Developing brand for the distributor in notebook business

TRƯỜNG ĐẠI HỌC MỞ TP.HCM UNIVERSITÉ LIBRE DE BRUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS CHOOL MBMM5 Nguyen Thanh Binh DEVELOPING BRAND FOR THE DISTRIBUTOR IN NOTEBOOK BUSINESS MASTER PROJECT MASTER IN BUSINESS & MARKETING MANAGEMENT Tutor's name: Dr Hoang Thi Phuong Thao Ho Chi Minh City (2011) i DECLARATION “I hereby declare that this submission is my own work and that, to the best of my knowledge and belief, it contains no material previously published or written by another person (except where explicitly defined in the acknowledgements), nor material which to a substantial extent has been submitted for the award of any other degree or diploma of a university or other institution of higher learning.” Ho Chi Minh City, February 13th, 2012 Signature of Student Nguyen Thanh Binh Master of Business and Marketing Management ii ACKNOWNLEDGEMENT I would like to convey my sincere gratitude to the following people Without their assistance the completion of this thesis would now have been possible To Dr Hoang Thi Phuong Thao for her useful guidance and encouragement To Ms Nguyen Thi Mong Thuy for her continual support during the implementation of my study To Mr Thai Minh Trang for his assistance of the database retrieval report of PSD To IT retailers in Ho Chi Minh City and Mekong Delta who took part in several surveys to provide input for customer insight information iii TUTOR’S COMMENTS I am writing to certify that this project meets the requirement for a business project at the master’s level I hereby propose candidate Nguyen Thanh Binh to present his project to the board of jury DR HOANG THI PHUONG THAO iv TABLE OF CONTENTS DECLARATION i ACKNOWNLEDGEMENT ii TUTOR’S COMMENTS iii TABLE OF CONTENTS iv ABBREVIATIONS vi LIST OF FIGURES AND TABLE vii EXECUTIVE SUMMARY CHAPTER 1: INTRODUCTION 1.1 Background 1.2 Problem statement 1.2.1 Distribution model of IT business in Vietnam 1.2.2 Vendors policy 1.2.3 Product life cycle 1.3 Project objectives 1.4 Scope and Project methodology 1.4.1 Primary data 1.4.2 Secondary data 1.4.3 Data analysis 1.5 Project outline CHAPTER 2: LITERAURE REVIEW 2.1 Brand Positioning 2.1.1 Brand definition 2.1.2 Brand positioning 2.1.3 Brand awareness and Brand identity 2.1.4 Role of distributor in IT business 10 2.1.5 Distributor brand 10 2.2 Marketing Mix – 7Ps model 11 CHAPTER 3: ENVIRONMENT ANALYSIS 13 3.1 External environment analysis 13 v 3.1.1 Marco-level market analysis 13 3.1.2 Industry analysis 14 3.1.2.1 Personal computer market analysis 14 3.1.2.2 Notebook market analysis 15 3.1.2.3 Major competitors/ participants 17 3.2 Internal analysis 20 3.2.1 PSD overview 20 3.2.2 Business customer and End consumer analysis 22 3.2.2.1 Business customer analysis 22 3.2.2.2 End Consumer analysis 25 3.3 Key finding from retailer requirement and consumer insight 28 3.4 SWOT analysis 29 CHAPTER 4: PROPOSAL MARKETING STRATEGY AND ACTIVITIES 32 4.1 Brand positioning 32 4.2 Marketing objectives 33 4.3 Marketing strategies 33 4.3.1 Retail segmentation 34 4.3.2 Product 35 4.3.3 Price 35 4.3.4 Place 36 4.3.5 Promotion 36 4.3.6 People 39 4.3.7 Process 39 4.3.8 Physical (evidence) 40 4.3.9 Re-design brand identity system 41 4.3 Budgeting 41 4.4 Evaluation 42 4.5 Project outcomes 43 4.6 Conclusion 43 REFERENCES 45 APENDIX 46 vi ABBREVIATIONS PSD Petrosetco Distribution Join Stock Company ICT Information and Communication Technology IT Information Technology PC Personal Computer DT Desktop NB Notebook CPU Central Processing Unit FECIT Fair of Electronics Communication Information Technology FOR Frame of Reference POD Points of Difference POP Points of parity CMC, FPT, DGW Company Name vii LIST OF FIGURES AND TABLES List of Figures Figure 3.1 Mobile Computing – Total market Vietnam .15 Figure 3.2 Mobile Computing – Brand share Vietnam 16 Figure 3.3 Mobile Computing – Region share Vietnam 16 Figure 3.4 Mobile Computing – Price class share Vietnam 17 Figure 3.5 Debt limitation for retailers 22 Figure 3.6 Allowed payment period .23 Figure 3.7 Notebook product range distributed by PSD 23 Figure 3.8 Retailer incentive program 24 Figure 3.9 Pricing protection 24 Figure 3.10 Delivery time 24 Figure 3.11 Respondent age .26 Figure 3.12 Professionalism of respondents 26 Figure 3.13 Internet connection 27 Figure 3.14 Requirement of Notebook usage model 27 Figure 3.15 Suitable price of a Notebook 28 List of Tables Table 1.1 Distribution system Table 3.1 Competitors in summary .19 Table 3.2 PSD customer satisfaction in summary 25 Table 3.3 SWOT matrix 31 Table 4.1 Retail segmentation .34 Table 4.2 Notebook price strategy 36 Table 4.3 Partnership program 37 Table 4.4 Push sale program 39 Table 4.5 PSD expenditure for year 2012 .42 EXECUTIVE SUMMARY For the last 10 years, Viet Nam Information and Communication Technologies (ICT) sector has been developing rapidly, playing an increasingly important role in national economy, emerging as a spearhead economic sector as well as an infrastructure and a driving force for the socio-economic development of the country Petrosetco Distribution Join Stock Company (PSD) was established in April 2007 as an official distributor for Nokia cell-phone in Vietnam PSD now is one of famous Vietnamese distributor, especially for Tele-communication & IT products Famous brands are co-operating with PSD includes Nokia (cell-phone), Dell, Acer (Notebook) With the mission to make PSD become the top distributor in Vietnam particularly in the field of ICT, a marketing plan will be set up to guide a strategic direction for the company The specific activities will be focus on building PSD brand in the Notebook market with an annual growth rate of about 30 to 35% In this project, through analyzing industry environment, internal situation and consumer behavior, PSD can identify opportunities and threats from the external environment as well as the strengths and weaknesses of company Then, marketing objectives and strategic plans for next year will be drawn out based on the exploration of common motivations, consumer behaviors, need of customer and the requirements of the partners in the selection of distribution for Notebook products The strategic plans will focus on main activities is direct marketing activities and customer service (CRM), which helps build brand identity for PSD, to make the difference between PSD with competitors as well as build the loyalty of partner with PSD CHAPTER INTRODUCTION 1.1 Background To be established in April 2007 as an official distributor for Nokia cell-phone in Vietnam Becoming Acer distributor for Notebook products in July 2008, PSD officially entered to IT market Within months later, PSD has been the distributor for many other famous IT products such as Dell, Hp, Lenovo and Gateway Currently, PSD is one of 10 Notebook distributors in Vietnam PSD proudly has strong financial capability, professional staff with more than 200 employees, and a nation-wide distribution system which allows for maximum market coverage The company’s direction is to directly offer all customers best-inclass distribution service thanks to a comprehensive distribution set-up with 11 branches including Hanoi, Haiphong, Vinh, Danang, Quynhon, Gialai, Buonmethuoc, Nhatrang, Hochiminh city, Tiengiang and Cantho Main customer of PSD is approximately 1,400 retail companies of telecommunications and IT equipment in nationwide, PSD enjoys current gross sales of VND 8.400 billion (US$ 400M) with an annual growth rate was 17% The Notebook business share 11% in the amount of VND 1,050 billion (US$ 51M) get 15.3% share of the market base on GFK retail and Technology research in 2011 PSD’ marketing objective is improving ties with retail systems to the level of business partners not merely trader This goal play an important part of expansion plans more products in the IT business, and it also increases the turnover of the company per a customer 1.2 Problem statement Competition on pricing is a basic method of competition as well as the most efficient way in the distribution business To better understand the competition in 34 Retail markets is quite complex with, it’s varied on location, sale volume as well as cluttered environments PSD needs to segment markets to build more specific marketing program as well as to communicate them more efficiently Base on the positioning of PSD as business partnership and marketing strategies, they will implement principles of marketing mix to promote and increase their image to retailer in years from year of 2012 to 2014 4.3.1 Retail segmentation PSD segment market into group base on their purchase volume, they are: - Platinum is top retail base on tier cities such as Hochiminh city and Hanoi, they require all Notebook product from low end to high end segment to selling to consumers - Gold is big retail in tier cities and top retail in tier cities like Hoiphong, Danang and Cantho Their main focus is low-end Notebook with price from to 14 Million VND but still have requirement on high end product - Silver is big retail in tier cities and Register is the rest cross country with sale volume is below 20 Notebook per month Almost they doing business with low end product from to 14 Million VND Segment Monthly purchase volume No of retail Platinum From 1,000 units 30 Gold From 300 to 1,000 units ~ 200 Silver From 20 to 300 units ~ 500 Register Below 20 units ~ 750 Table 4.1 Retail segmentation 35 4.3.2 Product Although product range is one of PSD’s weakness but develop new product is not main priority in 2012 It is depend too much on vendor and it as the story of chicken and egg, which one will come first PSD need more products to increase share in retailer as well as build the loyalty with retailer, whereas the vendor need the trust of retailers in PSD channel to make sure their products can grow in the market There are low-end Notebook brand that PSD will focus on 2012 is Lenovo and eMachines - Lenovo is current brand that PSD are distributing The current market share of Lenovo in Vietnam is only 6.9% but they are number in the world PSD will work with Lenovo to increase their market share as well as bring more new model to Vietnam - eMachines is low end Notebook brand come from United State but Acer just bought it eMachines has distributed in Vietnam though DGW and the market share is very low only 1% PSD can ask Acer to share this brand to develop it faster in Vietnam Moreover, PSD will use distribution centers in tier cities as authorize service center for those Notebook vendor that PSD is distribution Its help vendors can reduce the service cost as well as increase the satisfaction for both retailers and consumers in warranty and maintenance service 4.3.3 Price Price competition is a major problem of the market so PSD not want to participate in this competition; PSD does the same pricing strategy as common of market that is by package price Price of small order is higher than a large one Moreover, PSD run the cash rebate program That is the new grogram of PSD in pricing strategy When retailers buy by cash they can get more discounts 36 Package Number of units Price for retailer Cash rebate 1 Units Public price 0% off Units 1.0 % off 0.5% off 25 Units 1.5% off 0.7% off 50 Units 2.0% off 1.0% off Table 4.2 Notebook price strategy The public price is the same with public price of other competitors in market But with cash rebate is more focus on small retailers because large retailer purchase large package to get the discount and they not willing to pay by cash It’s too much Cash rebate program will restrict resellers when they buy large quantities to re-sell 4.3.4 Place Wide distribution system with 11 center in nationwide is key strong point of PSD and they will keep maintain in 2012 4.3.5 Promotion a Partnership program: Base on retail segmentation PSD building partnership program is base on elements (1) sale target (2) payment on time (3) sending inventory report When participating in the program, depending on membership level that retailer has other benefits such as rebate on revenue, join marketing fund, develop marketing fund and PSD round table - Rebate on revenue is sale incentive program of other distributor, however it don’t push more pressure on retailers The difference is sale incentive program retailer must hit the target while with this program, retailer still have small among of money if they fail - Join marketing fund is a small amount to support retailer run promotion for consumer In this fund have a policy that 50% of it can buy for gift and 50% for retailer marketing activities like advertising, brochures, showroom 37 design, etc… 50% is not too much for small amount, its restrict on pricing competition between retailer but will focus on the retailer development - Development marketing fund is a tactic support for retailer for special event of retailer like grand opening, birthday promotion - Roundtable is open meeting between PSD and retailers in every month, where all parties can sharing about IT market information, retailers send direct feedback to PSD as well as build up relationship between PSD and partners To communication program with retailer, PSD will keep using direct mailing method for current customers By monthly PSD will send the letter to retailers to update their status and sale person will have face-to-face meeting with retailers to explain more and answer their concern For new customer, sale person will have face-to-face meeting Membership Platinum Gold Silver Register 1.5 Mil USD 450K USD 250K USD 50K USD Revenue rebate 1.0% Rev 0.75% Rev 0.5% Rev 0.25% Rev Join marketing fund 0.1% Rev 0.075% Rev 0.05% Rev No $1,000 USD $750 USD $500 USD No Yes Yes No No Volume target (quarter) Develop marketing fund Roundtable Table 4.3 Partnership program This program have additional benefit is Join marketing fund and Develop marketing fund It’s a small amount and its restricted pricing competition between retailers Besides that, PSD launch this program with purposes: - To develop new customer on Register level and compete with reseller in this segment - To encourage retailers purchase more from PSD 38 - To increase the presence of PSD in all marketing activities of retailers to increase PSD brand awareness as well as build retailers loyalty b Push sale program Normally, push sale program of the distributor for retailer typically value predefined as “buy 20 get free”, rebate of 1% or 2% with value promotions such predefined, retailers commonly use for reduction in price or re-sell It’s creating more intense competition not only between retailers also with other distributors As a result, does not bring the desired profit margin for distributor, as well as push sale program no to take effect PSD launch new push sale program which promotion value is determined only when the program ends That make program more effective as well as bring more profits for retailers Below is detail of program: - Step 1: Retailer is divided randomly in groups; each group has the forecast target sale out is the same - Step 2: There are coupons with colors (Red, Yellow, Green and Blue) each group allowed choose types of coupons but not duplicated with other group - Step 3: Whenever retailers buy a Notebook they can choose a coupon belong to their group - Step 4: At the end of program, PSD will a lucky draw to define the value of coupons is $0, $0.25$, $2.5 and 25USD Total among of incentive is base on total value of the coupon they chosen With this program, PSD make sure that retailers will get more money but they don’t know how much they will earn until the end of program so they will not reduce price to compete each other 39 Retailers Red Yellow Green Blue Group Not allowed Can choose Can choose Can choose Group Can choose Not allowed Can choose Can choose Group Can choose Can choose Not allowed Can choose Group Can choose Can choose Can choose Not allowed Table 4.4 Push sale program 4.3.6 People PSD specialized in distribution and the product they sell Notebook and Mobile but essentially PSD is a service company They are an intermediary in the distribution system from Vendor to consumers PSD business based on other added value to products such as supply the products, delivery products, warranty service… and people is the key directly to make it value Investment in people is more important for PSD that can support they understand and create value for customer In 2012 PSD will increase training for staff for every month to increase knowledge about products, business process, the core business value… to understand more about customer requirement as well as company advantage to make sure everything has gone smoothly Providing excellence customer service and increasing customer loyalty 4.3.7 Process The current internal order process of PSD as follows:  Step 1: Sale person get purchase order from retailers and send to sale support  Step 2: Sale support will check with logistic department for available stock and with accounting department for debt situation of retailer  Step 3: Sale support work with logistic department for products delivery and update for sale person 40  Step 4: Sale person will follow up with retailers This process will take around hour and sometime it’s can be longer for some reason such as the data of departments is not matching, the data is not update on real time and approval process usually through paper or email but the approver is not available that time To solve this issue, in 2012, PSD will invest on IT infrastructure to improve internal process from paper process to electric process It’s reducing the time for this process from hour to a half hour in order to provide product quickly and promptly to the retailers as well as management system 4.3.8 Physical (evidence) In addition to the about activities, PSD will add other to assist retailer in the business like: - Product for demonstration: when new Notebook launched, PSD will send Notebook to display and show to consumer at retail store if they sell the Notebook they must buy another one to replace After 30 days PSD will take it back or if retailer interesting they can buy with 30% off This only applied for Platinum and some Gold member - Bank guarantee: When retailers get over the debt limited, they can order more Notebooks from PSD buy using bank guarantee service, they must meet the bank requirement of mortgaged property and PSD will pay 100% service fee - Product transition: For those products that retailer has purchased from PSD but not easy to sell to consumer and they has kept it longtime in their warehouse PSD will proactive to sell those products to other retailers that they have interesting And of course, PSD that with the permission of retailer and the price must be the same with current price of PSD 41 - Product display and demonstration: PSD will set up a showroom at the office to display all product to help customer can experience all products such as design, feature and also can compare all products before they design to buy 4.3.9 Re-design brand identity system Base on the current brand identity of PSD is their logo and slogan, PSD will re-design all other tool to create one consistent set of messages can be communicated, efficiency templates that customers are easy to reorganization PSD brand as well as build stronger relationship with retailers Other tool for re-designed is included: - Office document tool: business card, envelope, letter subject, cover profile, invitation and greeting cards, company profile… - Product tool: label is stick on Notebook box, warranty sticker on Notebook, Quotation… - Communication tool: leaflet template, uniform for employee, advertising template… - E-commercial tool: website and marketing email template… All tools are use for communication in both internal and external and also applied for retailer marketing when they using PSD fund for their program as mention above 4.4 Budgeting PSD is seeking a capital infusion of $500,000USD in order to promote their brand at Notebook retailers in Vietnam market This 500,000USD investment will be paid back in year plan 2012 PSD will apply the 7Ps marketing mix in partnership program, push sale program, customer event and other activities to develop their customer and brand image in 2012 42 The spending estimation for PSD marketing plan 2012 as show in the table below: No Expenditure Period Responsibility Total (USD) Cash rebate program Quarterly Sale 42,000 Join marketing fund Quarterly Marketing 108,000 Develop marketing fund Retailer requirement Marketing 40,000 Roundtable event Every month Marketing 20,000 Push sale program Quarterly Sale 150,000 Direct mailing Monthly Marketing 3,000 Internal training Every months HR 20,000 IT infrastructure Quarter I IT 40,000 Notebook for demonstration New product launch Sale 30,000 10 Bank guarantee fee Retailer requirement Accounting 20,000 11 Product transition Retailer requirement Sale 5,000 12 Showroom Quarter I Marketing 20,000 TOTAL $ 498,000 Table 4.5 PSD expenditure for year 2012 4.5 Evaluation To monitor this program, PSD will use both internal data and external data to evaluate PSD brand situation as well as business objective For brand situation, PSD will base on some key factors such as: - Number of new customers will help to know brand awareness of PSD 43 - Number of regular customers and the direct feedback of retailers at PSD round table in every moth will show PSD’s brand attitude and ethics in the eye of retailers - Besides that, PSD will use mystery shopper research to count on the share of PSD Notebook display at retail store as well as how retail sale person proactive on PSD Notebook to understand the favorable of PSD brand For business objectives, the share in sale out volume of retail and the number of Notebook display that PSD distribute is the key factor effects the business objectives Though revenue of PSD will be report monthly to help them understand those objectives In comparing with other competitors, PSD has some difference activities such as join market fund and develop marketing fund in membership program, push sale program, bank guarantee fee and product transition Those programs is only focus on adding more value for customer not on pricing, so PSD is avoid in the pricing competition However, other competitor can copy and apply those program but PSD has a competitive advanced is the first one and the leader of those program 4.6 Project outcomes By building brand image, name and equity PSD desires to become a trust partner for retailers as well as vendors to servers the business goals are annual growth rate of Notebook business is 35% Become the top IT distributor in Vietnam in 2014 with a share of market is around 20% 4.7 Conclusion Finally, the project deliver three objective stated above (1) give an overview about Notebook distribution market in Vietnam (2) apply theory of branding positioning (3) propose effective marketing strategy and activities to increase brand image of PSD 44 However, with the mission to make PSD become the top distributor in Vietnam particularly in the field of ICT, a marketing plan will be set up to guide a strategic direction for the company The specific activities will be focus on key products in the information technology (IT) market is Notebook with an annual growth rate of about 30 to 35% Without an efficient marketing plan, PSD is only enjoying the growth rate about 30% compare to 2011 However, with an effective marketing campaign, they set a feasible objective for PSD to increase new customer is 5% to bring the total customer is 1,500 retailers and 33% of that is regular customer And for the business, its growth rate at 35% with the share of market is 16.2% in 2012 In the following year 2012, they will try to increase the total customer is 1,800 retailers and keep the growth of PSD is 35% and become top IT distributor in 2014 with the share 20% In additional to the improvement in the market share, PSD has more chance to expand business with more vendors as well as expand product range 45 REFERENCES Do Ngoc My and Dang Van My (2008), Quan he hop tac giua cac nha san xuat va phan phoi linh vuc hang tieu dung, Tap chi khoa hoc va Cong nghe, Dai hoc Da Nang – So 3(26) Viet Nam Information and Communication Technology (2011), White Book, 36 Alain Van den Eynde (2011), Communication, PR & Advertising, MBMM5 course The American Marketing Association (2007), http://www.marketingpower.com/mgdictionary-view329.php Brad VanAuken (2007), Building Winning Brands http://www.brandingstrategyinsider.com/2007/02/building_winnin_1.html The Charter Institute of Marketing (2009), Marketing and the 7Ps, Christian Blumelhuber (2011), Building and Managing Brand, MBMM5 course Farris, Paul W, Neil T Bendle, Phillip E Pfeifer, David J (2010) Marketing Metrics: The Definitive Guide to Measuring Marketing Performance GFK (2011), GfK Retail and Technology Interim Group (2011), Interim Group Report, 77 Jean Pierre Baeyens (2011), Strategic Marketing Management, MBMM5 course Jean Tondeur (2011), Market Research, MBMM5 course Kevin Lane Keller (2009), Brand Planning, Laurent, Gilles, Jean-Noel Kapferer, and Francoise Roussel (1995), "The Underlying Structure of Brand Awareness Scores," Marketing Science Olivier Kupferman (2011), Marketing & Business Planning, MBMM5 course Medha Behera (2008), The 7Ps of Marketing Mix, http://ezinearticles.com/?The7Ps-of-Marketing-Mix&id=1486721 Susy Lunardi (2009), Know The Role Of Wholesale Distributor, http://www.artipot.com/articles/284549/know-the-role-of-wholesaledistributor.htm 46 APPENDIX Translated version and result of business customer survey and end consumer survey Business customer survey Debt limitation for retailers Very low Low Normal High Very high Frequency 19 43 14 11 Percent 6.5% 20.4% 46.2% 15.1% 11.8% Frequency 12 28 38 17 Percent 2.1% 12.4% 28.9% 39.2% 17.5% Frequency 25 33 18 Percent 0.0% 31.6% 41.8% 22.8% 3.8% Frequency 21 53 17 Percent 0.0% 23.1% 58.2% 18.7% Allowed payment period Very short period Short period Average Long period Very long period Notebook product range distributed by PSD Just few Few Normal Diversified Very diversified Retailer incentive program Not have Have but few Normal Frequent 47 Pricing protection No protection Have but not much Average Protection 100% Frequency 72 15 Percent 0.0% 82.8% 17.2% 0.0% Frequency 11 27 38 Percent 7.6% 12.0% 29.3% 41.3% 9.8% Frequency 2,340 4,678 4,943 473 Percent 18.8% 37.6% 39.8% 3.8% Frequency 5,347 1,865 1,492 2,363 612 358 459 Percent 42.8% 14.9% 11.9% 18.9% 4.9% 2.9% 3.7% Delivery time Very slow Slow Normal Fast Very fast End consumer survey Respondent age Over 35 years old From 26 to 35 years old From 19 to 25 years old Below 18 years old Professionalism of respondents Students Office staff Free lance Technical (engineers, IT technical…) Government officer Retirement Other 48 Internet connection Frequency 10,646 1,727 Percent 86.0% 14.0% Frequency 4,538 1,162 1,812 1,287 3,556 Percent 36.7% 9.4% 14.7% 10.4% 28.8% Frequency Percent Below Million VND 2,722 22.1% From to 10 Million VND 2,103 17.0% From 10 to 12 Million VND From 12 to 14 Million VND 2,845 2,598 23.1% 21.1% From 14 to 18 Million VND 1,275 10.3% 795 6.4% Yes No Requirement of Notebook usage model Entertainment Communication Information Education Working any where Suitable price of a Notebook Over 18 Million VND ... building brand for PSD In the case, finding out an advantage difference via brand positioning strategy for PSD is starting point, and then proposing marketing strategy to win customer mindset... (http://www.brandingstrategyinsider.com) 2.1.4 Role of distributor in IT business Distributor is a business of selling services to third parties who in turn sell them to their own end customers either... analyze the current business situation as well as PSD brand status of PSD and find out what is the main factors can be influencing to the PSD brand To develop marketing strategy for enhancing the