Marketing Plan for “B Airlines”
Academic Subject: Marketing
Word Count: 3500
Submitted by: Student
B Airlines is looking to expand its operations in the European holiday industry by opening up new routes to new locations. The company is looking to expand its fleet and offer customers short breaks and various summer and winter holiday packages. This is a unique opportunity for the company to invest a new concept of marketing in the aviation industry. In order to achieve this B Airlines will need to create a demand in the holiday industry by providing a multitude of destination options, on flight services, cheap and competitive fare rates.
B Airlines will have to begin the process of expansion, a marketing strategy plan which incorporates the major ideas of marketing to promote the new holiday packages. This report offers various strategies that can be implemented for the benefit of the airline as well as compete with other airlines. According to the research conducted the direct competitors of B Airline operations will be Easy Jet and Ryan Air as they provide low/cheap fare for both long-haul and short-haul travel. However, these airlines have not completely carved a niche in the holiday market, which will be the main aim of B Airline to provide luxury holidays with little expense.
The market research conducted for the report includes industry trends, market segmentation, an analysis of the various competitors that B Airline will need to interact with, and customer trends/profile. The report develops the marketing strategy for the holiday expansion by following the marketing information system (MIS) approach and comprehending the environmental setting in which the company will be operating in.
It is difficult to define marketing in a single best way. However, there are two definitions that truly capture the critical components:
“Marketing is the process of planning and executing programs designed to influence the behaviour of target audiences”
- Alan R. Andreansen and Philip Kotler (as cited in Kramer et al, 2010)
“Marketing is the art of identifying and understanding customer needs and creating solutions that delivery satisfaction to the customers, profits to the producers and benefits for the stakeholders”
- Sean Mauger (as cited in Kramer et al, 2010)
Marketing is a strong tool that can be used to attract customers, expand business, and initiate innovation to match the strategic needs of any organisation. Various marketing concepts are essential to development of a strategic marketing plan for B Airline in order to compete with competitors within the market. This data will be obtained from intensive market research to understand the consumer psyche, buying preferences, and air travel market place to capture the maximum market share. This report will discuss the various marketing strategies that can be used to develop a marketing department to focus on the European holiday market.
B Airline is a small but successful business mainly operating from small regional airports in the North of England with flights to 20 European destinations. The destinations that are catered to are either near major cities or seaside resorts. B Airline currently leases its fleet of 5 Boeing 737-600 planes with the capacity to carry 110 passengers. The current goals for B Airline include:
- Upgrade its fleet to include planes that are able to hold 150 passengers
- Increase current number of destinations to 30
- Expand operations by offering customers holiday packages and short breaks
Marketing information systems (MIS) and environmental scanning are essential components that are imperative for data collection in order to develop a strategic marketing plan. MIS is used to bring together incongruent or contrasting items of data into a form of information that is coherent and applicable. MIS should not be considered as just raw data, it provides a means of interpreting the information provided by MIS to aid in decision making. According to Kotler (1988) MIS is a “continuous form and interacting structure of people, equipment and procedures to gather, sort, analyse, evaluate, and distribute pertinent, timely and accurate information for use by implementation and control.” The following diagram illustrates the functional implementation of MIS that B Airline will need to employ in order to conduct research for expanding and developing packages for the European Holiday promotion.
B Airlines should incorporate in its MIS the four main constituent components: internal reporting system, marketing research system, marketing intelligence system and marketing models.
Since B Airline has been business for a number of years it has a wealth of information that can be utilised which includes internal records that are of instant value to marketing decisions, orders received, stockholdings, and sales invoices. Records can be used by marketing managers to sort, examine, and interpret data which can be incorporated into a marketing strategy from information received from sales invoices such as:
- Product type, date of purchase, and package type by territory
- Product type, date of purchase, and package type by type of account
- Product type, date of purchase, and package type by customer
- Average value and/or volume of sale by territory
- Average value and/or volume of sale by type of account
- Average value and/or volume of sale by sales person
By looking and comparing invoices B Airlines can establish to a certain extent if it is providing acceptable customer care and this data can also provide insight to trends of buying behaviour that is exhibited by customers in terms of purchases of holiday destination packages.
With marketing research systems a proactive search for information is taken by companies. It is suggested that B Airlines commission a study to solve the perceived marketing problem in order to develop a strategy that directs its efforts to an affordable European holiday.
To complete market analysis and market segmentation this will require a specific passenger and destination survey which is an added cost and is recommended for B Airlines to conduct such an analysis.
The preliminary analysis that B Airline should conduct and include a variety of methods such as observations, interviews with travel and airline industry professionals, economic segmentations, future projections based on marketing plan, and experience within the region and market for planning purposes. The following is an estimate overall market segmentation retrieved from literature review:
- Business- 16%
- Government and International Organisations- 10%
- Regional (North England) Resident Personal and Leisure Travellers- 26%
- Personal and Regional travellers based in South England- 11%
- Seasonal Holiday travellers- 37%
It should be noted that the seasonal/holiday travel segment of the market may distort the overall market percentages due to the following two reasons:
- Drop in business and government travel that is expected during the peak summer holiday travel season
- Significant portion of season/holiday traffic is carried on flights employing specially chartered supplementation aircrafts.
The following chart shows potential markets based on the estimated population in each segment.
It is well known that the airline industry is dominated by major carriers such as British Airways, Aer Lingus, and Emirates who have become market leaders through strategic marketing. The airline industry is also known for its many mergers, acquisitions, and consolidations. The airline industry is no different from other industries as it has evolved into one that only makes space for companies in the market place who are either, major players; such as the names mentioned, or smaller “niche” participants such as Ryan Air and Easy Jet. In the airline industry two speciality segments have developed which have been exploited by new entrants to the industry. The niches have been divided into price and route. For example, Ryan Air is an airline that focuses on the route niche with providing services to various European destinations. Easy Jet, on the other hand, has focused on providing cheaper prices for flights. The current market is segmented to develop a cross between both niches in which airlines provide more convenient and less costly service between two heavily travelled destinations.
Low fares have become an expectation from consumers due the extent of de-regulation of airlines and focus on price positioning is no longer the only concept an airline needs to build on. The market segment opportunities for an emerging airline such as B Airline include a combination of service mix, price, route selection and has to decide on a service mix and price in conjunction with this as this decision will impact customer preferences. Speciality carriers are categorised as either “short-haul” or “long-haul”. B Airline needs to primarily focus on European holiday destinations and therefore should exempt from servicing long-haul routes due to major carriers being a threat and concentrate on short-haul market segment which is more suited for B Airlines as there is a small gap in the market in England.
Short-haul carriers usually operate efficiently out of a single hub. This allows them to develop a consolidation of services and economies at a more down-sized scale. Correspondingly, the revenues that are available from short-hauls are more relatively higher than long-hauls based on per-passenger-mile. Short-haul revenues are concurrently high enough to develop an extensive business that is able to reach in the hundred million pound multiple ranges.
The SWOT analysis model enables to determine how B Airline compares to its peers and competitors. For this particular competitor analysis the following information is focused on:
- Air service offered: destinations, carriers, frequency, and aircraft type
- Business and leisure air fares
- Holiday package deals
- History of service at airports in North West England
From the previous section’s market research it is found that B Airline has the following competitors:
- Ryan Air
- Aer Lingus
- British Airways
- Wizz Air
- Easy Jet
The following are indirect competitors in terms of providing cheap rates for European holidays which includes the fares of flights and hotels:
Each of the competitors along with their products, brand attributes, and related marketing concepts are described in Figure 6 (See Appendix F). The competitor map highlights the method in which the airline product is bought from consumers. Each of the B Airline’s direct and indirect competitors have unique product items which separate them from the rest of the competition. For example, Easy Jet is known for its cheap domestic and international flights. The airline focuses on filling its seats and also provides discount rates to travellers that book at least three months in advance. Easy Jet has also invested in technology by developing a website that gives consumers excess to information for holiday adventures and recommends cheap hotels and rental cars in advance booking.
|Comparison of Air Services|
|Airline||No. Of Euro Destinations||No. Of Carriers||Aircraft Type|
|British Airways||139||290||Boeing; 737, 747, 767, 777, 777ER, 787-8, 787-9,787-10
Airbus; A318, 319, 320, 321, 350, 380,
|Aer Lingus||75||47||Airbus; A319, 320, 321, 330, 350|
|Emirates||215||29||Airbus; A330, 340-300, 340-500, 380-800. Boeing; 777-200, 777-200ER, 777-200LR, 777-300, 777-300ER, 777-8X, 777-9X|
|Ryan Air||156||301||Boeing; Boeing 737-800|
|Easy Jet||101||200||Airbus; A319, A320, A320neo|
|Wizz Air||91||54||Airbus; A320, A321|
The graphical display of the market capitalisation that each of the competitor airlines hold against B Airline is displayed in Figure 3:
*Emirates Airlines is not included in the graph as they are unlisted in the stock market.
The strength of competitors can better be understood by comparing the revenues of each of the airlines for the most recent fiscal year.
According to Zeithaml (1988) value is a trade off between ‘get’ and ‘give components of customer experiences. The relationship between the benefits that the customer attains from the product or brand and the cost borne by the customer to obtained from those benefits is known as the customer perceived value which is described in the equation:
Equation 1- Customer Perceived Value
Customers of B Airlines are mostly those leisure travellers situated in the North of England therefore the airline needs to target outbound passengers from counties such as Greater Manchester, North Yorkshire, Cheshire, Cumbria, Tyne and Wear, Merseyside, Northumberland, etc.
According to Chacon and Mason (2011) a study with respondents indicates the purchasing criteria of consumers in which respondents indicated the most important aspects when choosing an airline:
- Frequent-flier program
- Range of Destinations
- Service (onboard and at the airport)
For low cost carriers customers included Price and schedule as well as additional product features which included seats, in-flight entertainment, and lounge access. These are important aspects that are incorporated into B Airline customer profile which influences buying behaviour. Based on these buying behaviours (See Appendix B) and added demographic preference of travel for leisure travellers for both the summer and winter holidays we can build a customer profile.
Various strategic tools such as PESTEL, Porter’s Five Model, and SWOT analysis will b e used to aid in the strategic planning of the holiday destination expansion. The previous section has discussed the SWOT analysis for B Airlines and further can be found in Appendix [A]. Porter’s Five model gives us a better understanding into the competitive forces at work and using the tools makes it possible to analyse the current strategic position (Payne et al. 2011, pp. 56) of B Airlines. Since the UK airline industry is highly deregulated there are very minimum direct entry restrictions for competitors (Chernatony et al. 2010, pp. 106). This should not be seen as a major threat because new entrants into the market will need large capital to sustain any form of business. There has been a saturation of the domestic environment due to Easy Jet and Ryan Air limiting the amount of new entrants in the market. Failure of new entrants such as Zoom and XL in 2008 has also discouraged potential entrants from joining the industry. According to Steves (2010, pp. 77) brand name is not an important factor for customers any longer who are looking for savings. Thus, there is minimal threat for substitute products for a long-haul market in which B Airline is working. TOWs Matrix (Appendix E) is another imperative strategic tool that needs to be used by B Airlines. The PESTEL analysis is an important strategic tool that will enable us to describe the macro-environmental factors used in environmental scanning in order to develop strategies and make decisions that are strategically beneficial for the company. One of the major factors ‘Legal’ has a major impact on the airlines. For example, the Open Skies Agreement enables B airlines and their competitors to freely transfer aircrafts between the U.S. and EU (Masson et al. 2010, pp. 49). Building good relations through this agreement can prevent industrial actions and operational interruptions.
The airline industry is a competitive setting which is continuously changing and influencing the changes in B Airlines. Competition in the market will influence B Airlines into evolving their business model or competitors of the company to adapt their strategy in order to look for an advantage. However, with a strong pricing strategy along with revenue management and pricing solutions B Airlines can become flexible enough to achieve in the ever changing marketplace. It would be beneficial for B Airlines to integrate into their pricing strategy a designed solution that incorporates revenue management to effectively compete in with other carrier and low-cost carriers. The proposal would be to take advantage of B Airline’s connecting hubs using the company’s own network. An effective pricing solution needs to be able to collect information and analytics that allow it to respond rapidly and effectively against fare charges of their competitors.
B Airline should focus on a leg-based origin and destination system to determine prices for tickets to implement this it is essential to hire an expert that is experienced in leg system analyst in order to maximise revenues. The Airlines can offer a simple fare structure that will be composed of 3 different fare types and vary according to kilometres totalled in destination’s from Northern England airports such as Manchester/ Leeds- Bradford. The pricing structure will be attractive to leisure travellers in order to expand on the holiday package services that B Airlines willprovide. The Ansoff Matrix (See Appendix G) can play a critical role to regulate the pricing for B Airlines determining customer demand and taking the airline’s existing customers and introducing them to new holiday destinations. Ansoffs’ Matrix relates to four major product-market growth strategies in which B Airlines will focus on in market development. The development of new markets for the holiday destination product is a good strategy for the airline because its core competencies are related more to the specificity of the product since it is expanding into a new market.
The proposed revenue management system that B Airlines should implement is a leg-based system for point-to-point and origin and destination (O&D) system. This type of system will allow the airline to manage markets with whom they are competing such as Easy Jet or markets with traditional rules-based pricing such as British Airways. According to Moller et al. (2004) the O&D revenue management, either leg-based or PNR based, has become a common standard in the airline industry. To increase the revenue of the company B Airline will need to incorporate actual customer behaviour in demand forecasting which has been described in the previous section. By increasing forecasting accuracy the airline will be able to compete effectively in any pricing environment through an integrated support system for traditional and simplified pricing. According to Phillips (2005) using this network management strategy is important for airlines that are offering connection services for their holiday packages. Figure 5 in Appendix C shows the distribution of passengers by fare class and total fare paid on an example flight departure from Manchester to Paris using the leg based system. According to Phillips (2005) the leg-based capacity allocation allows an airline to accept discount class or economy class passengers for long haul destinations while rejecting first-class passengers for short-haul passengers. The main aim of this sort of revenue and pricing strategy is to improve revenue by managing the mix of products along with a mix of fare classes that are being sold for each product (Phillips 2005).
Using the simple leg-based system coupled with O&D the best prices for each single seat in the carriers will be determined. B Airlines will have a fare structure that is reflective of this system with three different fare types. The fare structure and description of fare type is described in the table below.
|Fare Type||Restrictions||One Way Fare||Round -Trip|
|Business Flexible||Changeable and refundable; no fee||£400||£800|
|Advanced Economic/First-Class||2 weeks advance booking; non-refundable; changeable without fee||£115||£230|
|Super Advanced Economic/First-Class||For travel booked 1 month in advance, non-refundable, changeable with a fee.||£50||£100|
*Prices shown in the table above are applicable for destinations that are up to 2,000km (includes destinations such as Paris, Lyon, Rome, Dublin, Madrid, etc.)
|Fare Type||Summer Holiday Prices||Winter Holiday Prices|
|Super Advanced Economic/First-Class||£45||£40|
|Business Flexible||Designed for business travellers who make last minute travel plans and are known to change their travelling plans often. It is fully changeable without any fees or restrictions. The fare is cheaper than competitor business class fares.|
|Advanced Economic/First Class||This is designed for leisure and holiday travellers who usually have fixed engagements and are price conscious. The ticket it equal to the premium economy fare on Easy Jet.|
|Super Advanced Economic/First Class||This fare will be used to further stimulate holiday and leisure travellers to travel on weekends or book one month in advance. Access to these fares varies in regards to booking and flying patterns. This fare is £7.00 cheaper than Easy Jet.|
B Airlines’ main aim is to establish itself as a niche player in long-haul market but low cost fares by providing high level service and comfort at cheap prices. In order to do so the company will work on the following branding strategies to incorporate concepts of significance, positioning, and benefits:
- Frequent Flyer Miles Program
Major airlines such as British Airways, Emirates and Aer Lingus have been successful in retaining customers by giving them frequent flyer miles each time they travel. As customer mount miles they gain specific privileges which include access to airport lounges, upgrades, and free flights. B Airlines will introduce a frequent flyer program of its own which is simple and coherent with the holiday concept. B Airlines will offer frequent flyer internet cash to customers that can be spent on specific travel websites for holiday packages.
- Promotions Strategies
Offer special holiday promotions to destinations such as Paris, Madrid, and other for the first month of the holiday scheme operations to attract as many customers as possible and get them to experience the services.
- Airline’s Convenience Services for Flight’s Passengers
- e-tickets- Tickets purchased are 100% electronic and the passenger will need their passport and confirmation number in order to board the plane. They will also be able to print a copy of the itinerary from the company’s website.
- Free transfers to-from airports: A free shared car service will be offered between airports of destination areas to specific hotels, ones that are affiliates of B Airlines will be made available to customers.
- Larger carry-on luggage- Increased space on board will allow for the airline to accommodate larger carry-on luggage which is a sensitive issue for most travellers that do not wish to check in.
B Airlines needs to market its products under the brand position that it is the complete holiday planning company giving its customers luxury at an affordable price. The developing brand itself creates an emotional tie with the customer that goes further than just the price. B Airline’s brand signifies a holiday experience that is developed to allow its customers to make worthwhile memories with family or loved ones. This is evident in the development of logos that target customers to establish an emotional relationship with the company. The logos that have been suggested draw on the holiday notion that B Airlines is aiming for (See Appendix H).
The report features an analysis of the industry and external environment of B airlines and looks at strategic options that the company can implement in order to make the new holiday package destinations to become a success. In order to survive in this industry’s changing environment it is essential that the airline implements a strong marketing strategy that incorporates that various aspects that have been discussed in this report. Competing airlines are also working daily to improve their business operations. There is serious competition for B Airlines with Easy Jet and Ryan Air who are already operating regionally and to major European destinations. B Airlines should focus on improving and maintaining a high level of customer service along with affiliating with hotels and car rental companies to give the customer the ultimate holiday experience and value for money.
- Agnilar, F. 1967. Scanning The Business Environment. New York: Macmillan.
- Kotler, P. 1988. Marketing Management: Analysis Planning and Control. Prentice- Hall.
- Lapp, M. and Weatherford, L.(2014) ‘Airline network revenue management: Considerations for implementation.’ Journal of Revenue & Pricing Management, 13, pp. 83.112. [Online] Available from: http://www.palgrave-journals.com/rpm/journal/v13/n2/full/rpm201333a.html. [Accessed: 25 November 2014].
- Mayer, J. H. 2011. “Managing the future- Six guidelines for designing environmental scanning systems.” Service-Oriented Perspectives in Design Science Research. Retrieved from http://link.springer.com/chapter/10.1007%2F978-3-642-20633-
- Moller, A., Romisch, W. and Weber, K. (2004) ‘A new approach to O&D revenue management based on scenario trees.’ Journal of Revenue and Pricing Management, 3(3), pp. 265-276. [Online] Available from:http://www.mathematik.hu-berlin.de/~romisch/papers/Moller%20et%20al%20final.pdf. [Accessed: 25 November 2014].
- Phillips, R. L. (2005) Pricing and Revenue Optimization. Stanford, CA: Stanford University Press.
- Yahoo Finance. (2014) ‘easy Jet plc (EZJ.L).Online available from https://finance.yahoo.com/q?s=EZJ.L
- Yahoo Finance. (2014) ‘Ryanair holdings plc (RYAAY). [Online] Available from http://finance.yahoo.com/q?s=RYAAY
|Variables||The Outbound Holiday Couple||The Outbound Holiday Family||The Single Adventurer|
|Geographic Region||North England, UK
|North England, UK||North England, UK|
|Gender||Males and Females||Males and Females||Usually Males|
|Family Life Cycle||Newly Weds, Couples||Married, Have children||Single May/May Not have children|
|Occupation||White-Collar Jobs||White-Collar Jobs||White-Collar Jobs or can be Retired|
|Education||Minimum Secondary Education||Minimum Secondary Education||Minimum Undergrad|
|Social Class||Upper and Middle Class||Upper and Middle Class||Upper and Middle Class|
|Psychographic Lifestyle||Luxury and High End||Middle setting lifestyle||Luxury and High End Lifestyle|
|Personality||Sophisticated||Sophisticated||Individualistic, culturally enthusiastic, Sophisticated, Well Educated|
|Behavioural Occasion||Holiday Occasions, Travel and Leisure Purpose||Holiday Occasions, Travel and Leisure Purpose||Holiday Occasions, Travel and Leisure Purpose, Business purpose outside England|
|Benefits||High customer value and convenient||Convenient, safe, high customer value, low prices||Convenient, safe, high customer value, privacy and luxury|
|User Status||First-time users, potential users, regular users||Non-user, first time user, regular users, potential users||Regular users|
|Usage Rate||Occasionally to Medium||Low to Occasionally||Medium to Very Frequently|
|Attitude Toward Product||Product should have available seating and range of destinations||Low prices, cheaper carriers, range of destinations||Have a great range of destinations, needs to convenient, has to connect with other services such as rental car and hotel booking.|
|Threat due to new Entrants: Low;
1. Entrants need large capital
2. Saturated long haul market
3. Dominance of major routes of major airlines
4. Failure of Entrants Zoom and XL in 2008.
|Bargaining Power of Suppliers: High;
1. Disruptions of suppliers operations would undermine airline’s operations.
2. Currently working with aeroplane suppliers of Boeing.
3. Employees of airlines can possess strong bargaining power through labour unions (Daniels and Mcllroy 2009).
|Threat of Substitutes: Low;
1. Non-luxury airlines offer cheaper fares
2. Brand name no longer important to customers
|Bargaining Power of Buyers: High;
1. Presence of lox cost or budget airlines- customers have cheaper alternatives
2. Increasing access to internet gives quick price comparisons
3. IN U.K. 46% of customers currently book tickets online (Griffin 2010, pp. 94).
|Competitive Rivalry: B Airline’s strategy is to offer long haul flights to holiday destinations. Competition exists in:
1. Fragmented short haul market
2. Fierce competitive tactics
3. Increased consolidation among competitors.
|TOWS MATRIX FOR
|Competitors failing on delivering reliability
Emergence of new markets
|Open Skies Agreement
Global Economic crisis
Lower cost competition
Partnerships and Alliances
|Strategies for strengths to meet opportunities:
Supply Chain management
Introduction of complimentary services
|Strategies for Strengths to defends threats:
Renovation of brand image
Diversify into another transport market
|Weaknesses||Quick Innovation and Change||Strategies for Opportunities to overcome weaknesses:
Improved people processes
|Strategies for Weakness not to expose threats:
Improved environmental stance
Offer destinations to variety of cities in Europe
Figure 6- Competitor Map
|Existing Products||New Products|