"Applying Price Strategy for Marketing Plan for Trung Nguyen Desiccate&Mill Coffee in Vietnam Market" Topic Objective: Based on different tastes in enjoying coffee of people lived in different geographic zones – Hochiminh City and Hanoi – to process Marketing Mix for Trung Nguyen Desciccate&Mill coffee Argumentative base and data source: - Theory: Basing on the book Marketing Management by Philip Kotler and instruction of Prof Ha Nam Khanh Giao - Data source: Basing on “Research on coffee consumption in Hanoi and Hochiminh city” from Rural Development Policies and Strategies Institution (IPSARD), Economic Management & Policies Consultance Center, and some other materials - Limitation of this Topic: Data used is rather out of date (records dated 2002 onward) It therefore is just generally a pattern application INTRODUCTION Vietnam is the 2nd coffee exporter in the World with its productivity continuously increased every year According to Bloomberg when doing research with 12 dealers of planting and exporting coffee, Vietnam coffee can achieve 1,32 million tons while it had only 1,12 million tons (equivalent to 18,7 million of 60-kg-bag) last crop As per USDA estimation, in the crop of 2011 – 2012, coffee productivity of Vietnam can reach to 1,24 million tons, being the highest productivity recorded since coffee productivity has been filed since 1959 (http://agribank.com.vn/ san-luong caphe-tai viet nam co the dat moc ky luc ) However, even though Vietnam is one the most coffee exporter in the world, the consumption of processed coffee in domestic market is still very low In the report of Rural Development Policies and Strategies Institution (IPSARD), the consumption of local people is very low in compare with other people in the world: only 1,25kg powder & instant coffee per year, equivalent to 0.5kg raw coffee while North Europe people use 10kg and West Erope use 5-6kg raw coffee per year (http://saigonnews.vn) Coffee is not only having economic meaning to improve people life but also having great political meaning in Vietnam as well as other contries When World coffee market fell into crisis years ago, its price droped to the lowest level in recent 40 years and badly effected to Coffee industry benefit in general and all members who joined in coffee producing, processing and consumpting coffee in specific As per researchs of ICARD, OXFAM England and OXFAM Hongkong, in 2001 living standard of coffee farmers in Daklak tended to be decreased: rich one became fair, fair became average, average became poor and worstly poor droped to hunger A lot of farmers did not have enough food to eat and burdened by the Bank because they’ve lent money to invest into coffee planting in previous crops, averagely 4,5million VND A lot of coffee purchasers and processors became bad debtors in Banks, averagely more than billion VND Vietnam was one of the worst loss countries, badly affected by Price Crisis (as per IPSARD, P.6) One of the solutions are raised to minimize loss from the current crisis is increasing coffee consumption in domestic market It will help to adjust the Demand – Supply balance in the market, consequently increasing coffee prices so that they can have more value added, creating more jobs for people, increasing Tax payable as well as helps to develop our economy Thus, it’s really necessary to intensify consumer’s awareness of Trademark, encourage their coffee drinking hobby to reach a Marketing Plan for Trung Nguyen Desiccate&Mill coffee in Vietnam Market Moreover, with the plentiful supply source, the low consumption in local market will be a great opportunity for Coffee Entities develop their business with more benefits MARKETING ANALYSIS AND DECISION MAKING Determination of product core benefits will help to produce good quality items or for more precise, to produce items which can be absorbable and satisfied consumer demands Meanwhile, entities can create competitive advantages and go in line with their target, expand their business when they have chosen the right target market Core benefits of Trung Nguyen Desiccate&Mill coffee for marketing plan is “Stimulation for creativeness” Market segments will be as per below patterns (Notes: Above chart is just described a pattern presentation Every branch of its will have a smaller branch followed Statistic and research figures: (Source: Rural Development Policies and Strategies Institution - IPSARD)  Coffee consumption per head, following Income group 2002:  In both of these two classes of city, people who often drink coffee have average age of under 40 – Hanoi is 36,3 and Hochiminh City is a little bit younger Besides, almost coffee-drinkers in Hanoi are at University level or at least graduated from senior high school while in Hochiminh City, people drink coffee at all levels % of people classified per race & income - HN % of people classified per race & income - HCM  Drinking coffee habit is also closely related to carreer: Retired people in Hanoi drink coffee most (19.8%) and University students drink less (8%) while it’s quite contrary in Hochiminh City – businessmen drink most (26,3%), University students come next and retired people drink less  Researchs showed, it’s average VND48,000 Hanoi people spent for 0,752kg coffee per year while Hochiminh city spent until VND121,000 for 1,65kgs coffee, times higher than Hanoi  There are 12% Hochiminh city people drink coffee several times per week and 40% drink coffee per month while it’s only 0.6% per week in Hanoi This’s quite easy to recognize through the numbers of Coffee shops and habit of drinking coffee at street-side shops of Saigon citizens while Hanoi people like to stay on street-side shops to drink tea  Hanoi people offer to their visitors tea but Hochiminh City people offer coffee instead Hence, there are up to 78% of HCMC people buy coffee home for welcoming their visistors Besides, Hanoi people like to drink coffee on holidays but HCMC people can drink coffee almost during the year  Coffee taste is also different between these cities: Saigon peole like pure-filterpowder-coffee (38%), filter-powder-coffee with milk (27%) and 20% of instant coffee while 67% of Hanoi people like instant coffee  Rate of people who enjoy coffee in shops are also different: Almost half of Saigon people have ever been to Coffee shop while it’s much lower in Hanoi When coming to Coffee shops, Saigon people prefer to have filter-coffee (61%), much higher than Hanoi peole While Saigon people consume coffee at no matter their income is, in Hanoi, the higher income people are, the more coffee they consume Number of people consuming coffee out of their house, in Hanoi & Hochiminh City  In Hanoi, coffee shops like to have no-flavour coffee, contrary to HCMC, they like flavours People come to Hanoi coffee shops prefer black filter-coffee in the moring, brow coffee (coffee with milk) in the evening However, in Hochiminh city, people like ice coffee despite of morning or evening  Population in HCMC & Hanoi: Average population per city (*) (*) Population in 2000-2009 adjusted as per General population & House research dated 01/4/2009 2001 2002 Hanoi – Male 1427.1 1464.9 2003 1500 Hanoi – Female HCMC – Male 1425.8 2628 HCMC – Female 2825.1 1463.4 2710 2909 1499.8 2802 3006 Hanoi 2852.9 5454 2928.3 3000 5619.4 5809.1 Hochiminh city 2004 2005 1568 2006 1596 1531.9 2894 1565.4 1588.2 3012.2 3140.8 1610.2 3254 3113.6 3218.7 3342.3 3071.4 6007 3133.4 6230 3184.8 1539.5 6483.1 2007 2008 2009 1618.3 3124.9 3256 3180.0 3353.9 3455.3 3471.3 3592.2 3740.8 3228.5 6725 6381.8 6946 6472.0 3292.0 7196.1 Basing on above records and analysis, we’ve decided to choose Marketing segment, targeted Customers and Market for TRUNG NGUYEN Desciccate &Mill coffee as follows: Marketing segment: Marketing Segment Less condense – Flavoured Demography features Aging from 20-40 Behavioural features Consume a lot Psychological featurs High self-reliant Value tended, easy going Condense – Less flavoured Aging from 41-65 Consume a lot Conservative minded Connoiseur, hard to please Targeted customers:  Young peole ages from 20 to 40  Middle aged people ages from 41 to 65 Targeted market:  Hanoi and Hochiminh City PRICE STRATEGY FOR TRUNG NGUYEN DESICCATE&MILL COFFEE According to teaching material, building up and managing price strategy well make sure that Company will be successful in invasion and development strategy into the market Price fixing means very important to the Company because it effects directly to company income and profit Price is one of the four important variable factors of Marketing Mix Price fixing is very difficult as it is impacted by internal factors: Maximize profit, marker-share leader, product-quality leader Price is one of usefull tools company uses to achieve marketing target for its product Researchs show: customers at middle-age and young have the most coffee consumtion and consumed it fastest Marketing segment at the age of 20-40 and 41-65 are customers with stable income Targeted markets are Hanoi & Hochiminh City, the two biggest markets having the highest consumption and influencing to other markets in the country Coming from the truth that the youth and businessman like high quality and flavoured coffee, Trung Nguyen has fixed its products at high price and “high quality leading”, products with “Creativeness”, totally different with Nescafé - Café Viet which is propagandized as “strong” because its coffee concentration of this product Comparision with other Competitors: No Brandname VINACAFE Vinacafé Black Weight 200 gr Unit Bag Selling Price 23,000 VNĐ 5 Heritage Blend Mundo Espresso Vinacafé Super Vinacafé Gold TRUNG NGUYÊN Creation Creation Creation Creation Creation 200 200 340 200 gr gr gr gr Bag Bag Bag Bag 44,000 50,000 63,500 38,400 VNĐ VNĐ VNĐ VNĐ 250 250 250 250 250 gr gr gr gr gr Bag Bag Bag Bag Bag 37,000 43,000 52,000 59,000 72,000 VNĐ VNĐ VNĐ VNĐ VNĐ (Source: www.vinacafe.com.vn and www.trungnguyen.com.vn) Because of the difficult economic circumstances currently, smart consumers sometimes have to set Price criterion at first when they decide to buy what product The fact that consumers tend to choose fair quality with fair price has pushed Companies to the difficult situation that how to provide to the market a product with same quality (as the previous ones) but accepted price by consumers Facing this, Trung Nguyen, in their Fixing Price strategy, has diversified their products, created several product series with specific tastes in order to satisfy customers various needs, with various price levels to maximize customers’ satisfactory: - With “Creation” series, Trung Nguyen has launched these products with the low-medium price (from 37,000đ to 72,000đ/bag 250gr), totally meets the demand of labor people, the majority of our population - With “Mixture” series of G7 and Passiona, Trung Nguyen has sold them with medium price (from 73,000đ to 110,500đ/bag), being instant coffee series with variuos tastes and flavours, convenient to the youth and office staff – the crowded laborforce of our country - Trung Nguyen also takes care of the special and rare market segment to create a very high quality product with very high price - "Weasel – The King of coffee” – at 16,000,000đ/box 250gr Another special product with price second high next to Weasel – The King of Coffee” is “Legendee” at 990,000đ/box 225gr These two high-value products were selected to serve Global conferences as ASEM, APEC, WEF, etc being special gifts for Heads of state, Kings and selected to be Cultual Diplomatic Ambassador by the Foreign Affair Ministry Trung Nguyen decides to launch a product having higher quality than competitors’ ones and obviously more expensive Hence, Trung Nguyen has sent a belief to their customers that because this product brings more value to customers, it worths to have higher price (www.trungnguyen.com.vn) These two products are currently the most expensive coffee in Vietnam As at the end of 2004, Trung Nguyen has set up a network of 600 coffee shops in Vietnam, 121 distributors, 7000 selling points and 59,000 retailed shops (ThS Do Van Tinh - www.trungnguyen.com.vn) To have such a large distribution system, when doing pricing its products, Trung Nguyen has set up a frame of discount % for this distribution system They are cash discount, quantity discount and seasons discount (for low season or peak season) Pricing with discount inside is one of important tools allowing Producer to react flexibly with market consumption and competitors activities Consumption decision sometimes depends on the seller than direct buyer because sellers will focus on selling what product brings them more benefit and the buyers are often beeng convinced by the sellers Because of this, when doing pricing for products, company should not forget to count this discount/middleseller’s benefit into products’ cost CONCLUSION Being impacted by many factors, Price and its movement are very complicated Therefore, Price management strategy is required to solve many general issues synchronisticly in order to build up a suitable pricing policy as well as to meet profit target of the company By owned efforts, Trung Nguyen are choosing the suitable price policy, the diversify product policy and good distribution policy as well as successful Promotion & PR policy, growing up from a very young coffee trademark in Vietnam in 1996, Trung Nguyen currently wins consumers’ trust and becomes a popular coffee bandname not only in domestic market but also in international one Referential materials: Marketing Management by Philip Kotler, Labor & Social Publishing House 2009 Annual reports of Vietnam Entities 2011 - Topic "Business associating" VCCI, Information & Media Publishing House 03/2012 "Research on coffee consumption in Hanoi and Hochiminh City” by Rural Development Policies and Strategies Institution (IPSARD), Economic Management & Policies Consultance Center Difference or Die by Jack Trout-Steve Revkin, 2nd edition, Youth Publishing House 2010 How much coffee Saigon people drink by Thoibaokinhtesaigon, dated 05/06/2012 Web page: www.trungnguyen.com.vn Web page: www.cafesangtao.com Web page: www.scribd.com ... and analysis, we’ve decided to choose Marketing segment, targeted Customers and Market for TRUNG NGUYEN Desciccate &Mill coffee as follows: Marketing segment: Marketing Segment Less condense... with their target, expand their business when they have chosen the right target market Core benefits of Trung Nguyen Desiccate&Mill coffee for marketing plan is “Stimulation for creativeness” Market... intensify consumer’s awareness of Trademark, encourage their coffee drinking hobby to reach a Marketing Plan for Trung Nguyen Desiccate&Mill coffee in Vietnam Market Moreover, with the plentiful supply