Principles to build customer loyalty in Vietnam card industry

ĐẠI HỌC QUỐC GIA HÀ NỘI
TRƯỜNG ĐẠI HỌC KINH TẾ

PHÙNG NGỌC HẠNH



PRINCIPLES TO BUILD CUSTOMER LOYALTY
IN VIETNAM CARD INDUSTRY




LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH



NGƯỜI HƯỚNG DẪN KHOA HỌC: TS. Vũ Huy Thông
Th.S Nguyễn Việt Anh





Hà Nội – 2005

ĐẠI HỌC QUỐC GIA HÀ NỘI
TRƯỜNG ĐẠI HỌC KINH TẾ

PHÙNG NGỌC HẠNH

PRINCIPLES TO BUILD CUSTOMER LOYALTY
IN VIETNAM CARD INDUSTRY

Chuyên ngành: Quản trị kinh doanh
Mã số: 60 34 05



LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH



NGƯỜI HƯỚNG DẪN KHOA HỌC: TS. Vũ Huy Thông
Th.S Nguyễn Việt Anh




Hà Nội – 2005
iv

TABLE OF CONTENT
CHAPTER 1 INTRODUCTION 1
1.1 NECESSITY OF THE THESIS 1
1.2 PURPOSE 2
1.3 KEY RESEARCH AREA 2
1.4 METHODOLOGY 3
1.5 CONTRIBUTIONS OF THE THESIS 4
1.6 OUTLINE 4

CHAPTER 2 CUSTOMER LOYATY LITERATURE REVIEW 6
2.1 WHAT IS CUSTOMER LOYALTY 6
2.1.1 Customer development process 6
2.1.2 What is customer loyalty ? 8
2.1.3 Customer loyalty and customer satisfaction 8
2.1.4 Customer loyalty is a journey 10
2.2 THE BENEFITS OF CUSTOMER LOYALTY 10
2.2.1 The value of Predictability 11
2.2.2 No price of attraction 12
2.2.3 The ease of doing business 12
2.2.4 Word of mouth marketing 13
2.3 FIVE PRINCIPLES TO BUILD CUSTOMER LOYALTY 14
2.3.1 People do business with people 15
2.3.2 Differentiation 22
2.3.3 Value and Assurance 26
2.3.4 Effective communication 30
2.3.5 Focus 33
CHAPTER 3 RESEARCH ON CUSTOMER LOYALTY IN VIETNAM
CARD INDUSTRY 37
3.1 VIETNAM CARD MARKET OVERVIEW 37
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3.1.1 Vietnam card market 37
3.1.2 Export opportunities 44
3.2 RESEARCH ON CUSTOMER LOYALTY IN VIETNAM CARD
INDUSTRY 45
3.2.1 Objectives of the research 45
3.2.2 Research methodology 45
3.2.3 Data analysis and results 48
3.2.5 CONCLUSION 61

CHAPTER 4 RECOMMENDATIONS TO BUILD CUSTOMER LOYALTY
IN VIETNAM CARD INDUSTRY 63
4.1 DEVELOPE ACTIVITIES THAT SUPPORT PEOPLE DOING
BUSINESS WITH PEOPLE 64
4.1.1 Test yourself how well you deal with your customers 64
4.1.2 Understand and effectively use the tool KUHL 65
4.1.3 Take the initiative visiting your customers 68
4.2 DEVELOPE ACTIVITIES THAT SUPPORT DIFFERENTIATION 68
4.2.1 Test yourself about your differentiation 68
4.2.1 Always think of something different 69
4.3 DEVELOPE ACTIVITIES THAT SUPPORT VALUE AND
ASSURANCE 75
4.3.1 Test yourself about your value preposition and assurance 75
4.3.2 Create value preposition for every product line 76
4.3.3 Stand in your customer’s shoes to prepare value preposition 76
4.3.4 Be flexible in delivering values 77
4.3.5 Ensure promises are kept 78
4.4 DEVELOPE ACTIVITIES THAT SUPPORT EFFECTIVE
COMMUNICATION 78
4.4.1 Take a test of your effective communication 78
4.4.2 Prepare well before you meet with your customer 79
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4.4.3 Being dedicated during the meet 80
4.4.4 Send thank you note to your customer 81
4.4.5 Create a newsletter 82
4.4.6 Survey about customer satisfaction regularly 84
4.5 DEVELOPE ACTIVITIES THAT SUPPORT FOCUS 87
4.5.1 Examine your focus 87
4.5.2 Do not apply more favor offer to new customer 87

4.5.3 Focus your resources on current customers 88
CONCLUSION 89
REFERENCES 90
Appendix A – Questionnaire for Vietnam card companies 91
Appendix B - Questionnaire for Vietnam Card Customers 95
Appendix C – Sample of Product Installation 101
Appendix D – List of card vendors participated the survey 102
Appendix E – List of card customer 103

vii


LIST OF TABLE
Table 3.1 - Vietnam Card Market Size
Table 3.2 - Vietnam Card Related Products
Table 3.3 - Samples Profiles
Table 3.4 – Satisfaction of Performance
Table 3.5 – Time of business relationship
Table 3.6 –
Likelihood of repurchase current card vendor’s products and services
Table 3.7–Likelihood of switching to another competing brands when experience
poor services
Table 3.8 – Likelihood of recommend current card vendor to others
Table 3.9 – Relation between customer loyalty building and loyalty rate
Table 4.1 – Examine how well you know about your customer
Table 4.2 – Understand your customer by asking questions
Table 4.3 – Examine your difference
Table 4.4 – Examine your value preposition and assurance
Table 4.5 - Examine your effective communication
Table 4.6 – Examine your focus

1

CHAPTER 1 INTRODUCTION
1.1 NECESSITY OF THE THESIS
Getting customers to come back again and again is the most important
endeavor of every business. No business can be successful by continually
dealing with new customers. Repeat customers are the source of all profit.
It is estimated that “acquiring new customers can cost five times more than
the cost of satisfying and retaining current customers” *Philip Kotler, 2001+.
Loyalty means profitability. When customers stay longer, they are easier to
predict, likely to create emotional bond and recommend us to others.
Meanwhile, serving cost reduce as we had experience and knowledge about
our customers. Advertising expense is saved as customers already know
about us, our products and services. Profit tends to increase and losing
customer, especially old one means losing profit.
However, many companies in Vietnamese card industry suffer from high
customer churn - they gain new customers only to lose many of them. A
statistic research in MK Technology Group, a well-known brand in Vietnamese
card industry showed that, “on average, retention rate of a Vietnamese card
company is 45% after 5 years.” The number is low. According to International
Card Manufacturing Association, average retention rate in 25 leading card
2

companies is 70%. For companies who pay great focus and efforts on building
customer loyalty, this rate may reach 80%.
Surveys have shown that, Vietnam card companies generally aware the cost
of losing customers, the benefits as well as the necessity of building customer
loyalty. However, activities to earn customer loyalty are currently poorly
conducted and how to build it effectively is still a question.

1.2 PURPOSE
The thesis has provided Vietnam card companies with an overview of
customer loyalty theory, the necessity and the benefits of building customer
loyalty. A survey was also conducted to help card companies have some
ideas about current loyalty rate in Vietnam card market. The most essential
part suggests some recommendation, guidelines to help Vietnam card
companies effectively achieve customer loyalty.
1.3 KEY RESEARCH AREA
The thesis studies customer loyalty theory, opinions and experiences from
different researchers and industries leaders. How to customize the theory to
successfully apply in Vietnam card industry. Chapter two of the thesis is a
research on Vietnam card industry with two main objectives:
1. To assess customer loyalty building activities.
2. To assess current customer loyalty
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1.4 METHODOLOGY
Related documents on customer loyalty were gathered, compared, analyzed
and customized for Vietnam card market. Various sources of information
were combined for use: books, internet, media, direct talks with marketing
experts. In chapter two, author has conducted 2 surveys with objectives as
mentioned above
Population and Sample
For the first survey, author assesses customer loyalty building activities in
card industry. The population is all Vietnamese card companies, which is
estimated at 19 companies. As most companies are based in Hanoi and Ho
Chi Minh City (HCMC), we will take the sample of 6 companies in Hanoi
and 6 others in HCMC. These 12 companies account for about 90%
Vietnamese card market share. This sample is typical enough to withdraw
conclusions about Vietnam card industry. The questionnaires are delivered

to key person in each company.
The second survey is to identify how loyal customers are in Vietnam card
industry. This is a B2B commerce, card customers usually are organizations.
Of course customer loyalty varies from company to company. However, we
would like to have a general view of current loyalty rate. Author has taken a
sample of 40 organizations that issuing cards. The sample is taken randomly,
25 in Hanoi and 15 in HCMC (see Table 3.3 for Sample profile).
4

Data collections methods
Many data collection methods were considered. Because of constraints in
terms of time, costs and human resources, a random sample from the whole
population of card companies could not be obtained in this research. Author
has approached 12 most well known card companies in Hanoi and HCMC
for the survey.
For the first survey, a total of 12 questionnaires were sent via email. Notice
phone calls were made in prior and follow up. All 12 completed usable
questionnaire were collected. For the second survey, a total 40 questionnaires
were distributed and 33 are completed usable. Secondary data provided by
card companies, media, Internet was used in compliment.
1.5 CONTRIBUTIONS OF THE THESIS
The thesis has systematically helped Vietnam card companies see what
customer loyalty is, the benefits and principles to effectively create customer
loyalty. Most important, the thesis has developed specific activities, tips to
guide Vietnam card companies in creating their loyal customers.
1.6 OUTLINE
The thesis is divided into four chapters:
 Chapter 1: Introduction
 Chapter 2: Customer Loyalty Literature Review
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This chapter will provide us with the literature review of customer loyalty.
We will together study what customer loyalty is, the benefits and five
principles to create customer loyalty. The content has been customized
specifically for card industry.
 Chapter 3: Research on Customer Loyalty in Vietnam Card Industry
The chapter is divided into two sections. Through the first section, we will
have a broad overview about Vietnam card industry: products, demand,
trend, competition and export opportunities. The second section is a research
about current customer loyalty in Vietnam card industry. Brief findings are
presented by the end of the section.
 Chapter 4: Recommendations to Build Customer Loyalty in Vietnam Card
Industry
Based on the literature in chapter 2 and the fact of customer loyalty in
Vietnam card industry, chapter 4 gives instructions toward Vietnam card
companies to create customer loyalty.




6

CHAPTER 2 CUSTOMER LOYATY LITERATURE REVIEW
In chapter two, we will study what customer loyalty is, the benefits or why
we should build customer loyalty and how to build it effectively. The
literature on customer loyalty has been customized specifically for card
industry. During discussion, several cases and simulations of Vietnam card
companies were introduced as well.
2.1 WHAT IS CUSTOMER LOYALTY
There are several truths around customer loyalty. For a better understand,

we will review the customer development process. Then we come to the
definition of customer loyalty. As often there is a misunderstanding between
customer loyalty and customer satisfaction, we will discuss the difference
between these two terms as well as the relevance between them.
2.1.1 Customer development process
Philip Kotler has summarized customer development process which
involved in attracting and keeping customers. Figure 2.1 shows main steps of
the process.
The starting point is Suspects – anyone who may buy our card product. We
can collect customer database by segments: Banking (All banks are suspects
for card programs, card issuing system, card acceptance devices); Telecom
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(All telecom companies for internet card, mobiphone card); Hospitality (All
restaurants, hotels, shops, bar clubs for loyalty programs); Enterprise (All
enterprise may issue employee cards, universities, for student card,
supermarket for customer card); Government (for National Identity Card,
Security Card, Driving License), etc.





Figure 2.1 - Customer development process
Second step is Prospect – accounts who have strong potential interest and
ability to deploy card programs.
Prospects are then converted to First time customer. When first time customer
comes back, he becomes Repeat customer. Repeat customer may become Client
– people whom the company treats specially. Now the card company know
more about its clients, it may deliver faster card service, more favorable

payment conditions.
Then clients may turn into advocates: Buying on repeat basis and recommend
Prospect
Inactive or ex-customer
Suspect
Disqualified
Prospects
First time
Repeat
Client
Advocate
Partner
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the company and its offerings to others. The ultimate challenges is to turn
advocates into Partners, where the customer and the company work together
actively. Telecom partners, for example, may work with R&D department of
a card company for months to develop new smart card technology for their
product. Partners are someone deeply involved in your business, you work
together for mutual interest.
2.1.2 What is customer loyalty ?
Customer loyalty is an activity of coming back again and again. When
customers buy from you again and again and tell the world why everyone
else should buy from you, they are demonstrating loyalty. Customer loyalty
is the specific activity of buying from you or recommending you to others on
a repeat basis.
2.1.3 Customer loyalty and customer satisfaction
Some people are may confused between customer satisfaction and customer
loyalty. However, there is a clear distinction between the two terms.
Customer satisfaction is a mental status of being satisfied. It is one person’s

feelings of pleasure or disappointment resulting from comparing your
products and services perceived performance (or outcome) in relation to his
or her expectations. If your card, machine, services’ performance falls short
of expectations, the customer is dissatisfied. If the performance matches
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expectations, the customer is satisfied. If it exceeds expectations, the
customer is highly satisfied or delighted.
Customer loyalty is an activity of buying again and again, and
recommending you to others.
Customers can be satisfied with your cards quality, your services, yet be
willing to switch to another provider who offers the next card feature, the
next price reduction. A loyal customer makes a business judgment - a value
determination – and concludes: I would choose company X again. A loyal
customer makes a brand decision; a satisfied customer makes a products
decision.
However, customer satisfaction is a needed factor to create customer loyalty.
It is hard to convince a dissatisfied customer to stay with you, while your
competitors are providing compelling products and services. A highly
satisfied customer stays loyal longer, buys more, talks favorably about your
company and your products, pays less attention to competitors, is less price-
sensitive, offers product or service ideas, and costs less to serve than new
customers because transactions are routinised.
In high tech industry like card, customer satisfaction in first deals is
extremely important and can create or destroy customer loyalty. If your
cards disappoint customers in first deals, they may never come back. The
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next order customers immediately switch to other vendors. It may forgivable
if both parties already have strong relationship. But it is hard to change early

perception. So keeping customers satisfied in first contracts is important.
2.1.4 Customer loyalty is a journey
“Having loyal customers is not a goal, it is a journey – a continuous process.”
[Arthur M. Hughes, 2003]. Customers do not sign an oath stating their
intention to buy card products from you again and again. Card companies
must forever commit to the activities that create loyalty. This commitment is
a process, an on going journey. When you commit to the process of creating
customer loyalty, you are committing to developing and refining the
activities that create loyalty. The activities to create customer loyalty will be
more discussed in section 1.3.
2.2 THE BENEFITS OF CUSTOMER LOYALTY
There are several benefits resulted from customer loyalty. Loyal customers
are easier to predicted. They already know where you are located, and what
service and products your business provides so you do not have the expense
of advertising in order to attract them. These repeat customers are easier to
do business with because of what you know about each other. Time and
money are saved and you earn more profit.
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2.2.1 The value of Predictability
Predictability is an important benefit of having loyal customers.
Predictability allows your card company to maximize its resources today and
plan for the future. When you can predict your customer’s buying habits,
taste, customization requirements, quantity per order, time of order,
payment term, you are also able to predict staffing, inventory, and every
other aspects of your business. This helps your business run more effective.
MK JSC with Banking Customers
MK is a big player in Vietnamese card industry. The company joined card
industry in 1999 and its customers are most big banks in Vietnam. After six
years of operation, the company now has learnt a lot in how to serve its

customers. For example, most banks implement their purchasing plans by
the end of year (Q04). Then in this period, MK is well prepared for bidding
participation. It makes more aggressive sale efforts, invites foreign partners
for customers tours, prepares marketing materials ready and sent to key
decision makers, holds road-show, etc. Aggressive activities in purchasing
seasons results better outcomes.
MK also finds easier to predict what specific products an old customer is
looking for. For example Vietcombank is using a card issuing system bought
from MK. They buy $10,000 of supplies from MK every two months. Then on
the one hand, MK can plan for most economic inventory and save storing
cost; on the other hand, most properly serve VCB with right time, right
quantity and raise customer satisfaction.
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2.2.2 No price of attraction
Predictability is only one advantage of having loyal customers. In card
industry, the cost to attract new customer is a large expense that is affected
by customer loyalty. Advertising, signs, promotions and special sales are just
a few of the additional expense of attracting new customers.
I was a sale executive in a card company. For new customers, it takes time,
money and energy to gain contracts. I should travel for meetings, do
presentations, bring demo products, invite them for firm tour, sending
marketing materials to introduce about my company, products and services.
All these incur expense and some may not buy my products.
For loyal customer, they already know who I am, where I am located, what is
my business, how to work with our company. We do not have to spend
thousands of USD to attract them. And when demand for card occurs, our
name is automatically taken into consideration.
2.2.3 The ease of doing business
Predictability and a reduction in costs to attract new customers are not the

only advantages to having loyal customers. There is third advantage that
helps reduce cost in dealing with customers. New customers have to learn
how to buy from you, and teaching them takes time. You also have to learn
how to serve new customers, it takes time as well.
New customers may have bad credit habits, high returns and millions other
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problems that need to be overcome before you can figure out how to best
work with them, and over coming these problems takes time. You must learn
what card specifications these new customers use: what card materials they
want, how many cards per order, how these new customers are going to pay.
You have to spend weeks or months to work out the final card designs.
Customers describe the card they want and your card designers have to
come back times after times to come to an agreement. For old customers,
they already made the designs with you and all you have to do is
manufacturing the old products.
You also must learn what new customers’ delivery requirements might be?
What are products selection they prefer? How demanding they are of
services? How responsiveness are these new customers to special sales or
promotion? Who are their key decision makers? How to handle each member
in purchasing board?
Only after you learn about them, you will be able to deal with these new
customers effectively. All this extra time cost you money and all of your
potential profit is spent on learning how to deal with these new customers.
2.2.4 Word of mouth marketing
Attracting and learning how to serve new customers can cost a substantial
amount of money and can be very time consuming. Meanwhile, your loyal
14

customer want to do this work for you at no charge. Once customers become

loyal, they are willing to tell others why everyone should buy from you, and
they do not want a single penny for their effort.
Everyone, every organization like good deals. A good deal might be a better
price, a special selection, an excellence service (very important in card
industry), a dedicated salesman or any number of other things. When a
customer feels happy with his purchase, he is willing to tell other about you
and your products.
This word of mouth advertising is very important in card industry and is the
most effective way to attract new customers. In card industry, normally
contracts’ values are high. For high capacity card issuance system, total value
can come up to millions USD. Then good references are critically important.
Most of us are risk adverse. New customers often look at old customers who
have already bought from you, asking for their experiences, how they were
served by your staff, how they evaluate your services, etc. And because their
recommendation is more credible, it is more valuable than any advertisement
you could possibly buy.
2.3 FIVE PRINCIPLES TO BUILD CUSTOMER LOYALTY
The five principles to build customer loyalty we will discuss below are
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summarized by Manzie R. Lawfer who has spent 25 years researching on
customer spending habits and loyal. Manzie has discovered these principles
through thousands of interviews with customers, captains of industries, and
business leaders. These principles were built on two facts that: i) people will
do business with people who they like and who like them, who show their
importance, and ii) they are delighted with their purchases.
Through my research over Manzie’s work and from my experience in card
industry, I found these five principles are useful and powerful. These
principles were scattered in hundreds of books and articles as well. They are
based on the actual buying habits and experiences of loyal customers. Any

one of the five principles will increase loyalty, but when all five principles
are put to use, the results are astounding.
Below we will together review the five principles. During discussion, I have
done some customization for better apply into Vietnam card industry.
2.3.1 People do business with people
People doing business with people is the cornerstone principle of creating
customer loyalty in not only card but every other industries as well. All of
the principles that create loyalty are based on the interaction of people.
“Loyalty is a response to these interaction. People are the heart and soul of
all deals – not buildings, products, patents, or anything else.” *Manzie
16

R.Lawfer, 2004]. People doing business with people is all about how you
create and maintain your customer relationship, the way you deal and how
you handle your customer.
Card features, machine specifications, price, services, all things being equal,
people want to do business with people they like and who like them. All
things being unequal, people still would rather do business with people they
like and that like them.
Card companies traditionally compete on issues such as price, product
advantages, selection and services. The best competitive tool is not any of
these things. The best competitive tool is genuinely caring about people and
making them feel important. People are motivated by the need to be
important.
Customers love to find card companies that recognizes them by name, and
gladly welcomes them when they come through the door. Customers will
pay more money, spend more time and buy your products if you make them
feel important. Of course you better have cards, machines and services they
want if you sincerely believe they are important. Now we will discuss a tool
to make our customers feel their importance, it is KUHL.

KUHL
All customers want the same thing: they will buy cards, equipments with
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people who know and understand them, who confirm their importance. The
customer’s importance is demonstrated by:
 Know me
 Understand me
 Help me
 Lead me
Know ME
Customers like to do business with people who know them. When you
demonstrate that you know someone, you are demonstrating that they are
important to you, because you had spent time studying about them. The
more you know about them, the more important they will feel.
Knowing can be as simple as knowing your customer’s name or
remembering your last card types, equipments sold to them. If you do not
know a new customer’s name, his company when he comes into your
business, make sure you ask and memorize it for the next time. They will
repay your effort by coming back to order cards from you again and again.
Understand ME
All customers want to be understood. The more you understand their needs,
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the more adequate the proposal you offer, in consequence, the more possible
you win the contracts.
In card industry, requirements for product specifications varies from
customer to customer. Vietcombank may want ATM machines with
premium brand because they want to position VCB as the number one bank
in Vietnam. Meanwhile, VIBank may want middle-end ATM. To them,

investing in ATM network must be cost effective. They want to have a large
ATM network to bring more convenience to ATM cardholders, and by this to
gain competitiveness. By understanding all these different needs, you can
propose right products to right customers. When customers see you deeply
understand their situation, their needs, they trust you more.
Customers want to be understood so that you can lead, help and serve
them. A customer will not accept your leadership unless they believe
you understand them, which is why understanding is the mutual
starting point in purchasing decisions for many contracts.
[Manzie R.Lawfer, 2004]
Like in the case mentioned above, if you understand what kind of ATM
customers are looking for, you can lead them. You cannot help your
customer plan their card issuing program, choose an ATM, buy a terminal or
make any other purchasing decision until you understand them and what
they want and their specification.

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Understanding your customers
When card companies track the activities of their professional sales team,
they find most often that a sale is made only after the prospect has been
called or visited on five or more times. This is a testimonial to the importance
of understanding the customer. Customers are reassured that you really
understand them only after you have taken time to visit them and learn
about their issues and concerns.
When writing a proposal to a bank, a very important part is Demand Analysis,
in which you analyze current demand of your customer. Normally, Vietnamese
card companies when sending proposal to their customers only stating what
products they have: what cards they have, what machine, equipment are
available, their unique selling points, etc. But customers will value your

proposal much higher if in that proposal, you show your understanding toward
customers’ current situation. For instance, you should analyze: what system they
are having, their strengths and weaknesses, why do they need your products,
what coming trends in card payment industry are, how customers should react
toward those trends, etc. By these, customers know that you understand them,
and your solutions become more reliable.
Help ME
Card is a high tech industry. New technologies are born everyday, new