Selling Factors/Techniques in Vietnam

An Expert's View about Marketing in Vietnam

Last updated: 4 Mar 2011

Development of Consumerism: Foreign brands have proliferated in Vietnam over the past decade. This is indicative of rising urban incomes and increasing integration with the global economy. Market observers speak of the growth of “consumerism” in Vietnam, but it must be borne in mind that this remains a country with low per capita GDP ($1,024 for the country as a whole in 2009, according to official figures). The market for most imported consumer goods is still in a handful of the larger cities where incomes are considerably higher than the national average, and some parts of the Mekong Delta. Among consumers there is much trial usage, but little brand loyalty except for among the affluent. The bottom line generally comes down to price. The main attractions of foreign products are their perceived higher quality and status. Among foreign products, there is a general hierarchy of perceived quality, based on the country of origin. Vietnamese consumers tend to prefer imported U.S., Japanese and European brands over Chinese products and those made locally by foreign and Vietnamese producers. Recent international product recalls and high-profile safety issues from manufacturers in Asia have increased consumer awareness in Vietnam. Ultimately, brand loyalty is built on price, proven quality and availability.

 

Awareness of brands comes from word of mouth, promotions and advertising, where “TV is King.” Urban consumers are remarkably familiar with leading foreign products, even those not generally available in Vietnam. One major reason for this is contact with relatives abroad. Overseas Vietnamese, mostly first-generation emigrants, amount to a few million people concentrated primarily in the United States, Canada, France, Australia, and Southeast Asia. A large number of them maintain close contact with their families in Vietnam, and transfer quite a bit of information on lifestyles abroad. An increasingly affluent Vietnamese population is also traveling more widely than in the past, and the number of Vietnamese students abroad is growing rapidly. The large volume of gray and black-market goods also furthers consumer familiarity with foreign brands brought in from neighboring countries. However, copycat products made in Vietnam have taken market share from some original producers.

 

Market segmentation: Geography is a key factor in segmenting Vietnam’s market. This includes not only the regional segmentation of North-Central-South, but also the segmentation of urban versus rural markets. Vietnam is roughly separated into three economic regions surrounding core urban centers: the South centered on Ho Chi Minh City, the North based in Hanoi, and the Center focused on Da Nang. The main distinctions among these regions are consumer purchasing ability, brand awareness and recognition. Vietnam's per capita GDP stands at around $1,024, while unofficial estimates put HCMC's and Hanoi’s per capita GDP at well over triple the national average. The actual disparity is probably even greater, as certain income elements that are not well captured in official statistics (such as remittances from overseas relatives and private sector activity) are centered more in the South. Currently, consumer purchases are strongest in Ho Chi Minh City (and the contiguous provinces of Binh Duong, Dong Nai, and Ba Ria-Vung Tau), where there is a concentrated and growing population of consumers with disposable income. Consumers in the South also tend to exhibit a greater degree of brand awareness than do consumers in the North and Central regions, although this is changing. This is principally due to extensive contact with Westerners prior to 1975 and the influence of returning overseas Vietnamese. These defining factors have had an impact on market demand disparities, market entry strategies, product-line segmentation and marketing mix. For many consumer goods and retail-related companies, the first marketing goal is to penetrate Ho Chi Minh City; well over half of all Vietnamese purchases of foreign consumer goods take place in this area.

 

By contrast, companies that sell products related to Vietnam’s infrastructure development (energy, environment, aviation, telecommunications, etc.) frequently focus selling efforts in Hanoi, which is headquarters to most state owned enterprises (SOEs), the multilateral development banks (Asian Development Bank and World Bank) and other development organizations offering official development assistance (ODA). Even with Vietnam’s rapid transition to a more consumer-based society, SOEs still control a large portion of the economy and account for a significant portion of overall imports on a total value basis.

 

Product Information: Foreign companies in Vietnam utilize trade fairs, product seminars, product demonstrations, and point-of-sales materials, as well as print and broadcast advertising. The aim is not only to promote their merchandise, but also to educate both sellers and end-users. Successful long-term brands typically have to be adapted to long term tastes, particularly consumer goods. It may be necessary to educate the buyer as to the features and benefits of the product. Detailed product information in the Vietnamese language should be provided to agents and distributors. It should be noted that seminars, product promotions, workshops, and press conferences might require approval in advance by local authorities.

 

Practical Considerations: Hands-on involvement is required to achieve commercial success in Vietnam. U.S. firms should foster close relationships and maintain regular communication with Vietnamese representatives, agents, and/or distributors of their products. Not only are many products competing for limited shelf, showroom or warehouse space, but Vietnamese representatives also often handle multiple brands of the same product type. A close relationship allows the foreign supplier to keep abreast of the changes and developments in local market conditions and assess the competitiveness of its products. This approach ensures that the Vietnamese partner is updated on product information and motivated to market the product. Frequent training and support for after-service activities are also key elements of this activity.

 

 

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Posted: 24 June 2010, last updated 4 March 2011