Interview Guidelines

APPENDIX D: Interview Rankings

APPENDIX E: Focus Group Guideline

REFERENCES

LIST OF FIGURES

Figure 1: Illustration of Problem Formulation

Figure 2: Reference framework of consumer goods

Figure 3: Impacts of promotion

Figure 4: Communication process

Figure 5: Communication process in a marketing context

Figure 6: Comparison between Promotion Categories and AIDA model

Figure 7: Geography of Vietnam

Figure 8: Key Economic Rations

Figure 9: Window of opportunity analysis for retailers 2007

Figure 10: Retail Formats in Vietnam

Figure 13: Map of Vietnam’s population density

Figure 14: Age structure in Vietnam

Figure 15: Monthly declared household income

Figure 16: Number of household members

Figure 17: Reasons to shop at the supermarket

Figure 18: Shopping frequency at supermarkets

LIST OF TABLES

Table 1: Household durable consumer goods in Vietnam by residences

Table 2: Differences between North and South Vietnamese

Table 3: Strengths and weaknesses of qualitative research

Table 4: Advertising appeals and Hofstede’s cultural dimensions

LIST OF ABBREVIATIONS

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ACKNOWLEDGEMENTS

First, I would like to thank the DAAD (German Academic Exchange Service) for their belief in my project and granting me a research scholarship which helped me to finance my study trip to Ho Chi Minh City Vietnam.

Moreover, I remain grateful to all interview partners who received me and patiently answered my questions, despite their busy schedules. Some of them recommended me to other interviewees, supplied me with further information and even became friends. Also, I would like to thank all participants of the focus groups, who sacrificed their day off in order to take part in my project. Special acknowledgement goes to my supervisor Prof. Dr. Löffler for supporting my scholarship application and having confidence in my abilities. Due to the nature of this project, I would not have been able to approach it without his flexibility. For spontaneously initiating contact to Mr. Nguyen Van Trinh, Vice Dean of the National University, who became my contact person in Vietnam, I am grateful to Prof. Dr. Marsden.

I also want to thank my academic assistants, La Bao Chau and Nguyen Than Thuy who supported me by translating Vietnamese sources and recruited the participants of the focus groups. I also remain grateful to Le Phuong Hai for introducing me to the Vietnamese culture and leisure time activities, being a good friend and further updating me about current developments in Vietnam. For giving me the opportunity to conduct the focus groups in the conveniently located Goethe Institute in downtown Ho Chi Minh City, I would also like to thank Mr. Helmut Frielinghaus.

This thesis marks the end of my studies at Heilbronn University. Hence, I would like to express my sincerest thanks to my parents and my brother for their support in all aspects of my life and encouraging me whenever they feel I have to be heartened. Finally, in particular, my girlfriend Vanessa Wartusch needs special acknowledgment for her emotional assistance during my studies and bravery to accompany me on my field trip to Vietnam.

“Without promotion something terrible happens… nothing!”

P.T. Barnum, American Circus Entertainer

1. Introduction

1.1 Background

Vietnam has gradually opened its market economy towards foreign investors and businesses in recent years, climaxing in the accession to the World Trade Organization at the beginning of 2007. Having one of the highest economic growth rates in Asia, Vietnam is evolving rapidly and in the centre of attraction of foreign producers and retailers all over the world. In particular Vietnam’s increasing popu- lation, half of its 85 million people being below the age of 30¹, makes the country so appealing for consumer goods companies. Furthermore, consumers’ purcha- sing power is increasing fast. With limited choice during years of centrally planned economy, Vietnamese consumers these days face growing market liberalisation and personal wealth and hence must learn how to successfully navigate the new abundance of products and brands.

Confronted with the challenge of gaining foothold, as well as increasing and defending market-share, foreign and indigenous consumer goods companies are beginning to realize the absolute essentiality of doing promotion successfully in this potential market. Meanwhile, more and more promotion agencies² develop to provide support in an increasingly competitive environment. Thus, it is more important than ever to understand the Vietnamese way of thinking and lifestyle and gain deep insights of promotion within the context of Vietnam’s culture.

This thesis attempts to provide in-depth information about promotion in Vietnam. Based on secondary research as well as primary data gained in expert interviews, focus groups and observation during a three-month field research in Vietnam, it will describe Vietnamese consumers and culture and draw implications for designing a sound message, promotion mix and media mix. Furthermore, it will present current consumer trends. Only those marketers who are able to tailor their promotional efforts to fit the culture and lifestyle of Vietnamese consumers stand to reap the benefits.

1.2 Problem Formulation

Despite being a highly potential market, little consumer research has been conducted in Vietnam so far. Even though thousands of books about the country exist, most of them deal with Vietnam’s eventful past, predominantly the Vietnam War. The Vietnamese consumer is relatively unknown. Many companies lack the sensitivity to truly understand differences in consumer tastes and preferences. Marketers often underestimate the paramount importance of local knowledge when it comes to promotion causing insufficient results and the risk of offending consumers. Beside consumers, culture also profoundly impacts the way of doing promotion as it influences consumers. In fact, culture is “an integrated part of the consumer, not an environmental one”³. Despite the fact that Vietnamese culture is not as unfamiliar as the Vietnamese consumer, it has yet not often been related to consumer behaviour and thinking as well as promotion. The following figure illustrates the problem:

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Figure 1: Illustration of Problem Formulation

The problem is formulated as follows:

There is a lack of in-depth information regarding characteristics of Vietnamese consumers and culture to derive success factors how to promote consumer goods in Vietnam.

This problem formulation is rather broad due to the fact that a holistic approach will be followed in the course of this thesis. Only if an integrated view is taken, cohe- rences and interrelations between consumers, culture, promotion and media can be investigated.

1.3 Purpose

The problem formulation leads to the suggestion of several research objectives. First, this thesis shall provide in-depth information about the current state of promotion in Vietnam. It aims to describe Vietnam’s promotion environment, such as the political, economic and legal environment and illustrate the development, recent market situation and trends of the consumer goods producing-, promotion- and retail industries. Second, the purpose of this thesis is to present deep understanding of Vietnamese consumers. Obviously, they are heavily affected by external factors. Hence, the historical, geographical and climatic environment shall be described and their influence on consumer behaviour identified. Moreover, this thesis aspires to illustrate behaviour oriented, psychographic and socio- demographic characteristics of Vietnamese consumers and present miscellaneous consumer groups. Besides, current consumer trends shall be discovered and described in the context of promotion. Third, as it is widely recognized that cultural factors exert a profound impact on consumers, this thesis aspires to categorize Vietnam’s culture and describe certain cultural elements. Its purpose is to further analyze how these cultural elements are influencing the way to do promotion in Vietnam. Finally, this thesis aims to provide information how to fine-tune the promotion and media mix in Vietnam. It shall discuss the functions of the major promotional tools, analyze the implications of culture’s influence on the message, illustrate media-availability and media-regulations and evaluate their significance for consumer goods producers.

1.4 Research Questions

The following research questions will be addressed in the course of this thesis:

- What are behaviour oriented, psychographic and socio-demographic characteristics of Vietnamese consumers? What consumer groups are most attractive to consumer goods producers? Which consumer trends can be observed in Vietnam?
- How can Vietnam’s culture be categorized? What are its peculiarities? What influences does Vietnam’s culture have on consumers?
- Which kinds of promotional tools are possible in Vietnam? What are their characteristics? What should marketers consider when designing the message? What are specific features of the various media in Vietnam? What are sensitive issues when doing promotion in Vietnam?

1.5 Structure

The thesis has the following structure:

Chapter 2 lays the theoretical foundation of this thesis and is divided into two parts. First, the terms “promotion”, “consumers”, “consumer goods” and “culture” will be defined. Subsequently, a short introduction of promotion theory will be given, namely the role of promotion, the communication process, promotion mix and integrated marketing communication.

Chapter 3 presents an overview of Vietnam. After the key data about Vietnam’s history, geography and climate are illustrated, the promotion environment will be examined. This includes the political, administrational, economic and legal environment. Furthermore, selected industries that is to say the consumer goods producing-, promotion- and retail industries will be described to provide information about the context in which marketing communications take place.

Chapter 4 characterizes Vietnamese consumers and consists of six parts. After socio-demographic features such as population, employment and ethnic origin of Vietnamese have been explained, living conditions of rural and urban Vietnamese consumers will be illustrated. Afterwards the shopping behaviour will be analyzed in regard to the traditional and modern trade channel. Finally, differences between the genders and the two geographic regions of North and South Vietnam will be addressed.

Chapter 5 analyzes the culture of Vietnam in the context of promotion. It begins with demonstrating external influences on Vietnamese culture and afterwards categorizing it in the context of theoretical frameworks developed by Geert Hofstede and Richard D. Lewis. Lastly, various elements of Vietnamese culture will be examined.

Chapter 6 introduces the research design. First, an overview of the applied research methods will be given which are secondary research, and the primary research methods expert interviews, focus groups and observation. Then, the way these methods have been executed in the course of this thesis will be explained in more detail. The chapter closes with a description of the research constraints.

Chapter 7 presents the findings of the field research conducted in Vietnam which will also be put in a context and discussed. The findings are categorized into six parts, which are target consumer groups, promotional tools, message, media, taboos and outlooks.

Chapter 8 draws implications which derive from the findings of the research conducted in the course of this thesis.

Chapter 9 will provide a conclusion of this thesis, pick up the research questions, show limitations and give recommendations for future research in Vietnam.

2. Theoretical Foundations

2.1 Disambiguation

2.1.1 Promotion

The term promotion has been extensively used during the last decades, unfortunately in various meanings and contexts. Kotler defines it as „activities that communicate the product or service and its merits to target customers and persuade them to buy“⁴. This definition is rather narrow. Other authors follow wider approaches in several aspects:

- Besides customers, other audiences can be targeted with promotion such as trade, employees, shareholders, community groups, government bodies and so on,⁵
- Ideas, brands and persons can be promoted, too, not only products and services,⁶
- Provoking purchase is not the only intention of promotion, but “to create a favourable predisposition”⁷ about the promoted object/subject in general.

However, even within the marketing context, there are different meanings associated with the term “promotion” as it is often misleadingly used interchange- ably with “advertising” or “sales promotion”. As will be discussed later in more detail, advertising and sales promotion are just two of the promotional tools available to marketers. In recent years, the term “marketing communications” also has been brought up by academics as a synonym to replace promotion. In the course of this thesis, the term “promotion” will be used for two reasons: first, it is still the most common; second, communication goes beyond promotion in the sense that e.g. the product’s price, type of outlet etc. also communicate something to the audience. However, these are part of the other marketing elements and hence not covered by this thesis.

2.1.2 Consumers and Consumer Goods

By definition, consumers are „individuals and households who buy goods and services for personal consumption”⁸. In fact, almost every human being is also a consumer. Often, a consumer identifies a need or desire, purchases the product and finally consumes it but this is not always the case.⁹ Regularly, other people are involved in this process. It might be another person who actually buys the product or influences the buying decision. For instance, small children, even though being the end-consumers of instant milk would not be able to do the purchase. This could be the father who has been influenced by the mother which brand to buy. Studying consumers is crucial for the consumer goods producing industry. A consumer good is defined as “a product bought by final consumers for personal consumption”¹⁰. It might prove helpful to put it in a reference framework:

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Figure 2: Reference framework of consumer goods

The above figure shows that a product not necessarily must be tangible. However, consumer goods are always tangible even though they can include intangible elements, like value-adding services (e.g. hotline, guarantee etc.), as part of a complex bundle. One can differentiate consumer goods concerning their durability. Durable goods are usually used over a longer period, for instance, furniture or washing machines. In contrast, non-durable products are consumed quickly and for a short term only, such as food or beauty products.

Based on consumer shopping habits, consumer goods can in turn be categorized into four classifications - unsought, convenience, shopping and specialty goods.¹¹ The main feature of unsought products is the fact that consumers usually do not have them in mind, simply because of not being aware of them or even having negative interest. Thus, customers first have to be educated about it (e.g. a new communication concept). Convenience goods are frequently purchased low priced goods (e.g. toothpaste, salt, etc.). Customers hardly make many efforts prior to purchasing these products. Customer involvement is more intensive when buying shopping goods (e.g. apparel, TV, etc.). Being of higher price, customers spend more time and effort on comparing these goods and planning the purchase. Finally, luxury goods, e.g. Gucci handbags or cars belong to the category specialty goods. Its main characteristic is the considerably higher price. Customers are highly involved in the purchase decision and have a strong brand preference.

It is worth mentioning that consumer goods, as well as all other products traditionally consist of several levels or layers, namely:¹²

- the core product, which stands for the functional, problem-solving benefit (for instance, a soft drink to satisfy someone’s thirst),
- the actual product, which includes the quality level, features, styling, brand name and packaging and
- the augmented product, which is the complete bundle consisting of services and other benefits.

Ultimately, the customer will evaluate on how far the complete solution can satisfy his needs.

2.1.3 Culture

Culture is a very complex concept. It is pervading almost everything and dominantly affects all relationships, behaviours and interactions, in short, virtually every part of life.¹³ Considering marketing and promotion in particular, the paramount importance of culture is beyond dispute. Culture impacts communication appeals that are appropriate, the offers and attributes consumers value, their wants and needs, product usage and the decision process.

The concept of culture has been researched extensively and several hundred definitions exist. Probably one of the most popular ones was introduced by Gert Hofstede that culture is “the collective programming of the mind that distinguishes the members of one group or category of people from others”.¹⁴ This definition emphasizes that culture is learned rather than biologically inherited. Additional characteristics are that culture is interrelated (consists of various elements interacting and influencing each other) and is shared among members of a group.¹⁵ Culture comes in different layers consisting of visible parts, e.g. body language or clothing which are manifestations of underlying invisible values and assumptions, e.g. family values or national identity.

Due to the universalism of the concept, one researcher considered it might prove helpful to ask if there is anything not encompassed by culture and came to the conclusion that culture is everything but nature.¹⁶

2.2 Introduction to Promotion Theory

2.2.1 Role of Promotion

2.2.1.1 Overview

Putting promotion in a reference framework is essential to truly understand its scope. Promotion can be assigned to the marketing area. Marketing traditionally consists of four responsibilities - product, price, place and promotion - also referred to as the “4 Ps of marketing” or “marketing mix”.¹⁷ Concerning promotion two implications can be drawn: First, promotion is not the only critical factor in the marketing mix. The quality of the products, the attractiveness of the pricing and the distribution are fundamental as well. If there are problems in any of these factors, it will be hard or even impossible for promotion to compensate this. Second, pro- motion is of paramount importance for the success of the marketing strategy as it is one of the basic elements in the marketing mix and essential to successfully implement the other elements. Thus, companies are not confronted whether to communicate or not, the question is how much to spend on promotion and in what ways. Every company is inevitably communicating with internal and external audiences. The following figure shows the effect of promotion on other marketing mix elements and its impact on the strategies:

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Figure 3: Impacts of promotion; based on: Semenik, R.J. (2001), pp. 18

There are two main impacts of promotion. Its impact on the other elements of the marketing mix will be discussed and its impact on the marketing strategies segmentation, differentiation and positioning.

2.2.1.2 Impacts on other Marketing Mix Elements

One of the most evident roles of promotion is its impact on product management.¹⁸ First of all, with the help of the promotional tools beneficial information can be distributed to the company’s various target audiences. It is self- evident that intro-duction of new brands or products would be unsuccessful if it was not supported by promotion to attract attention. Aside from purely informing, a large part of promotional efforts aims for influencing and persuading audiences in certain ways, for instance, changing customers’ usual shopping behaviour in favour of the company’s brands. Finally, another effect of promotion on the product manage-ment is to build and maintain brand loyalty so that consumers repeatedly purchase the company’s brand(s).¹⁹

Building brand loyalty with promotion also has effects on pricing as it enables companies to increase prices without losing customers. When customers perceive the value of the offer higher than its costs they will eventually consider buying it. Moreover, promotion directly impacts pricing in the consumer market. Examples for the former are coupons and price-reductions (reduction of the costs) on the one hand and premiums and sweepstakes (increase of value) on the other hand.²⁰ Instances for the latter are case-lot discounts and other incentives.

Ultimately, promotion has effects on distribution (place) in two ways. First, it is enhancing consumer access to brands e.g. if merchandising is used at the point of sale (PoS).²¹ Likewise, companies could include databases on their webpage, also part of promotion, to inform customers about stores where the products or brands can be purchased. The second effect of promotion is on securing trade distribution. Prior to the introduction of new products for example, intermediaries are much easier to be convinced of listing the innovation when seeing that it is backed-up by heavy promotion. Besides, they expect promotional items and merchandising to assure high sales.

2.2.1.3 Impacts on Marketing Strategies

In the case of market segmentation, defined by the American Marketing Association as “the process of subdividing a market into distinct subsets of customers that behave in the same way or have similar needs”²², promotion’s task is to:

- design the message which is most relevant to the specific segments,
- choose the most appropriate forms of promotional tools to appeal to each target audience,
- select the media with which to reach the target group and
- manage these elements in a way which is effective and efficient.

To put it more dramatically, the use of market segmentation would be rather ineffective without being the foundation of diversified promotion.²³ Another key role of promotion concerns product differentiation in two ways - tangible and intangible. Promotional tools, like on-packs (attaching an additional item to the product for a limited time) differentiate the offer physically from competitors’ offers. Still, differentiation can also take place based on consumer perception rather than actual (e.g. material or functional) attributes. As aforementioned, promotion is communicating the benefits and merits of the offer. Thus, it is affecting customers’ mindset and thereby creating difference to competitors’ offers. Perceived distinctiveness is one of the main drivers for purchase decisions at the PoS.²⁴ Differentiating brands, products and services from competitors’ offers in audiences’ minds is one important aspect of promotion. Another aspect is choosing where exactly to position it, relative to competitors. While marketing analysis might for example identify a certain positioning of the brand as advantageous (e.g. high quality but reasonable price), it is promotion’s task to move the product there. Again, this is based on the perception, or in other words the minds of consumers, rather than material attributes. Recapitulatory, it can be said that promotion has a strong impact on many other of the marketing elements. It directly contributes to generating revenue by creating brand loyalty and rising sales. Also, it affects profits through causing price flexibility and contributes to economies of scale. In this sense, marketing in general and promotion in particular should be seen as investments by the organisation not as costs.

2.2.2 Communication Process

As has been outlined, in the marketing context promotion is a process to convey information. Effective communication requires an understanding of the underlying elements and processes. Essential for a communication to take place is that at least two parties are involved: one party which is sending a message and another party which is receiving it. The communications process consists of several elements which are shown in the following figure and will be explained below:

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Figure 4: Communication process; based on Kotler et al. (2005), p. 729; Pickton/ Broderick (2005), p. 49

The sender is the source of the message and consequently the starting point of every communication process. This could be the marketer or the company in general. By the use of symbols, words, pictures, music and other sensory stimulants the sender is encoding the intended message. In the following, the transmission of the message takes place which means the encoded message is moved from sender to receiver. Media, such as magazines or TV are of utmost importance in carrying the message but also influencing its effectiveness.²⁵ If the message finally gets through (which is obligatory if the communication process is to take place), the receiver, e.g. customer or employee, interprets the message (decoding).

There are two options how the communication process might continue. If the receiver does not show any reaction, the communication process will stop here. On the contrary, the receiver might show any reaction or response. What is often overlooked is the fact that the response is also encoded. For instance, a customer’s response could be to visit the webpage of the company, purchase the product or tell other people about it.

Finally, there are distortions affecting all elements of the communication process. Noise is the unintentional distortion, for instance, through a blackout while watching TV, interference is referred to as a deliberate attempt to distract the receiver e.g. through distracting a car driver from listening to the radio commercial with a billboard at the street side.²⁶ Needless to say, distortions are more difficult to handle when communicating to prospective customers in different markets around the globe.

In conclusion, two major problems must be considered in the communication process: interpretation and attention.²⁷ Concerning interpretation the sender must make sure that the receiver’s decoding coincidences with the intended message content. This is only presumable if both participants “share a common field of experience”²⁸. Communicators thus need to understand their targeted receivers in terms of their needs, values etc. when designing the message. Still, even if the message is designed in such a way, a second critical element exists: attention. Assuming that audiences are exposed to a message it is still unclear whether they pay attention to it.

2.2.3 Promotion Mix

The general communication process has been described above. The following figure shows the application of the communication process in a marketing context and the classification of the promotion mix in this model:

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Figure 5: Communication process in a marketing context

Today, companies are communicating with three groups: intermediaries (such as retailers), consumers and publics (e.g. society, government, employees, etc.). Additionally, intermediaries themselves communicate with consumers and publics and meanwhile consumers communicate with each other and other publics. Finally, all groups provide feedback. How companies design their marketing communication can be described as the promotion mix. In the figure above, two promotion mixes can be distinguished, “promotion mix I” and “promotion mix II”. The former is managed by the company/producer and directed towards the intermediaries, consumers and publics. The latter is managed by the intermediaries who target consumers and publics. Due to the fact that this thesis shall provide means how to successfully promote consumer goods for consumer goods companies, the author focuses on the “promotion mix I” only. Hence, the target groups “intermediaries” and “publics” will also be disregarded.

The promotion mix is the blend of different marketing tools, with which the company tries to achieve its communication objectives. One can distinguish different elements or areas which must be taken into account when designing this mix. However, different classifications exist. Some authors differentiate adver- tising, personal selling, public relations, sales promotion and sponsorship.²⁹ Others categorize sponsorship as a tool of public relations and add direct marketing instead.³⁰ In its most basic form, the promotion mix is subdivided into the following four elements:^{31 32}

- Advertising,
- Public Relations,
- Sales Promotion,
- Personal Selling.

Unfortunately, it remains debatable for some communications tool where exactly to assign them. Hence, many overlaps exist, for instance, direct mail could be attributed to advertising or sales promotion.

In theory all these four categories have their merits. This can best be illustrated when opposing them to the hierarchy of effects model AIDA.³³ This model is based on the perception that individuals move through different stages when confronted with promotion until purchase, trial or consumption takes place. Even though this model is not without drawbacks and is disputable, its simplicity makes it neverthe-less helpful.

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Figure 6: Comparison between Promotion Categories and AIDA model; based on: Pickton/ Broderick (2005), p. 598

The AIDA model, which is one of the earliest developed hierarchies of effects frameworks, distinguishes four phases. The first phase consumers pass through is awareness. Being confronted with promotion, consumers find out about the product’s existence. After they know about it, some of them will become interested in it. This is the second stage of the model. The promotional tools falling into the categories advertising and Public Relations are predominantly adopted to build awareness and move consumers to the second stage through generating interest. However, knowing and being interested in the promoted product does not automatically result in purchase. Only if consumers are also overcome by desire they will finally act and purchase or consume the product. To arouse desire and obtain action, promotional tools attributed to the categories sales promotion and personal selling are the prevailing means of promotion.

2.2.4 Integrated Marketing Communications

Today, marketers can chose from a variety of promotional tools and communication channels to deliver the message. This may be seen as an opportunity and threat at the same time. Opportunity, as it allows marketers to precisely target those audiences which are of interest to the company and build closer relationships with them. Also, target audiences can be reached at several contact points (also referred to as consumer touch points) which makes communication more effective. Nevertheless, marketers must be aware of the fact each brand contact will deliver a message to the consumer. On account of this, array of choices could be conceived as a threat, too. Consumers do not differentiate between channels and tools, used to deliver the message. Instead, all the messages from different sources make up the single overall message of the company.

Given that consumers could be confused by blurred or even contradictory messages, marketers must attend to integrate the promotional efforts. Hence, more and more companies are adapting the Integrated Marketing Communications (IMC) concept. Put in its simplest form, IMC is “a way of looking at the whole marketing process from the viewpoint of the customer”³⁴. The following features are part of IMC:³⁵

- Clear identification of marketing communication objectives,
- Planned approach covering all promotion activities, all media and all target audiences,
- Management and integration of all forms of contact (within the organisation and between the organisation and its publics),
- Inclusion of all products/brands etc. and corporate marketing,
- Clearness, consistency, credibility and competitiveness of the message strategy (which does not necessarily have to be a single message strategy).

The characteristics reveal that IMC is a complex philosophy involving various players beside the marketing organization, such as other internal departments (customer service, sales etc.) and external agencies like media organizations, advertising agencies, PR agencies and so forth. Even worse, the various external players often will compete for the marketing spending or might not be willing to cooperate with each other to achieve a sound coordination. Still, companies picking up and successfully solving these challenges will eventually be rewarded with the following benefits:³⁶

- Improved consistency and impact,
- Clearer positioning,
- Operational efficiency,
- Cost savings,
- Synergy effects in media,
- Greater agency accountability,
- Media-neutral planning,
- Unbiased evaluation of promotional tools.

3. Country Overview

3.1 Key Data

3.1.1 History

3.1.1.1 Overview

To understand Vietnam, its people and culture it is essential to have a look at their past since the country’s history still shapes Vietnamese body of thought. It is said “Vietnam is a place where history is not an abstraction but a living, breathing entity.”³⁷ Due to its geography Vietnam has always been vulnerable to invasion and the Vietnam War in particular (which is referred to as the American War by the Vietnamese) continues to shape the image of foreigners towards Vietnam. In fact, thousands of books dealing with Vietnam’s eventful history, especially the Vietnam War, exist. Furthermore, “memories of the past remain an important part of all contemporary Vietnamese socio-cultural systems”.³⁸ Many stories and poems are dedicated to Vietnamese heroes and the spirit of resistance and independence is etched on people’s minds. In the following the most important events in Vietnam’s history will be described.

3.1.1.2 Pre-colonial and Colonial History

Vietnam’s current name was established at the beginning of the nineteenth century.³⁹ Vietnam means “people of the South”, whereby “Viet” refers to the ethnic majority and “Nam” stands for the South, as Vietnam was a southern province of China from 179 B.C. until 938 A.D.⁴⁰ Even though there were times in which Vietnamese accepted the Chinese domination, economic exploitation eventually resulted in resistance and rebellion. Finally, after more than a millennium of occupation (as it was seen by most Vietnamese), Vietnamese leaders expelled Chinese forces. China’s efforts to regain power in Vietnam continued during the following centuries being successful only for a brief period between 1407 and 1427.⁴¹ During this time, the region was returned to the status of a Chinese province and a policy of assimilation pursued, meaning that works of Vietnamese literature were destroyed and Chinese customs enforced. Using guerrilla warfare, the Chinese were defeated again. From the mid 15th century the cultivation of Southern Vietnam took place (Southward Movement).⁴² The country was divided throughout the 17th and 18th centuries.⁴³

In 1858 the French navy attacked Da Nang following the decision to gain admini- strative control over the country (referred to Indochina by the French).⁴⁴ The first region controlled by the French was the South by 1961.⁴⁵ After several provoked conflicts, France ultimately got full authority in Vietnam in 1885 and divided the country into three protectorates: Cochinchina (south), Annam (central) and Tonkin (north). The following decades, Vietnamese saw themselves confronted with a modern and developed Western power. Even though the French carried out public works, e.g. construction of schools, hospitals and roads their policy was determined by the belief to be superior to Vietnamese in every aspect. They exploited people and natural resources ruthlessly and introduced heavy taxation and state monopolies on alcohol, opium and salt.⁴⁶

3.1.1.3 Development of the Socialist Republic of Vietnam

During French occupation several anti-colonial groups formed to regain independence. The founder of the most successful formation was Nguyen Sinh Cuong (best known as Ho Chi Minh). During World War II France agreed Japanese troops to be stationed in Vietnam. In 1941, Ho Chi Minh founded the Vietnam Independence League (Viet Minh) to fight the occupying forces.⁴⁷ Following the defeat of Japan in 1945, Ho Chi Minh proclaimed Vietnam’s independence on September 2nd.⁴⁸ Yet the French sought to regain power over Vietnam. This eventually resulted in the First Indochina War in which France was finally defeated through Chinese support and revolutionary warfare. The ensuing peace agreement, which was signed at the Geneva Conference in 1954, temporarily divided Vietnam into the communist North and the capitalist South including the accord of free elections the year after. Nonetheless, the occupation power broke the engagement fearing that popular Ho Chi Minh would win the elections. France rather appointed a chief of a State of Vietnam (S.O.V.) itself.⁴⁹ The USA, being concerned about the communist threat also entered the scene, encouraging the acceptance of Ngo Dinh Diem as Prime Minister. He declared himself president of South Vietnam in 1955 thereby founding the R.V.N. so that two Vietnams existed.

In 1960 the National Front for the Liberation of South Vietnam (NLF, also known as the Viet Cong) was founded by the communist regime of the North “dedicated to destroying the R.V.N., terminating US influence, and reunifying Vietnam”⁵⁰. In an incident in the Gulf of Tonkin in 1964, the US Navy claimed they had been under attack of Vietnamese forces (this should prove wrong later on) providing a reason to begin bombing the country. This Second Indochina War became famous as the Vietnam War. In its meantime, the troop strength of the Americans amounted to more than 500,000 soldiers using about 15 million tons of ammunition.⁵¹ Using guerrilla warfare, a sophisticated tunnel system and simplest weaponry the communists finally wore down the Americans. Following the Tet Offensive in 1968 public opinion worldwide turned against US involvement.⁵² The American combat forces withdrew in 1973 “leaving behind a devastated country, with poisoned grounds, destroyed infrastructure and an unbelievable misery - 15% of the Vietnamese population had been wounded or killed”.⁵³ However, even after American withdrawal the war continued between Vietnamese for two years. Finally, in 1975 the R.V.N fell and the country reunified in 1976 becoming the Socialist Republic of Vietnam (S.R.V.).⁵⁴ Saigon was renamed into Thanh Pho Ho Chi Minh (Ho Chi Minh City) and Hanoi became the nation’s capital.

3.1.1.4 Doi Moi Policy and Recent Milestones

In view of the fact that the economy in Southern Vietnam had depended on U.S. aid and expenditures from 1955 to 1975, the withdrawal of US forces came along with major economic problems. Even though Vietnam “won” the war, it had been very costly and a lot of destroyed infrastructure needed to be rebuilt. Soon after the reunion, Soviet-style central planning was adopted. Privately owned land was confiscated by the government, agriculture collectivized and industry was nationalized. To make matters even worse, the U.S. managed to effectively isolate the country by persuading its European allies to place a trade and aid embargo against Vietnam in 1979.⁵⁵ Following the economic difficulties, hundreds of thousands of Vietnamese began fleeing the country via boat in several emigration waves. In 1986, after the death of former president Le Duan, the “Doi Moi” policy (Renovation) was launched.⁵⁶ Its main objective was “to raise production via market incentives with limited political liberalization”⁵⁷. However, it was not before 1989 until the reform process accelerated and eventually resulted in improved macroeconomic performance.

In 1994 the US dismissed its trade embargo on Vietnam giving it the opportunity to become the 126th member of the World Bank.⁵⁸ One year later, on 28th July 1995, Vietnam joined the Association of Southeast Asian Nations (ASEAN)⁵⁹ and resumed diplomatic relations to the US, thereby further boosting its economic growth.

Unfortunately, the Asian Economic Crisis, which started in July 1997⁶⁰ also caused severe turbulences in Vietnam’s economy. Having heavily relied on Foreign Direct Investments (FDI), the economy began struggling when investors’ confidence decreased and registered FDI fell by 11.3 percent.⁶¹ Another major impact was the shrinking of the export market due to the fact that many of Vietnam’s trade partners were under strong pressure as well. Contrariwise, imports rose further “causing difficulties for the already troubled domestic enterprises”.⁶² Hence, the government decided to increase its efforts to control imports and protect its economy, even using means such as banning foreign products which could be produced on home soil.

In recent years, namely between 2000 and 2005, “Vietnam has stood as an example of a development model that has lifted millions of people out of poverty while ensuring the benefits of its vibrant market economy are fairly evenly distributed across society”⁶³. On 11th January 2007, after eleven years of preparation Vietnam finally joined the World Trade Organization and became its 150th member⁶⁴ thus bringing with it commitments and challenges but also opening the door for many new opportunities.⁶⁵

3.1.2 Geography and Climate

Being located in the centre of South-East Asia, Vietnam is bordered by China to the North, Laos, Cambodia and the Gulf of Thailand to the West and the Gulf of Tonkin and the South China Sea to the East and South. Its land area comprises approximately 331,688 square kilometres⁶⁶ with more than 3,400 kilometres of coastline⁶⁷. Three-quarters of the country are hills, mountains and tropical forests.⁶⁸ Vietnam is long on a north-south axis and very thin, with less than 40 miles width at the narrowest part as can be seen in the following map:

Abbildung in dieser Leseprobe nicht enthalten

Figure 7: Geography of Vietnam; Source: University of Texas Libraries (n.D.)

Vietnamese often compare their country to a shoulder pole with rice baskets on both ends.⁶⁹ This is due to the fact that Vietnam can be divided into three areas: the North consists of the highlands and the densely populated, grain-producing Red River Delta with Ha Noi, the capital of Vietnam, situated in this area. The northern highlands are rich of natural resources such as iron ore and coal.⁷⁰ The

Red River is used for transportation, irrigation and power supply for the surrounding areas. The centre consists of central mountains and less productive and densely populated narrow coastal lowlands. Da Nang, the third largest city in Vietnam, is located in this area. This part is often struggling with extensive flooding and typhoons during the raining season. Finally, the South consists of the also heavily populated Mekong River Delta. The largest commercial city of Vietnam, Ho Chi Minh City (formerly known as Saigon) is situated in the Southern part. The Mekong River’s flood is more predictable and usually calmer than in the Central parts of Vietnam.

One problem about geographical terminology in Vietnam is that many changes in place names have occurred. However, the old and new names are often still used interchangeably, e.g. Southern Vietnamese still refer to Ho Chi Minh City as Saigon, thereby sometimes indicating political preference.

Given Vietnam’s long north-south stretch-out and differences in topography, the country has various climatic conditions. In general, the weather is affected by seasonal monsoons - between October to March a relatively dry and cold winter monsoon and between April to October a wet and warm summer monsoon. The latter accounts for approximately 90 percent of the country’s total rainfall.⁷¹ Vietnam has an average humidity of 84 percent.⁷² The country’s climatic regions are separated by the Hai Van Mountain pass. While average temperatures in the Northern part are between 22 and 24 degrees Celsius⁷³ on average (in the northern highlands they can even fall below 10 degrees Celsius in winter time), temperatures in Southern Vietnam are steadier with an average of 25 to 29 degrees Celsius⁷⁴.

3.2 Promotion Environment

3.2.1 Overview

Promotion does not take place in a vacuum. There are various environmental factors constantly affecting and shaping the circumstances in which marketing communications occur. Accordingly, monitoring the promotion environment is vital for consumer goods companies as well as promotion agencies, for instance, to identify possible opportunities and threats. The technological infrastructure affects the availability of certain media, such as billboard technologies, mobile phone penetration etc. The government encourages the transfer of advanced technology from abroad through tax reductions.⁷⁵ In recent years the telecommunication performance, which is of peculiar importance to the promotion industry, has improved substantially, in 2005 and 2006 growth rates exceeded 50%.⁷⁶ Concerning communication access, 191 telephone main lines (per 1,000 people) compared to an average of 214 telephone main lines in the East Asia & Pacific Region existed in 2005.⁷⁷ Political and administrational factors determine the general context of promotion, e.g. what barriers foreign companies are facing or which message contents are appropriate. Economic aspects not only verify consumers’ resources, they also provide insights into the economic infrastructure, penetration of media etc. Obviously, the legal or regulatory dimension also heavily impacts promotion, as it dictates what marketers must bear in mind when designing and executing promotional campaigns. It answers questions such as which promotional tools being permitted to employ. In the following, the political, administrational, economic and legal environment of Vietnam will be examined.

3.2.2 Politics and Administration

For the last decades, Vietnam remained to be a one-party state with the Communist Party being the leading force of state and society. Every five years the National Congress takes place in order to review, discuss and approve the country’s strategies and direction. At least semi-annually, a smaller Central Committee meets.

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¹ Cf. Oxford Economics Database (2008).

² Please note that in the course of this thesis the term “promotion agencies” also comprises advertising agencies.

³ De Mooji, M. (2004), p. 19.

⁴ Kotler, P. et al. (2005), p. 34.

⁵ Cf. Doyle, P. (2003), p. 239.

⁶ Cf. Semenik, R.J. (2001), p. 7.

⁷ Cf. Ibid.

⁸ Kotler, P. et al. (2005), p. 255.

⁹ Cf. Solomon, M.R. (2002), pp. 44.

¹⁰ Kotler, P. et al. (2005), p. 540.

¹¹ Cf. Kotler et al.(2005), pp. 540.

¹² Cf. Ibid., pp. 539.

¹³ Trompenaars/ Woolliams (2004), p. 7.

¹⁴ Hofstede/ Hofstede (2004), p.4.

¹⁵ Cf. Hollensen, S. (2001), p. 159.

¹⁶ Cf. Trompenaars/ Woolliams (2004), pp. 21.

¹⁷ Cf. Pickton/ Broderick (2005), p. 4.

¹⁸ Cf. Semenik, R.J. (2001), pp.18.

¹⁹ Please note that a one way relationship between brand loyalty and repeat purchase exists; brand loyalty affects the probability the customer buys the brand again, but repeated purchase does not necessarily mean the customer is brand loyal.

²⁰ Please refer to chapter 7.2.2 for further information about these tools.

²¹ Cf. Semenik, R.J. (2001), p.19.

²² American Marketing Association (2008).

²³ It could be argued that market segmentation is also essential for product management, as also services, products and other offers can be differentiated according to segments’ needs. However, in the broader sense of promotion as a communication process, customers would not be informed about these differences without the use of promotion.

²⁴ Cf. Semenik, R.J. (2001), p. 20.

²⁵ As will be discussed in chapter 7.3, the media itself can be seen as a message.

²⁶ Pickton/ Broderick (2005), p. 48.

²⁷ Cf. Doyle, P. (2003), p. 241.

²⁸ Pickton/ Broderick (2005), p. 48.

²⁹ Cf. Czinkota/ Ronkainen (2006), p. 394.

³⁰ Cf. Jobber, D. (2007), p.498, Kotler, P. et al. (2005), p. 719.

³¹ Cf. Pickton/ Broderick (2005), pp. 16.

³² The author is using this categorization due its simplicity and reduction of complexity in particular regarding the expert interviews.

³³ Cf. Pickton/ Broderick (2005), p. 517.

³⁴ Kotler, P., in: Pickton/ Broderick (2005), p.3.

³⁵ Cf. Pickton/ Broderick (2005), pp.25, Jobber, D. (2007), pp. 500. 18

³⁶ Cf. Semenik, R.J. (2002), pp. 27, Pickton/ Broderick (2005), pp. 27, Jobber, D. (2007), pp. 500. 19

³⁷ Ashwill/ Thai (2005), p. 28.

³⁸ Jamieson, N.L. (1993), p. 2.

³⁹ Cf. Chong, L.C. (2002), p. 12.

⁴⁰ Cf. Ashwill/ Thai (2005), p. 30.

⁴¹ Cf. McLeod/ Nguyen (2001), p. 6.

⁴² Cf. Ibid., p. 17.

⁴³ Cf. Chong, L.C. (2002), p. 12.

⁴⁴ Cf. Viettouch (2007).

⁴⁵ Cf. Jamieson, N.L. (1993), p. 43.

⁴⁶ Cf. Chong, L.C. (2002), p. 13.

⁴⁷ Cf. McLeod/ Nguyen (2001), p. 31.

⁴⁸ Cf. Ashwill/ Thai (2005), p. 36.

⁴⁹ Cf. McLeod/ Nguyen (2001), p. 33.

⁵⁰ McLeod/ Nguyen (2001), p. 34.

⁵¹ Cf. Ashwill/ Thai (2005), p. 39.

⁵² Cf. Ibid.

⁵³ Cf. Chong, L.C. (2002), p. 14.

⁵⁴ Cf. McLeod/ Nguyen (2001), p. 36.

⁵⁵ Cf. Ashwill/ Thai (2005), p. 46.

⁵⁶ Cf. McLeod/ Nguyen (2001), p. 41.

⁵⁷ McLeod/ Nguyen (2001), p. 41.

⁵⁸ Cf. World Bank Group Archives (2005), p. 233.

⁵⁹ Cf. Association of Southeast Asian Nations (2007).

⁶⁰ Cf. Karunatilleka, E. (1999), p. 4.

⁶¹ Cf. Binh, D.T. (2000), p. 49.

⁶² Cf. Binh, D.T. (2000), p. 49.

⁶³ Cf. World Bank Group Archives (2005).

⁶⁴ Cf. World Trade Organization (2007).

⁶⁵ In fact, Vietnam became member of the WTO on 7 November 2006, but commitments were put into effect on the 11th of January 2007.

⁶⁶ Cf. Federal Research Division - Library of Congress (2007).

⁶⁷ Cf. CIA - World Fact Book (2007).

⁶⁸ Cf. Federal Research Division - Library of Congress (2007). 24

⁶⁹ Cf. McLeod/ Nguyen (2001), p. 1.

⁷⁰ Cf. Ibid.

⁷¹ Cf. McLeod/ Nguyen (2001), p. 6.

⁷² Cf. Federal Research Division - Library of Congress (2007).

⁷³ Cf. United Nations Environment Programme (2001).

⁷⁴ Cf. Worldclimate (2007).

⁷⁵ Cf. Pricewaterhouse Coopers (2006), p.5.

⁷⁶ Cf. Ibid., p. 8.

⁷⁷ Cf. World Bank (2007), p. 1.