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Question 1How do easyJet’s marketing objectives andits marketing mix strategy affect its pricingdecisions?
easyJet’s Mission Statement:“To provide our customers with safe, good value, point-to-point air services . To effect and to offer aconsistent and reliable product and faresappealing to leisure and business markets on a range ofEuropean routes. To achieve this we will develop our people
OBJECTIVESLow fares and high frequency between majorEuropean airportsConsumers willing to pay ( a little ) more for value-added propositionGrowth based on joining the dots and addingfrequency
Segmentation and Targeting:•Business and Leisure ConsumersDifferentiation and Positioning:•Flies to all the primary airports in Europe•Commitment to customer service
With recognition for providing more efﬁcient, low-cost ﬂights,whilst maintaining as a high quality of service as possible,easyJet is positioning itself to its consumer base as the bestform of budget travel in Europe. Price is a crucial positioning factor
•Therefore, the marketing mix is based on keepingcosts to a minimum to allow the airline to offerthe lowest fares possible
Product / Customer solution:‣Features: Punctual and no-frills‣Brand name: EASY to pronounce, recognise, and remember‣Packaging: ORANGE
Place / Convenience:• easyJet’s website acts as a main distribution channel for e-ticketing• Can be viewed in 18 languages
Promotion/Communications:easyJet advertisements can beseen everywhere, in cities allover Europe from giantbillboards to public transportbuses.
Question 2Discuss factors that have affected the natureof costs in the airline industry since 2000.How have these factors affected pricingdecisions?
FACTORS SINCE 2000Heightened Environmental ConsciousnessInformation AgeTerrorismEnergy Crisis
HEIGHTENED ENVIRONMENTAL CONSCIOUSNESS2002s World Summit on SustainableDevelopmentEnvironmental TaxesCleaner plane models/engines
INFORMATION AGEBroadband mainstream since2000sIntroduction of advancedtechnologyLess cost for labour andinfrastructure and less timeincurred to complete the samejob
TERRORISM9/11 attacksSecurity procedures introducedHigh-tech detection hardwareHigher costs incurred for safety andpeace of mindAviation insurance
ENERGY CRISIS2000s energy crisisRising cost of crude oilHigher costs are translated toairline industry as jet fuel isprocessed from crude oilHedging policy reduces fuel costincrease to a limited extent
AIRFARE PRICING TRENDSLow enough to attract demand, high enough to offset increases incostAirfare price range depends dramatically on the following variableslisted in order of importance: Competition on Route Seat Demand Distance of Route Seat Supply Fuel Prices
OUTCOME➡ Higher Costs Are Translated To The Airfares
Question 3How do the nature of the airline marketand the demand for airline service affecteasyJet’s decisions?
NATURE OF AIRLINE MARKETOligopolistic competitionConsists of some older and majorconventional airlinesA few up and coming low costcarriersRival consciousness prevalent
DEMAND FOR AIRLINE SERVICE(FROM EASYJET’S VIEWPOINT)The price-demand relationship: lower theprice, the higher the demandeasyJet has positioned itself as low-costairlineIts pricing strategy is based on GoodValue Pricing
PRICE ELASTICITY OF DEMAND (FOR EASYJET SERVICES)easyJet faces a consumer DD that is highly elastici.e. There will be a large change in Qd for a smallchange in price
REASONS FOR HIGH PEDIts services are no-frills airplaneﬂights. These are not unique.Relatively easy to ﬁnd similarsubstitutesTotal expenditure of airline tickets is asigniﬁcant proportion of Yd
EASYJET MARKETING DECISIONSNature of market + DDproduct= Marketing Decisions
Question 4What general pricing approaches haveairlines pursued?
PRICING STRATEGIES MATRIX Quality LOW HIGH LOW ECONOMY PENETRATIONPrice HIGH SKIMMING PREMIUM
FULL SERVICE CARRIERSPrice Discrimination Based on fare classes Charge each customers as much as they are willing to pay
Value-Added Pricing Offering passengers a superior range of ground and onboard services In return for a much HIGHER fare
“Fences” Must be built to prevent passengers from substituting higher fares for discounted tickets In the form of minimum stay requirements, date and/ or route change penalties
Different Class of Services First, Business, Economy Plus, Economy Business class may cost 5-10 times more than Economy but the service costs much lesser than that
LOW COST CARRIERSReverse Price System The further the date of departure, the cheaper the ticket Encourages customers to book early Able to gauge demand for every ﬂight
No “Frills” No free meals and beverages onboard, no frequent ﬂiers program etc More seats are available in one ﬂight to maximise proﬁts
One-way Ticketing Policy Customers only required to buy one-way ticket Need to purchase two one-way tickets for a round trip Gives full ﬂexibility to plan their trip as they please Appeal to the business travellers
Question 5Do you think that EasyJet will be able tocontinue to maintain a competitiveadvantage based on price? What will happenif other carriers match the low-price leader?
CURRENT COMPETITIVEADVANTAGES BASED ON PRICESNo frillsLower operating costsHigh productivity of resourcesIncreasing revenueReduced distribution costs
ARGUMENTS AGAINST MAINTAININGCOMPETITIVE ADVANTAGES BASED ON PRICESLow cost airline industry increasingly competitiveCompetitors serving secondary airports (More cost savings)Natural limitations on price; Increases in fuel price andairport charges
Competitors imitate online booking process andoffer competitive ﬂight ratesLow cost airline industry characterized by mergersand acquisitions
Proﬁle #1: WinstonBackground: ★Businessman ★Age: 25-39 ★Middle Income★High reliance on information technology★Independent★Work for SMEs (size of the company price sensitive)★Job scope requires them to ﬂy frequentlyNeeds:★Punctuality of ﬂights★Adequate amount of comfort★Flexible reservation systems★Affordability
INFRASTRUCTUREDevelop infrastructure for in-ﬂightWireless Internet serviceProvide in-ﬂight Wireless Internet forFREE
DISCOUNTED CONTRACTSDevelop discounted contracts withSMEsPartner with prominent SMEs andprovide their staff with beneﬁtswhen they travel with easyJet
BUSINESS-SELECT SEATS Implementation of business- select seats/tickets Provide front row seats with more leg rooms
FREQUENT FLYER PROGRAMImplementation of frequentﬂyer program-loyalty basedbeneﬁts to ensure continuedrevenue Eg. KrisFlyerCurrent easyJet card has onlymembership-based beneﬁts
Facebook and Twitter➡ Social Networking Sites to keep EasyJet backpackers informed for the latest tourist attractions
Discounts for Reliable & Low-CostAccomodation Exclusively for easyBIG members
EASYJET BACKPACKER FORUM (EBF)Provide a common platform forexchange of information andpreferences on tourist destinationsInform backpackers of upcomingEasyJet promotionsTourists with common interest cantravel together
EasyJet Merchandise Partner with an established baggage brand (eg, Crumpler, Timbuk2) Allow members to accumulate ﬂyer points to redeem such merchandize This can create a sense of belonging
Links between Recommendations and Proﬁling of Backpackers
GENERIC RECOMMENDATIONSSequence of boarding To minimise obstruction
Implement full refund for cancellations within 24 hrs Abolish cancellation fee Psychological comfort – peace of mind Eg, For Businessmen- meeting time changes For Backpackers – Unforeseen circumstances such as weather conditions / political situations