Real situation of sales promotion in ho chi minh city

• • • HO cm MINH CITY UNIVERSITY OF FOREIGN LA.l\lGUAGES-INFORMATION TECHNOLOGY SCHOOL OF FOREIGN LANGUAGES GRADUATION PAPER THEME: ADVISOR: TRUONG QUANG TUAN, MBA STUDENT: NGUYEN THI MY DUNG CLASS: KA9601 Ho Chi Minh City, July 2000 -~-_.- - TEACHERS' REMARKS ••• • '.' ' ; ~• • .• • • ••• ABSTRACT In recent years, the business environment in Vietnam has changed considerably There has been an increase in the appearance of many enterprises of the same industry To compete for customers, businesses use a variety of marketing activities Of these, sales promotion proves to be effective activity to attract customers The purpose of this study was to have a closer look at the sales promotion situation in typical market of Ho Chi Minh City Then, we find it easy to have a good view over it and find out some suggestions to create a fair competition By collecting data from newspaper, reference books, and questionnaire, the research was carried out The result revealed that sales promotion has appealed to not only businessman but customers as well Moreover, it is likely to knock the door of every house in the city And most sensible companies are taking advantage of this to expand their market share and affirm their position Beside legal sales promotion activities, there are also some unacceptable ones Hence, there is a gap between domestic companies and joint venture foreign companies In so say.ing, a specific sales promotion lmv needs to be issued and measures that support local companies need to take into account 'llWiN •••• I 'I 'I ACKNOWLEDGMENT I offer thanks to the Department of Foreign languages for giving the oppVrtunity to conduct this research and current teachers who share their questions and experience with me Special thanks to Mr Truong Quang Juan, my professor who taught me the subject Marketing and gave me whole-hearted guidance He has \pent much time to correct all my drafis I sincerely thank him for that I also wish to acknowledge the librarians of Huflit University, College of marketing, Economic University, who gave me many opportunities in finding out information Thanks also to my close friend, who helps me up when I face with so many difficulties And, of course, I offer :,pecial thanks to all members of my family Their encouragement is the most supportive and happiest source Although, they live far from me, without their wonde,:ful care, it is hard forme to finish this paper They seem to stand by me as I \pent the countless hours of time on this research I am grateful to them all CONTENTS CHAPTER ONE GENERAL CONCEPTIONS OF THE THEME I.An overview of promotion I IAn introduction 1.2Promotion to promotion mix 1.3Reiationship Sales promotion among promotion tools I Factors in setting promotion mix 5 2.1.I.Type of market 2.1.2.Push versus pull promotional 2.1.3.Buyer strategy readiness stage 6 2.1.4 Stages in the product life circle 2.1.5.Position of company in market 2.2.Sales promotion tools 2.2.1.Consumer -promotion tools 2.2.2 Trade _ promotion tools 12 2.2.3 Business _ promotion tools 12 CHATER TWO SALES PROMOTION l.Targets of a promotion IN HCM CITY strategy 14 1Consumers 14 l.20ffices, 18 firms Effects of sales promotion 2.1 Stimulating on local economy consumption 2.2 Creating competitive 2.3Building brand identity environment 21 21 among the producers 23 25 CHAPER THREE A TYPICAL COMPANY IN HCM CITY: VINAMILK COMPANY I.Sales promotion activities of the company in last three years 27 I IPosition of company in market 27 1.2Company v~rsus competitors 29 1.2.1 Advantages & problems of domestic company 29 1.2.1.1 Advantages 29 1.2.1.2 Problems 31 1.2.2 Problems facing the company when having new eompetitors 32 1.2.3 Problems arising when launching sales promotion program 36 40 1.3 Developing sales promotion program 1.3.1 Setting up sales promotion objectives 40 1.3.2 Sales promotion tools 43 2.Evaluating and forecasting business activity 48 2.1.Results of sales promotion program 48 2.2 Forecasting business activities 49 CHAPTER COMMON EVALUATION PROMOTION FOUR AND KEY SUGGESTION ACTIVITY FOR SALES IN HCM CITY I.Common evaluation 53 2.Key suggestions 54 1Enforcing a specific sales promotion law 54 2.2.Encouraging sales promotion activities in unwell-known product to improve consumption 55 2.3 Keeping trust in sales promotion activity 57 2.4.Diversifylng sales promotion pattems 59 INTRODUCTION There i\' no a~pect in our life interesting than Sales promotion involving both theory and practice In the more and more complicated business world, businessman in both private and State factor try their best message customers Sales promotion seems 10 10 10 send expected be the most powerjitl tool in today competitive market Sales promotion is very popular conception in the world market It includes many kinds of activities that are quite new to Vietnamese Particularly, there is not many reference books mentioning this problem on Vietnam's market This research aims at analyzing general sales promotion tools and its effects on domestic market It oflers a clear understanding of real situation of sale:\'promotion in Ho Chi Minh City It also tries to suggest some necessary solutions needed to improve sales promotion environment Due 10 the open-door policy, Vietnam's economy has been developing thoroughly with the advance of different branches In the market economy, the business activities related to marketing tools is indispensable in which, the promotion strategy is the most visible Especially, in recent years, sales promotion activities in Ho Chi Minh's ,animated Promotion perspective enables businessman market have become increasingly is a source of never-ending inspiration It to affirm himself in stormy winds of the competitive marketplace And so it is a good time to analysis Sales promotion tools in such a typical market as Ho Chi Minh City This paper tries to offer relatively fresh and general view %ne a/the most important tools in promotion mix CHAPTER ONE GENERAL CONCEPTIONS OF THE THEME I.An overview of promotion IAn introduction to promotion 1.2Promotion mix 1.3Relationship among promotion tools Sales promotion IFactors in setting promotion mix 1.1.Type of market 2.1.2.Push versus pull promotional strategy 2.1.3 Buyer readiness stage 2.1.4 Stages in the product life circle 2.1.5.Position of company in market 2.2.Sales proI)1otion tools 2.2.I.Consumer -promotion tools 2.2.2 Trade _ promotion tools 2.2.3 Business _ promotion tools CHAPTER ONE GENERAL CONCEPTS OF THE THEME An overview of promotion 1.1 An introduction to promotion ProJ?otion is the aspect of marketing concerned with increasing sales of a product The task of promotion is to ensure that targeted consumers know and like the company's products Once buyers have been informed about the availability and nature of a product, they need to be persuaded that purchase of the product will lead to satisfaction Thus, it is very impOitant to continually remind consumers or custumers the existence of the products and their availability Promotion is a major force in the battle for the consumer's mind Most promotional activities are designed to accomplish one of four basic aims: To provide information on the product characteristic, price and availability _To encourage a particular market segment to associate the product with its own values and interest _To increase sales by creating desire that helps increase the demand for the product _To stabilize sales so that demand would not fluctuate wildly 1.2 Promotion mix Four major promotional activities are adveltising, personal selling, sales promotion and publicity _ Advertising: Advertising IS any impersonal form of communication about goods, servIces and ideas that IS paid for by an identified sponsor It's usually transmitted ?y mass media _ newspaper, magazme, television, radio, outdoor billboard _Personal selling: Personal selling is person-to-person communication in which salesperson trying to convince customer directly to buy a product and hence, the customer provide immediate feedback to source's massage through words, gestures, expressIOns Public relations: Public relations is about creating & managing information aimed at one or more target audiences in the hope of influencing opinions and decisions It is a promotional activity to communicate a favorable image of the product and to promote goodwill promotion toward the intermediary and some special preferential programs In marketing campaign, Vinamilk applies the discount for those who buy a large number of products By offering desired assortments and prices related to perceived value, the retailer encourages the customers to make a purchase and thereby obtain possession utility Take a look at Vinamilk's market share, 80%, the result that is so difficult for other domestic companies to achieve Vinamilk' s success depends on not only high quality product but also its market strategy The company has chosen suitable sales promotion programs for each kind of product These are applied for right place and right time The business environment in challenging and strategy must be responsive to it Knowing which form of sales promotion is best and using that form well are two unseparated things Vinamilk learns to take a flexible approach, use the best fmm for the various circumstances Moreover, they know how to bring benefit to customers So, it is obvious to be successful 2.2 Forecasting business activities Forecasting is best viewed as necessary because every business must plan for the future Look at the present state of the environment, Vinamilk' s forecasting trends are on its various aspects To demographic factors, its demographic analysis revealed that the number of potential buyers of such products is increasing It is essential to portray their target customers For instance, the demand for baby products will be 49 increased when people's Income Increases and they pay much attention to nutrition of their children To other contemporary trends, they need to pay concentration on ability to buy, age, etc In Ho Chi Minh City, temperature is a matter In dry season, a large number of soft drink has used by city people The key to effective and efficient movement of products throughout the physical distribution system is correctly forecasting the demand for Vinamilk's products Hence, correctly forecasting the level of demand is critical to controlling the flow of products through the distribution system To forecast the business activity, the company needs to review its SWOT It is said that analyzing SWOT is an indispensable step to plan a business strategy Vinamilk can inherit the typical characteristics of a domestic company such as home market, same culture, same language, etc With high product quality and clear infOlmation; Vinamilk brings a familiar and reliable image to customers Also, products in diverse design are sold at reasonable price and everyone can buy them at evelywhere However, in the future, Vietnam will be a member of AFT A (Asean Free Trade Association) It will cause some disadvantages to the company There are many kinds of product from joint venture Companies and foreign ones appearing on the market at the present These companies have launched big sales promotion programs to attract customers And many people have expressed concerns over abnOlmal pr.omotion forms, such as free distribution, high prize, sales for excessively low priced products Once; customers are influenced by these sales 50 ••• promotions, Vinamilk can lose a large number of potential clients In this case, it is hard to enlarge the market share and build a finn position on the market Indeed, when the regulation of AFT A is applied, the market will be overwhelmed with various forms of product promotion How about its opportunities? Due to the joining to AFT A, Vinamilk can have more 0ppOliunities to introduce its products to various markets in Asean In addition, it also has 0ppOliunities to learn and use modem technology, management skill, etc To local market, customers more and more admire high quality Vietnamese product Finally, when planning business activity, the company should take account of the threat Domestic companies have expressed their concerns over the fact that big foreign firms, most of them famous multinational giants, have take advantages of promotion to swallow up their smaller rivals As a result, Vinamilk ahyays can-ies out abundant sales promotion to keep client's belief To achieve this target, Vinamilk must reform technology, invest in modem production facilities to increase product quality, improve productivity and by to be more price _ competitive The design of package is more eye- catching and the quality has greatly improved It is believed that if the quality of local brands continues to improve, consumers will certainly ask themselves: "Why should we buy foreign goods?" Besides, Vinamilk should pay attention to fake products that can be harmful to its reputation The preparation to cope with the threat is really crucial for every company to gain its expected targets 51 It takes some creativity and insight to combine different kinds of numbers and ask different questions before the company can reach its targets To forecast business activity, Vinamilk should carefully research its SWOT to plan a suitable and efficient campaign On the marketing side, the impOliant thing is what product will be promoted and what form of promotion will be applied in confOlmity with each company's targets 52 CHAPTER FOUR COMMON EVALUATION SALES PROMOTION AND KEY SUGGESTION FOR ACTIVITY IN HCM CITY l.Common evaluation 2.Key suggestions 2.1 Enforcing a specific sales promotion law 2.2.Encouraging sales promotion activities in unwell-known product to improve consumptiop 2.3 Keeping trust in sales promotion activity 2.4 DiversifYing sales promotion patterns CHAPTER FOUR COMMON EVALUATION SUGGESTIONS AND KEY FOR SALES PROMOTION ACTIVITY IN HCM CITY Common evaluation SALES PROMOTION ACTIVITY IN HO CHI MINH CITY Popular form Advantages promotion of sales - Samples - Coupons - Premiums - Contest, sweepstakes & games - Joint-sales promotion - Lucky draws - Stimulating consumption - Creating competitive environment among producers - Building brand identity - Abusing sales promotion to knock out opponents Disadvantages of sales promotion - Creating gap between domestic producer and foreign producer - Not keeping trust in sales promotion activities - Domestic company - High quality Vietnam good - Sales promotion targets: Typical company VINAMILK *To encourage the effort of sales force *To stimulate intermediaries to introduce the products to customers *To encourage consumers to try or continue using Vinamilk's product - Sales promotion tools: *To consumer: contests, premiums, display at stores *To intermediary: offer gifts to sellers, reduce prices Figure 4.1 !:,vaillalion lable 53 Key suggestions 2.1 Enforcing a specific sales promotion law The most visible and controversial advettising and sales promotion law is protectionism in attempt to protect domestic indush'ies from foreign competition, Decree/CP dated MayS, 1999 has created favorable environment for advertising and sales promotion activities It contains several definitions regarding sales promotion Item of Chapter II of Decree 32 which stimulates six forms of promotion: sending sample products to customers, offering gifts to sellers, reducing prices, selling goods by installments, selling goods with the notes, and organizing lotteries Decree aims at building a wide-open legal corridor for advertising and sales promotion activities of businesses, Nevertheless, many advertisers say the basic conception _ sales promotion_has enough, With six fOllliS of promotion, stipulations resh'ict businesses' dynamism not been transparent many businesses argue that such and creativity Others say that promotional forms stated in the Decree are too general The limitation to six sales promotion fOllliSmay cause difficulties to businesses, One more thing is that Decree mles that the value of promotional goods or services for a product must not exceed 30% of the value of the goods or services before the time of the promotion, In reality, wholly foreign owned companies or joint venture launched most big sales promotions, And since there are many indush'ies, there are plenty of businesses and they all sh'ive to compete for customers, In so saying, sales promotion law should be more specific and 54 transparent When the gap between locally and foreign made goods is broken, domestic companies have 0ppOliunity to survive Indeed, with specific sales promotion law, it can prevent some companies taking advantage of promotional campaigns to sell their low quality stockpiled products In summary, promotional activities must not make the market chaotic and cause harm to the interest of consumers We need to have a legal framework for fair competition among all economic elements to promote production and trade Sales promotion should be a legal trading activity 2.2, Encouraging sales promotion activities in traditional product to improve consumption To local producer, the Govemment ought to help small and medium sized enterprises to develop Some companies may use the profits generated from one market to compensate the losses incuned on another Encouraging sales promotion activities in unwell - known product to improve consumption is essential This is a good way to stimulate producer to take part in business market When there are many producers, the market is covered with the variety of goods to meet demand From the time being, customers are fed up with sales promotion gifts and influenced by advertising programs Therefore, to remind and to infonTI them about the availability and the existence of unwell - known product, sales promotion needs to be used Too, it creates the inspiration to try 55 these products To achieve customers' belief and to create good impression, they must have attractive sales promotion program Consumers had to queue up to buy commodities but today they are "Kings" and goods can be delivered to their homes This is result of the market tool: sales promotion Sales promotion is in fact a marketing form to attract customers, to launch a new product, or to boost sales of a product on the decline Fair competition among the enterprises should ensure that the goods are sold at the right prices and qualities So, although they are unwell- known products, they have right to be on the market when involving necessary requirements The economy of a country will develop when it has dynamic producers Businessmen will have to satisfy society's needs while attempting to satisfy their own In seeking to increase their wealth in the form of profits, they must serve consumers and benefit society Being a developing economy, the State should provide opportunities for small businesses to perform According to their pocket, producers can choose a suitable sales promotion form to encourage the curiosity of customers This activity provides a supportive and significant role in the economic development process, not only in terms of better meeting domestic df:mand but also in increasing export to other markets To be successful, they need to master the modem technology collaboration and have business From these things above, it is undeniable that the business environment will be improved 56 2.3 Keeping trust in sales promotion activity It is natural that business tries to hold a share of the market; their strategy and tactics may differ but they all aim at the same goal: to make a profit Consumption characteristics are why does this group of consumers buy that type of product in large qualities while others don't? Because this group knew that there is something wrong when they buy those products It is no wonder that businesses devote so much time, attention and money to activities designed to attract and retain customers However, keeping trust in sales promotion activity is most impOltant The business environment in Vietnam has changed greatly in few recent years The appearance of several enterprises of the same industIy causes fierce competition But a fair competition environment So, sales promotion IS is always desirable for any business an activity to promote businesses' sales Consumers benefit from this activity to have relatively complete information about a celtain product There is a wide range of goods sold on the market and so there are also many forms of marketing and sales promotion At the present, there are plenty of businesses tIying their best to compete for customers by using some unacceptable activities Take, for example, a collection of Doremon teacup of certain film brand Sales promotion program is a small gift with a Doremon teacup accompanying a roll of film But a set has six cups, therefore, no one can resist the temptation to buy six rolls of film in order 57 to have a complete set of Doremon teacups Each company has its own manner of promoting sales, but some are cheating their customers For instance, one mobile phone company advertised a price reduction, but their phones actually were sold without the usual leather case or rechargeable battery; these two components cost about the same amount as the discount In this case, actually, customers just award for themselves Or another typical example is that a sales promotion launched 'Our special offer is valid for three days," but this same sales promotion has appeared several times in the same newspaper It is hard to accept an unfair competition Some companies take advantage of sales promotion to enhance them and knock out others Rejoice shampoo is good example in this case It has compared itself with 80 Ket brand, a long-lived shampoo in Vietnamese market We also need to refer to several companies using promotional campaigns to sell low quality stockpiled products Sales promotion is used widely in Vietnam, especially in H6 Chi Minh City, these days, and it wOlTies many people If sales promotion is true, customers will be beneficial If not, it is not only a cheating action but also cause harm to the State and customers It is said that good ideas don't begin around the conference table, they begin with the customer Keeping the h.ust in business activity should be put ahead, particularly in sales promotion activity Hence, to insure sales promotion program with healthy content, it is really significant to issue specific regulations 58 Furthermore, punishments should be clarified to protect the interests of consumers as well as the interests of the society 2.4 Diversifying sales promotion patterns Nowadays, the Government creates favorable conditions for businesses to cany out sales promotion activities legally and at the same time protects consumers when they buy promoted commercial goods But the fact that choosing form of sales promotion depends on business target and capital of each company To create their own picture, sales promotion campaign requires marketer's dynamism and creativity In order to gam highest efficiency, promotion must be unique and innovative Beside six forms of sales promotion, from free sample for customers to selling goods or providing services accompanied by sweepstakes, the State should diversify some various forms to make businesses more comfortable when planning a promotion program The combination of two or three companies for one sales promotion is fantastic example After- sale services should be take into account because it brings buyers best benefit To avoid dumping situation, the Government should issue regulations on the publication of product quality in order to determine whether the product is sold at rational prices Sales promotion is not only the material prizes but the striking as well For instance, every week only has one lucky time for customers with four "happy" 59 pnzes (a Dream II Honda for each) or twenty " sweet" pnzes (a Sanyo refrigerator for each) One more exciting example is offering a kilogram of 9999 gold to winner Actually, a kilogram of gold is e'quivalent to 130m VND These are some relatively efficient ways to attract customers without effecting their benefit It is shown in Figure 4,2 , ,~ VdI TRA CAY BA , ,.;, • AI CUNG CO PHAN """ Khuy0n mai (11 11/6 d~n 23/7;2000 \'Jj I •.0 b'jp lOOg hoac \6 g61 Sl)g Ttl Ur l)a b~ll >i; {\";l nu,}.: ci.y kern Wall's loai WOOd, Viii w'; h,)p IOOg h