Product Specific Strategy for Customer Segments

While traditional airlines have the advantage of attracting business travelers and high-income earners, these are the customers who accept to buy high-priced tickets but want to receive service quality that is worthy of what they have paid. Therefore, in the development orientation of VNA, in order to compete with LCAs and other traditional airlines, VNA needs to have special product development strategies to surpass competitors and bring trust to customers, creating a competitive advantage at a higher level. Regarding products, in the development strategy of Vietnam Airlines Corporation until 2010 and orientation to 2020, the Corporation chooses a comprehensive development strategy based on the combination of a low-cost strategy to create local and short-term competitive advantages with a diversification - individualization strategy to develop long-term and stable competitiveness. Diversification strategy - personalization of marketing policy and product shaping with a focus on developing a dense domestic and regional flight network based on the perspective of network organization - hub, hub - spoke structure, high frequency, creating long-term, solid competitiveness to serve diverse travel needs domestically and in the Asia-Pacific region.

Development strategy based on low cost through standardization of service supply system, rationalization of management and operation system, optimization of asset utilization, improvement of labor productivity and business performance to create competitive advantage in price towards tourist flows to Vietnam, and routes managed by VNA.

2.1 Product solutions

2.1.1 Product diversification

Product diversification is the inherent characteristic of traditional airlines. With a wide flight schedule and network, diverse policies and price structures, and a wide range of products, traditional airlines are able to meet the needs of many different types of passengers. In the current competitive environment, product diversification is becoming an inevitable requirement to maintain traditional customers and attract new customers to the maximum. Because, pursuing a policy of diversification

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Product diversification is consistent with the operational orientation of any traditional airline - a prerequisite for the airline to survive and develop sustainably.

According to this orientation, VNA needs to continue to provide and improve the quality of its full range of products and services on medium and long-haul routes and some flights on domestic trunk routes to serve high-income customers, enhancing its competitiveness with other traditional airlines. In this activity, VNA needs to maximize the image, position and advantages of a national airline with prestige and standing in the regional aviation market. At the same time, provide low-cost products for low-income customers (especially tourists) in the regional and domestic markets. To compete with low-cost airlines in this passenger market segment, VNA needs to make some changes in the direction of “LCAization”, that is, reconfiguring some types of narrow-body, short-range aircraft (such as Airbus 320, Airbus 321, Boeing 737) to provide only economy class seats, increase the frequency of aircraft use, reduce additional services to minimize costs and limit selling prices. However, it is necessary to coordinate with flight schedules to ensure the ability to support the medium and long-haul flight network.

This product diversification will create some difficulties in management, creating customer comparisons when using many types of VNA products at the same time. However, this measure will help VNA improve operational efficiency and enhance its competitiveness with other low-cost airlines and traditional airlines.

2.1.2 Product customization

Although product differentiation is a strategy that many other airlines are using, using this strategy flexibly will be very effective. VNA has to compete with other traditional airlines in the world, especially in the region, and also has to face the development of low-cost airlines. If low-cost airlines attract passengers with low prices and minimal services, VNA needs to focus on product value.

of traditional airlines with good quality main products and supplementary products.

Aviation products include two main factors: product and supporting services. VNA needs to focus on both of these factors.

For the main product, diverse flight schedules and extensive flight networks are the factors that help distinguish the products of traditional airlines from low-cost airlines. To compete with other airlines in the region, VNA's flight schedules and flight networks must be constantly researched to increasingly suit the needs of customers, especially for business travelers who have high demands on flight schedules and flight networks. At the same time, VNA can still build low-cost flight products to serve low-income customers and compete directly with low-cost airlines. However, these low-cost products also need to be coordinated with the airline's flight schedules in a suitable way to bring more choices to customers. And to compete with other traditional airlines, if it is not possible to compete on the high level of product personalization, a factor that can be used as a competitive factor is the quality of service and the reputation of the airline built on the trust of customers.

Product differentiation policies also need to go hand in hand with providing customers with full information about these policies. Specific information about: flight schedules, connecting flight capabilities, new aircraft generations, information about on-board amenities, seat width, seat recline, and additional services help customers compare products. By competing with products and service quality, customers have the opportunity to compare the relationship between service quality and price (service quality/price). This information will help customers make their decisions in choosing an airline's products.

In the long term, VNA must build an image and brand for its products so that customers can easily distinguish them from competitors. Building a brand and image is the goal of any airline because it will increase the value of the product. To do so, VNA needs to determine the image

What is your image, identify both tangible and intangible elements (e.g. clean planes, varied flight schedules, on-time flights etc.), promote what that image represents and maintain those elements in the long term.

2.1.3 Product completion

2.1.3.1 Flight delay and cancellation problem

The problem of flight delays and cancellations is not only a problem of Vietnam Airlines but also a problem of airlines around the world. There are many reasons leading to the problem of flight delays and cancellations. For Vietnam Airlines as well as many other traditional airlines, the management problem is cumbersome, forecasting plays an important role, so the problem of flight delays and cancellations also faces many difficulties. Although this problem at VNA is not too frequent, it still causes flight schedules to be disrupted to some extent, making customers wait. In addition, changing flight times causes dissatisfaction among customers, reducing the airline's reputation with both domestic and foreign customers. In 2009, VNA made progress in flight delays and cancellations, with a fairly stable exploitation rate of 86%, meaning that out of every 100 flights, 14 flights were canceled or delayed.

The causes of flight delays and cancellations are usually due to:

- Technical issues related to aircraft such as checking engines, checking fuel levels, etc. take a lot of time;

- Another reason is the lack of flight crews. Flight crews are sometimes scheduled to overlap and sometimes the difference between the two flight times is not much, causing the flight crew's preparation to be slow and not giving the flight crew enough time to rest;

- Causes related to ground operations such as preparing the airport for aircraft landing, preparing tools, ladder trucks to retrieve luggage and help passengers get off the plane still have many shortcomings and limitations;

- Another objective reason is due to weather and political and social conditions. Weather, political and social issues are the most difficult to predict and are also the biggest problems for each airline. Like the recent incident of a volcano in Europe re-activating, causing direct or connecting flights to Europe to be canceled, many VNA passengers were unable to return to Vietnam as scheduled.

plan, and VNA also had to cancel many flights to Europe, causing quite a large loss for VNA.

However, with some of the following solutions, the problem of delayed and canceled flights can be somewhat reduced and gradually overcome:

- Forecasting: Forecasting is one of the important tasks for a traditional airline. Good forecasting will help the airline build flight schedules, operate flight schedules and determine other factors in the best way and avoid unnecessary costs in the best way. Forecasting issues related to weather, political or social issues of a country that the airline flies through or to. Forecasting the possibility of airport closure, the possibility of government aircraft requisition, etc. If forecasting is well adjusted, it will be the basis for effective contingency planning.

- Contingency work: Because it is difficult for carriers to foresee all factors arising from objective causes, it is necessary to develop a contingency plan to minimize flight delays and cancellations. The overall contingency plan includes the following contents:

+ Reserve medium and short range aircraft as a backup function when an abnormality occurs

+ Provision of alternative products including alternative route networks, alternative service classes, alternative means of transport, alternative airports and the implementation mechanisms that go with it.

+ Backup flight plan: change flight plan when technical weather conditions change.

+ Flight crew reserve

+ Pre-flight technical inspections must be carried out seriously to ensure early detection and timely repair before the plane takes off.

- Some other solutions:

+ Clearly determine and prioritize on-time flights. On-time flights are very important to customers, so VNA needs to make every effort to ensure that once a flight time has been decided, it is determined to carry it out.

+ Do not change flights due to commercial requirements close to the date of operation. Many times, commercial flights are the cause of delays and cancellations, so VNA needs to pay close attention and come up with specific methods to best meet customer needs, especially focusing on scheduled flights so as not to lose credibility with passengers choosing the airline.

+ Planning operating time and connecting time at some airports, especially airports with limited operations and flight services.

+ Strengthen coordination between agencies and units participating in the management process to ensure information exchange in order to make timely and accurate decisions on remedial measures.

+ Ensure that the aircraft quickly overcomes technical problems

+ Coordination between flight service agencies needs to be improved, especially information exchange.

2.1.3.2 On flight network development

In order for an airline to continuously develop, its flight network must be continuously expanded to everywhere, meeting all transportation needs of all passengers traveling around the world. The same goes for VNA, the airline must also continuously develop its flight network, expand its operating market with the following measures:

- Increase flights on routes to key source markets: gradually develop the ASEAN regional flight network; continue to affirm the dominant position and develop new products on the CLMV flight network (Cambodia, Laos, Myanmar, Vietnam).

- Compete and maintain market share on domestic routes.

- Flexible in product management, using aircraft fleet to suit market needs.

VNA's flight network development plan is built on the basis of closely following the country's socio-economic development orientation, ensuring the good performance of its leading role in the national air transport industry, and being the main bridge for international relations.

At the same time, it contributes to supporting the socio-economic development of localities. With this perspective, the flight network structure includes:

+ The domestic and Indochina flight network is a vital strategic route network for VNA, and at the same time has great political significance, playing an important role in serving the development of the national economy. The domestic flight network needs a specific plan to be used effectively and serve the task of developing the country's socio-economy. Continue to expand, consolidate and enhance the exploitation of key domestic routes, providing convenient aviation products that are suitable for the travel needs and payment capacity of the people. In the CLMV sub-regional flight network, it is necessary to maintain its strengths.

+ The Southeast Asia and Northeast Asia international flight network is the main operating flight network, bringing the main profit in VNA's air transport operations. On the Northeast Asia flight network, VNA should continue to consolidate and develop existing routes by increasing flight frequency, using large aircraft (250-300 seats or more), improving competitiveness and operational efficiency. Open new routes to other destinations in Japan, Korea, China, consider opening routes between Da Nang and Northeast Asia destinations. On the Southeast Asia, South Asia and South Pacific flight network, gradually improve flight schedule products, increase flight frequency, develop routes from Hanoi, combine exploitation of Southeast Asian destinations with destinations in India, Indonesia, Australia through exploitation of 6-way rights between these destinations.

+ Long-range, transcontinental routes are routes with long-term strategic significance. VNA needs to carefully and selectively research and develop them on the basis of ensuring the overall operational efficiency of VNA's entire flight network. In the coming time, continue to prepare necessary market conditions and consider the possibility of opening new routes to some potential destinations and trans-Pacific routes to the West Coast of North America when market, business, operational and legal conditions allow.

2.1.4 Specific product strategies for customer segments

To best serve the needs of passengers, VNA needs to have specific strategies for each of these groups. The groups of customers on VNA's regional routes include high-income customers, tourists, visitors, workers and business passengers. These groups have different requirements for products and services, VNA's policy of diversifying and personalizing products must be based on the characteristics of the customers on each route to implement, specifically:

- For high-income customers: the requirement is to have high-quality products and services that are maintained stably on routes, flights and airports. In addition, they also require to be treated differently from other groups. Currently, VNA has a separate policy for C-class customers, however, high-priced Y-class customers do not have a policy to differentiate from other low-priced Y-class customers. In addition, in the coming time, VNA will also build more special services such as pick-up and drop-off, airport check-in, etc. to enhance the competitiveness of VNA products compared to other traditional airlines.

- For customers who are visitors, workers, mainly Vietnamese, are relatively price-sensitive and are the target that low-cost airlines can attract. VNA also needs to have a clever policy towards these customers and have additional support services with their own characteristics such as support with instructions, languages at foreign destinations, providing information on procedures, documents, etc. to create a difference with other low-cost airlines and traditional airlines.

- For tourists, the group with the strongest competition with other low-cost and traditional airlines, in addition to competing on price, to create a difference, VNA must focus on perfecting ground services, connecting flights, and baggage.

etc. and provide ancillary products (such as transit tours, stopover tours etc.).

- For the customer segment of franchise 6, VNA's current price is relatively competitive. The factor that needs attention is the connecting service, this service has been improved a lot in the past but still does not really bring satisfaction to customers because of long connecting time, few connecting services.

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