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Released at: 08:21, 26/11/2017

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Photo: Viet Tuan

Long-standing Vietnamese cosmetics brand Thorakao needs a stronger, modern brand communications strategy to remain competitive.

by Huyen Thanh

With 60 years in the cosmetics business, Thorakao has become known as a brand that operates under the old ways of doing business. Despite foreign cosmetics brands launching large-scale marketing campaigns, Thorakao has for many years continued to put too much focus on researching production. It has seen varying levels of success and failure in the domestic market over the years but expects to retain its current market share despite the competition becoming tougher. 

The Lan Hao Cosmetics Limited Company, which owns Thorakao, was well-known by Saigonese in the 1960s and was founded by a Vietnamese family who worked in the traditional medicine field for many generations. After succeeding with exports, Lan Hao returned to the domestic market and recorded turnover growth of 20 per cent in 2010 and then 35 per cent in 2016. “The returns are a good sign,” said Mr. Le Quoc Vinh, Chairman and CEO of Le Invest (Holdings) Corp. “However, the company remains unfamiliar with the trend towards modern brand communications. The view of natural incense is no longer suitable in gaining market access, especially for cosmetics brands, which require customer interaction at the highest level.” Similarly, Mr. Bui Minh Tuan, a local marketing expert, said the company hasn’t focused on branding or building emotional attachment among customers. It hasn’t made any branding efforts but has increased its sales in the past.

Lan Hao has defined Thorakao’s products as natural and is trying to lead in creating new products that stand out from others in the market, according to the company’s Deputy Director of Business Development Mai Tan Dung. “Quality is the basic value of Lan Hao, as the company started with a traditional family,” said Mr. Tuan. “Frankly speaking, at this time, the development strategy of Lan Hao based on products being the core is still partly effective in the market and the company also has a strategy of low price. The most important thing is whether consumers are aware of the difference or not. Quality is the most important factor for the manufacturer but it isn’t everything.”

As product quality is relatively homogenous and not especially notable, emotional attachment among customers makes a difference to the competitiveness of a brand, according to Mr. Vinh. “I haven’t seen the difference at Thorakao,” he said “Most current customers are still nostalgic for Thorakao’s glorious past while others are interested in its cheap prices. These are not factors that increase the competitiveness of the brand. The competitiveness other small domestic cosmetics have gained is not in quality based on scientific criteria, but built from feelings about quality through experiencing products.” 

Recognizing that a weakness for Thorakao is its packaging, Mr. Dung said that improving this would increase production costs and limit its approach to a number of consumers. But packaging is an important part of the customer experiences, according to Mr. Vinh. “Thorakao should conduct specific market research on its packaging and design and the efficiency of past marketing strategies, and then learn and adopt a revised strategy,” he said. “I would suggest that the aesthetic of the packaging is higher than the normal requirements of the targeted customer segment, as cosmetics are a luxury product, not an essential one.”

Thorakao’s strategy aims at rural customers, an area large foreign cosmetics brands haven’t focused on. Rural areas account for 65 per cent of the total population and 55 per cent of domestic trade turnover. Lan Hao should rapidly extend in the market and apply competitive strategies and tactics in the mid and long terms, Mr. Tuan said, as global giants are also turning strongly towards the rural market. 

The rural market is now being impacted by new trends and brand loyalty is low. With better living conditions and access to information reaching levels seen in urban areas, demand in rural areas will be more advanced. “If Thorakao’s branding remains in the old style, it will be hard for it to hold on to its markets,” Mr. Vinh said. 

With total cosmetics turnover standing at VND26 trillion ($1.1 billion) in 2015 and 20 million women in Vietnam being aged from 16-39 representing major potential, competition in the industry will become tougher and correct strategies in marketing and branding must be adopted. Developing sales networks in key locations, increasing coverage and displays as well as promotional programs for shoppers would help the company, according to Mr. Tuan.

Lan Hao is now also investing in online channels to expand its customer base. According to Mr. Vinh, however, while the channel has developed strongly in urban areas, Thorakao’s targeted customers are in rural areas. The online cosmetics business also relies heavily on brand loyalty. “Brands must build an online community through changing their marketing strategies and creating interaction with consumers,” he said. 

Brand repositioning is an issue Thorakao should seriously consider. Its brand value relates to heritage, which very few Vietnamese brands can rely on, Mr. Tuan said, and its production quality over its 60-year history needs to be incorporated into its brand attributes. 

Lan Hao is currently negotiating with a Japanese partner and expects to make use of technology in materials processing. But, according to Mr. Vinh, it needs a strategic partner rather than a financial investor, to make a breakthrough in terms of brand strategy.

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