Aviation Management College AIRLINE MARKETING Product Analysis In Airline Marketing -CONT-

Aviation Management College

AIRLINE MARKETING

Product AnalysisIn

Airline Marketing-CONT-

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Product AnalysisIn Airline Marketing

AIRLINE MARKETING

Lecture 28/01/10

Managing a Product Portfolio – Boston Box




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Background- US Boston Consulting Group 1963- Using product range & portfolio- Using 2 variables: - a) The size of total market- b) The share of the market or market share




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i) WILDCAT - Characteristics

- Product with low market share- The overall market is growing- Invest to increase market share- Using ‘4 Ps’ of Marketing Mix




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i) Wildcat - Using ‘4 Ps’ of Marketing Mix

- Product specs equal or better- Competitive pricing- Advertising & promotion activities- Using the right distribution channels




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i) Wildcat – in Airline Marketing

- Airline route as product; frequencies, connections, package

- International market; image & status, withdrawal, an advantage to competitor and difficult to re-enter




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ii) THE STAR - Characteristics

- Product has good market share- The market is growing- The best product to the firm- The product produce max profit- Need to spend heavily to defend market




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ii) STAR – product investment

- Advertising & promotion- Pricing strategy; competitive- High volume sales- Thin profit margins




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ii) STAR – in Airline Marketing

- Aero-engine market powering large jet aircraft- Players: GE, Pratt & Whitney & Rolls - Competition is intense- Spend large sum to defend market




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ii) STAR – in Airline Marketing

- Spend large amount on continuous product development & improvement program.

- Stiff pricing sometimes sold below cost- Profit from sales of spares & lifetime product

support- All with huge sales revenues, often thin margins




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ii) STAR – for Cost Leader Airlines (LCC)

- Intra European route & Asian regional routes- Attracts new players- Growing market- Competitive pricing- High sales revenue- Low profit margins




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iii) CASH COW PRODUCT – characteristics

- Product have good market share- Market is in maturity stage (not growing)- Market not attractive to new entrants- A major source for profit because no/less

spending to protect market share




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iii) CASH COW PRODUCT – in Airline Marketing

- Smaller engine market; a monopoly by The Tay of Rolls-Royce

- Fokker & Gulfstream jets, stagnant market- Now Fokker has gone bankrupt from 1996




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iv) DOG PRODUCTS – characteristics

- Low market share- Market is small & not growing- Ready to discontinue product- No spending, money used for other product

-




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Balancing Risk & Opportunity – the Ansoff Matrix

A marketing tool created by Igor Ansoff and first published in his article "Strategies for Diversification" in the Harvard Business Review (1957). The matrix allows marketers to consider ways to grow the business via existing and/or new products, in existing and/or new markets




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There are four possible product/market combinations. This matrix helps companies decide what course of action should be taken given current performance. The matrix consists of four strategies:




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Customer Service-Related Product Features

3. Inflight-service

-Wider seats & aisle-Inflight cabin service-Food & bevereges




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1, Market Penetration

- Market our existing products to existing customers. - Able to increase sales/revenue- e.g., promoting the product, repositioning the brand, etc.- Product is not altered and we do not seek any

new customers.




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1. Market Penetration

(existing markets, existing products):- company enters/penetrates a market with

current product- by gaining competitors' customers (part of their

market share). - other ways include attracting non-users of your

product or convincing current clients to use more- with advertising or other promotions. - on is the least risky way for a company to grow.




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2. Market Development

- market existing product range in a new market- product remains the same, but promote to a new

customers - Exporting the product, or marketing it in a new

region




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2. Market development - (new markets, existing products): - established product in the marketplace can be

targeted to a different customer segment, - as a strategy to earn more revenue for the firm.- Eg.,, Lucozade was first marketed for sick children

and then rebranded to target athletes. - developing a new market for an existing product.- the market need not be new in itself, but the

market is new to the company.




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3. Product Development- new product to be marketed to our existing

customers. - develop and innovate new product offerings to

replace existing ones. - products are then marketed to our existing

customers. - often happens with the auto markets where

existing models are updated or replaced and then marketed to existing customers.




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3. Product development (existing markets, new products): - developing new products for to the same market- old product but new to the company- Eg., McDonald's within the fast-food industry, but

frequently markets new burgers. - when a firm creates new products, it gain new

customers for these products. - new product development, a crucial business

strategy for firms to stay competitive.




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4. Diversification

New products to new customers. Two types of diversification,

a) Related diversification - remain in a market which we are familiar. Eg., a soup manufacturer diversifies into cake (food industry).

b) Unrelated diversification - we have no previous industry nor market experience. For example a soup manufacturer invests in the rail business.




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4. Diversification

- (new markets, new products): - Virgin Cola, Virgin Megastores, Virgin Airlines- Telecommunications are examples of new

products created by the Virgin Group of UK, to leverage the Virgin brand.

- This resulted in the company entering new markets where it had no presence before




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4. Diversification

Federal Express (FedEx):

- door 2 door service, - smaller shipments




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Lesson From Ansoff Matrix

To achieve the correct balance between risk & opportunity:

1. Firm must have product that fit into each of the four boxes

2. Need establish product &market for short term profit

3. To grow business must create new product & market




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Fleet & Schedules-Related Product Features

1.Cabin Configuration & Classes of Service

LCC airline (trade-off between comfort and price)

– single class, to put as many sits- Safety is not a major concern- Lack of pax comfort




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2. Network, Frequencies & Timing(compromise between product quality & cost)

-Routes are more often regulated-Frequencies are also determined by regulatory factors-Timing eg. Long haul not stop, now more efficient by the introduction of new aircraft B777 and A330




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3. Puctuality (trade-offs cost vs. punctuality

- New aircraft vs old/2nd hand (replacing policy)- Invest in Auto-Landing-Capability for poor visibility condition- Scheduled maintenance & sufficient spares- Schedules Planning: max aircraft utilization, low cost- Punctual arrivals importance: connections, business meetings, emergencies




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1.Point-of sale service

-travel agent- Global distribution system –computer

reservation- Internet bookings




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2. Airport Service

-Low-fare airlines-Few counters, longer check-ins-No seat numbers-Traditional Airlines-frequent buss traveler-Limousine service-Check-in & transfers services-Preferential baggage service-Departure/arrival lounge

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3. Inflight-service

-Wider seats & aisle-Inflight cabin service-Food & bevereges




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The Air Freight Market

1.Air Freight Capacity

-Cabin door size: length and square sizes limitations-Design density: weight capacity & volume metric-Special freighter aircraft




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Lesson Learnt



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Aviation Management College AIRLINE MARKETING Product Analysis In Airline Marketing -CONT-

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