Jul 22, 2015 | Strategy | Comments Off on Blending in
When penetrating into a foreign market a company must conduct thorough market research to gain a deep understanding of customers and settle into its new environment. Food and beverage (F&B) brands are no different. “We feel localization is very important and crucial to our success,” said Mr. Marko Moric, Operational Director for Asia-Pacific Markets at Surf’n’Fries. “Since the beginning we have tried to fit in into local markets and have not pushed something on to people that they don’t like or don’t want.”
Realizing the importance of adopting a localization strategy, brands spend considerable time conducting research before taking a step into a new country. The time needed for research is never fixed; it depends on the scale of the penetration, the city or country, and other factors. According to Ms. Patricia Marques, CEO of Starbucks Vietnam, it has been conducting market research in Vietnam for many years as the country has among the highest coffee consumption in the world. During those years Starbucks planned to open multiple outlets in Vietnam, starting with Ho Chi Minh and then expanding nationwide. Conversely, with a policy to open franchises, Surf’N’Fries launched its first outlet in Hanoi last January after only a year of planning its localization strategy, according to Mr. Moric.
In the F&B industry there is a common misconception that localizing is all about the products (the food and drinks) and the taste. But the nature of a localization strategy is much broader than that, with different factors to consider other than making the products suitable for consumers. “We looked into different aspects when launching, checking locations, people’s habits, and local tastes and flavors, and also the local competition,” said Mr. Moric. Implementation is a long, ongoing journey, as lifestyles can change, so brands must carefully follow trends. “Besides working on the creation of products that are suitable for Vietnam we must also have plans for the future,” he added.
Promoting and Pricing
Localization is not limited to the time customers first have the chance to experience products and services. It begins long before that, when the brands begin to promote their arrival and raise awareness among customers. In Vietnam people who know about different brands are mostly those who follow what’s happening around the world, have travelled, studied or worked overseas, or who want to be part of certain social groups. And these groups are very keen on using social media platforms. Seizing the opportunity, brands commonly focus on social media advertising and ignore others, including TV advertising.
For example, McDonald’s Vietnam has a Facebook page with nearly 420,000 “Likes”. In other countries, such as Singapore and the UK, there is no national McDonald’s Facebook page but rather a page for its many branches, and even then the number of “Likes” is nowhere near the number in Vietnam.
By promoting themselves on social media platforms, brands made people who already knew about them aware of their arrival in Vietnam, while making others who had yet to hear about them keen to try them out, to show that they are “trendy”. Vietnamese tend to have social lives rather than personal lives, which makes them believe that brands are great and using their products and services is also great.
The results are clear. Back in February 2013, when the first Starbucks outlet was opened in Ho Chi Minh City, and last July, when it opened its first in Hanoi, many people stood in a long queue for a long time just to experience its coffee, which was quite a rare sight to see. And, recently, knowing that Vietnamese want to experience big brands for free, McDonald’s introduced its new drive-thru service in March by handing out free meals. Thousands of people lined up and about 16,000 free meals were handed out.
Pricing is a big factor contributing to a localization strategy. In the case of Burger King, when compared with its products in the UK, prices are much cheaper in Vietnam. For example, a Whopper Meal (including a Whopper burger, a Coke, and French fries) in the UK sells for around £5.39 ($8) on average, while in Vietnam it goes for VND109,000 ($5).
Lowering the price is a must, of course, as Vietnam is still a developing company. When comparing incomes in the two countries, however, the results are quite different. In the UK the hourly minimum wage set by the government for people from 18 to 20 years old is £5.5 ($8) and for people from 21 years old and over £6.7 ($10), which means that by working for an hour they can buy a Whopper Meal. In Vietnam, meanwhile, the current monthly minimum wage is VND3.1 million ($143.62), for a working month of about 22 days (with Saturdays and Sundays off), or an hourly rate of about VND17,613 (82 US cents). People on the minimum wage would therefore have to work at least six hours to be able to buy a Whopper Meal. The figures imply that Burger King Vietnam’s market segment is different from Burger King UK’s, with the former targeting people who earn higher incomes and can afford one of their meals.
Service and Design
In Vietnam, the most attractive customer segment for F&B brands is young people, as this is the generation with the desire to experience smooth service and eat out more often. Knowing this, Surf’n’Fries focused on innovating its services. “First of all, we wanted to bring something to the new generation of the young Vietnamese population,” said Mr. Moric. “We hired young people and trained them to serve customers to a high standard.” It’s important, he added, to approach customers in a person to person manner not in a business to customer manner.
There are many cases of localization of services by brands that may go unnoticed. At fast food outlets like Burger King and McDonald’s in Western countries, customers are used to cleaning up after themselves. In Vietnam, however, the staff always clean up after customers, as this has always been an unwritten rule in the country.
As for localization in design, Starbucks is typical. Its outlet in Hanoi’s Ba Trieu Street has the roof of an old Vietnamese house, which is unique and different from its other outlets. Its furniture consists of wooden seats and tables, unlike the modern furniture found in its outlets in the West. “Depending on the store, the design department will choose the most suitable plan so that it will be harmonious with its surrounding environment, as our premises can be in a modern shopping mall or in a classic townhouse,” Ms. Marques explained. Decor and furniture are always based on what seems most appropriate, ensuring a true coffee space while blending in with the surrounding environment and following the general principles of the brand identity. “There is nothing wrong with our stores having different furniture,” she said, “We believe that, in any of our stores, customers can experience a ‘Starbucks moment’, which most have widely accepted all along.”
Domino’s Pizza is another example of tailored service and design. In Western countries its outlets can be quite small, catering mostly to home deliveries. In Vietnam, however, the pizza-eating culture is different so it has regular restaurants where people can sit down, order their food, and stay for a little while. Its outlets are not only bigger but also more luxurious, such as the one on Hanoi’s To Hien Thanh Street, which has three floors and a décor that makes its look like a restaurant rather than a fast food outlet.
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