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Uploaded byNarudh Cheramakara
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Airline Marketing 6 airline product analysis

This document provides an overview of airline marketing and products. It discusses key aspects of airline products like routes, in-flight services, and fare structures. It also covers airline product life cycles and strategies for managing product portfolios. Specific airline products discussed include cabin classes, networks and frequencies, punctuality, points of sale, reservations and overbooking policies, airport and arrival services. Frameworks like the BCG matrix, ANSOFF matrix, and Rogers' model of innovation attributes are referenced in relation to airline product development and management.

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Airline Marketing 6: Airline Marketing Product Analysis Dr Narudh Cheramakara 1/2017 Bangkok University
1. What are airlines’ products? • Airline industry product’s is intangible unlike manufacturing industry • Instantly perishable and can not be stored • Intangible and multifaceted -
1. What are airlines’ products? Route as product - The rise and fall of TPE : and potential rise again - Connectivity through hubs: DXB v traditional kangaroo route - Nok with the highest domestic destinations
1. What are airlines’ products? In-flight Products/Service - Through touchpoints Booking-Baggage arrival - What are touchpoints?
1. What are airlines’ products? Fare structure as product Air France International Fare structure
2. Product life cycle
2. Product Life Cycle 2.1 Introduction Stage • costs are very high • slow sales volumes to start • little or no competition • demand has to be created • customers have to be prompted to try the product • makes little money at this stage
2. Product Life Cycle 2.2 Growth Stage • costs reduced due to economies of scale • sales volume increases significantly • profitability begins to rise • public awareness increases • competition begins to increase with a few new players in establishing market • increased competition leads to price decreases
2. Product Life Cycle 2.3 Maturity Stage • costs are decreased as a result of production volumes increasing and experience curve effects • sales volume peaks and market saturation is reached • increase in competitors entering the market • prices tend to drop due to the proliferation of competing products • brand differentiation and feature diversification is emphasized to maintain or increase market share • industrial profits go down
2. Product Life Cycle 2.4 Decline stage • costs become counter-optimal • sales volume decline • prices, profitability diminish • profit becomes more a challenge of production/distribution efficiency than increased sales
3. Product Innovation For a successful product innovation E.M. Rogers suggests the following points of consideration 3.1 Relative Advantage • new products must be substantially better value- for-money thanthose they are replacing, in order for consumers to accept the risks of using them
3. Product Innovation • 3.2 Compatibility • An innovation is unlikely to be successful if it is a very radical departure from the existing ways in which business is done in the market sector in - This could be wrong for inflight product (e.g. flatbed on BA, Etihad Suite) - But could be right for standing seats - How about charging for cabin luggage? (like Spirit and Wizzair)
3. Product Innovation • 3.3 Complexity • Some innovations fail because they are perceived as being extremelydifficult to use, requiring purchasers to invest a great deal of time and effort • This is why LCCs make booking and payment very easy. • Nok Air has a policy of not collecting irrelevant passengers’ data (DOB, passport no, etc.)  This is a double-edged sword for CRM Analysis.
3. Product Innovation • 3.4 4. Divisibility • It is often easier to persuade consumers to take a series of short steps, rather than one very large and risky one. • The principle of Divisibility is very well illustrated by the growing popularity of so-called Fractional Ownership schemes for business jets. (In which the manufacturer expect the fractional owners will buy the plane outright at the later stage
3. Product Innovation • 3.5 Communicability • Customers are unlikely to be persuaded to buy a product if the benefits this product will bring cannot be communicated to them persuasively. • Miscommunication and the socalled ‘internet drama’ is very difficult to handle by airlines
4. Product Life Cycle in the Aviation Industry: Boeing
4. Product Life Cycle in the Aviation Industry: Airbus - ETOPS revoluti on - Engine Change
4. Product Life Cycle in the Aviation Industry: IFE - Audio - Feature film - Personal Screen - AVOD - Larger screens - Touch Screen - USB/ Self-content - WIFI - What’s next?
4. Product Life Cycle in the Aviation Industry: Seats - Lounge Chair - Flat Bed - Aisle Access
5. Managing Product Portfolio BGC Product Portfolio Metrix
BGC Portfolio Metrix: Airlines 1. Question Mark (Wildcat) - Rapid growing route but still have low share - China/India for Example - Possibly TPE in the future 2. Star - Engine manufacturers (with profit potential from spares) - None for airline market in Deregulated markets.
BGC Portfolio Metrix: Airlines 3. Cashcow This is the one where the product in question still has a good share of the market, but where the total market is no longer growing strongly. The fundamental difference between Stars and Cash Cows is that the Cash Cow market will no longer be an attractive one for new entrants. Established firms will have invested to gain their place in the market, and should be able to continue to exploit it successfully. - CFM56 for 737NGs 4. Dog - KBV for Nok Air
6. ANSOFF Metrix • The Ansoff Matrix is a strategic planning tool that provides a framework to help executives, senior managers, and marketers devise strategies for future growth. It is named after Russian American Igor Ansoff, who came up with the concept.
6. ANSOFF Metrix
6. ANSOFF Metrix • Market penetration • In market penetration strategy, the organization tries to grow using its existing offerings (products and services) in existing markets. • In other words, it tries to increase its market sharein current market scenario. This involves increasing market share within existing market segments. This can be achieved by selling more products or services to established customers or by finding new customers within existing markets. Here, the company seeks increased sales for its present products in its present markets through more aggressive promotion and distribution. • This can be accomplished by: (i) Price decrease; (ii) Increase in promotion and distribution support; (iii) Acquisition of a rival in the same market; (iv) Modest product refinements
6. ANSOFF Metrix • Market development[edit] • In market development strategy, a firm tries to expand into new markets (geographies, countries etc.) using its existing offerings. • This can be accomplished by (i) Different customer segments (ii) Industrial buyers for a good that was previously sold only to the households; (iii) New areas or regions about of the country (iv) Foreign markets. This strategy is more likely to be successful where:- (i) The firm has a unique product technology it can leverage in the new market; (ii) It benefits from economies of scale if it increases output; (iii) The new market is not too different from the one it has experience of; (iv) The buyers in the market are intrinsically profitable.
6. ANSOFF Metrix • Product development • In product development strategy, a company tries to create new products and services targeted at its existing markets to achieve growth. • This involves extending the product range available to the firm's existing markets. These products may be obtained by: (i) Investment in research and development of additional products; (ii) Acquisition of rights to produce someone else's product; (iii) Buying in the product and "branding" it; (iv) Joint development with ownership of another company who need access to the firm's distribution channels or brands.
6. ANSOFF Metrix • Diversification • In diversification an organization tries to grow its market share by introducing new offerings in new markets. It is the most risky strategy because both product and market development is required. (i) Related Diversification - Here there is relationship and, therefore, potential synergy, between the firms in existing business and the new product/market space. (a) Concentric diversification, and (b) Vertical integration. (ii) Unrelated Diversification: This is otherwise termed conglomerate growth because the resulting corporation is a conglomerate, i.e. a collection of businesses without any relationship to one another.A strategy for company growth through starting up or acquiring businesses outside the company’s current products and markets
Key Take Away from ANSOFF Matrix • The overall message of the Ansoff Matrix is a clear one. To achieve the correct balance between risk and opportunity, firms must have products which fit into each of the four boxes of the Matrix. There must be established products and markets which provide for profits in the short term. The business must grow and develop using examples drawn from Boxes Two and Three. If it can do so, there may be room for some much riskier products drawn from the Fourth Box. It must be accepted that some of these products will fail. Others may cause large early losses before becoming long-term winners. The business must be certain that current profits are sufficient to cover these possible losses.
7. Airline Product 7.1 Cabin and Class - Declining Seat Pitch for Economy (min 28) - Seat Abreast on 777, 330 - Premium Economy Class Development - The Flatbed in Business Class and Decline of First Class
777 Cabin: United v Philippine Airlines
Economy
Premium Economy
Business Class: Highly innovative
First Class: Increasingly matched by Business class
7. Airline Product 7.2 Network, Frequencies and Timing A. Network: - Hub or Direct? Pros and Cons (BA v Easyjet) - Problem of Constraint (Slot, operating hours – noise banned at night at LHR, traffic rights)
7. Airline Product 7.2 Network, Frequencies and Timing
7. Airline Product - Business travelers require frequency and timing as they need flexibility - Travellers wanted to arrive early and back late to utilize the full holiday leave
7. Airline Product 7.3 Punctuality - No one would wanted to fly on a often-delayed airlines - Compensation mechanism
7. Airline Product 7.3 Point of Sale service - Agent – Declining - OTA - Booking Office - Declining - Call Centre – Declining - E-Commerce - Leading
7. Airline Product 7.3 Reservation and Overbooking - Shuttle Service (Go-show) on important airbridges - Overbooking to earn more revenues (highly- controversial) - What are the points of consideration for overbooking?
7. Airline Product 7.4 Airport Service - Important part of the journey - Particularly shorthaul - Aiming to be stressfree, business traveler friendly - London City Example - Business class lounge
Inflight Service • Crew • Meal • Entertainment • Seats • Selling through national image
Arrival • Baggage Collection • Priority Baggage • Arrival Lounge • Complaint/Baggage issue handling