FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS
-GRADUATION THESISMajor: International Business Economics
APPLYING MARKETING MIX (7Ps) TOIMPROVE BUSINESS ACTIVITIES OF
VIETJET AIR JOINT STOCKCORPORATION IN VIETNAM
Trang 2CHAPTER 1: THEORETICAL BACKGROUND 4
1.1 Marketing strategy definition 4
2.4 Competitor in Vietnam marketplace 37
2.4.1 Vietnam Airlines (VNA) 37
Trang 32.4.2 Jetstar Pacific Airlines (JPA) 38
2.5 Applying marketing mix (7Ps) in VJA’s business activities 40
3.2 Development orientation of Vietjet air in the next period 68
3.2.1 Development orientation of Vietnam civil transportation 68
3.2.2 Development orientation of VietJet Air 69
3.3 Recommendations 71
3.3.1 Development the inputs of the firm 71
3.3.2 Recommendation for marketing aspect 73
3.3.3 Recommendations for the government 75
REFERENCE 77APPENDICES
Trang 4LIST OF ABBREVIATION
JPA Jestar Pacific Airline
WFDSA World Federation of Direct Selling AssociationsIMC Integrated marketing communication
GDP Gross Domestic Product
ACV Airports Corporation of VietnamADP Aéroports de Paris
IPO Initial Public Offering
WCHR Passengers requiring wheelchair for rampWCHS Passengers requiring wheelchair for stepWCHC Passengers requiring wheelchair for cabinBLND Blind passengers
EXST Extra seat service
Trang 5LIST OF FIGURES
Figure 1.2 Different between with and without distributor 14Figure 2.1 Vietnam aviation development compared to other countries 27Figure 2.2 Vietnam domestic capacities share (% of seats) in 2016 30
Trang 6LIST OF TABLES
Table 2.3 Jet star Pacific domestic destination from Ho Chi Minh by 39weekly capacity in 2016
Trang 7INTRODUCTION1 Rationale
In recent year, along with the development of economy, Vietnam civil aviationalso achieve a lot of remarkable success Therefore, the aviation industry continue tochange and improve to develop the quality, better service and plays an important rolefor the National Budget.
In 2015, Vietnam's aviation market has made encouraging progress with anaverage growth rate of 20% Continue to implement the action program of thegovernment on international economic integration, Noi Bai international airport inVietnam actively invest heavily in infrastructure to meet development needs, trendsglobal integration Airports today are expanding in size and infrastructure, modernaircraft, fully equipped, air services comes increasingly diversified to meet the needs ofthe people The management of the real aircraft moving from classical to modernmethods with the media, technology and innovation Improvement on equipment is animprovement in capacity management, professional skills, quality of service and styleof service of staff, trained attendants and fostering domestic and foreign operations.Vietnam is a potentially lucrative market for air transport Regardless of the poor andlimited infrastructure system and the economic growth averaging at just above 5% peryear, the sector has experienced a dramatic annual two-digit growth at least over thepast ten years (Kraiser, 2013) According to Vietnam Aviation Authority (2015), therewere up to 17,5 million domestic seats purchased in 2015, increasing by 20,5% inrelation to 2014 International Air Transport Association evaluates that Vietnameseairlines will possibly double or triple their fleets to serve the huge domestic populationof more than 90 million and the number of foreign visitors annually growing byapproximately 20%.
Besides the advances in technology as well as the development of Vietnam'saviation industry poses challenges for the aviation business with a more competitiveenvironment, higher customer demand for the rules, international standards becomestricter With the fierce competition between the airlines to take over the trust and the
Trang 8confidence of consumers, air VJA has adopted several strategic marketing solutions toimprove and enhance the quality of services to serve and satisfy customer needs stand.
The question is proposed that how VJA can stand out, compete with domesticrivals to show its advantages and which strategy can they apply in Vietnam market
place This question has lead the author to choose the topic “Applying marketing mix(7Ps) to improve business activities of VietJetAir Joint Stock Corporation in
Vietnam market place” with the purpose of analyzing the environment and applyingmarketing strategy of VJA Thereby, the author could make recommendation on how toaddress the change for the purpose of developing and improve business activities.
2 Objectives of the study
The study attempts to apply marketing mix (7Ps) in VJA marketing strategy inorder to build a marketing strategy to be excluded and unique in the marketplace Theprocess will be analyze in 7 factors in 7Ps strategy.
From those projections, the author would give some implications on policies topromote the development and competitiveness of the market.
3 The scope of the study
Within the framework of a graduation thesis, the author would like to confine thescope of Vietnam aviation and the study focusing on strategy that VJA apply inVietnam market place Moreover, coming up some implements and some ofrecommendation to promote VJA image in Vietnam market.
The research object is VJA and Vietnam aviation market The main country in researchwould be Viet Nam market.
4 Research methodologies
Overall, the study employs statistical collection, information synthetization,inductive and deductive methods It collects and synthesizes a number of data andinformation to present an overview of theories and arguments in chapter 1, to give outassessment points in chapter 2 It uses inductive and deductive methods to express ideasand present supporting arguments throughout the entire paper.
In addition, analysis (including comparison and contrast methods) is employed
very often in chapter 2 to draw comments and conclusions about the agreements’
impacts.
Trang 95 Thesis structure
Apart from introduction, conclusion, references and appendices, the thesis comprises the following sections as main elements.
Chapter 1: Theoretical background
Chapter 2: An overview about VJA joint stock and their segment in Vietnam marketplace.
Chapter 3: Some recommendations for VietJet Air
The author would like to express deep gratitude to Mr Nguyen Ngoc Dat for hiscritical comments and encouraging support as a supervisor He has employed his strongresearch expertise and experience not only to orient the topic, structure the outline butalso to have overall and detailed looks into the study to help the author accomplish it ina better way.
Being aware of the importance of the thesis, the author has paid serious attention to study and research However, due to limited time, reference resources and
professional competences as well as practical experience, the thesis does expose a number of shortcomings Thus, any feedback or comment for this study would be of great value for the author to improve it later on.
Trang 10CHAPTER 1: THEORETICAL BACKGROUND1.1.Marketing strategy definition
1.1.1 Marketing
Until now, there are many term that defined “marketing” in the world (about2000 definitions) However, these definition basically are not different and theinteresting fact that none of them are exactly true, each of them has a good point toobserve.
According to businessdictionary.com, marketing is defined as “themanagement process through which goods and services moves from conceptto the customer” and “marketing is based on thinking about business in term ofcustomer needs and their satisfaction”.
According to the American Marketing Association (AMA) Board of Directors,Marketing is the activity, set of institutions, and processes for creating, communicating,delivering, and exchanging offerings that have value for customers, clients, partners,and society at large.
Or based on research, Dr Philip Kotler defined marketing as “the science and artof exploring, creating, and delivering value to satisfy the needs of a target market at aprofit Marketing identifies unfulfilled needs and desires It defines, measures andquantifies the size of the identified market and the profit potential It pinpoints whichsegments the company is capable of serving best and it designs and promotes theappropriate products and services.”(Kotler, 2015, p.1-50)
In the book Marketing - Essential techniques and strategies geared toward results,Alexander Hiam stated that “Marketing is primarily about understanding peopleand what makes them buy It’s getting inside the customer’s head and trying tothink as he or she thinks” (Hiam & Rastelli, 2007, p.2)
In business, marketing is considered as “branding, naming, pricing and the bridgebetween paid and earned media It is not sale” - Gini Dietrich, Chief Executive Officerof Arment Dietrich said.
In conclusion, basically, Marketing is business’s operation aiming to satisfy the customer’s needs in the market to earn profit.
Trang 111.1.2 Marketing strategy
Within any company, setting a good marketing strategy plays an important role inthe general marketing activities Identifying a proper marketing strategy will effectivelycreate customer value as well as achieve profitable customer relationships So, how canthe company obtain these goals?
Marketing strategy is the marketing logic by which the business unit hopes to createcustomer value and achieve profitable customer relationship The company decides whichcustomers it will serve and how It identifies the total market, then divides into smallersegments, selects the most promising segments, and focuses on serving and satisfying thecustomers in these segments ( Kotler and Armstrong, 2010, p48)
When the companies take adventures in business, after defining the customer’sneeds and wants at first, they decide the marketing offering, then segment and target themarket that they plan to serve In fact, the companies are not able to serve and satisfy allcustomers in the same way For that reason, the market is divided into smaller parts,which include consumers who respond in a similar way to a given set of marketingefforts The companies evaluate the potential of these parts and select one or more toengage By segmenting and targeting the market, the needs and wants of targetedcustomers will be served easier and better (Kotler and Armstrong, 2014).
Next, the companies have to determine where their position is and how theydifferentiate themselves from their rivals in the market When all steps above arecompleted, it means the company’s overall marketing strategy is determined Underthe guidance of marketing strategy, the companies start to plan the marketing mix
specifically To achieve the company’s goals, the marketing mix elements are blended into an integrated marketing program (Kotler and Armstrong, 2014)
After deciding on its overall marketing strategy, the company is ready to beginplanning the details of the marketing mix, one of the major concepts in modernmarketing.
1.2.Marketing Mix (7Ps)
The marketing mix is the set of controllable, tactical marketing tools that the firmblends to produce the response it wants in the target market The marketing mix consistof everything the firm can do to influence the demand of its products.
Trang 12Kotler and Armstrong (2014) claimed that marketing is considered as one of the major
concepts in modern marketing They also defined marketing mix as: “…the set of
tactical marketing tools that the firm blends to produce the response it wants in thetarget market” (Kotler and Armstrong, 2014, p.76).
Marketing mix has become dominant in appraising the growth of marketing theoryand practice Due to the developments and changes in the commercial landscape overthe last few decades, many marketing thinkers have explored new theoreticalapproaches and have expanded the scope of marketing mix concept Beside
the traditional 4Ps, there have been more new P’s introduced into the marketing fieldto help the firms gain advantages in highly competitive environment Marketing mix7Ps is the development from the traditional 4Ps.
The product marketing mix consists of the 4 P’s which are Product, Pricing,Promotions and Placement The extended service marketing mix places 3 further P’swhich include People, Process and Physical evidence All of these factors are necessaryfor optimum service delivery Let us discuss the same in further detail.
Figure 1.1: 7Ps Marketing Mix
(Source: http://www.professionalacademy.com – the extended 7Ps)
Trang 131.2.1 Product
Product is the first and also the key element in market offering, specifically, in
marketing mix Kotler and Armstrong (2014, p.248) defined product as: “…anything
that can be offered to a market for attention, acquisition, use, or consumption thatmight satisfy a want or need”.
Basically, products include tangible objects such as cars, bottles of shampoo,lipstick, mobile phones, or the others with the same tangible attributes Services, events,persons, places, organizations, ideas, or a mixture of these things are also included inproducts Among the forms of product, services are considered more special to payattention to because of its importance in the world economy Services consist ofactivities, benefits, or satisfactions offered for sale that are essentially intangible and donot result in the ownership of anything.
There are three levels in making decisions for any products or services They areindividual product decisions, product line decisions, and product mix decisions (Kotlerand Armstrong, 2014)
a Individual Product DecisionsProduct quality
A product’s ability to satisfy a customer’s needs or requirements is called productquality Quality is a very difficult concept, for it has both relative and absolute status,quality can be subjective Since product or service performance is affected by productquality, so are the customer value and satisfaction There are two dimensions within theproduct quality concept: level and consistency It means the companies should choosean appropriate quality level to match target market needs and quality levels ofcompeting products Besides, the targeted level of performance should also be deliveredaccurately and consistently.
The product must meet a quality standard to be successful and a goodmanufacturing, or sourcing, company will have quality control procedures to ensurethis These procedures will vary enormously according to the risk of unacceptablequality.
Branding
Trang 14A brand is a name, term, sign, symbol, or design, or a combination of thesefactors, which identifies the maker or seller of a product or service (Kotler andArmstrong, 2014) Specifically, the use of brand names, trademarks, and practically allother means of product identification are also considered branding (Perreault andMcCarthy, 2002).
Nowadays, it seem like there is no product going to markets without brands.Choosing brand for a product has an important meaning for the success of developingnew products Branding helps both consumers and sellers in many ways Based onbrand names, consumers will be able to easily identify and shop for products that mightbenefit them Moreover, brand names and trademarks in branding protect the sellers inlegal perspective to avoid copying from competitors In some cases, the sellers can alsosegment their markets relying on branding (Kotler and Armstrong, 2014)
In fact, it is not easy to build and manage brands efficiently There are severalcharacteristics of a good brand name that should be taken into account when branding.Perreault and McCarthy (2002) suggested the typical characteristics of a good brandname as: short and simple; easy to spell, read, and pronounce; can be pronounce in onlyone way and in all language; suggestive of product benefits; adaptable topackaging/labeling needs and to any advertising medium; no undesirable imagery; andlegally available for use (not in use by another firm).
Packaging and Labeling
Designing and producing the container or wrapper for a product are the activitiesof packaging In marketing, packaging is not just simply holding and protecting theproducts, it also means attracting buyers and creating immediate consumer recognitionof a brand (Kotler and Armstrong, 2014) In addition, packaging also supports thedistribution processes by avoiding damage during shipment as well as providing ease inhandling and displaying (Perreault and McCarthy, 2002) Recently, come along with thedevelopment of green marketing concept, the environmental concerns have becomedominant in packaging decisions.
Likewise packaging, labeling plays the role of complementing the appearance ofproducts Labeling not only supports in capturing the attentions of buyers, but as well
Trang 15provides consumers necessary information regarding the products such as: manufactureof the product, date of manufacture and expire, instruction, etc The products withinnovative packaging and labeling, as well as adapted in green marketing concept cangive the companies competitive advantages.
Product support services
The final important element in individual product decisions relates to customerservices It is obvious that interacting with customers is the essential part of everybusiness Hence, giving much importance to customers is highly recommended.Designing and building effective support services can help companies differentiatethemselves from competitors, and obtain satisfaction and loyalty from customers aftersale Nowadays, with the development of high technology, the companies can use manyways to interact efficiently with customers, for example via phone, e-mail, Internet, etc.(Kotler and Armstrong, 2014).
b Product line and product mix decisions
In fact, within a large firm, the sales of only one single or a few products mightnot afford to fulfill all financial issues for the firm Besides, due to the product life cycle15 patterns and possibility of mishap with a product, the requirement of creating moretypes of products is apparent.
A group of products is called product line when they are closely related In detail,products in the product line function in a similar manner and have the same customertargets They are marketed through the same types of outlets or put in the given priceranges as well.
Most vendors sells more than one product in different product categories.Marketer define the portfolio of products offered to the market as the product mix.
1.2.2 Pricing
Pricing is one of the most important elements of the marketing mix It is also oneof the most difficult If the company get it right, it can bring back a lot of profit Get itwrong, the company will suffer a huge failure in its hands.
Kotler and Armstrong (2014, p.313) defined price as: “…the amount of money
charged for a product or services, or the sum of the value that customers exchange for
Trang 16the benefits of having or using the product or service” In simply term, price is theamount of money that a buyer has to pay for a product or service that he or shepurchases.
Typically, companies will calculate their costs and add a suitable mark – up, thusproducing a price at which if the market accepts it they know they will make a profit.Of course, they will have failed to capture the total potential profit from the market butwill have the security of knowing that the business is profitable from day one, assumingtheir calculate are accurate.
Nowadays, pricing is not the most crucial key element in competition by affectingbuyer choice as in history, but it still plays an important role in creating customer value,and building customer relationships Comparing to other tools within marketing mixconcept, price is the only tool which produces revenues while the others represent costs.Price is also the factor that has the highest flexibility (Kotler and Armstrong, 2014)
a Pricing objective
The firms’ objectives of pricing should be taken into account before definingpricing strategies Generally, due to a variety of ideas regarding pricing objectives, thethree main objectives that suggested by Perreault and McCarthy (2002) are: profit-oriented, sales-oriented, and status quo.
Profit-oriented objectives: There are two subordinate objectives in profit orientedobjective: target return and maximize profits The aim of target return is to set satisfactory profit while the aim of maximize profits is to set price to get as muchprofit as possible (Perreault and McCarthy, 2002).
Sales-oriented objectives: Some managers deem that sales growth will lead to high profit For that reason, they have tendency to set prices at levels which minimum profit, and focus on increasing market share in the market (Perreault and McCarthy, 2002)
Status quo oriented objectives: When the profit and market levels of a firm are achieved as expected, status quo objectives are usually adopted The price now tends to be stabilized, besides, managers might want to meet or avoid
competition (Perreault and McCarthy, 2002)
Trang 17b Major pricing strategy
Setting a suitable price for a product is not an easy task Customers’ perceptionand demand, costs and expenses, as well as competitors’ strategies and prices are thetypical and essential factors that need to be taken into account when setting prices.Kotler and Armstrong (2014) suggested three major methods for setting price of aproduct: customer value-based pricing, cost-based pricing, and competition-basedpricing.
Customer value-based pricing
Like other marketing mix decisions, pricing decisions must start with customervalue When buying a product, customers pay an amount of money to get the benefits ofhaving or using that product; here we call it something of value If the customersperceive that the value they receive does not worth with the amount of money that theyhad to pay, they will tend to not buying that product Therefore, in customer value- 17based pricing, the firms have to analyze consumer needs and value perceptions, then setprices based on the customer perception of value, not on the costs of production (Kotlerand Armstrong, 2014)
Cost-based pricing
There are many kinds of costs in the run of any businesses: costs of producing,distributing, selling the product, and the fair rates of return for the product’s effortand risk Cost-based pricing is based on the factors above In this pricing, the mosttypical setting price method is cost-plus pricing (or markup pricing) (Kotler andArmstrong, 2014)
Competition-based pricing
Competition-based pricing occurs when a firm sets price for their products basedon competitors’ strategies, costs, prices, and market offerings This method gives thefirms the ability to focus on their competitors Once the activities of the competitors areanalyzed, the firms can be able to adjust their prices higher or lower than those ofcompetitors for competing On the other hand, the firms need to be aware of losingprofits since the competitive prices are set too low (Kotler and Armstrong, 2014)
c Additional pricing considerations
Trang 18As price is the most changeable tool in marketing mix, there are many pricingstrategies to follow Beside three main pricing strategies above, the following pricingstrategies also support the firm’s managing prices in the changes of variable elementssuch as costs, demands, or competitive environment, etc.
Product mix pricing strategies
As mentioned in the product decisions part, a product mix of a firm includes manyproduct lines Each product line has related demand and costs, but at different degreesof competition For that reason, the five strategies have been suggested for the firms tomanage their product mix prices are:
Product line pricing: Companies determine cost differences between the products, customer evaluations of different features, and competitors’ prices to set prices for various products in a line.
Optional product pricing: Companies decide the pricing of optional or accessory products along with a main product.
Captive product pricing: Companies set a price for products that must be used along with a main product.
By-product pricing: Companies set prices at low-value for by-products to get rid of or make money on them.
Product bundle pricing: There might be some products that consumers will not buy separately Companies combine these products with other products and offerthis bundle at a reduced price to encourage purchases of consumers (Kotler and Armstrong, 2014)
Price adjustment strategies
Price adjustment strategies are usually applied when the firms need to adjust theirbasic prices The aim is to take into consideration the various customer differences andchanging situations The main strategies in price adjustment are:
Discount and allowance pricing: Companies adjust their basis price to reward customers for certain responses under a variety of forms (paying bills early, volume purchase, off-season buying, etc.)
Segment pricing: Companies sell a product at two or more prices The aim is to allow for differences in customers, products, or locations.
Trang 19Psychological pricing: Consumers usually bear in mind a psychology in terms of product’s price that: higher-priced products have higher quality Based on that,companies use psychological strategy to adjust their prices.
Promotional pricing: With the aim of increasing short-run sales, the companies temporarily set their products’ prices below the list price, even below cost.
Geographical pricing: Companies set their different prices based on geographic location of customers Due to the particular geographic location, the companies will applied more specific strategies within geographic pricing for customers such as: FOB-origin pricing, uniform-delivered pricing, zone pricing, basing point pricing, and freight-absorption pricing.
Dynamic and Internet pricing: Companies adjust prices frequently to meet the characteristics and needs of individual customers and situations.
International pricing: Many companies nowadays not only run their business in domestics but also in international market Depending on the conditions of countries that the companies aim to take adventures, the prices will be adjusted accordingly (Kotler and Armstrong, 2014)
1.2.3 Place (distribution)
In the marketing mix, place refers to the process of moving products fromproducers to the intended user (Marc, 2014a) In order to operate and manage theseprocesses, the companies need to build a suitable marketing channel that corresponds
with the companies’ objectives Kotler and Armstrong (2014, p.363) defined
marketing channel (distribution channel) as: A set of interdependent organizations thathelp make a product or service available for user or consumption by the consumer orbusiness user.
When your place of marketing is your own place different rule apply Every sellermust decide how to make its goods available to the target market The two choice are tosell the good directly or to sell them through a third party.
In distribution channel, there are third party companies who act as the wholesaler,transporter, and retailer: the intermediaries The basis role of the intermediaries issimplifying the channel transactions by reducing the total amount of works that theproducers and consumers supposed to do.
Trang 20Figure 1.2 will illustrate the differentiation between the channel withoutdistributor (A) and the channel with distributor (B)
Figure 1.2: Different between with and without distributor
(Source: Kotler and Armstrong, 2014, p.364)
a Types of distribution channels
There are different ways that the companies can choose to provide products andservices to customers Among them, the two typical types of distribution channels aredirect and indirect marketing channels (Kotler and Armstrong, 2014).
Direct marketing channel is applied when a producer sells its products directly toconsumers without any intermediaries This method provides companies the advantagesof controlling over the products completely Furthermore, according to the WFDSA(World Federation of Direct Selling Associations), the direct selling also
provides the convenience and benefits in consumers’ perspective such as: home
delivery, or generous satisfaction guarantees (Boundless, n.d.).
In contrast, indirect marketing channel requires one or more intermediaries todeliver companies’ products to customers This method is recommended for thelarge producers who sell their products through many retailers Though, there areseveral issues regarding the increase of distribution costs, less controllability, and alsogreater channel complexity needed to take into account (Marc, 2014a)
b Types of intermediaries
In many cases, the companies cannot afford to handle all activities to deliver theiroffers to customers That is when they need the supports from intermediaries Besides,
Trang 21due to the differences in terms of objectives or strategies, the choices of intermediariesbetween companies will be varied Even though there are many sale models existing inthe markets, they are grouped into two typical intermediaries: retailers and wholesalers.
Basically, all activities involved in selling goods or services directly to finalconsumers for their personal, nonbusiness uses are called retailing In fact, retailing isvery familiar with people since it occurs everywhere in daily life In addition, mostbusinesses whose sales come primarily from retailing are called retailers 21 Inretailing, the major store retailer types are specialty store, department store,supermarket, convenience store, discount store, off-price retailer, and superstore(Appendix 1).
The nature of wholesaling is similar with retailing, but opposite in the end userssince it sells goods and services to those buying them for resale or business use.Consequently, the firms that engage primarily in wholesaling activities are wholesalers.The major types of wholesalers are merchant wholesaler, broker, agent,
and manufacturers’ sales branches and offices (Appendix 2) (Kotler and Armstrong,2014).
c Channel design decisions
Channel decisions play a significant role in marketing since it directly affectsother marketing decisions Selecting an appropriate marketing channel is not an easytask since it requires high levels of investments and efforts However, it is obvious thatan effective and efficient marketing channel gives the company the substantialadvantages in the competitive market The important channel design decisions include:analyzing consumer needs, setting channel objectives, identifying major channelalternatives, and evaluating those alternatives (Kotler and Armstrong, 2014)
Analyzing consumer needs
Since delivering customer value is the core idea of marketing, the channel designdecisions begin with analyzing consumer needs The marketers should focus on whattheir customers truly want in term of where, how, and which to buy From Kotler and
Trang 22Keller (2009), these aspects are reflected through five channel’s service outputs Theseoutputs are: lot size, waiting and delivery time, spatial convenience, product variety,and service backup.
It is understandable that consumers usually refer fast delivery, large assortment,and varieties add-on services as well However, the greater service outputs, the higherchannel costs and also, higher prices for customers The key is that the companies
must seek for the solutions to balance the services outputs and consumers’ needs.
Setting channel objectives
After analyzing consumers’ needs, the companies should set their marketing
channel objectives which regard targeted service output levels The idea is trying to
minimize the channel costs while the customers’ requirements in terms of service
output levels are still satisfied Besides, the other factors that might affect channelobjectives and design should be taken into account are: product characteristics,competitors’ channel, economic conditions, and legal constraints (Kotler and Keller,2009)
Identifying major alternatives
There are varieties of marketing channels that the companies can choose to delivertheir offers to costumers, each type of channel contains both advantages anddisadvantages In addition, each alternative is indicated through: the types ofintermediaries, the number of intermediaries, and the responsibilities of each channelmember.
The types of intermediaries
The companies choose which types of channel members to work with in order tocarry on their channel works The options can be merchants (wholesalers, retailers),agents (brokers, manufacturers’ representatives, sales agents), and facilitators (transportation companies, independent warehouses, banks, advertising agencies).
The number of intermediaries
Besides choosing the types of intermediaries, the companies also have to considerhow many intermediaries to use in distribution channels In order to consider thenumber issue, there are three strategies suggested: intensive distribution, exclusivedistribution, and selective distribution (See Glossary).
Trang 23The responsibilities of each channel member
The distinct terms and responsibilities of each channel member are necessary tocreate the win-win collaborations The suggested issues, which should be given out inthe agreements are price policies, conditions of sale, territory rights, and the specificservices to be performed by each party (Kotler and Keller, 2009)
Evaluating the major alternatives
When the identifications of major alternatives are done, the companies now evaluate the selected ones The criteria used for the evaluating processes are:
Economic criteria: The likely sales, costs, and profitability of different channel alternatives are compared.
Control issues: The controllability of the alternatives towards the whole channelsis determined.
Adaptability criteria: The alternatives should have high ability to adapt to changes of the environment (Kotler and Armstrong, 2014)
1.2.4 Promotion
Promotion covers all those communication tools that can deliver a message to atarget audience After planning and developing a good product, setting a suitableproduct price, and making it available to customers, the companies now need tocommunicate their value propositions to customers (Kotler and Armstrong, 2014).The aim is to increase the consumers’ awareness in terms of their products, leading tothe increase in sales, and also creating brand loyalty Similar with other tools ofmarketing mix, the information and activities in the companies’ promotion alsoaffect the buying decision of customers.
According to Kotler and Armstrong (2014, p.429), the promotion mix (ormarketing communication mix) of a company is: The specific blend of promotion toolsthat the company uses to persuasively communicate customer value and build customerrelationships.
From the definition above, it can be seen that the main objectives of the promotionmix are making customers aware the existence of the products and
Trang 24persuading them to buy those products instead of ones from competitors In anotherword, promotion mix is considered the communication aspect of the marketing mix.
a The promotion mix tools
As mentioned, the company uses the specific blend of promotion tools for itspromotion activities, these tools are: advertising, sales promotion, personal selling,public relations, and direct marketing.
Advertising Sales Public Sales forces Direct
Banner ads Contest Annual reports Catalogues IncentiveBillboards sweepstakes Charitable Internet programs
Broadcast ads Exhibits Community Fax Presentations
Directories Low-interest Corporate Telemarketing Trade showsInner- financing magazines TV shopping
Packaging Product Lobbying Voice mailLeaflets demonstrations Media
Motion Rebates Press kitspictures Sampling Public eventsOuter – Tie-ins Publicationpackaging Trade shows SeminarsPamphlets Trade-in SpeechesPoint of allowances Sponsorshipspurchase
Table 1.1: Promotion tool kit
(Source: Kotler and Armstrong, 2014, p.385)
According to the American Marketing associate, advertising is the placement if announcement and persuasive messages in time or space purchased in any of the mass
Trang 25media by business firms, non – profit organizations, government agencies, andindividuals who seek to inform and/or persuade members of a particular target marketor audience about their products, services, organization or ideas Advertising is by farthe most popular means if reaching a target audience because it is a cost – effective wayto build awareness in the minds of an audience And through repeated exposure,
the audience accepts product’s positioning and comes to trust the product to delivered the promised benefits.
This tool includes any paid forms of non-personal presentation and promotion ofideas, goods, or services by an identified sponsor Advertising allows the companiescommunicating with a large number of people concurrently Advertising is appearedmostly through mass media such as television, newspapers, magazines, and also webpages, posters, brochures, etc.
Sales Promotion
Most advertising does not deliver sales quickly Advertising works mostly onmind, not on behavior It is sales promotion that works on behavior The customerhearts of a sale, an offer of two for the price of one, a gift, or a chance to winsomething Now the customer acts.
Sale promotions are short-term incentive to encourage customers to make apurchase Sale promotion, which comprises a wide – ranging set of incentives, has beenspinning out of control Sale promotions are popular with vendors because customerseasily recognize the value a sale promotion offers saving The examples of salespromotion are coupons, season discounts, loyalty programs or even a contest, etc.
Personal selling
Personal selling represents the personal presentation by the firm’s sales force.
The main purpose of this tool is making sales and building customer relationships.Personal selling usually occurs between person to person, in some cases are over phoneor email.
Public relation
Public relations, like sales promotion, comprises a diverse set of tools Publicrelations can be quite effective, although it tends to be underutized in the promotion ofproducts and services.
Trang 26The main tasks of public relation are building good relations with the company’svarious publics This is done by obtaining favorable publicity, building up a goodcorporate image, and handling or heading off unfavorable rumors, stories, and events.Similar to advertising, public relation can be occurred through newspapers, talk shows,or social network, etc However, depending on the situations, the fee for public relationmay or may not be paid.
Direct marketing
While advertising covers the large number of people, direct marketing onlyfocuses on some targeted individual consumers, and connects directly with them Theaims are to obtain the immediate response and cultivating customer relationships.Telemarketing customized letters, emails, or text messages are the common methodsused in direct marketing (Kotler and Armstrong, 2014; and Marc, 2014b)
b Developing effective marketing communications
It is not easy to build effective marketing communications since it is influenced bymany factors Vargas (2005) claimed that the factors which influence the selection andeffectiveness of a marketing communication are: nature of the market, nature of theproduct, stage in the product life cycle, price, and funds available for promotion Forthat reason, it is necessary to carefully follow the steps in developing effectivemarketing communications.
Kotler (2000) stated the eight steps in developing effective marketingcommunications as: (1) identifying the target audience, (2) determining thecommunication objectives, (3) designing the message, (4) selecting the communicationchannels, (5) establishing the total communications budget, (6) deciding on the
communications mix, (7) measuring the communications’ results, and (8) managing the integrated marketing communication process.
Identifying the target audience
Developing an effective marketing communication starts with a clear target
audience The audience can be potential buyers of the company’s products, current
users, or individual, groups, particular publics, or the general public The target
audience is a critical influence on the communicator’s decisions in terms of what, how,when, where and to whom to say (Kotler, 2000) In another word, identifying the
Trang 27target audience simply means understanding them in terms of their way of thinking, factors that motivate their purchase decisions, or even their living environment.
Determining the communication objectives
After defining the target audience, the marketing communicators now determinethe audience response Normally, there are three main response stages that most ofconsumers pass through on their way to making a purchase: cognitive, affective, andbehavioral stage.
At first, the consumers may only know little or even unaware the product, thecompanies need to communicate with customers to build the cognitions in terms of theirproducts Assume that the consumers already know about the product, the companies inthis stage should determine the feelings of consumers regarding the products Lastly,the marketing communicators lead the customers to making purchases.
Briefly, the response stages of consumers can be considered as the “learn-feel-do”sequence, the orders of this sequence can be changed according to the levels ofcustomers’ involvement in the product category Determining the right sequence cangive the communicators particular advantages (Kotler, 2000)
Designing the message
Once the target audience and communication objectives are defined, the next taskis producing a message to achieve the objectives Ideally, an effective message shouldconcurrently gain attention, hold interest, arouse desire, and elicit action In Kotler’spoint of view (2000), four major issues that the marketing communicators have tohandle when formulating the message are: message content, message structure, messageformat, and message source.
Message content
In determining message content, the communicators have to figure out an appeal,theme or idea that will create the desired response There are three types of appeal:rational, emotional, and moral Rational appeals relate to the audience’s self-interestsince they claim that the product will produce certain benefits Emotional appeals attempt tostir up negative or positive emotions that will motivate purchase Moral
appeals are directed to the audience’s sense of what is right and proper (Kotler, 2000).
Trang 28Message structure
Basically, there are three typical message structure issues for the communicatorsto handle The first issue is whether to draw a conclusion or leave it to the audience.The second one is whether to present the strongest argument first or last The final issueis whether to present the one-sided argument (mention only the product’sstrengths), or a tow-sided argument (touting the product’s strengths while alsoadmitting its shortcomings) (Kotler and Armstrong, 2014)
Message format
The message format is suggested should be strong Depending on particularmediums, the communicators will make decisions regarding specific aspects Forinstance, for a print ad, the communicators have to decide on headline, copy,illustration, and color, etc (Kotler and Armstrong, 2014; and Kotler, 2000)
Message source
In fact, messages delivered by highly credible sources are usually morepersuasive For that reason, the chosen sources have to be satisfied in threeperspectives: expertise (specialized knowledge the communicator possess to back theclaim), trustworthiness (how objective and honest the source is perceived to be), andlikability (source’s attractiveness) (Kotler, 2000)
Selecting the communication channels
After the message was designed, the companies now select the channels ofcommunication to carry the message Kotler and Armstrong (2014) stated the twocommon types of communication channels are:
Personal channels: involve two or more persons communicating directly with each other (face to face, person to audience, over the telephone, through emails).
Non-personal channels: media that carry message without personal contact or feedback These channels include major media, atmospheres, and events.Establishing the total communications budget
How much to spend for the marketing communications? This is one of the most challenging issues for most of marketers since the total budgets are varied from
Trang 29companies to companies The four common methods used to set the total budget for promotion are:
Affordable method: Setting the promotion budget at the level management thinksthe company can afford.
Percentage-of-sales method: Setting the promotion budget at a certain percentageof current of forecasted sales or as a percentage of the unit sales price.
Competitive-parity method: Setting the promotion budget to match competitors’ outlays.
Objective-and-task method: Developing the promotion budget by defining specific promotion objectives, determining the tasks needed to achieve these objectives, and estimating the costs of performing these tasks The sum of these costs is the proposed promotion budget (Kotler and Armstrong, 2014)
Deciding on the communication mix
When setting the total budget for promotion is done, it is time to allocate thebudget over the five promotion mix tools: advertising, sales promotion, public relations,personal selling, and direct marketing Each tool has its own unique characteristics andcosts Therefore, the communicators should blend these tools carefully to achieveeffective marketing communications (Kotler and Armstrong, 2014)
Measuring the communications’ result
After the marketing communications were processed, their impacts should bemeasured The communicators can ask the target audience issues regarding the messageor product For examples: whether the target audiences recognize or recall the message,how many times they saw it, how they felt about the message, their previous and currentattitudes towards the product and company, and so on Moreover, the communicatorscan also collect behavioral measures of audience response (how many people bought theproduct, liked and talked about it, etc.) (Kotler, 2000)
Managing the integrated marketing communication process
Due to some relative factors such as the proliferation of new types of media or the growing sophistication of consumers, the companies need to widen their range in
Trang 30terms of communication tools, messages, and audiences That when the integratedmarketing communication (IMC) becomes necessary Once being implementedaccurately, IMC will improve the company’s ability to reach the right customers, withthe right messages, at the right time, and in the right place (Kotler, 2000)
1.2.5 People
All companies are reliant on the people who run them from front line Sales staff tothe Managing Director Having the right people is essential because they are as much apart of your business offering as the products/services you are offering.
People are particular important in marketing in marketing because marketing shouldtake the lead, so it is necessary to find the right people in the right position
As a firm, there are several qualifications to build a team.Recruitment and assessment
Find a good candidate for the job is one way to build the system The companyneed to look into the candidate job application and the information that person provides.It is necessary to find employees that work with the job and complete it in the best way.Managers must to find the right candidate for the right position.
Whether at the recruitment stages or later, we may wish to assess the abilities of anindividual The first judgment is not really suitable for the work Yet it is not easybecause there are many factors that can contribute to the numbers and manager shouldassess a candidate from a much wider perspective.
Training and development
After recruiting and find the right person for the right job, new employees shouldbe trained and develop for better performance A certain job requires training forworking accuracy and professional New employees must know what they supposed todo and what they are hired for They need to get used with the work and need training toknow more about the work The first thing that the job requires is proficient Workingwithout flaws, working fast and professional are the first priority for a new member.Training follows a simple cycle First, explanation – the trainer explain how to aparticular job The demonstration – the trainer demonstrates the function to the trainee.Then imitation – the trainee imitates the trainer and performs the function Thenconsolidation – if the trainee has shown understanding of what is required then
Trang 31the trainer leaves him or her alone to consolidate this piece of the job before returningat a later date to check that this is still working and, if so, to reach a new skill using thesame cycle of explanation, demonstration, imitation and consolidation.
Being trained and master the job, they need develop and working more creative.Working area now is not in one aspect and require in one traditional form People needto develop and need to find the way that work with best efforts Development consistsof giving an individual more and more challenges in order to develop their abilities anconfidence This can be done both on the job and alongside the job In a large
organization, there will be many opportunities to test an individual’s qualifications for additional responsibility in projects, test markets, etc.
Team building
An important aspect of people management is team building In every work andevery task, people have to interact with each other A firm require a team that work toenhance the profit and productivity No one in the firm can work alone All tasks haveto been through steps of people and these people have to know how to work with eachother.
Processes include direct activities and indirect activities Direct activities addvalue at the customer interface as the consumer experiences the service Manyprocesses are supported by indirect activities, often known as back office activities,which support the service before, during and after it has been consumed.
1.2.7 Physical evidence
Services as we know are largely intangible when marketing However customerstend to rely on physical cues to help them evaluate the product before they buy it.Therefore marketers develop what we call physical evidence to replace these physical
Trang 32cues in a service The role of the marketer is to design and implement such tangibleevidence Physical evidence is the material part of a service In the service industries,there should be physical evidence that the service was delivered Additionally, physicalevidence pertains also to how a business and its products are perceived in themarketplace.
Corporate image and identity are supported by signs, symbols and artefacts of thebusiness itself This is all important to the physical evidence as a fundamental elementof the services marketing mix.
There are many examples of physical evidence, including some of the following:The building itself (such as prestigious offices or scenic headquarters) This includes the design of the building itself, signage around the building, and parking at the building, how the building is landscaped and the environment that surrounds the building This is part of what is known as the services cape.
The interior of any service environment is important This includes the interior design of the facility, how well it is equipped, internal signage, how well the internal environment is laid out, and aspects such as temperature and air conditioning This is also part of the services cape.
Trang 33CHAPTER 2: AN OVERVIEW ABOUT VIETJET AIR JOINTSTOCK AND THEIR SEGMENT IN VIETNAM MARKET2.1.Vietnam Aviation marketplace
2.1.1 Market overview
With a growing GDP and over 90 million people, Vietnam is projected to be oneof the fastest growing aviation markets in Southeast Asia over the next 10-20 years.Particularly, with the ASEAN Open Skies policy being in effect since January 2015,which allows airlines to fly freely throughout the ASEAN member states in a unified airtransport market, and with Vietnam joining several free trade agreements (FTAs)including the upcoming TPP, the passenger and cargo air transport in Vietnam will havemore opportunities to grow Continued strong market growth presents opportunities forU.S companies as Vietnam makes large investments in airport construction andupgrades, aircraft fleet expansion, air traffic service enhancements, aircraft maintenanceand overhaul capacity and service development.
Figure 2.1: Vietnam aviation development compared to other countries
(Source: World Bank Data in 2015)
Trang 34Aviation is one of the top priority sectors for development by the government ofVietnam as it is critical to the country’s economic growth The aviation sector isoverseen and managed by the Civil Aviation Administration of Vietnam (CAAV),which reports to Vietnam’s Ministry of Transport.
According to the CAAV, the annual passenger growth rate was 14.9 percent for theperiod 2010- 2015 By 2015, the number of passengers reached 63 million (18 millioninternational, 45 million domestic) annually CAAV estimates the passenger trafficthrough airports will reach 122 million by 2020 with an average growth rate of 14.2percent per year for the period 2015-2020 By 2030, passenger air traffic is forecast at322 million per year, a 10.2 percent annual growth rate.
The freight market grew at 10.7 percent between 2010 and 2015, with 0.96 milliontons of cargo (0.62 million international, 0.34 million domestic) through airports in2015 Freight traffic will increase to 1.8 million tons by 2020 with an average of 12.8percent growth per year for the period 2015-2020 By 2030 the freight traffic is forecastto reach 7.3 million tons of cargo, a 15.3 percent growth per year for the period of 2020-2030.
2.1.2 Airport development
Vietnam will need continued investment in new terminals, longer runways andupgraded equipment to meet the increased passenger air transport, which will grow at14.2 percent a year for the period between 2015 and 2020, as estimated by CAAV.
Airports Corporation of Vietnam (ACV) – a state-owned entity, established inFebruary 2012 after the merger of the Northern, Central and Southern AirportsCorporations, currently manages and operates a network of 21 airports throughout thecountry, of which eight are international and 13 are domestic ACV plans to equip theairports with necessary equipment to ensure safety, security and efficient operations,including instrument landing systems, lighting systems, X-ray machines, firefightingvehicles, ambulance vehicles, lifting vehicles, power vehicles, etc In addition, ACV iscalling for investment in more airports to increase the number of airports in the
country to 23 by 2020 and 25 by 2030 To achieve this ambitiousplan, ACV is sourcing investment through various means, including the equalization ofACV; and the Private-Public Partnership (PPP)
Trang 35investment model In November 2015, ACV launched an IPO to sell a five percent staketo the public and become a stock company ACV is planning to sign a strategicpartnership with Aéroports de Paris (ADP) in 2016, with ADP owing 7.4 percent of thefirm Recently, ACV has moved away from using ODA (official developmentassistance) to using the PPP model as a source of investment capital to develop airports.This will allow ACV to exploit the best technologies and services from many countriesin its airport development projects, and thus provide more opportunities for U.S.aviation companies in supplying airport technologies and services.
There are some main projects of maintenance and developmentTan Son Nhat Airport (Ho Chi Minh City)
Noi Bai AirportDanang AirportQuang Ninh AirportPhu Quoc Airport
Chu Lai Airport (Quang Ngai)Lao Cai Airport
2.1.3 Market share
There are three main carrier in Vietnam market share which are VJA, Vietnam airlines and Jetstar Pacific.
Trang 36Figure 2.2: Vietnam domestic capacities share (% of seats) in 2016
(Source: CAPA – Centre for aviation)For the first four months from Jan-2016 to Apr – 2016, Vietnam Airline hold44%, VJA took 41% and Jetstar Pacific accounted for 15%.
2.2.History of development
2.2.1 History
VJA Joint Stock Corporation is operated under the trading name as “VJA” socalled VietJet Established since 2007, VJA (VJA) is the first private airline in Vietnamwhich is licensed to operate with charter capital of 37.5 million USD VJA has markedthe development of the low-cost carrier, prestige and quality Not only that, VJA wasthe top choice of passengers when required to move by air.
25 December 2011, the first flight from Ho Chi Minh City to Ha Noi was operated
June 2013, VJA opened the first flight to Bangkok,, Thailand and cooperated with Thailand airline to open international flight.
Trang 37September 2013, VJA signed to order 100 airplane of Airbus production In November and December 2014, VJA received 2 of 100 on the contract, upgrading to 20 airplanes in total
23 October 2014, VJA was honored in top 10 of best low – cost carriers in Asia in Smart Travel Asia Magazine
31 January 2015, VJA marked the 10 million guests.
VJA is operating an intensive flight network in Vietnam and is planning toexpand its operation throughout the Asia-Pacific region The airline’s mission is tomeet the increasing travel demands of domestic and international travelers by providingpunctual flights and a high quality of service, helping to lead the Vietnam aviationindustry into a new era VJA is already well-known in Southeast Asia for providingpassengers with a wide range of flying routes as well as its trademark fun and friendlyservice and easy to use online booking and purchase systems.
VJA has been honored with prestigious prizes in Vietnam and in the world Atthe“Budgies & Travel Awards”, held in London, VJA, along with SpiceJet (India),EasyJet (England), Southwest (USA) and AirAsia X( Malaysia), was shortlisted in thecategory for “Top 5 Best New Route Launch.” VJA has also awarded as “The
Airline with Cultural Creative and Entertainment
in-flight Programs” by the Asian Record Organization and earned a “Golden StarAward for Quality” from Business Initiative Directions (B.I.D), Switzerland Furthermore,the airline earned Merit of Distinction by Ministry of Transport of Vietnam in two yearcontinuously, Vietnam National Administration of Tourism & Vietnam TourismAssociation and was declared “the most friendly transportation and
best promotion Airline in Vietnam” by Spend & Use Advisory Magazine
2.2.2 Exploiting achievements
During 2016, VJA has make some achievements and improvements comparedwith 2015 In 2016, VJA exploit 9.3 million passengers with total air crew of 29aircrafts and total of 58355 flights.
Trang 38Table 2.1: Exploit achievement
(Source: Vietjet air performance report in October 2016)
Until October 2016, VJA contributed on national budget directly and indirectly2000 billion vnd Total profit increased 155% compared with 2015 Compared to 2015,the number of aircraft crew increased 61%, the amount of passengers also raised 66%.The total hours of flying increased significantly with 84% Meanwhile, the expensedecreased 14% which is the good sign for the low – carrier like VJA.
Total profit of selling 11,747,678 7,811,491 50%Total profit of flying 10,990,990 6,928,363 59%
Table 2.2 : Total profit 2015 – 2016
(Source: Vietjet air performance report in October 2016)
With the increasing of passengers, the total profit selling increased 50%
compared to 2015 which is a good sign for the development of VJA The total profit of flying also rise up to 59% rather than in 2015.
2.2.3 Development strategy
a Domestic strategy
Vietnam is a potential market with the high growth rate VJA understand and takes advantages of the domestic market VJA put strong investment into Vietnam
Trang 39market to push the net profit Even the growth of low – cost carrier in Vietnam is stilllower than other market in area such as Philippines or Malaysia, specialists considerthat Vietnam and Myanmar will be the highest growth in low – cost aviation industry.
Especially, VJA aims at fame and popularity more than money Therefore, theywin the customer’s trust and attention Maybe that strategy doesn’t make sense,however, VJA still continuously improve its image and reputation.
With the particular characteristics is cost huge amount in 2 or 3 first year model,the priority thing that investors should do is increase the fund capacity This situation isexactly with VJA for the upcoming IPO to attract international investors.
VJA manage tightly the input and output of money and make sure the quality of service.Therefore, the ticket fee are collected early from 3 to 6 months or 9 months beforetaking off Meanwhile, other expenses such as gas, renting plane fee, ground services,etc can be paid lately within 1 month Based on that, the firm can balance betweeninput and output.
With domestic flight, VJA continuously open more flights with the frequency of500 flight per week “Domestic segment of VJA increases from15% to 40% in2016” – Mr Brendan Sobie –analyst said Moreover, Vietnam is a potential market In2016, the Congress had gone through the GDP growth rate is 6,7% , which is thehighest rate within 6 recent years Along with this, the fuel price is estimated to reduceto 11% and 45 million guests – increased 19% compared with 2015 With thedevelopment strategy, Vietnam planned to have more than 26 airports in 2020 and in theprogress of develop and extend Noi Bai International Airport and Tan Son NhatInternational Airport VJA takes advantages of the development and build trust ondomestic customers It aims at the stable development with great profit
However, the pushing domestic segment is just a small step and a base for VJA toenter to another larger market VJA want to co-operate with other air carriers for a betterbenefit and larger flight Until 2016, VJA connected and opened flight to Thailand,Singapore, Korea, Taiwan, Malaysia, China and Myanmar.
b Low – cost strategy
Trang 40VJA operate according to a low – cost carrier model with high quality services.The purpose is that create more chance to fly with low cost for Vietnam citizens andinternational guests VJA proposes variety of ticket fee for customer with 12 standardsprice for customers to select such as Promo, Eco, Flexi, etc.
Understanding of the need of traveling, VJA issue many discount strategy with 0dong for one – way to many domestic destinations Buyers only charge for the fuel andservices and tax price Customers are encouraged to book the ticket early through VJAwebsite and choosing the proper payment method.
To have low – cost strategy, VJA cut down some expenses that customers mightnot need during the flight:
Reduce the printing price of ticket check inUse only 1 kind of plane
Eliminate meal plan services and magazinesReduce costs at the airport
Diversified extra services such as luggage transportation services
With domestic flight, Vietjet apply non – meal on the flight It doesn’t provide mealplan included in ticket price which can reduce money for customers who don’t havedemand of eating during the flight It doesn’t mean that Vietjet doesn’t have any
meal on the flight They still prepare for the meal with the customers who want to havesomething to eat and want to choose the food which is not really expensive.