Economic and Psychological Incentive Mechanisms


Marketing plays a fundamental role in the formation of consumer attitudes. In turn, consumer attitudes contribute to the shaping of buying behavior towards multiple services and products. While sales are regarded as the result of customers’ choices, multiple incentives are used by organizations and companies in order to influence people’s views, motives, and economic decision-making. In the present day, when competition in the market is immeasurably high, incentives become the main stage of promotion, and companies undertake considerable efforts to attract and influence prospects. In this paper, a specific issue in the Vietnamese market related to the refusal of citizens to purchase domestic smartphones is presented. The purpose of the work is to analyze the problem and suggest what economic and psychological incentives may be applied to change customers’ motives and behavior.

General Background of the Issue

In general, the development of the local mobile industry and the production of smartphones are economically reasonable in Vietnam. The country has been dependent on factory work for the last several decades and in the present day, it “is moving up the value chain into electronics” (Jennings, 2019, para. 1). For instance, Samsung has already invested more than $17 billion in factories based in Vietnam using the country’s cheap labor (Jennings, 2019).

Due to these investments from abroad, Vietnamese specialists have subsequently received the parts, supplies, and skills essential for making their own smartphones. Meanwhile, the majority of young citizens use smartphones for multiple purposes, including information search, communication, social networking, entertainment, and online shopping. In addition, public schools and universities emphasize the significance of science. There is a common belief in the country that graduates who work in foreign technological corporations have better knowledge concerning the manufacturing of high-quality phones.

As a matter of fact, local companies have made several attempts to create an appropriate product. In 2017, Bkav Corp., a Vietnamese technical firm, developed Bphone and Bphone 2, Vietnam’s first smartphones (Jennings, 2019). Although these models received poor reviews, and only 12,000 units were sold due to the absence of effective marketing campaigns, marketing research, and evaluation of customers’ demand, they initiated the development of the country’s mobile industry (Jennings, 2019).

In turn, Bphone 3 released in 2018 received considerably positive feedback from experts for its water resistance and processing speed. In addition, Vingroup, the Ho Chi Minh City-based conglomerate owned by the country’s richest man, Pham Nhat Vuong, is currently selling a new brand called Vsmart for an affordable price (Jennings, 2019). Moreover, it aims to overtake popular Chinese brands presented in the Vietnamese mobile market.

However, despite the fact that Vietnamese spend substantial amounts of money on handsets, they do not buy locally branded products. According to recent market research of analysis firms, in 2018, the Vietnamese spent almost VND28 trillion buying smartphones in the first quarter of the year (Kim, 2018). In comparison with the same period of the previous year, this sum increased regardless of the fact that salaries in Vietnam rarely exceed $170 per month (Jennings, 2019). At the same time, the money “was not spent on Vietnamese products and the market share held by Vietnamese brands has shrunk rapidly” (Kim, 2018, para. 2).

In fact, Vietnamese prefer more recognized and worldwide popular foreign brands for the same or even higher prices. According to market analysts, in 2019, home-grown smartphones “made up no more than 1% of the total sold in Vietnam” (Jennings, 2019, para. 8). Although this share in Vietnam’s smartphone market has increased up to 5% in 2020, it cannot be compared with the 42.8%, 23.2%, and 6.5% shares of Samsung, Oppo, and Xiaomi, respectively (Jennings, 2019). In addition, with the gaining popularity of social networks, the new generation of Vietnamese pays attention to brand awareness and prestige rather than the products’ technical characteristics. People’s interest in international products is expected to grow in the future with the rise of consumer spending.

Incentive Mechanisms for the Initiation of Consumers’ Interest

It goes without saying that financial incentives in relation to Vietnam’s mobile market may be regarded as predominant. Customers will be motivated to buy homemade products if prices are affordable. Despite the fact that the majority of Vietnamese companies do not focus on the low-cost segment, they generally offer their handsets for approximately $100 (Jennings, 2019). However, customers’ needs should be thoroughly investigated for the manufacturing and appropriate promotion of local smartphones as competition in the market is immeasurably high. As foreign smartphone brands are aware of Vietnamese consumers’ purchasing power, they keep prices low enough to motivate people to buy (Jennings, 2019). In general, a considerable number of people prioritize the price instead of the brand’s origin.

At the same time, it is essential for Vietnamese to receive a good quality smartphone. Local consumers traditionally pay attention to the smartphone’s operating system, camera, battery capacity, and screen (Jennings, 2019). That is why if Vietnam’s brands offer the most affordable prices and appropriate quality of their devices, people will buy them. In addition, the microeconomic concept of the price’s fairness should be considered in this case (Pindyck & Rubinfeld, 2018).

Foreign smartphone brands that are well-recognized all over the world traditionally include the value of their names in the devices’ prices, and a prevalent number of people regard this approach as unfair. Domestic companies should present smartphones that have the same price but better quality in comparison with international brands’ models as the payment for brand awareness is not required. Customers will prefer Vietnam-made handsets when they see that their prices are fair as they will pay for a higher-quality product and not for a foreign brand’s name.

In microeconomics, consumers who obtain full knowledge of the products’ prices and quality traditionally choose goods “so as to maximize their satisfaction subject to a budget constraint” (Pindyck & Rubinfeld, 2018, p. 713). According to a basic theory, consumer demand is affected by three fundamental assumptions:

  • Customers have the knowledge and clear preferences for particular products over others;
  • Customers inevitably have budget constraints;
  • Taking into consideration limited incomes, preferences, and prices, customers purchase products to maximize their satisfaction (Pindyck & Rubinfeld, 2018).

Despite the fact that these assumptions may be regarded as logical, they are frequently not realistic as people are not always motivated by extrinsic economic incentives. Consumers may take decisions on the basis of their individual peculiarities, emotions, values, beliefs, and other inner motives even if these decisions will be economically unprofitable. That is why companies should consider psychological incentives as well and apply appropriate mechanisms in order to change people’s behavior for their own benefit and boost sales.

The refusal of Vietnamese to purchase smartphones made in their country is partly connected with their both reasonable and unreasonable belief that the majority of foreign products have better quality in comparison with local ones. This tendency is more noticeable among young Vietnamese who connect the smartphone brands with their social well-being. In other words, they believe that they will improve their sense of social involvement, enhance their image, and gain high social status if they have a smartphone made by a worldwide renowned company.

According to analysts, the Vietnamese pro-foreign-brand smartphone trend is similar to the Chinese which started approximately two decades ago (Jennings, 2019). With the rise in income, consumers started to purchase foreign electronics, food, and wine in the first instance. However, they later returned to domestic brands and currently “show patriotism by shopping local” when appropriate quality is certain (Jennings, 2019, para. 13).

The same tendency of returning back to the domestic product and the strengthening of national sentiments is expected in Vietnam in the foreseeable future as well. In addition, although a reference point may be different for individuals, the process of socialization is typical for Vietnamese society in relation to the development of behavioral patterns and knowledge essential for decision-making (Pindyck & Rubinfeld, 2018). People consider the experience of others and the positive feedback from relatives, friends, peers, colleagues, and public influencers who use a particular smartphone make them more willing to buy the same product as well. That is why domestic technical firms should understand and respect this consolidation in order to take leading positions in the Vietnamese smartphone market.

However, local smartphone brands should also contribute to the change in consumers’ behavior and motivate them to buy Vietnam-made devices through the creation of their positive image. First of all, successful brands are competitive in the market. Consequently, in order to attract customers when Chinese and Korean companies afford products with strong features, Vietnamese manufacturers should focus on constant development and innovations. As a matter of fact, the major achievements of domestic companies may be already observed.

According to Vsmart deputy CEO Tran Minh Trung, “even though Vsmart phones use Android operating system, Vsmart’s software engineering department customized the original Android operating system to develop it into a VOS operating system with features specific to Vietnamese consumers” (Jennings, 2020, para. 5).

These smartphones run faster in comparison with other phones on the basis of Android. In addition, they support free calls between Vsmart devices and free Vsmart-to-Vsmart messaging (Jennings, 2020). Another model, Joy 3 phone, comes with a 6.5-inch screen, Snapdragon 632 processor, three-rear camera cluster system, and 8MP selfie camera, and its price starts from $98 apiece (Jennings, 2020).

Furthermore, consumers will change their attitude toward domestic smartphones and change their purchasing behavior when they see that Vietnam technical brands are reliable and prestigious. In order to guarantee their credibility, companies may cooperate with major governmental and private organizations within the country. For instance, Vinsmart, the subsidiary of Vingroup, has joined the smartphone “universalization” program of the Vietnamese Ministry of Information and Communications and offered devices for approximately $22 a piece in exchange for preinstalled applications and wireless packages (Jennings, 2020).

Through this action, the company demonstrates its care about consumers, values their comfort, and considers their financial constraints. In addition, it is planning to create its own ecosystem of the attraction of customers through cooperation with Viettel, a domestic telecommunication firm (Jennings, 2020). Finally, Vinsmart is developing a strong collaborative relationship with Google for the use of Android-powered operating systems in its devices.

Vietnamese will be more motivated to buy domestic devices if they will be as prestigious and well-recognized all over the world as international brands, including Samsung, Oppo, Huawei, Xiaomi, and Apple. It goes without saying that the most effective solution for local companies to improve their awareness is to distribute their devices across the globe. In fact, the largest Vietnamese smartphone corporations have already undertaken efforts to meet this challenge. According to the Vietnam Investment Review reports, Vinsmart has signed a contract with BQ of Spain to sell four smartphone models under the Vsmart brand (Jennings, 2019). In the future, Vietnamese should establish a partnership with the largest smartphone retailers all over the world and develop its online shopping with an international shipment.

In addition, the development of online shopping is highly essential for Vietnam to target local consumers as well. It helps to apply economic and psychological incentive mechanisms more effectively in comparison with offline retailing. As a matter of fact, Vingroup has substantial opportunities for selling smartphones offline as it runs a considerably wide network of convenience stores, malls, housing developments, and resorts in the country (Jennings, 2020).

Moreover, the conglomerate has already distributed more than 100,000 smartphones free to people who live in Vinhomes-brand properties (Jennings, 2020). In general, in Vietnam, 85% of sales take place offline, however, this circumstance inevitably restrains sales as domestic brands become uncompetitive, especially under the conditions of the pandemic (Jennings, 2020). Nevertheless, the offline smartphone market is highly essential, and the tendency of anchoring may be applied to boost sales of domestic devices (Pindyck & Rubinfeld, 2018). For example, sales assistants may offer Vietnamese smartphones to customers on a first priority basis to limit their choice and determine their decision.

The development of online shopping and the launch of effective marketing campaigns will help Vietnamese smartphone brands to change consumers’ preferences through the application of particular rules that affect people’s economic decision-making. In fact, this decision-making is strongly impacted by previous experience in the market, the consumption of products in the past, and the context of purchasing (Pindyck & Rubinfeld, 2018).

A successful marketing campaign for Vietnam-made smartphones should not only include the customers’ demands but consider framing as well. It may be defined as “a tendency to rely on the context in which a choice is described when making a decision” (Pindyck & Rubinfeld, 2018, p. 716). Taking into consideration the desire of a prevalent number of Vietnamese to purchase foreign goods, it will be incorrect to state that “Vietnamese smartphones are cheap.” Instead, choices should be framed in another way – “Vietnamese smartphones are the combination of globally recognized quality and affordable prices.” Nevertheless, quality should become the salience of domestic devices.

Moreover, in online retailing, the rules of thumb may be applied. In microeconomics, they refer to the ability of customers to ignore “seemingly unimportant pieces of information” (Pindyck & Rubinfeld, 2018, p. 720). Prices for Vietnamese devices may be lower in online shops or discounts may be permanently made. People will ignore shipping costs or other additional expenditures because they will see more attractive offers in comparison with foreign goods. On the contrary, if shipping for Vietnam-made smartphones is free, customers will be deeply interested in purchasing even if prices remain the same as in offline outlets. In fact, they may feel more comfortable if they save time and avoid moving around the city and searching for a desirable device.

Online product reviews from consumers who had already purchased handsets may be highly beneficial for the promotion of Vietnamese smartphone brands. Regarded as useful sources of pre-purchase information, online reviews help people to feel more confident about their buying decision. In Vietnam, a considerable number of consumers prefer to consult reviews and online ratings before purchasing a smartphone model for the first time. In addition, besides their direct impact on sales, online reviews create a positive image of a company and contribute to its success as well.


The development of the local mobile industry and the production of smartphones are economically reasonable in Vietnam. The country that was dependent on factory work for the last several decades currently has now all the necessary technologies, materials, and skills. As a matter of fact, local companies have made several successful attempts to create an appropriate product. However, Vietnamese do not buy locally branded products and prefer foreign recognizable brands.

That is why Vietnamese companies should currently attract people’s interest and persuade them to buy domestic products. First of all, they should focus on good quality and constant innovations, however, prices should be affordable and fair for Vietnamese with an average income. In addition, they should develop online retailing, launch effective marketing campaigns considering framing and the rules of thumb, and create a positive image of Vietnamese smartphones as reliable and recognizable all over the world.


Jennings, R. (2019). Vietnam keeps producing its own smartphones, so why don’t they sell them?. Forbes. Web.

Jennings, R. (2020). Vietnamese smartphone brand aims to take market share away from Chinese rivals. Forbes. Web.

Kim, C. (2018). What’s the future for Vietnamese-made smartphones?. Vietnam Insider. Web.

Pindyck, R. S., & Rubinfeld, D. L. (2018). Microeconomics (9th ed.). Pearson.

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BusinessEssay. "Economic and Psychological Incentive Mechanisms." January 9, 2023.