Maintaining Customer Loyalty In Vietnam Dental Market Marketing Essay

Pacific Dental, the company that I am working for, is a professional supplier in dental business and exclusive distributor for some well-known dental manufacturers in the world such as Dentsply International Inc. (The No.1 Dental Company in the world), Adec International Inc (The No.1 Dental Chair in USA) and other famous dental producers from Japan, Germany, Switzerland, Denmark, Italy, etc. We supply consumable & equipment dental products to dental clinics for patient’s treatment. Pacific Dental is doing business in Vietnam, Cambodian & Laos but the main market is Vietnam. Pacific Dental supply dental products to customers in Vietnam directly and via dealers in Cambodian & Laos. Pacific Dental sales generate mostly from consumable products which is accounted more than 75% of our sales revenue. Usually customers buy consumable product monthly.

One of Pacific Dental objectives is to motivate customer loyalty with the company through various programs such as special discount, offering scientific & training program, products sampling, customer service before & after sales, accumulated points to exchange FOC, year-end customer meetings in resorts…etc. With those activities, we expect to create customer loyalty in order to increase sales productivity while deliver cost-effective products to customers.

We have been in Vietnam dental market for almost 10 years and well-known as a leading supplier of dental products. Pacific Dental Vietnam revenue of the year 2010 was approximately 5 million USD and mostly generated from loyal customers base. Pacific Dental has 60 staffs in Viet Nam and 2 staffs in Cambodia & Laos. Our company structure has different division such as Sales division, Marketing division, Human Resources division, Technical division, Logistic division & Finance division.

Dental sector in Vietnam

Oral health services in Vietnam are provided by both government health service & private practitioners under payment of fees covering the total cost of treatment. There is government health care insurance scheme covering basis dental treatments as examination, extraction, prophylaxis, endodontic and X-ray. Private insurances covering dental expenses can offer reimbursement or convention. With reimbursement scheme, the treatment is paid by the patient who then will be reimbursed by the government. With the convention scheme, dentist earns a certain amount of each treatment defined by the insurance company, while the patient makes a copayment to dentist according what is agreed in the contract. Most of patients can pay dental treatment fee to dental clinics in private & government hospitals directly based on agreement of treatment plan. It is main income source of dental clinic customers in Vietnam dental market.

Vietnam is an attractive dental market with estimated annual revenue is 30 million USD and growing at rate valued from 20% to 30% per year. The number of dentists in Vietnam is 5,000 approximately. The revenue of consumable products and equipment products represent around 70% and 30% of total sales respectively. Most of dentists prefer imported products due to high quality from well-known brands and state of the art technology to satisfy demanding patients. There are around 65 dental suppliers in Vietnam dental market today. More & more dental supplier will be established to supply dental products to dental clinic customers every year. It will create more fierce competition in Vietnam dental market in coming time.

As the Vietnam dental market is fragmented in difference markets joined by two hubs of Hanoi & Ho Chi Minh cities. Most of dental supply companies establish offices in both two areas.

Dental workforce in Vietnam in 2010

 Year

2010

Total inhabitants

90,000,000

 Number of practicing dentists ( public & private )

5,000

 Population/dentist

18,000

 Chair side Assistants (dental nurses)

4,000

 Number of active dental Technicians

3,000

Number of dental laboratories

2,000

 Number of Dental Schools

6

 Length of Curriculum (years)

6

Number of New Graduated Per Year

300

 Schools for Chair side Assistants (dental nurses)

5

 Schools for Lab Technicians

3

(Sources: Internal data)

Generally, 98% adults ranging from 18 to 35 years old suffer from oral health problems and this seems to be an increasing trend. The population is yet becoming more and more aware of dental health care. Because of rising living standards and health care education in Vietnam

More and more dental private clinics have been established over the years and there is a growing demand for dental consumable, equipment products and services from supplies.

In 2005, Vietnamese dental market size has been US $9 million, an increase of 25% over 2004 figures. Vietnam relies especially on imports coming from USA, Germany and Japan. Japan & USA leads 50% of the market, thanks to its early penetration, affordable prices and design.

Germany leads another 30% of the market with its high quality equipment. Italy, Switzerland, France, Korea also import goods to the country, together with China and Asean countries (20%).

Vietnamese import tariffs are low, from 0% to 5% for dental equipment. Best sales prospects are to be seen in imports of dental equipment, consumables, Implant, Orthodontics, Cosmetics, drill engines, chairs with equipment included, dental hand instruments, x-ray devices and radiation equipment.

Selling is advised to institutions with strong purchasing power and influence to dentists, such as large dental hospitals and dental faculty supported by the government. As most of dentists work for government in working hours and work at their dental clinic after working hours. More and more dental clinics are looking for advanced consumable and equipment products. Decision makers during sales are quality, price, service, brand name, training & education and promotion. The distribution channels are most come from direct sales to dental clinic & government hospital.

(Sources: www.infodent.com)

Objective of the study

Today the dental business will become more difficult and fierce competition. More and more dental companies will be established and supply services & products to Vietnam dental market. Keeping and building long term profitable relationship with customers to achieve customer loyalty is important task for dental suppliers in the market today. There are many sales & marketing tactics will be implemented for retaining customers. However some programs did not affect to customer loyalty effectively and switching behaviors frequently happen in most targeted customers.

For this case research I focus on how to maintain customer loyalty with Pacific Dental and targeted group is dental clinic customers as they purchase dental products monthly or bi-monthly from dental suppliers

Dental products belong to health care industry which safety standard with patient health issue is very important. Therefore, customers consider selecting to purchase product very strict on quality and origin. Therefore, my case research aim to explore most effective sale & marketing tactics on customer satisfaction and trust which will be returned to increase customer loyalty and the research is focusing on Vietnam dental market. The analytical model is developed as guideline to research the relationship between sales and marketing, customer service, human resource management theory and customer loyalty. Findings from this research can help Pacific Dental could save budget to get more new customer by retain existing loyal customers and those customers will generate more benefit to Pacific Dental in return. Furthermore, main findings from this research will help my company to develop and to become market leader in Vietnam dental market & will build strong distribution network in Cambodia & Laos dental markets. Pacific Dental always focused on customer loyalty base to get high customer satisfaction & trust in order to consolidate long term mutual benefit relationship with customer.

2. Relationship to management theory

Loyalty marketing

Loyalty marketing is an approach to loyal customer base with strategy in which a company focuses on growing and retaining existing customers through branding, products quality, customer, service quality, promotion. The loyalty marketing all form part of the customer proposition – the subjective assessment by the customer of whether to purchase a brand or not based on the integrated combination of the value they receive from each of these marketing disciplines

The discipline of customer loyalty marketing has been around for many years, but expansions from it merely being a model for conducting business to becoming a vehicle for marketing and advertising have made it present in consumer marketing organizations since the mid- to late-1990s. Some of the new loyalty marketing theories such as the author Frederick F. Reichheld of Loyalty Effect & Loyalty Rules have claimed a strong link between customer loyalty marketing and customer referral. In recent years, a new marketing discipline called “customer advocacy marketing” has been combined with or replaced “customer loyalty marketing.” To the general public, many airline miles programs, hotel frequent, food chain guest programs and credit card are the most visible customer loyalty marketing programs.

(Definition by Wikipedia)

Customer Loyalty

Loyal customers purchase products and services again and again over time and increase the volume of their purchases. Loyal customers will buy beyond traditional purchases, across available product lines and refer new customer to purchase company’s products and services. Loyal customers become immune to the pull of the competition and pricing strategies and are more likely to give more benefit to a company. (Predicting Market Success by Robert Passikoff Page 4) Loyal customers are considered the most important assets of a company. Loyal customers had positive commitment to re-purchase products and service from company over the time and less switching to competitors by pricing issue. They will buy more products from company products portfolio and use additional service if they may know. Loyal customer even refer new customer to buy products or services from company also.

Customer loyalty was always desirable. Loyalty is an economic and engagement model for predicting consumer behavior and boosting profit and future revenue streams. It costs 7 to 10 times more to recruit a new customer than to keep an existing customer. An increase of loyalty customer of only 5 percent can lift lifetime profits per customer by as much as 95 percent. An increase in loyalty of just 2 percent, it may equivalent of a 10 percent across the board cost reduction (Predicting Market Success by Robert Passikoff Page 6). So keeping loyalty customers will help company save marketing expense and increase more profit tremendously.

3. Research methodology

Both quantitative and qualitative data was collected for analysis. In order to collect quantitative data, a questionnaire form is designed and sent to customers randomly to fill in. From analysis of collected data, I can find out factors influencing customer loyalty such as product quality, customer service quality, price perception, benefit offers, brand image and education etc. Besides that, I also conducted in-depth interviews with my colleagues. From in-depth with my staff, I can find out appropriate way to motivate staff loyalty.

Internally, I have conducted interviews with staff in charge for sales, marketing & customer service. All of us know the loyalty of staff play very important role in company’s business success. With dedicated staff team, they will deliver excellence quality services to satisfy customers and become unique benefit to compare with rival companies. So that company’s responsibility have to find out what is motivation factors to deliver to staffs in return. I have conducted interview the staff in personally with around 30-45 minutes approximately from March.15-30.2011 with below guiding questions.

What do you think about company policy & strategy in business?

Which areas that company need to improve or could do better in future? Any suggestions/recommendations?

Do you need more training program? Please specific which area of training?

How do you think about communication environment and procedures in the company?

Do you satisfy with remuneration annually?

How do you think about working environment in company?

What is your career development? What kind of support do you need from company?

How do you think about company responsibility & policy with loyal staffs?

Parallel, I have conducted external survey with questionnaires form which sent out to 50 customers randomly. The table below is presenting figures collected from collected questionnaires form.

No

Factors

Level of satisfaction & trust

1

2

3

4

5

Products quality :

1

Products quality

2

Scientific information

Brand Image :

3

Branding identity

4

Branding awareness

5

Communication

Training & Education :

6

Training & Education

7

Hand on workshop

8

Continuous Education

9

Professional support

Benefit offers :

10

Promotion offer

11

Rewards program

Customer service quality :

12

Customized solution

13

Delivery time

14

After sales service

15

Warranty policy

16

Credit

Level 5: Fully satisfaction, Level 4: Satisfaction, Level 3: Moderate satisfaction, Level 2: partly satisfaction & Level 1: completely unsatisfied

4. Main findings from the case research

Factors influencing customer loyalty

Price Perception

Customer Service Quality

Brand Image

Training

& Education

Benefit Offers

Product quality

Customer Loyalty

Product quality

Product quality is one of most important factors influencing the customer loyalty. Therefore, Pacific Dental is very careful to select products from suppliers based on customer needs and market demands to launch in Vietnam market. We try to find out which are qualify & cost effective products among products line to offer to customer with high quality, easy to use, compatible with environment and suitable with customer technique in order to treat patient effectively with high standard safety.

Pacific Dental is exclusive distributor of well -known dental manufactures as Dentsply International Inc, Adec Inc. So most of products supply by Pacific Dental are high quality products which made in America & European where the governments control very strict on quality with health care certificates approval as FDA, ADA, ISO, EC Free Sales Certificates…etc.

Pacific Dental always follow up strict procedures which developed by Vietnam Ministry of Health to apply import license documentation. That strict procedure will help us to avoid and mitigate risks in case any problem happened. We also sent sampling products to opinion leaders as experience dentists to use sampling products to make sure high quality products before official launching to market.

Keeping products at good condition and control expiry date also one issue that Pacific Dental take most concern to maintain quality standard as manufacturers instruction.

Customer Service quality: service is intangible product and different with physical products since it is unable to be kept in stock. That interaction is providing solutions to solve customer problem. Customer service is divided into three stages: before sales, during sales and after sales.

Service before sales: Pacific Dental offers consultancy service free of charge to customers that help customers understand fully products’ features & benefits in order to meet customer requirement and budget. Usually Pacific Dental sales staff and technical staff will meet customers to discuss and offer appropriate products to customers. We also offering sampling products and demonstration to customers in order to get customer confident on products before confirm orders.

Service during sales: Pacific Dental offer reliable & fast delivery with maximum products available as list of products order. Our aim is providing more than 95% products items base on customers order within 24 hours in Hanoi & Hochiminh city and 36 hours which send to customers in provinces

Service after sales: Pacific Dental commit to support customers’ direction for use, technical activities as installation, demonstration and warranty time as manufacturer’s instruction. We also have policy to offer replacement new product in case product defective within 3 days and give customer demo equipment to use during waiting repairing equipment. Pacific Dental commits to supply spare part to customers within 10 years from date of purchased.

Offering high quality service to customers which will help Pacific Dental is taking apart from market fierce competition and retain loyal customer who will bring long term benefit to company and get more new customers by customer referral as word of mouth marketing tactic, as well as obtaining competitive advantages and build long term relationship with customer. That is unique tool to get more customer satisfaction and trust to compete with other competitors in market today.

Training & Education

Pacific Dental organizes training workshops to customers periodically. It is one of the best ways to maintain customer loyalty. Pacific Dental invites well- known trainer as experience & skillful dentists from development countries such as America, Germany, France, Switzerland & Singapore…etc. to come to Vietnam for conducting lectures and workshops to introduce new techniques in modern dentistry. It will help customers obtain updated & advancing knowledge to treat patients more effective and minimal invasive. Obviously Pacific Dental spent huge amount money to cover various expenses as travelling, honorarium & accommodation for those trainers.

Training & education also help Pacific Dental get closer with customers’ point of view and differentiate with other dental suppliers in Vietnam dental market. Once customer get familiar with techniques & products, they will be more loyalty to repurchase products which supplied by Pacific Dental.

Pacific Dental set strategy to be pioneer in training & education to maximize Pacific Dental brand image in customer’s mind time by time and move forward to progress future.

Pacific Dental also invited good Vietnam dentists whom have passion to share expertise with new graduate dentist and other dentist did not update advance technique & knowledge. Conducting training by local dentist is good tool to add more value to loyal customers.

Pacific Dental set quarterly training course in various management skills for key staffs to get more commitment & loyalty to improve better service quality to customers. One customer happy with customer service quality they will be more loyal with products & services which providing by Pacific Dental

Price perception

Customers have to pay monetary cost to supplier for products and services. They usually select products and service base on price perception in among suppliers.

Customers want to select products and service with competitive price and reliable service from best suppliers by searching process. Negatively high price may influence to customers decision on purchasing products and services.

The price perception reflects to customer satisfaction and trust. Therefore, in order to increase customer satisfaction in market. Pacific Dental is carrying out attractive pricing, reasonable prices mix, and lower prices than competitors without decreasing quality.

Pacific Dental also understands Vietnam dental market is emerging market. So that pricing issue is very sensitive and may affect to customer’s behavior to switch to other competitors due to unfair or high price perceived or deceptive pricing practiced. That why Pacific Dental sets strategy always keep pricing competitive in Vietnam market and keep price stable even during crisis time or exchange rate fluctuation between domestic and foreign currency.

Pacific Dental price list proposed to measure by two factors: Reasonable price which reflect the way that price is perceived by customers comparing with other competitors on the Vietnam dental market currently. Another factor is value of money which related to products & service quality of Dental Pacific. Of course high quality is considered equal to high price.

Benefit offers:

Pacific Dental conducted many programs which increase customer benefits and adding more value to loyalty customer such as special training course, rewards program, gifts, special promotion offers, free sample products and discount programs by privilege card to encourage customer repeat purchase which all together increase trust & then enhance customer loyalty.

Brand Image:

Brand image has been discussed frequently in marketing management theory. It is thought to be formed in customer mind and reflect to customer memory. Pacific Dental set a strategy to build & develop brand image through series of business activities and contact with customer. Customer can easy to recognize Pacific Dental brand image from their mind and refer to other customers by their way such as word of mouth. Therefore, Pacific Dental positive brand is supposed to meet customer expectation and offer benefits to customer, which may lead to customer satisfaction and trust. It is very good to retain loyal customer and attract new customer.

Discussion on findings from internal interviews with staffs: Pacific Dental has found some problems need to be improved such as Pacific Dental needs to provide more customer service training for staff to improve higher quality customer service to increase customer satisfaction. Besides that, Pacific Dental has to take more responsibility and give more opportunity to promote and motivate loyal staff.

In order to keep good & talent staff, Pacific Dental also needs more flexible with salary & bonus scheme to get staff’s commitment.

Discussion on findings from external interviews:

More detailed discussion on findings from external interviews with customers will be discussed later right after we collect external interview form which sent out to 50 customers randomly.

5. Conclusion/ Recommendation

Will be discuss later