Wade Armstrong

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Five Things I Learned About Capitalism in Vietnam

Posted Monday August 21, 2006 in Business

It’s been too long since I posted, but there’s nothing to do about that other than get back on this horse. Apart from working on some business opportunities, I spent my hiatus on a 30-day vacation to Southeast Asia; while there, I fell in love with Vietnam. The country was beautiful, the people were friendly, the food was incredible, and everyone everywhere was engaged in business — centrally-planned socialist economy or not. Vietnam or America, many of the business problems we face are the same, they’re just well-illustrated in a developing economy. So here are five things that seeing capitalism emerge in Vietnam reminded me about how to do business well.

ABC

Shopping in Thailand, time after time, I was pitched fully with every single feature of the product I was looking at. I’d come up to a stall, look at the product, learn about how cheap it was, or beautiful it was, or whatever, and then I’d reach for my wallet, ready to buy. Next thing that happened, the Thai salesperson would tell me about the next feature — how big the product was, or how tasty, or something like that, and then a few more features, and eventually I’d hear that feature that I didn’t like, and my wallet would go back in my pocket, and on I’d leave. Now, the Vietnamese, they know how to close: stop by a market stall and express interest in a product, they’ll give you a price, if you ask a question they’ll answer it, and before they’ve finished answering the question your product is all wrapped up, and the proprietor’s hand is outstretched for the quoted price. That’s closing! Remember that selling is all about finding out your customer’s needs and then figuring out how to fill those needs, not rattling off a list of features, and when your customer knows that their needs are filled, give them a chance to give you their money. If you keep talking, you just interrupt that chance, and maybe give them a reason to say no — never fight a man who’s trying to hand you money. Always Be Closing.

Segment, Segment, Segment

As Vietnam has opened up to tourism, it’s seen an influx of backpackers attracted by the country’s low prices and willing to put up with substantial discomfort and inconvenience to keep those prices low. But many of the travelers I met on my trip weren’t backpackers — they were flashpackers, higher-income individuals who follow the itinerant customs of backpackers but are willing to pay more for a higher standard of service and luxury. Most Vietnamese companies are accustomed to serving backpackers well, which means that they can shave every possible penny off of a tour or hotel room, but they’re unprepared to recognize the new needs of flashpackers. A great example of the failure of price-based segmentation with a flashpacker like me is my experience booking a trip up the Mekong from Saigon to Phnom Penh. I first stopped off at Saigon’s famous Sinh Cafe travel agency, where I was offered a great price on a two-day trip including several stops along the way and a hotel room; the catch was, the boat left from a town about four hours’ bus drive away, and Sinh wouldn’t book my bus. For a backpacker with half a day to spare, it would be easy to get the cost of that bus as low as it could go, just by calling around; for me, I’d rather spend my half day seeing Saigon and pay for a more expensive bus up to the boat. Sinh didn’t offer a bus at all — none of their backpacker clients wanted it — so I went next door and paid $7 more for the same trip, but with a bus to the boat. I’m relatively comfortable that their profit margin on that bus was at least $5, but I was prepared to pay that premium because my travel objectives were different. Don’t assume current segmentations will always describe the market; instead, watch your customer continuously for signs that new and different segments exist or are emerging. Otherwise, you’re leaving margin on the table.

Sell, Don’t Annoy

Few things were more annoying than the street vendors who wouldn’t take no for an answer. It was fine to be pitched by people selling lighters, fruit, and more; but when I said “no,” I wanted it to stick. Instead, the vendors persisted, one girl even crying for 10 minutes and following me around a park in Saigon until I bought flowers from her. It’s true that you can browbeat most people into buying from you, and many American companies try it too — witness how many credit card applications you get in the mail, or how persistent an insurance agent can be once you start shopping for new rates. By the end of my trip, I was ignoring whole classes of vendors, vendors from whom I may have bought cheap gifts. It’s the same in America — raise your hand if you regularly open and carefully peruse the credit card offers that come in the mail. Now raise your hand if you save your Ikea catalogs and thumb through them on a lazy weekend afternoon. Both types of mailing have the goal of selling; one is not annoying.

If Your Customer Can’t Tell the Difference Between You and Your Neighbor, You’re a Commodity

In Southeast Asia, motorbike and pedicab and tuk-tuk drivers solicit you at every street corner. It’s likely that there is a difference between all of these providers — some are better drivers, some know town better, some operate better-maintained vehicles — but the passing tourist simply can’t tell. That means, every block, the tourist is solicited by exactly identical commodities; it also means that the tourist will never pay anything less than the lowest possible price, and, if you’re a cyclo driver, it never means that you can count on a tourist choosing you over the guy next to you. Why leave your living to chance? Figure out a way to break out of the commodity world, or accept getting the lowest price for your services and being exactly substitutable with any other instance of your commodity.

Break the Commodity Cycle With a Local Monopoly

There’s a big trestle bridge that spans the Perfume River right in the middle of Hue; every night, local couples take romantic walks down that bridge, and, every night, local photographers line up to take photos of the cute couples. Most photogs lounge against the railings, but one, positioned just so that the passing pedestrian is lit by the bridge’s girder lights, seems to have an endless stream of customers. She’s found the spot that differentiates her product, the spot where you get the most romantic and beautiful photo, and that makes her more than a commodity. Economists call this a local monopoly, but such a monopoly is not just space — although it can be, look at any gas station by a freeway off-ramp that charges a nickel a gallon more than the gas station a block and a half away — it can be a monopoly over access to a community (for instance, the only Spanish-speaking lawyer in town), over skills (the last person who knows an artisanal trade), over partners (the only authorized Mercedes repair shop in fifty miles), or more.

It was fascinating to see real economic growth taking place right in front of my eyes. If you’re interested in seeing business change, and being on its frontier, go to Vietnam. Heck, if you’re interested in a great, inexpensive vacation, go to Vietnam. It’s a wonderful country and I bet that, if I return in two years, I’ll see that the average Vietnamese has learned these five points and more on their way to becoming part of the next Asian “tiger” economy.