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Marketing Airline


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Marketing Airline

  1. 1. Fundamentals <ul><li>What is Marketing? </li></ul><ul><li>It is the management process responsible for identifying, anticipating and satisfying customer requirements profitably. </li></ul><ul><li>The other definition: </li></ul><ul><li>It is about producing things that people don’t really need and then tricking them into buying them through deceitful advertising. </li></ul>
  2. 2. Advertising
  3. 3. Advertising
  4. 4. Advertising
  5. 5. Advertising
  6. 6. Advertising Thee initial advertised flight price is 19% of the final cost of the flight .
  7. 7. Advertising
  8. 8. From Marketing to Customer Service <ul><li>Southwest Airlines Has Been Profitable for 33 Straight Years, The Reasons Are Obvious, Yet Very Few Companies Think to Do Business the Same Way </li></ul><ul><li>The Consumerist posts the account of a Southwest Airlines ticket holder whose departing flight was delayed four and a half hours, while her return flight was a half hour delayed. </li></ul><ul><li>When she got home, she found in her mailbox a voucher from Southwest Airlines for $200 (her original round trip ticket cost only $100) along with a letter explaining the flight delay. </li></ul><ul><li>That's it, folks. Good customer service . That's the big secret to turning a profit for 33 straight years while your competitors are fighting off bankruptcy. </li></ul><ul><li>You'll find the importance of customer service written about in every marketing textbook, lectured about in every MBA program, and referred to in countless advertising campaigns. </li></ul><ul><li>So why don't more companies practice good customer service ? </li></ul>
  9. 9. Success or not success <ul><li>Successful airlines are likely to be those which anticipate change and are ready for it when it occurs. Unsuccessful carriers tend to be those which wait for change to happen and then try to catch up with it. </li></ul><ul><li>Legacy vs. Low Cost </li></ul>
  10. 10. Marketing Mix: The 4Ps <ul><li>Product </li></ul><ul><li>Price </li></ul><ul><li>Promotion (marketing methods to sell) </li></ul><ul><li>Place (distribution channels used by airlines) </li></ul>It emphasizes that marketing decisions cannot be made in isolation. Instead, all decisions are linked, with the ability to make tradeoffs between them in order to optimize the overall result for the firm an absolutely crucial skill.
  11. 11. Application of Marketing <ul><li>The 7 interlinked stages: </li></ul><ul><ul><li>The Customer (Who? What? When?) </li></ul></ul><ul><ul><li>The Marketing Environment (PESTE analysis) </li></ul></ul><ul><ul><li>Strategy Formulation </li></ul></ul><ul><ul><li>(goals and objectives; How? Where?) </li></ul></ul><ul><ul><li>Product Design and Development </li></ul></ul><ul><ul><li>Pricing and Revenue Management </li></ul></ul><ul><ul><li>Distribution Channel Selection and Control </li></ul></ul><ul><ul><li>Selling, Advertising and Promotional Policies </li></ul></ul>
  12. 12. What business are we in? <ul><li>Transportation </li></ul><ul><li>Surface transport (door to door) </li></ul><ul><li>Communication </li></ul><ul><li>Video conferencing </li></ul><ul><li>Leisure </li></ul><ul><li>Leisure money for leisure activities </li></ul><ul><li>Logistic </li></ul><ul><li>Price of surface transport </li></ul><ul><li>Information </li></ul><ul><li>(transport of mail, newspaper, important documents) </li></ul><ul><li>Selling services </li></ul><ul><li>(a/c engineering, airport ground handling, etc.) </li></ul>
  13. 13. Who is our Customer? <ul><li>Consumer vs. Customer distinction </li></ul><ul><li>Consumers are those people who actually fly. </li></ul><ul><li>They make their existence clear by reporting for flights and their requirements and preferences can be analyzed using questionnaires . They are therefore usually given a great deal of attention by those responsible for Marketing in the airline business. </li></ul>May not be the decision-makers
  14. 14. 1. Will the trip be made? <ul><li>Example 1: executives might present a case to their boss that a business trip should be undertaken, only to find that the necessary expenditure is not sanctioned. Instead, they are told to use, say, the phone, email or video-conferencing as a way of conducting the business in question. In such a situation the true “Customer” for the airlines might be the firm’s CEO or VP-Finance. </li></ul>
  15. 15. 2. What mode of transport? <ul><li>Example 2: For leisure travelers, the impact of surface transport competition is likely to be great. Besides competition on service quality, surface operators will be able to challenge airlines on price, with both train and bus services likely to become increasingly significant. The “Customer” in such a situation might be the family member who has most influence in travel decisions. </li></ul>
  16. 16. 3. What class of service? <ul><li>In order to maximize the amount of high yielding traffic available to them, carriers will have to target those who make decisions about Corporate Travel policies. They will, in particular, have to persuade these people that the benefits of buying travel in the premium cabins of the aircraft – for example, that these cabins allow better opportunities for sleep or work – outweigh the very substantially higher prices that are charged for access to them. </li></ul>
  17. 17. 4. Which airline? <ul><li>Leisure travelers: wholesale vs retailer </li></ul><ul><li>Business travelers: single airline due to corporate discount? </li></ul><ul><li>Conclusion of the 4 points: the mistake of assuming that the “Customer” is the same person who boards the aircraft must be avoided. </li></ul>
  18. 18. Apparent and True needs <ul><li>Understanding the factors that their customers take into account in making up their minds Survey! </li></ul><ul><li>The problem is: what people say may not be the truth (acceptable answers vs accurate description). </li></ul><ul><li>This difference between the claim and the truth is known in Marketing as the difference between “Apparent” and “True” needs. </li></ul>
  19. 19. Apparent and True needs <ul><li>Example of the business traveler: </li></ul><ul><ul><li>Apparent needs: flight frequency (to allow for travel flexibility), punctuality and a roomy cabin (to permit working during flight) might figure prominently. </li></ul></ul><ul><ul><li>True needs: Frequent flyer program while using the company’s money!!! True need of greed </li></ul></ul>True needs reflect the weaknesses of the human personality
  20. 20. Targeting <ul><li>Identifying your Customers means identifying their True Needs!! </li></ul><ul><li>In the Corporate/Business world: </li></ul>Who makes the decision? (tough question to answer) The Boss? The secretary? The individual? Marketing Strategy Note: HR policy and corporate travel employee.
  21. 21. Targeting <ul><li>In the Leisure Air Travel Market: It is all about the person’s disposable time and disposable income. </li></ul>The airline must ensure that… An air-based vacation was selected The holiday is taken at a destination it serves They travel on its flights
  22. 22. Targeting <ul><li>Importance of Children: </li></ul><ul><ul><li>Younger  baby care facilities as a determining choice </li></ul></ul><ul><ul><li>Young  entertainment availability </li></ul></ul><ul><ul><li>Older  their preferences may be considered </li></ul></ul><ul><li>Example: Disney Resorts, McDonald’s thru pester power (the power children have, by repeated nagging, of influencing their parents to buy advertised or fashionable items). </li></ul>
  23. 23. Targeting <ul><li>Differences in culture and among countries: </li></ul><ul><ul><li>Men decide in patriarchal societies </li></ul></ul><ul><ul><li>Women decide in matriarchal societies (UK) </li></ul></ul><ul><li>Travel agents importance in the leisure travel: </li></ul><ul><ul><li>Inexperienced traveler asking for advice </li></ul></ul><ul><ul><li>Visa questions, etc. </li></ul></ul>
  24. 24. Market Segmentation <ul><li>The objective of a firm’s marketing policies should be to meet the needs of its Customers, at a profit . We now have to deal with the problem that in one very real sense, this ideal objective is often unobtainable . </li></ul><ul><li>Example: car colors </li></ul>
  25. 25. Market Segmentation <ul><li>The process of trading off customer requirements against production economics occurs in almost all industries – notably so amongst airlines. It is called ‘Market Segmentation’. </li></ul>
  26. 26. Market Segmentation <ul><li>Definition: </li></ul><ul><li>A market segment is a group of Customers who have sufficient in common that they form a viable basis for a product/price/promotion combination. </li></ul><ul><li>Mistakes: </li></ul><ul><ul><li>Under-segmentation </li></ul></ul><ul><ul><li>Over-segmentation </li></ul></ul><ul><li>What is the obvious segmentation end-result for airlines? </li></ul>
  27. 27. Segmentation Variables <ul><li>Journey Purpose: business/leisure/exceptions (pilgrims to Islam’s holy places) </li></ul><ul><ul><li>Sub-segments: Holiday and VFR (meals vs no meals) </li></ul></ul><ul><li>Length of Journey: short vs long-haule </li></ul><ul><ul><li>Airport experience </li></ul></ul><ul><ul><li>Inflight experience </li></ul></ul><ul><li>Country/Culture of Origin of the Traveler </li></ul><ul><ul><li>Global brand/seamless service in large alliance/comparable products </li></ul></ul><ul><ul><li>Baggage allowance! </li></ul></ul><ul><ul><li>Suitable meals/breakfast </li></ul></ul>
  28. 28. Customer Requirements Business Travelers <ul><li>Surveys: </li></ul><ul><ul><li>Inflight? Good but limited. </li></ul></ul><ul><ul><li>What methods? Mail? Email? Phone? </li></ul></ul><ul><li>Priorities: 1) Frequency and Timings 2) Punctuality 3) Airport Location and Access 4) Seat Accessibility/Ticket Flexibility 5) Frequent Flyer Benefits 6) Airport Service 7) In-Flight Service </li></ul>
  29. 29. Demographics and Psychographics <ul><li>“ Demographics” is used to describe the physical and tangible characteristics of the members of the segment. </li></ul><ul><li>“ Psychographics” is the term used to describe the intangible attitudes, preferences and, perhaps, prejudices of the members of the segment. </li></ul>
  30. 30. Demographics and Psychographics <ul><li>In Europe for example, still over 80% of business travelers are men, whilst the average age of those who travel on business is in the early forties. </li></ul><ul><li>In Europe and North America, though, radical change is beginning to occur. Women are becoming much more important in business travel, with forecasts suggesting that by the year 2010 perhaps 25-30% of all business travel will be undertaken by women. </li></ul>
  31. 31. Demographics and Psychographics <ul><li>Strong opinion </li></ul><ul><li>Life Cycle attitude concept: young executive vs tired one! </li></ul>
  32. 32. Leisure Segment <ul><li>Demographics difference: good balance b/w males and females (and females live longer) </li></ul><ul><li>Importance of children </li></ul><ul><li>Personal incomes </li></ul><ul><li>Customer requirements: cheap fare </li></ul><ul><li>Not tax deductible </li></ul><ul><li>Lower standards for lower fares (pitch) </li></ul>
  33. 33. Advantage for airlines <ul><li>use of larger aircraft to serve the leisure market, and gain the benefits of the lower seat-kilometre costs available from such aircraft. </li></ul><ul><li>Can operate at higher load factor (90%) </li></ul><ul><li>This will minimize the difference between available and revenue seat-kilometre costs. </li></ul><ul><li>Peak time off-peak time utilization </li></ul>
  34. 34. Advantage for airlines <ul><li>Do not assume that profitability cannot be reached with only leisure pax due to low yield. </li></ul><ul><li>Leisure market has many characteristics which allow efficient airlines to meet their customers’ requirements much more cheaply than it is possible in the business market. </li></ul><ul><li>They don’t need frequent, on-demand service  use of larger aircraft  lower seat-kilometre cost  high load factor cause no last minute availability needs to be offered. </li></ul>
  35. 35. Advantage for airlines <ul><li>Difference in peaking patterns and timing: </li></ul><ul><ul><li>Despite seasonal and costly peak-time resources, it can be spread out throughout the day. </li></ul></ul><ul><ul><li>Higher annual utilization of the aircraft (4000-4200 hours per year in Europe vs. 2500-2700 when relying on a large number of bus. Pax) </li></ul></ul><ul><li>Willingness to sacrifice product features for lower fare. What product feature would leisure pax NOT give up (think of Ryanair)? </li></ul>