Marketing Strategies of Star Alliance: An In-depth...

Proceedings of the International Conference on Tourism, Hospitality &

Sustainable Development (IC17Dubai Conference) ISBN: 978-1-943579-18-1

Dubai - UAE. 6-8, October 2017. Paper ID: DT745

1 www.globalbizresearch.org

Marketing Strategies of Star Alliance:

An In-depth Analysis of Asian based Airline Members

Chayapoj Lee-Anant,

Graduate School of Tourism Management,

National Institute of Development Administration, Thailand.

E-mail: [email protected]

Worarak Sucher,

Graduate School of Tourism Management,

National Institute of Development Administration, Thailand.

E-mail: [email protected]

_________________________________________________________________________

Abstract

Nowadays, it is very common for everyone, when travelling, they fly. This has resulted in the

more intense competitiveness in the airline business around the world particularly Asia. Even

though airline business is rapidly growing, the business still needs adaptation to match the

rapid economic changes and strategies to survive. One of the approaches the airliners have

employed for the regarded purposes is the strategic airline alliance strategy namely Oneworld,

Skyteam and Star Alliance. Under the airline formation, the airlines have launched many

marketing strategies differently to influence purchasing intention. Some are successful and

some are not among the Asia-based star alliance airline members. The Star Alliance, which is

the focus of this paper, has 28 airline members worldwide and only 9 airlines are based in Asia.

It is interesting to study about how they do for their marketing strategies. The purpose of the

paper is therefore aimed at 1) analyzing and discussing the marketing strategies employed by

Asia-based airline members of the Star alliance 2) finding the common marketing strategies

practiced by the Asia-based airline members of the Star alliance. The discussion of this paper

is based on literature review with a support of the vast examples of marketing strategies of

Asia-based Star Alliance airline members. It is found that there are 13 marketing strategies,

currently employed to increase the purchasing intention by the Asia-based Star Alliance airline

members. Those are Strategic Alliance Strategy, Social Marketing Strategy, Quick Response

Strategy, Competitive Differentiation Strategy, Product Diversification Strategy, Product

Diversification Strategy, Pricing Strategy, Airline Branding Strategy, Customer Retention

Strategy, Cost Leadership Strategy, Customized and Personalized Strategy, Market Positioning

Strategy and Product Distribution & Digital Marketing Strategy. And among them, only 6

marketing strategies are similarly used, which are Strategic Alliance Strategy, Quick Response

Strategy, Pricing Strategy, Customer Retention Strategy, Product Differentiation Strategy, and

Product Distribution and Digital Marketing Strategy. This paper is composed of three parts.

The first part of this paper explains the current situation of airline business and then the second

part discusses the marketing strategies employed for increasing purchasing intention among

the 9 Asia-based Star alliance airline members. The last part demonstrates the common

marketing strategies.

___________________________________________________________________________

Key Words: Marketing strategy, Star alliance, Asian based airline member, Strategic Airline

Alliance, Airline industry

JEL Classification: C 19, G13, G 14





1. Introduction

In the past two decades, air transportation has been changed rapidly due to globalization,

global dynamics, science and technological advancement. These factors have eased global

transportation to be more convenient, leading the increasingly higher demand in air travelling.

(Wensveen, 2015; Belobaba, Odoni, and Barnhart, 2015). Air transportation businesses have

expanded compared to the past years. Although the global airline industry is continually

growing, the profitability of each airline is hardly found. (IATA, 2016). The International Air

Transportation Association (2016) declared that the airline industry has double projected

revenue from only US$746 billion in 2004 to US$746 billion in 2014. Mainly, the growth

numbers mainly come from low-cost carriers (LCCs) which contributes about 25 percent of the

worldwide market. These percentages tend to increase yearly especially from the expansion of

low-cost carriers in Asia continent. Because of the popularity of low-cost carriers, full service

airlines are struggling hard to survive in the high competitive industry. (Morrison and Winston,

2010). Not only because of the high competitiveness, the airline business is also vulnerable to

uncontrollable events, such as infectious diseases, security issues, natural disaster and etc.

(Borenstein and Rose, 1995; Tavakolian 1995). With these vulnerable concerns, the airlines

need to concentrate on increasing revenue margins as well as improving product quality in order

to outstandingly perform in the competitive industry.

Presently, there are three global airline alliances which are Star Alliance, Skyteam and

Oneworld. By considering the size, Star Alliance is the largest global airline alliance, including

27 airlines, serving more than 1,000 airports in 194 countries and carrying 637.6 million

passengers per year on more than 18,000 daily departure flights (Star Alliance, 2016). IATA

(2016) shows that Star Alliance covers 23% of total scheduled flights, while Skyteam comes

second with 20.4% and Oneworld comes third with 17.8%, leaving 28.8% for minor airline

alliances.

Star Alliance had been founded in 1997 with the formation of airlines on three continents

including Lufthansa, United Airlines, SAS, Air Canada and Thai Airways (Mitchell, 1998). At

the early stage, it primarily focused on code sharing and common frequent flyer benefits. Years

after, the Star Alliance network becomes stronger with more airline members, covering broader

routes, sharing airline facilities such as check-in counter and ground handling service (Vinod,

2005; Vaara, Kleymann and Seristo, 2004).

The star alliance is considered as the first and the largest airline alliance in the world. There

are currently 27 airline members in alliance portfolio under slogan ‘the way the earth connects’.

As of October 2016, the airline partners in the portfolio are Adria, Aegean, Air Canada, Air

China, Air India, Air New Zealand, ANA, Asiana Airlines, Austrian, Avianca, Brussels

Airlines, Copa Airlines, Croatia Airlines, Egypt Air, Ethiopian, EVA Air, Lot Polish Airlines,





Lufthansa, SAS, Shenzhen Airlines, Singapore Airlines, South African Airways, Swiss Air,

Tap Portugal, Thai Airways, Turkish Airlines, and United. The Star Alliance is principally

focused on marketing and cost reducing for its airline partners. The founding members in 1997

were Lufthansa, SAS, Thai International and United Airlines. Among 27 airlines, there are 9

airlines operating in Asia, which are Air China, Air India, All Nippon Airways, Asiana Airlines,

EVA Air, Shenzhen Airlines, Singapore Airlines, Turkish Airlines and Thai Airways.

Although each Asia-based star alliance airline studied operates under the same alliance, they

employ different marketing strategies in driving its business. This causes a visibly

disconnection between airlines in terms of alliance brand image, especially under the same

airline alliance. In relevant to passengers’ perception, they usually expect similar service

operational standards when flying with airlines under the same alliance (Weber, 2005).

From the above discussion, it is possible to say here that the competitiveness of airline

industry creates the strategic alliance marketing in airline business. Therefore, the purpose of

the paper is aimed at 1) analyzing and discussing the marketing strategies employed by Asia-

based airline members of the Star alliance 2) finding the common marketing strategies practiced

by the Asia-based airline members of the Star alliance. This paper is beneficial for the marketers

to improve the service operational effectiveness and purchasing intention via the common

marketing strategies in Star Alliance airline members. Additionally, this paper is useful for

airline students who would like to further study in strategic airline alliance.

2. Marketing strategies used in Asia-based Star Alliance Members

Given the large marketing share within the industry, airline business has dynamic marketing

strategies to gain profitable market share as much as possible (Shaw, 2011). As a result, each

airline comes with different or similar marketing strategies to influence more passengers to fly

with as well as maintain its existing passengers (Terblanche, 2015). The airline alliance is

actually considered as the major marketing tool for airlines within the umbrella to promote the

wider network of travel. In airline business, it is believed that branding is the most important

for each airline to differently position itself from the competitors and convey the airline

personality to passenger retention. Park, Robertson and Wu (2006) state that airline marketing

is difficult because it is considered as a service provider. The service perception by customers

is also varied relying on the quality of service the passenger received. Nonetheless, the

expansion of low cost carriers (LLCs) gradually changes passengers’ perception that full

service airline is wasteful and over than passengers’ requirements. This is in accordance with

Hapsari, Clemes and Dean (2016), Namukasa (2013), and Mun (2011) that the characteristics





of passengers in 21st century are more value-conscious, low loyalty, but high empowered, more

demanding in flexibility, and service excellence.

Although the alliance is the key marketing tool used by a particular airline alliance in Asia,

each airline is still required to work on its own marketing strategies to promote as well as uplift

its brand recognition (Gayle and Le, 2013). Each airline employs similar or different marketing

strategies depending on the brand position the airline is situated. The airline may include more

than two marketing strategies depending on the airline executives to set the directions.

Additionally, the airlines need to pay attention to the target market they have as well as the

behavior of the passengers. However, it has been found out as Gayle and le (2013)

demonstrating that the marketing strategies the airlines launch have created more intense

competitiveness, as a result, the airlines have to launch new marketing to complete with each

other to increase the market share. Su and Tsang (2015) insert that whatever marketing

strategies the airlines employ, pricing strategy seems to be prominent. However, doing so may

lead to the downgrade of airlines’ image and positioning. The reviews of Asia-based Star

Alliance members, there are thirteen key marketing strategies that airlines employ in their

marketing plan namely strategic alliance strategy, product diversification strategy, product

integration strategy, quick response strategy, competitive differentiation strategy, customer

retention strategy, customized and personalized strategy, market positioning strategy, pricing

strategy, cost leadership strategy, product distribution and online marketing strategy, social

marketing strategy, and airline branding strategy as shown in Table 1 below.

Table 1: Airline marketing strategies employed by the Asia-based Star Alliance members

The Table shows that among Asia-based star alliance airlines, the strategic alliance strategy,

quick response strategy, competitive differentiation strategy, pricing strategy, customer

retention strategy, and product distribution and digital marketing strategy have been employed

by all airlines while social marketing strategy has been practiced by 5 airlines namely Air

NO. AIRLINE MARKETING STRATEGIES

ASIA-BASED STAR ALLIANCE AIRLINE MEMBERS

Air China

(CA)

Air India

(AI)

ANA

(NH)

Asiana

Airlines

(OZ)

EVA Air

(BR)

Thai

Airways

(TG)

Turkish

Airlines

(TK)

Shenzhen

Airlines

(ZH)

Singapore

Airlines

(SQ)

1 Strategic Alliance Strategy

2 Social Marketing Strategy

3 Quick Response Strategy

4 Competitive Differentiation Strategy

5 Product Diversification Strategy

6 Product Integration Strategy

7 Pricing Strategy

8 Airline Branding Strategy

9 Customer Retention Strategy

10 Cost Leadership Strategy

11 Customized and Personalized Strategy

12 Market Positioning Strategy

13 Product Distribution and Digital Marketing Strategy





China, ANA, Asiana, Thai Airways, and Shenzhen airlines. It is interesting to point out that

only 3 airlines employed product diversification strategy namely EVA, Thai Airways and

Singapore Airlines while only Thai Airways and Shenzhen Airlines launched product

integration strategy. Furthermore, ANA is the only airline that has not employed airline

branding strategy. Regarding the cost leadership strategy, there are only 3 airlines seeing its

importance namely Air China, Air India and EVA while customized and personalized strategy

has been employed by 3 airlines namely Thai Airways, Turkish Airlines and Singapore

Airlines. It is noticeable that there are only 3 airlines namely Asiana Airlines, Shenzhen Airlines

and Singapore Airlines, paying attention to market positioning strategy. The analyses of the 13

marketing strategies the Asia-based star alliance members have employed are detailed below.

3. Product Diversification Strategy

It has been defined by Su and Tsang (2015) and Czinkota and Ronkainen (2013) that product

diversification is a useful strategy to enhance the business opportunities using an existing

product to penetrate new potential markets. The product diversification strategy can be a

product extension under the same brand umbrella (Su and Tsang, 2015; Shaw, 2011). Su and

Tsang (2015) summed that the product diversification strategy aims at building the new

customer base and expand the marketing potential of original product. The analyses signify that

the approach that the studied airlines have employed for product diversification strategy is

firstly to have subsidiary airlines to target at different market. For example, Singapore airlines

has four subsidiary airlines to target different market segmentations, Singapore airlines

positioned as a premium airline while tiger and scoot airlines are budget airlines, targeting at

budget travelers. Silk air is playing a role as a regional full service airline, targeting Asia-pacific

based passengers. (Singapore Airlines, 2015). This increases market shares for Singapore

airline while broadens its customer segments. Thai Airways has diversified its business units

namely ‘Thai Airways’ offering air tickets, ‘Royal Orchid Holiday’ having package tours as a

product and ‘Puff and Pie’ targeting at passengers who like bakery products served on board.

(Thai Airways, 2015). Lastly, Singapore and EVA Airlines have diversified a more variety

classes on board, economy, premium economy, business and first class. (Singapore, 2015;

EVA, 2015).

4. Product Integration Strategy

The product integration always comes up with product placement strategy to expand the

customers using new copious media channels. Lu, Wang, Hung and Lu (2012) differentiate the

product integration strategy from product placement strategy that the product integration

significantly involves the integration of the product into the script of any form of advertisement.

It is believed by Shaw (2011) that the purpose of product integration strategy is to orderly

manage the tools of marketing communications in order to ensure that the delivered messages





go through advertising, sales promotion, social media, public relations and personal selling.

The product integration strategy requires extensive knowledge of target audience and strong

experience in media and marketing communications. (Gillen and Morrison, 2003). Lovelock

(2011) further describes that the product integration strategy also refers to a certain company

with has different business units to gain more profitability and reputation. Take Thai Airways

international as an example. Thai Airways has promoted a Royal orchid holiday program to

convince the customers to purchase a Thai airways ticket but also get accommodation and tour

services concurrently. (Thai Airways, 2015). The Shenzhen airlines has highlighted a cargo

service as a core product while the business passengers can get ticket to fly the destination for

meeting and visiting. (Shenzhen Airlines, 2015).

5. Customized and Personalized Strategy

Admitted by Kotler, Burton, Deans, Brown and Armstrong (2015), the customized and

personalized strategy is widely employed to build the relationship with niche customers. The

marketers require to understand the needs and desires a particular customer group and later

tailor the products and services based on individual customers’ preferences. Product adaptation

and improvement are necessary to keep it stylish and up-to-date. Kajtax et al. (2015) discover

that customized and personalized strategy is steadily growing because the customers have

different factors selecting products and services based on personal income, taste, education,

perception, style of living. Therefore, it is a practical path for marketers to customize and

personalize products and services serving at the precise customer group and individual. Baines,

Fill and Page (2013) note that besides creating the personal impression, the customized and

personalized also bond the relationship between the brand and customers. However, Kotler et.

Al (2015) describe the disadvantage of customized and personalized strategy that it may

increase cost operation and production costs which only aim at very niche group and individual.

The literature reviews show that Turkish Airlines and Thai Airways have chef that cater the

demand of requested meal cooked on board while Singapore airlines has addressed the name

of passengers who are elite member and flying business class. (Turkish Airlines, 2015;

Singapore Airlines, 2015; Thai Airways, 2015).

6. Market Positioning Strategy

The marketing positioning strategy is a long-term effort to differentiate and balance the

brand from competitors. In marketing, the businesses should indicate the customers’ perception

of brand while establish the positive image and identity of brands, products and service.

(Narangajavana, Garrigod-Simon, Garcia, Forgas-Coll, 2014). The theory of marketing

positioning strategy focuses on the way to pull an attention from customers and how to set a

distinct characteristic apart from the competitors. Correspondingly, the challenging matter of

this strategy is how to influence the audience to perceive the set characteristic for brand, product





and service. In order to run this strategy, the business data is necessarily required to balance

concepts of differentiation, distinction and similarity for the brand-narrative. Heracleous and

Wirtz (2012) and Czinkota and Ronkainen (2013) agree that the market positioning strategy

helps simplifying the product image and identity as well as changing the perceptions of

customers on the liability of brand.

The studies present that Asiana Airlines employs K-Pop marketing to target at teenagers

who passionate in K-pop singers (Asiana Airlines, 2015). Also, Shenzhen Airlines has targeted

at business and corporate passengers working in imports and exports business (Shenzhen

Airlines, 2015). Singapore Airlines has targeted at passengers who would like to travel to

Australia and New Zealand by using a special offer to convince the decision making (Singapore,

2015).

7. Cost Leadership Strategy

Kotler et al. (2015) and Baines, Fill and Page (2013) describe the cost leadership strategy as

the minimum cost of operation in the industry, allowing company to present a competitive

advantage. Though using least costs in operating the business, the products and services should

also be standardized. It is described by Banker, Mashruwala and Tripathy (2014), Sengupta and

Wiggings (2014), Baines, Fill and Page (2013) that the cost leadership is useful for some

companies while sometimes difficult to employ. It means that the company needs to source the

lowest costs for goods and services before passing these savings to the customers. Therefore,

the goods and services have to well standardized with the minimum costs spent. Kotler et al.

(2015) state that the outcomes are more necessary in this strategy as it is the factor creating a

repurchasing attention. To sum up, cost leadership strategy is suitable for marketers targeting

budgeted customers and effective in calling attention from wide audiences. (Kotler et al., 2015;

Baines, Fill and Page, 2013). To compare the fare ticket among the studied airlines, it is found

that Air India has set the ticket fare at the lowest rates compared to the other airlines (Air India,

2015).

8. Social Marketing Strategy

It is believed that the principle of social marketing strategy is to convince to change

customers’ behavior using any approach. The marketers must know how to change customers’

behavior in order to indirectly convince them to purchase the products and services. Kotler et

al. (2015) and Tuten and Solomon (2014) agree that the significant difficulty in social marketing

strategy is the path to create awareness and interest to the products and services. Marketers

require to convey the message to the targeted audiences, which the message needs to make

sense for their daily life as well. Usually, the effective message literally motivates audience to

change their behavior, from attitude to intention. It should make the audiences feel that this

message is sensible and encourage them to comply. To sum up, Grant (2016) and Kotler et al.





(2015) state that marketers must be able to target the right audiences, and later personally design

the effective messages to call attention. This will finally change customers’ attention into

action.

The social marketing strategy is found to be employed in all Asia-based Star alliance

members under the concept of corporate social responsibility (CSR) or environmental corporate

social responsibility (ECSR) with their main purposes to create the friendly brand image of the

airlines. The social marketing strategy has been in the form of CSR activities in majority. For

examples, Asiana Airlines has initiated student sponsorship program to provide travelling

opportunity for Korean students to learn outside the country while Shenzhen Airlines sees

environmental social governance as a concept for constructing logistic park. (Asiana, 2015;

Shenzhen Airline, 2015). Another outstanding example goes to Thai Airways, operating flight

by biodiesel. (Thai Airways, 2015). Air India has put corporate social responsibility as a key

concept in airline business operation to strengthen the brand. As well, All Nippon Airways has

vividly announced in its annual report that CSR is regarded as a marketing strategy to shorten

the distance between airline and its customers by indicating that they need to reduce to carbon

footprint. (ANA, 2016).

9. Branding Strategy

Branding strategy is defined as a long-time marketing strategy setting the characteristics,

preferences and expectations to the target customers (Kotler et al., 2015; Baines, Fill and Page;

2013). The branding strategy normally contains creativity and moral steps to create customer

while maintain existing customers (Balmer, Stuart and Greyser, 2009; Lim, Mohamed and

Ariffin, 2009; Thurlow and Aiello, 2007). Basically, the branding strategy mainly focuses on

the customers because customers are the key important in driving the business. Therefore, an

efficient branding strategy should provide value added to position the brands higher than

competitors (Duncan, 2012). Most companies position themselves based on the vision, missions

and core values which later uplift these to be a brand identity. Kotler et al. (2015) and

Rothaermel (2015) sum that the branding strategy is a crucial tool to distinguish the companies

from the competitors while help driving customer recognition in products and services.

From the analysis of annual report of the studied airlines, it is found that the airlines studied

have projected the brand image similarly. ANA, “To be the world leading airline group”, Thai

Airways, “The First Choice Carrier with Touches of Thai”, Air China, “A professional, trusted

airline with world-class standards and a unique Chinese Flair”, Air India, “To be the leader in

Indian aviation and India’s Ambassador to the world”, Turkish Airlines, “To become the

preferred leading European air carrier with a global network of coverage thanks to its strict

compliance with flight safety, reliability, product line, service quality and competitiveness,

whilst maintaining its identity as the flag carrier of the Republic of Turkey in the civil air





transportation industry”, Asiana Airlines, “A beautiful corporation that creates the best values

in the industry”, Singapore Airlines, “To position the airline for continued growth in a

globalizing industry while maintaining the airline’s loss free record”, and EVA Air, “To

promote safe and punctual flights, friendly and professional services and innovative, efficient

operations”, and Shenzhen Airlines, “To become the most welcome and valuable airlines in the

world, promote the national aviation industry to be the world's preferred choice. These

statements concluded that each airline employs different brand strategy, nonetheless every

airline aims to be the leader in the market, portraying through the country-based national and

cultural image. (ANA, 2016; Thai Airways; 2015; Air China; 2015; Air India, 2015; Turkish

Airlines, 2015; Asiana Airlines, 2015; Singapore Airlines, 2015; EVA Airlines, 2015;

Shenzhen Airlines, 2015).

10. Common Marketing Strategies Employed by Star Alliance Airline

Members Strategic Alliance Strategy

Kalligiannis Latrou and Mason (2006) simply defined the strategic alliance strategy as the

business partnership between two or more, temporarily, permanently or periodically. The

strategy aims at sharing resources such as products and services, distribution channels, project

funding, knowledge and expertise and etc. (Lin and Tsui, 2016; Burton and Hanlon, 1994).

Chen and Chen (2003) explains that the strategic alliance is a cooperation which aims for the

synergy in order to share benefits that are greater than those from individual. There are far more

partnership models in strategic alliance strategy such as outsourcing relationships,

infrastructure and facility relationships, distributional relationships. Liou (2012) gives benefits

of strategic alliance strategy as a tool to overcome the restrictions of market penetration by

sharing business power. The analysis of the eight airlines annual reports shows that every airline

of Asia-based Star alliance members employ strategic alliance strategy in several

characteristics. First, allying themselves into Star alliance to create the airline image in order to

attract the customers to use the services. Secondly, every airline has run airline businesses in

the form of networking. Take Air China, Singapore Airlines, and ANA as examples. Air China

has put an emphasis on creating co-regional hub in many important cities, both within and

outside China by under the slogan, ‘One belt, One road, Go global’. (Air China, 2015).

Singapore Airlines has undertaken a strategic alliance to have multi hubs under a multi-hub

strategy in Singapore, India, and Thailand to provide more choices of Singapore airlines routes

to grab the opportunity growth in these countries. (Singapore Airlines, 2015). ANA has vividly





shown the partnership approach in the annual report 2015 that they have built up partnership

working system. (ANA, 2015).

11. Quick Response Strategy

According to Bernstein, Desai and Vernik (2012), Rust, Lemon and Zeithaml (2004), a

quick response strategy primarily relates to customer satisfaction because customers always

expect fast and accuracy service. Besides demanding the customer satisfaction, quick response

strategy also refers to the effectiveness of managing unexpected circumstances and adaptation

in high competitive market. (Benstein, Desai and Vernik, 2012). Professional management

approach is required when dealing with troubles in a timely manner. Not only a strategy using

in daily business operation, the quick response strategy also being used in marketing term to

place a strict time limit on the offer in the published advertisements. (Hadjiconstantinou, 2012).

The quick response strategy of the studied airlines is found in many forms of contact center

where the airlines have outsourced for its operation such as Thai contact center of Thai Airways,

ANA mileage club service center, Air China Hotlines, EVA web service center and etc. In

addition, the quick response strategy can be seen through the information online service of the

airline. Many airlines have created websites to provide feedback and response generated by the

customer. Asiana Airlines has a special communication system regarded as as mutual

communication methods to customers through Tweeter, Facebook, Instagram and other

channels. Additionally, Asiana has a service quality inspection program regarded as a quick

response channel for the customers to show their views on service quality provided. Under this

program, service quality committee is set-up to inspect on-board and on-ground for service

quality and take passenger views on service for improvement. (Asiana, 2015). Also, EVA Air

has launched a mobile application aggregating EVA flight information system from all

information sources under the program named EVA flight information mobility. (EVA, 2015).

12. Competitive Differentiation Strategy

Rothaermel (2015) and Homsonbat, Lei and Fu (2014) define the competitive differentiation

strategy as the strategic positioning approach to differentiate its products, services and brands

from the surrounding competitors. Depending on the tactics, the company may offer unique

benefits, and qualities that make the customers feel superior when purchase goods and services,

comparing to the competitors in similar offerings. To differentiate, company can offer

customers through outstanding packaging, marketing activities, prompt product support, or

targeting a niche market to avoid high competition in a mass environment. It is also suggested

by Lovelock (2011) and Heracleous and Wirtz (2012) that competitive differentiation strategy

requires company to set up a positioning statement as a guideline to run the business, defining

a brand position, advantages in similar products or services offering. The analyses show the

studied airlines have different approaches in differentiating their airline products as follows.





Thai Airways is the only airline that serves meal on-bard in Thai traditional costume besides

having a uniform onboard. Sky chef on-board is one of the techniques that shows different on-

board services, practiced by Turkish Airline and Thai Airways. (Thai Airways, 2015; Turkish

Airlines, 2015). Another approach that shows different products provided by the studied airlines

is central tool providing modern and comfortable airline facilities, such as Turkish Airline has

used a bigger head set to feel the real authenticity of music. On the other hand, All Nippon

Airways has launched the five languages spoken crew member program to cater the demand of

passengers in different language communication and increase the high technological self-

check-in at the airport. Product value adding is another technique that the studied airlines have

employed. Take EVA as an example, EVA Air has done a high investment in developing in-

flight entertainment services with a belief that it can create more values added to the ticket

bought. (EVA, 2015).

Furthermore, it is found that the way that the studied airlines have been doing in creating

service difference is to focus on the aircraft and seat configurations. Take Air China as an

example for aircraft configuration. Air China has launched a wider body aircraft to attract

customers to use the service while other airlines such as Thai Airways, Singapore Airlines,

Asiana have promoted A-380. (Air China, 2015; Thai Airways, 2015; Singapore Airlines, 2015;

Asiana Airlines, 2015). Singapore Airlines is one of the airline, attempting to show the

outstanding characteristic of the seat configuration by advertising ‘Premium economy class’

with wider seats. Asiana Airlines has launched the program called the ‘Magic boarding pass’

to urge the market to fly with them and after flying, the passengers can use the boarding pass

for shopping with agreed business partners. (Asiana Airlines, 2015). Lastly, competitive

product differentiation strategy which aims to differentiate the product always focuses on

tangible and intangible products while using the service but Turkish Airlines has manifested

the program called chauffeur-driven transfer before and after service. (Turkish, 2015).

13. Pricing Strategy

There are two kinds of pricing strategies found practiced in airline marketing, which are

premium pricing strategy and competitive pricing strategy. The premium pricing strategy has

been defined as the practice of retaining the price of product or service higher than competitors

to inspire and create customer’s perception that the product or service offered represents

exceptional quality and distinction (Grant, 2016; Mumbower, Garrow and Newman, 2015);

while Rothaermel (2015) and Sengupta and Wiggings (2014) believe that customers buy more

expensive product and service because they expect a superior quality. The premium pricing

strategy is suitable for the businesses that would like to sell the value and experience. (Grant,

2016; Sengupta and Wiggins, 2014). Although the products may be similar to the competitors,

the business can add extra costs of experience and value to its goods and services. The data





analysis shows that all studied airlines have practiced premium pricing strategy particularly

during the high season. However, price differs from different market positioning. In the same

travelling seasons, prices of each airline vary according to different target market. To the same

destination, Singapore Airlines would have higher price compared with Air India (Singapore

Airlines, 2015; Air India, 2015).

The competitive pricing strategy defined as the dynamic pricing based on how the

competitors are setting the selling price. (Grant, 2016; Narangajavana et al, 2014). Gayle and

Le (2013) focuses that competitive pricing strategy requires the knowledge of the product life

cycle; therefore, marketers must understand which stage of cycle the product is falling in.

Sengupta and Wiggins (2014) suggests that pricing above the competitors require the features

adding or improvement on the products that is a reason for price increase. It can be extra

warranty and special after sales service. While Hernandez and Wiggins (2014) and McGrath

(2013) suggest that pricing below competitors can exercise when the businesses can minimize

the production costs which they can reduce selling price afterwards. However, it is significant

to monitor the profit margins, not to sell too low which also later causes market inconsistency

(Banker, Mashruwala and Tripathy, 2014). For this strategy, it has been found that every airline

has timely ticket promotion in different seasons. For the studied airlines, they have different

period of time offering promotional tickets depending on the demand calendar, especially

during low season period.

14. Customer Retention Strategy

Wang and Fong (2016) explains the customer retention strategy as the marketing approach

to maintain existing customers, aiming to create repurchasing intention. There are numerous

factors to retain customers, nonetheless, the only important key for any factor is ‘creating a

personal relationship’ between company and customers. (Wang and Fong, 2016). A good

example of customer retention tool is a frequent flyer program in airline business which entices

airline passengers to stick to the airline for the better benefits such as more luggage weight and

priority boarding for airline frequent elite members. (Terblanche, 2015; Vlachos and Lin, 2014;

Forgas, Moliner, Sanchez and Palau, 2010). Regarding customer retention strategy, every

airline has been practicing it in the form of mileage accumulation programs, namely, Phoenix

Miles by Air China and Shenzhen Airlines, Flying Returns by Air India, Mileage Club by ANA,

Asiana Club by Asiana, Infinity MileageLands by EVA, Royal Orchid Plus by Thai Airways,

Miles and Smiles by Turkish Airlines and KrisFlyer by Singapore Airlines.

15. Online Marketing and Product Distribution Strategy

The crucial channel at the present is the online marketing strategy. Known as a digital

marketing, a web marketing and an internet marketing, the online marketing is considered as

the most influencing strategy in the globalization era. (Tuten and Solomon, 2014; Czinkota and





Ronkainen, 2013). Kotler et al. (2015), and McGrath (2013), Rust, Lemon and Zeithaml (2004),

term the online marketing strategy as the influencing tools and methodologies that promote

products and services through the online resources. Kotler et al. (2015) and Roberts and Zahay

(2012) list the benefits of online marketing including the customer service improvement,

effective communication, competitive advantage, minimizing expenses and efficient marketing

control. Importantly, the efficient online marketing strategy creates an effective tool for

customer analysis and customer relationship management for products and services

development. (Roberts and Zahay, 2012). Due to the fact that online marketing has become a

must for airline marketing at present, it is found that every airline in Star Alliance has brutal

competition via social media channels and websites. Every airline has their own system to

support the passengers to buy tickets online. In addition, they provide necessary information to

convince the purchasing intention.

It is possible to say here that online marketing has been widely used among the studied

airlines for the past five years. However, the purpose of online marketing strategy is not only

to make the customers know the product but also provide the ability for the passengers to buy

online. Air China has built a new product system and added more values on the product and

placed all products on their own website (Air China, 2015). As well, Asiana Airlines has built

up SNS communication system to be a mutual communication method to customers. They have

done the digital marketing through Twitter, Facebook, Instagram to communicate airline’s

information and all marketing activities (Asiana Airlines, 2015).





Figure 1: Conceptual Framework on Asia-based Star Alliance Marketing Strategies under

Airline Business Competitiveness `

The above figure explains the factors creating the airline competitiveness which the obvious

factors are an expansion of low cost carriers, an economic downturn, infectious diseases, a

natural disaster, a political instability and uncontrollable factors such as the fluctuation of fuel

price, safety and security issues etc. In order survive in the competitive aviation market, the

strategic airline alliance has been initially formed by Star Alliance. The airlines seek the

corporation between the airlines, aim to share routes, facilities and expand the targets.

Nowadays, there are 3 preeminent airline alliance which are Sky Team, One World and Star

Alliance. For this paper, we focus on the 9 Asia-based Star Alliance airline members, include

Air China, Air India, All Nippon Airways, Asiana Airlines, EVA Air, Shenzhen airlines,

Singapore Airlines, Turkish Airlines and Thai Airways. The extensive reviews show that the

airlines generally apply 13 marketing strategies which are 1.) Strategic Alliance Strategy 2.)

Social Marketing Strategy 3.) Quick Response Strategy 4.) Competitive Differentiation

`





Strategy 5.) Product Diversification Strategy 6.) Product Integration Strategy 7.) Pricing

Strategy 8.) Airline Branding Strategy 9.) Customer Retention Strategy 10.) Cost Leadership

Strategy 11.) Customized and Personalized Strategy 12.) Marketing Positioning Strategy and

13.) Product Distribution and Digital Marketing Strategy. However, merely 6 common

marketing strategies are employed by Asia-based Star Alliance airline members, containing 1.)

Strategic Alliance Strategy 2.) Quick Response Strategy 3.) Pricing Strategy 4.) Customer

Retention Strategy 5.) Product Differentiation Strategy and 6.) Product Distribution and Digital

Marketing Strategy.

16. Conclusions and Recommendations

The 6 common marketing strategies and 7 different marketing strategies employed in the

Asia-based star alliance airline members, as discussed above, may have relationship to

purchasing intension of customers. However, the success in influencing the clients to have more

intention in purchasing the ticket to fly may also lie on other issues that the airlines need to pay

attention to. This article may be useful for Asia-based Star Alliance airlines’ performance

enhancement. Also, the data may be used for effective alliance branding creation of Asia-based

Star Alliance airline members. In terms of theoretical contribution, this article would encourage

researchers to undertake related research in airline alliance field, leading to higher numbers of

research. Furthermore, this article can be a great case study for airline students who are

interested in airline alliance field. For future research, it is possible to advise here that the topic

of marketing strategies that influence purchasing intention could be broaden to the whole

members of Star Alliance not just the Asia-based ones. Additionally, the further research should

focus on the other airline alliances namely One World and Sky team.

Acknowledgement

This paper is part of the Master of Management Program in Integrated Tourism and Hospitality

Management, National Institute of Development Administration, under the thesis titled, “Enhancing

Purchasing Intention via Strategic Airline Alliances Marketing Strategies and Service Operational

Effectiveness in Star Alliance Airline Members”.

References

AIR CHINA. 2015. 2015 Annual report, Beijing, China, Air China.

AIR INDIA. 2015. 2015 Annual report, New Delhi, India, Air India.

ALL NIPPON AIRLINES. 2015. 2015 Annual report, Tokyo, Japan, All Nippon Airlines.

ASIANA AIRLINES. 2015. 2015 Annual report, Seoul, South Korea, Asiana Airlines.

BAINES, P., FILL, C. & PAGE, K. 2013. Essentials of marketing, Oxford, Oxford University Press.

BALMER, J. M. T., STUART, H. & GREYSER, S. A. 2009. Aligning identity and strategy: Corporate

branding at British airways in the late 20th century. California Management Review, 51, 6-23.

BELOBABA, P., ODONI, A. R. & BARNHART, C. 2015. The global airline industry, Hoboken,

JohnWiley & Sons.

BERNSTEIN, F., DESAI, P. & COHEN-VERNIK, D. 2012. Managing a new product introduction

through quick response and advance selling. Duke University and Rice University.





BORENSTEIN, S. & ROSE, N. L. 1995. Bankruptcy and pricing behavior in U.S. airline markets. The

American Economic Review, 85, 397-402.

BUKHARI, S. M. F., GHONEIM, A., DENNIS, C. & JAMJOOM, B. 2013. The antecedents of

travellers’ e-satisfaction and intention to buy airline tickets online: A conceptual model. Journal of

Enterprise Information Management, 26, 624-641.

CZINKOTA, M. R. & RONKAINEN, I. A. 2013. International marketing, Mason, OH, South-Western

Cengage Learning.

DUNCAN, T. 2012. Branding and content: Finding the right balance–A content marketing whitepaper

[Online]. Studio One. Available: http://www.studioone.com [Accessed August 28, 2016].

EVA AIR. 2015. 2015 Annual report, Taipei, Taiwan, EVA Air.

FORGAS, S., MOLINER, M. A., SÁNCHEZ, J. & PALAU, R. 2010. Antecedents of airline passenger

loyalty: Low-cost versus traditional airlines. Journal of Air Transport Management, 16, 229-233.

GAYLE, P. G. & LE, H. B. 2013. Airline alliances and their effects on costs. Available: http://www-

personal.ksu.edu/~gaylep/Manuscript_Gayle_Le_February_14_2014_Alliance.pdf.

GILLEN, D. & MORRISON, W. 2003. Bundling, integration and the delivered price of air travel: Are

low cost carriers full service competitors? Journal of Air Transport Management, 9, 15-23.

GRANT, R. M. 2013. Contemporary strategy analysis: Text and cases, Chichester, West Sussex, John

Wiley & Sons.

HADJICONSTANTINOU, E. (ed.). 2012. Quick response in the supply chain, New York, Springer.

HAPSARI, R., CLEMES, M. & DEAN, D. 2016. The mediating role of rerceived value on the

relationship between service quality and customer satisfaction: Evidence from Indonesian airline

passengers. Procedia Economics and Finance, 35, 388-395.

HERACLEOUS, L. & WIRTZ, J. 2012. Strategy and organisation at Singapore airlines: Achieving

sustainable advantage through dual strategy. In: INDERWILDI, O. & KING, S. D. (eds.) Energy,

Transport, & the Environment: Addressing the Sustainable Mobility Paradigm. London: Springer.

IATA. 2015. Demand for air travel in 2015 surges to strongest result in five years [Online]. Available:

http://www.iata.org/pressroom/pr/Pages/2016-02-04-01.aspx [Accessed August 28, 2016].

KAJTAZ, M., WITHEROW, B., USMA, C., BRANDT, M. & SUBIC, A. 2015. An approach for

personalised product development. Procedia Technology, 20, 191-198.

KALLIGIANNIS, K., IATROU, K. & MASON, K. 2006. How do airlines perceive that strategic

alliances affect their individual branding? Journal of Air Transportation, 11, 3-21.

KALYANASUNDARAM, V. & LEWIS, K. 2014. A function based approach for product integration.

Journal of Mechanical Design, 136, 041002-041016.

KHAN, I. 2012. Impact of customers satisfaction and customers retention on customer loyalty.

International Journal of Scientific & Technology Research, 1, 106-110.

KOTLER, P., BURTON, S., DEANS, K., BROWN, L. & ARMSTRONG, G. 2015. Marketing,

Australia, Pearson Education Australia.

LIM, K. Y., MOHAMED, R. & ARIFFIN, A. 2009. Branding an airline: A case study of Airasia.

Malaysian Journal of Media Studies, 11, 35-48.

LONG, M. M. & SCHIFFMAN, L. G. 2000. Consumption values and relationships: Segmenting the

market for frequency programs. Journal of Consumer Marketing, 17, 214-232.

LOVELOCK, C. H. & WIRTZ, J. 2011. Services marketing: People, technology, strategy, Boston,

Prentice Hall.

LU, W.-M., WANG, W.-K., HUNG, S.-W. & LU, E.-T. 2012. The effects of corporate governance on

airline performance: Production and marketing efficiency perspectives. Transportation Research Part E:

Logistics and Transportation Review, 48, 529-544.

MORRISON, S. & WINSTON, C. 2010. The evolution of the airline industry, Washington, DC,

Brookings Institution.





MUN, K. 2011. Branding satisfaction in the airline industry: A comparative study of Malaysia airlines

and air asia. African Journal of Business Management, 5, 3410-3423.

NAMUKASA, J. 2013. The influence of airline service quality on passenger satisfaction and loyalty:

The case of Uganda airline industry. The TQM Journal, 25, 520-532.

NARANGAJAVANA, Y., GARRIGOS-SIMON, F. J., GARCÍA, J. S. & FORGAS-COLL, S. 2014.

Prices, prices and prices: A study in the airline sector. Tourism Management, 41, 28-42.

PARK, J.-W., ROBERTSON, R. & WU, C.-L. 2006. Modelling the impact of airline service quality and

marketing variables on passengers’ future behavioural intentions. Transportation Planning and

Technology, 29, 359-381.

PARK, N. K. & CHO, D.-S. 1997. The effect of strategic alliance on performance. Journal of Air

Transport Management, 3, 155-164.

RAJIV, D. B., RAJ, M. & ARINDAM, T. 2014. Does a differentiation strategy lead to more sustainable

financial performance than a cost leadership strategy? Management Decision, 52, 872-896.

RHOADES, D. L. & LUSH, H. 1997. A typology of strategic alliances in the airline industry:

Propositions for stability and duration. Journal of Air Transport Management, 3, 109-114.

ROTHAERMEL, F. T. 2015. Strategic management, New York, McGraw-Hill Education.

RUST, R. T., LEMON, K. N. & ZEITHAML, V. A. 2004. Return on marketing: Using customer equity

to focus marketing strategy. Journal of Marketing, 68, 109-127.

SENGUPTA, A. & WIGGINS, S. N. 2014. Airline pricing, price dispersion, and ticket characteristics

on and off the internet. American Economic Journal: Economic Policy, 6, 272-307.

SERRAT, O. 2010. Learning in strategic alliances, Washington, DC, Asian Development Bank.

SHAW, S. 2011. Airline marketing and management, Burlington, VT, Ashgate.

SHENZHEN AIRLINES. 2015. 2015 Annual report, Shenzhen, China, Shenzhen Airlines.

SINGAPORE AIRLINES. 2015. 2015 Annual report, Singapore, Singapore Airlines.

TAVAKOLIAN, H. 1995. Bankruptcy: An emerging corporate strategy. S.A.M. Advanced Management

Journal, 60, 18-22.

TERBLANCHE, N. S. 2015. Customers’ perceived benefits of a frequent-flyer program. Journal of

Travel & Tourism Marketing, 32, 199-210.

THAI AIRWAYS. 2015. 2015 Annual report, Bangkok, Thailand, Thai Airways.

TURKISH AIRLINES. 2015. 2015 Annual report, Istanbul, Turkey, Turkish Airlines.

TUTEN, T. L. & SOLOMON, M. R. 2015. Social media marketing, Boston, Pearson.

VAARA, E., KLEYMANN, B. & SERISTÖ, H. 2004. Strategies as discursive constructions: The case

of airline alliances. Journal of Management Studies, 41, 1-35.

VINOD, B. 2005. Alliance revenue management. Journal of Revenue and Pricing Management, 4, 66-

82.

VLACHOS, I. & LIN, Z. 2014. Drivers of airline loyalty: Evidence from the business travelers in China.

Transportation Research Part E: Logistics and Transportation Review, 71, 1-17.

WANG, C.-H. & FONG, H.-Y. 2016. Integrating fuzzy Kano model with importance-performance

analysis to identify the key determinants of customer retention for airline services. Journal of Industrial

and Production Engineering, 33, 450-458.

WEBER, K. 2005. Travelers’ perceptions of airline alliance benefits and performance. Journal of Travel

Research, 43, 257-265.

WEICHIEH, S. U. & TSANG, E. W. K. 2015. Product diversification and financial performance: The

moderating role of secondary stakeholders. Academy of Management Journal, 58, 1128-1148.

WENSVEEN, J. G. 2015. Air transportation: A management perspective, Farnham, Surrey, UK:

Ashgate.

Marketing Strategies of Star Alliance: An In-depth...

Documents

Transcript of Marketing Strategies of Star Alliance: An In-depth...