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Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
Airline Marketing Presentation, Fall 09
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Airline Marketing Presentation, Fall 09

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Rob Britton gives a lecture about the changing marketing and economics environment facing American Airlines, and its competitors.

Rob Britton gives a lecture about the changing marketing and economics environment facing American Airlines, and its competitors.

Published in: Career, Business, Technology
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  • 1. Marketing in the Real World: The Challenge of the Airline Industry Dr. Rob Britton Adviser to the Chairman Former Managing Director, Advertising Austin, 28 October 2009
  • 2. Today’s Agenda • Overview of the airline sector: a difficult industry • The challenge of a commodity business • A brief look at the range of activities in airline marketing • Questions and discussion > This presentation will be available as a PDF file
  • 3. A Small Commercial Message! • I want to acknowledge the kind help of American Airlines, which for more than 20 years has provided travel support for my lectures at places like UT • Without their help I could not visit 32 schools this year help, • American Airlines believes strongly in supporting the communities it serves • We are proud to be a good corporate citizen – in the U.S. and all over the world
  • 4. Some “Facts of Life” about Airlines • The two types of carriers – old ones and new ones – are very different – Labor rates and productivity – Customer expectations • Profit margins are thin – or nonexistent • High fixed costs (70-80% of total) drive decisions • It’s hard to match supply and demand pp y – Demand varies temporally, by time of day, day of week, and season – Product is perishable – When demand declines, airlines cannot remove costs quickly declines enough, or proportional to the decrease – Low barriers to entry
  • 5. Some “Facts of Life” • Airlines are capital-intensive, labor-intensive, and energy- intensive • The airline market is competitive, but the markets that supply the business are not – Union labor and airports are monopolies – Airframes, engines, and others are oligopolies • Government influence has been and remains enormous – The legacy of domestic regulation – Infrastructure on the ground and in the air – Excessive taxation – Archaic laws restricting foreign investment – Continued regulation of international flying
  • 6. A Catalyst to Economies Worldwide • Airline services precede or facilitate the flow of investment, information, and human capital – what we commonly call “business travel” • Enable global logistics, the fast movement of high-value, perishable, or time-sensitive goods i h bl i ii d • Provide the indispensable foundation for tourism, by many measures the world’s largest single industry world s • Thus a first question for y to p q you ponder: how can a business so indispensable to us be on such unstable foundations?
  • 7. A Commodity Business • Undifferentiated brands are one legacy of more than 50 years of government control of key economic parameters – entry, routes, price, and even amenities • More fundamentally, the economy-class flight experience is essentially the same – and has been for decades • The product is produced and consumed in real time, with many factors outside our control, notably weather and infrastructure – and thus prone to failure • These factors have created product uniformity, and the belief that “a seat is a seat” a seat – In the U.S., we collectively became “the airlines”
  • 8. A Commodity Business • Flight schedules, historically a major driver of choice, has also caused “commoditization” – Companies with big networks and lots of flights have always enjoyed this benefit j y – Conversely, smaller firms with differentiated products have been disadvantaged • Examples: Eos, Maxjet, and Silverjet in the London-New York London New market – The hotel-industry model of amenity-based differentiation did not take hold
  • 9. A Commodity Business • The commodity problem continues to the present day – Transparent pricing, the result of online distribution, drives much consumer choice – The rise of low-cost carriers (LCCs) like Ryanair, EasyJet, low cost Southwest, and Air Asia, all offering a simple product focused on low price, are perpetuating the commodity perception • It is possible to create sustainable differentiation as differentiation, exists in other sectors?
  • 10. Airline Marketing • Controls and managed competition during the regulated era made comprehensive consumer and B2B marketing, as we understand it today, unnecessary – A curious exception: Braniff Airways’ rebranding, 1965-69:
  • 11. Airline Marketing • Airline marketing is thus a new discipline, and we’re working hard to catch up! • Professor Kotler’s 4 Ps, elements of the marketing mix, are a good way to understand contemporary marketing practice in our business: – Product – Price – Place – Promotion
  • 12. Product • Fundamentally, what is the product that we “put on the shelf”? • To airline people, it starts with schedule: the ability to carry you from point A to point B is the basic product • If you offer lots of “A to B” combinations you create a A B combinations, network – Two basic configurations, point to point, and hub and spoke • Network may also involve partnerships, with smaller airlines and with peers – Airlines and their customers benefit from network breadth
  • 13. Product: Service Quality • Many believe that the aspect of product that we just discussed is foundational – it is a given • Th i focus is on service quality – th components of Their f i i lit the t f service delivery at airports and in flight • Within this framework, there are several fundamentals – Safety – Dependability – Reasonable prices • Beyond this are the softer, but still vital, elements – Tangible offerings on the g g g ground and in the air – Human connections: friendliness, respect, and responsiveness • Across this wide spectrum, consistency is key
  • 14. Price • During regulated times, governments encouraged linear pricing • It was easier in those days to minimize some hard economic realities – High fixed and thus low variable costs – Perishability – Temporal variation in demand • Today, we must also deal with the following – Vigorous competitors with much lower cost structures – Different network configurations – Varied financial conditions (and in some places liberal bankruptcy laws)
  • 15. Place (Sales Channels) • Channel strategy has flip-flopped during the past 40 years • Managing distribution costs has become a major focus, partly because so few other expense lines seem controllable • We have made great progress with “disintermediation” – The trend toward online selling and e-Commerce • But it’s also about regaining control of the product – it is, after all, ours
  • 16. Promotion • What can we do to create sustainable brand preference? • The rise of loyalty programs – the single most effective marketing initiative since the airline business began – Increased share of wallet – Useful data on consumption – Opportunities to sell points to others • Tactical advertising increasingly moves online • What about brand or strategic advertising?
  • 17. Questions and Comments

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