1. The AIRLINES Case Study
SUBMITTED BY:
 Archit Garg
 Geet Sawhney
 Mohit Sharma
 Siddharth Kumar

2. Q1: How did the airlines find or discover the
opportunities for growth?
 The airlines company discovered that the passenger
differs in their expectation. Business travellers value
convenience, comfort and service while leisure
travellers were more interested in just commuting
from one place to another.

3. Q2: What segmentation variables or bases did they
use in segmenting the market?
 Segmentation was done on the basis of Demographic
differences i.e. Social class, ability to pay and
occupation.

4. Q3: Make profile of each of three segments.
What targeting strategy did they select?
 The three profiles where:
- Economy: For $250 per passenger
- Business: For $500 per passenger
- First Class: For $1000 per passenger
 They went for product specialization because the
company concentrates on making single product
category that it sells to several segments.

5. M1 M2 M3
P1
P2
P3

6. M1 M2 M3
P1
P2
P3

7. Q4: How did they take position or what position
strategy they applied?
 They have used User positioning and Quality/Price
positioning strategy.
 User positioning because it involved positioning
product as required by some user group.
 Quality/Price positioning because product is
offering best value for money.

8. When can segmentation go wrong? How to avoid
segmentation from going wrong? What precautions to take?
 Basis of segmentation are as follows. If any of the following is not read or analyzed
properly , it can go wrong.
Geographic & Demographic variables:
 Purchasing power, size and characteristics of the segment are interpreted wrongly.
 Small and heterogeneous segments.
 There can be an overlapping in the segments making them in-differentiable from
each other. As in this case, there might be customers who are capable of paying for
business class but want to travel in economy class.
Psychographic Variables:
 Wrong approach in targeting heavy, medium and low users.
 Improper selection of services to be provided to suit the lifestyle and personality of
the customer.
Behavioral Factors:
 Services provided should be based on frequency and urgency to the customers.
 Loyalty and user-status of the customers should form the basis of the services.

9. The management can avoid wrong segmentation in this case by:
 Clearly defining the size of each class in terms of no. of seats allocated to
each class.
 Services provided in each class should be at par with the prices paid.
 Ascertaining the profit earned from the seats allocated in each class.
Segmentation bases for airlines:
Geographical: Tier 1 and Tier II cities
Demographics: - High Income & occupation
Psychographics - Life Style
- First Class- Customers conscious of status
- Business Class –customers who wish comforts and facilities.
- Executive Class – customers who wish faster travel at minimum rates
 Behavioral
- Business and first class will remain loyal if they get the required
luxuries they expect.
- Economy class will remain loyal if they get reasonable travel fare.

10.  Calculate the following :
 Revenue
 Cost Incurred
 Profit
 Profitability
 Break Even Point(B.E.P.)
For both strategies for the full plane, for each class and per
passenger in each class, assuming that plane is 80% loaded.

11. UNDIFFERENTIATED STRATEGY
 REVENUE
 No. of Seats, A= 300
 Average Load Factor, B=0.8
 Average no. of seats occupied, C=A*B=240
 Charge per Seat, D=$250
 Revenue=C*D = $60000

12. EXPENSES
 Fixed Cost = $50,000
 Variable Cost per Passenger = $20
 Total Variable Cost = No. of passengers * $20
= 240 * $20
= $4,800
 Total Expense = $50,000+$4,800 = $54,800
PROFIT
Profit= Revenue - Expense
=$60,000-$54,800
= $5,200

13. PROFITABILITY
 Profitability by Revenue= (Profit / Revenue) * 100
= ($5,200/$60,000) * 100
= 8.66%
 Profitability by Cost= (Profit / Total Cost) * 100
= ($5,200/$54,800) * 100
= 9.45%

14. BREAK EVEN POINT (BEP)
 Contribution/unit, C = Price per ticket – Variable Cost
per ticket
= $250-$20
= $230
Fixed Cost, FC = $50,000
BEP (in units) =FC/C = $50000/$230 =217.39
= 218 seats
BEP (in sales) =FC/PV ratio = BEP (in units) * Price per
ticket
=$54500

15. DIFFERENTIATED STRATEGY

16. List down all benefits of segmentation to all
possible stakeholders of the airlines.
CUSTOMERS
 Customer satisfaction is achieved if the customers get their choice and
preferences.
 Customers get the value for their money.
SUPPLIERS AND VENDORS
 Travel agents: Better commission due to increase in customer base.
 Caterers: Opportunity to provide superior quality food and beverages.
EMPLOYEES
 Better wages, therefore they are more satisfied.
 Clarity in job description, resulting in better performance.
SHAREHOLDERS
 Higher dividends
 Increases faith in management
 Brand loyalty

17. Who all could be the
beneficiaries?
 Government
 Service Industry
 Business travellers- They get personalized service,
comfort and convenience.
 Company- The profits of the company has increased a
lot due to segmenting the market.

18. (a) Do you think any segment is subsidizing for any
other segment? If so who to whom? If not. Why not?
 No, segment is subsidizing for any other segments.
 They are receiving services commensurate for the price
they paying.

19. (b) What do you mean by absolute and relative satisfaction? Do
you think there is a possibility that any class may feel relatively
dissatisfied although absolutely satisfied? How would management
prevent it?
Absolute satisfaction of segment:
 In this case there is no external comparison but the comparison is only
between what the customer/buyer expected to get and what he got after
buying. This occurs when the perceived and delivered value match
from the point of the view of the customer.
Relative satisfaction:
 In this case customer/buyer compares the value he gets with what the
others have got.
 For relative satisfaction, a customer should perceive same value/cost
ratio as that of another customer in the other high value and high
service segment.

20. Relative dissatisfaction although absolutely satisfied:
 This occurs when the customer is fully satisfied with the services
received according to his perception, but is relatively unsatisfied
vis-à-vis the other high value and high service segments.
 In this case, we don’t think any class feels relatively dissatisfied as
the price paid are in proportion to the services provided for every
class.
 However there is a possibility that the first class and business
class have relative dissatisfaction if the service quality and
differential benefits go down.
Prevention of relative dissatisfaction:
 Management should ensure that the price paid by the customer is
in proportion to the services and values provided. Value/Cost
ratio across various segments would remain same.

21. Thank You