Marketing Airline

Fundamentals

• What is Marketing?It is the management process responsible for identifying, anticipating and satisfying customer requirements profitably.

• The other definition:It is about producing things that people don’t really need and then tricking them into buying them through deceitful advertising.

Advertising

Advertising

Thee initial advertised flight price is 19% of the final cost of the flight.

Advertising

From Marketing to Customer Service• Southwest Airlines Has Been Profitable for 33 Straight Years, The Reasons

Are Obvious, Yet Very Few Companies Think to Do Business the Same Way• 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.

• 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.

• 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.

• 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.

• So why don't more companies practice good customer service?

Success or not success

• 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.

• Legacy vs. Low Cost

Marketing Mix: The 4Ps

• Product• Price• Promotion (marketing methods to sell)• Place (distribution channels used by airlines)

It emphasizes that marketing decisions cannot be made in isolation. Instead, all decisions arelinked, with the ability to make tradeoffs between them in order to optimize the overall result for the firm an absolutely crucial skill.

Application of Marketing

The 7 interlinked stages:1. The Customer (Who? What? When?)2. The Marketing Environment (PESTE analysis)3. Strategy Formulation

(goals and objectives; How? Where?)1. Product Design and Development2. Pricing and Revenue Management3. Distribution Channel Selection and Control4. Selling, Advertising and Promotional Policies

What business are we in?• Transportation

Surface transport (door to door)• Communication

Video conferencing• Leisure

Leisure money for leisure activities• Logistic

Price of surface transport• Information

(transport of mail, newspaper, important documents)• Selling services

(a/c engineering, airport ground handling, etc.)

Who is our Customer?

• Consumer vs. Customer distinction• Consumers are those people who actually fly.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.

May not be the decision-makers

1. Will the trip be made?

• 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.

2. What mode of transport?

• 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.

3. What class of service?

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.

4. Which airline?

• Leisure travelers: wholesale vs retailer• Business travelers: single airline due to

corporate discount?

• Conclusion of the 4 points: the mistake of assuming that the “Customer” is the same person who boards the aircraft must be avoided.

Apparent and True needs

• Understanding the factors that their customers take into account in making up their minds Survey!

• The problem is: what people say may not be the truth (acceptable answers vs accurate description).

• This difference between the claim and the truth is known in Marketing as the difference between “Apparent” and “True” needs.

Apparent and True needs

• Example of the business traveler:– Apparent needs: flight frequency (to allow for travel

flexibility), punctuality and a roomy cabin (to permit working during flight) might figure prominently.

– True needs: Frequent flyer program while using the company’s money!!! True need of greed

True needs reflect the weaknesses of the human personality

Targeting

• Identifying your Customers means identifying their True Needs!!

• In the Corporate/Business world:

Who makes the decision? (tough question to answer)Who makes the decision? (tough question to answer)

The Boss?The Boss? The secretary?The secretary? The individual?The individual?

Marketing Strategy

Marketing Strategy

Note: HR policy and corporate travel employee.

Targeting

• In the Leisure Air Travel Market: It is all about the person’s disposable time and disposable income.

The airline must ensure that…The airline must ensure that…

An air-based vacation was selected

An air-based vacation was selected

The holiday is taken at a destination it servesThe holiday is taken at a destination it serves

They travel on its flights

They travel on its flights

Targeting

• Importance of Children:– Younger baby care facilities as a determining

choice– Young entertainment availability– Older their preferences may be considered

• 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).

Targeting

• Differences in culture and among countries:– Men decide in patriarchal societies– Women decide in matriarchal societies (UK)

• Travel agents importance in the leisure travel:– Inexperienced traveler asking for advice– Visa questions, etc.

Market Segmentation

• 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.

• Example: car colors

Market Segmentation

• The process of trading off customer requirements against production economics occurs in almost all industries – notably so amongst airlines. It is called ‘Market Segmentation’.

Market Segmentation• Definition:

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.

• Mistakes:– Under-segmentation– Over-segmentation

• What is the obvious segmentation end-result for airlines?

Segmentation Variables• Journey Purpose: business/leisure/exceptions

(pilgrims to Islam’s holy places)– Sub-segments: Holiday and VFR (meals vs no meals)

• Length of Journey: short vs long-haule– Airport experience– Inflight experience

• Country/Culture of Origin of the Traveler– Global brand/seamless service in large

alliance/comparable productsBaggage allowance!Suitable meals/breakfast

Customer RequirementsBusiness Travelers

• Surveys:– Inflight? Good but limited.– What methods? Mail? Email? Phone?

• 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

Demographics and Psychographics

• “Demographics” is used to describe the physical and tangible characteristics of the members of the segment.

• “Psychographics” is the term used to describe the intangible attitudes, preferences and, perhaps, prejudices of the members of the segment.


• 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.

• 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.


• Strong opinion• Life Cycle attitude concept: young executive vs

tired one!

Leisure Segment

• Demographics difference: good balance b/w males and females (and females live longer)

• Importance of children• Personal incomes• Customer requirements: cheap fare• Not tax deductible • Lower standards for lower fares (pitch)

Advantage for airlines

• use of larger aircraft to serve the leisure market, and gain the benefits of the lower seat-kilometre costs available from such aircraft.

• Can operate at higher load factor (90%)This will minimize the difference between

available and revenue seat-kilometre costs.• Peak time off-peak time utilization


• Do not assume that profitability cannot be reached with only leisure pax due to low yield.

• 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.

• 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.


• Difference in peaking patterns and timing:– Despite seasonal and costly peak-time resources,

it can be spread out throughout the day.– 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)

• Willingness to sacrifice product features for lower fare. What product feature would leisure pax NOT give up (think of Ryanair)?

Marketing Airline

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