Student Travel (mini-case study)

NB. this article includes the subjective views of the author, and real Student Travel Agency (STA) company
information has been adapted to make the Case Study more challenging. In reality STA are much better at
marketing than is suggested by these notes.

Background
Student Travel Agency (STA) is a global travel company specialising in independent travel for the
student and youth market aged between 18 and 26 years old. In the UK, they have over 60 retail
locations. Half of these on university campuses and the others are located on high streets. They
also have national call centre in Manchester and a website which provides flight prices, availability
and on-line bookings

Student Travel Agency exists because they provide a “value add” link between the suppliers
(Airlines and Tour Operators) and customers. They promote themselves as a “marketing
company”. Student Travel believes its brand is its core point of differentiation. Its entire strategy is
centred on building a “lifestyle brand” which is the embodiment of everything it represents.

Its brand equity consists of; trademark, logo, people, systems, locations, products, market
intelligence, brand recognition, customer loyalty (repeat business) and lifestyle association. All of
these provide both a unique selling proposition and create physical and psychological barriers to
existing and potential competition. The travel industry is a highly competitive market place where
change is the only constant. Advancements in technology, specifically the Internet, are driving this
change.

Page number 1
The two key external challenges facing STA are;

• Suppliers want to reduce distribution costs and one way is cutting out intermediaries like ST
and target direct sales.
• Low Cost airlines continue to take significant market share of the European routes.

Current Vision Statement - Students and similar young people travel for education,
experience, cultural exchange, adventure and fun - improving international understanding from
which the world benefits.

Current Mission Statement - to be the world’s leading travel group for students and other
young people with similar travel needs, by offering outstanding product opportunities and
delivering excellent service.

Situation Analysis
Current Business Mix

Business Mix 2009 2010 Sales Mix 2009 2010

Long-Haul 60% 70% On-Line* 5% 15%
Short-Haul 40% 30% Off-line* 95% 85%
* Internet generated direct and indirect

Trend = a reduction in short haul sales (European) and increased on-line sales.

Current Market Share stats

STA estimates its existing market share as;
Students - It is estimated that the current market value is £245m. Existing penetration is 44%.
Youth - It is estimated that the current market value is £771m. Existing penetration is 3%.

Current “product” offer

STA’s overall aim is to constantly improve its proposition; ultimately the goal is to achieve the 5th
level, which recognises customer relationships as a major competitive advantage. (Kotler. P)

Page number 2
Level Attribute Customer experience

1 Core Air ticket

2 Basic Transportation
3 Expected Safety, security, reliability, service
4 Augmented Convenience, Price Guarantee,
Image, lifestyle association, tours,
accommodation, insurance,
foreign exchange, visa service
5 Potential E-commerce, CRM (IS/IT)
Customer service = Vulnerable
customer
Good customer service =
Vulnerable customer
Great customer service = Loyal
customer
Delighted customers = Raving fan

Current distribution (Internet v Direct Sales)

STA is aware that its existing retail strategy (shops) is at the mature stage of the Retail Lifecycle
and that its e-commerce strategy represents the greatest growth potential, however, the retail
network provides customers with convenience, reassurance and security and confidence that they
are dealing with a reputable company.

Often the parents are involved in the decision making process therefore these are important
considerations. The shops increase brand awareness and recognition. STA has seen a significant
increase in Internet usage over the last 12 months, from 5% to 15% of total demand although only

Page number 3
1% of total sales were transacted on-line (i.e. no human intervention, full e-commerce). This is
expected to increase in the future. STA believes the future is to develop a mixed “bricks and clicks”
strategy and continue to differentiate itself on customer value and service. It wants to dominate
both distribution channels for its target market. (De Kare-Silver, 2001)
No e-retail
Information Only
Export
Order and Collect
Add another Channel .
Separate business
All Fronts
Mixed
Best of both worlds
E-retail only

Current Core Competences

• People – STA recruits directly from its target market, travellers talking to travellers,
passing on first hand experience through people who can empathise with customer
needs.
• Product - STA negotiates exclusive student airline contracts, not available to the mass
market
• Distribution - 60 retail locations in the UK, a call centre and web site with full e-
commerce capability for on-line bookings. A global retailer with over 600 branches
worldwide.
• Empathy - STA understands its customer’s current and evolving needs. It regularly
undertakes both qualitative (focus groups) and quantitive market research (omnibus) to
stay ahead of its competitors with its service offering.
• Focus - STA Travel is very clear about its target market and intends to remain the
market leader.

The Micro environment

Page number 4
Existing Customer Research - Internal data
• 90% of customers are students or youths (typically 18–26 years old)
• 40% are overseas students
• most effective advertising medium is word of mouth – over 50%
Recent external qualitative research findings
• STA has a 45% unprompted brand recognition from its target market compared to 34% for
Flight Centre. This figure increased to 61% in locations where STA had a branch.
• 80% of UK students who used STA were from the ABC1 socio economic group

• almost two thirds of students travel abroad each year

• their preference is for independent travel

• STA was currently used by 14% of students and 3% for non students

• reasons for using STA - exclusive student deals 80% and convenient location 50% of
respondents
• increase in internet use for travel information but not for bookings

Current Segmentation approach

STA considers itself a niche company and it adopts a focused marketing approach. The UK market
segment is under 26 year olds. The primary targets are students and its secondary market is
youths. The marketing challenge over the last few years is the increasing recognition that students
and young people are becoming more heterogeneous. To counteract this shift, further
segmentation of the target market is required and specific marketing initiatives will be
implemented. The figures also show that the youth market has significantly potential, however, this
market is much more heterogeneous and more difficult to target effectively.

Key Market Segments Market Size

UK Students 981,000

UK Student – School & 6th form 562,000

Inbound – O/seas student (f/t) 119,000
GAP Year 200,000
Youth 16-25 (not student or grad) 5.15 million
Youth Graduates (21-25) 1 million

STA has considered other Lifecycle market segments, and not simply socio demographics or age
classifications however the airlines and suppliers impose the age restriction (26 years old) as a
non-negotiable market condition.

Competition – The five forces model – (Porter.M 1980)

Page number 5
 Barriers to New Entrants

Lifestyle Brand

Technology

Distribution channels

Market knowledge

Existing trade relationships

Industry knowledge

Exclusive student contracts

Suppliers Competitive Environment Buyers

Provide valuable CRM

distribution and Primary Key Competitors
sales volume Flight Centres Improve
Trailfinders communication
Joint strategic (SMS, internet etc)
marketing plans Secondary Competitors
(win/win) Low cost airlines Web site – on-line
Other on-line bookings
Co brand, co
promotion Unique “bundled”
(Brand stretch) Tactics products

IT – seamless Knowledge staff Unique student

integration to contract
increase speed of Security, reliability, reputation
distribution (late Special offers,
offers) Product range loyalty programs

Retail network (face to face) Expert advice

Technology - Increase
responsiveness

On-Line marketing

Threats from substitute products

Low cost airlines – STA To focus on

long haul

On-line providers – STA to focus on

quality and value

STA key USP provide services

across all distribution channels

Page number 6
STA is aware of the key competitive forces. To protect and strengthen its position information
systems (IS) and information technology (IT) will play an increasingly important strategic role.
Key future IS/IT marketing aims;
Improve CRM capability
• Seamless integration of all existing systems across all distribution channels on a single
operating platform, recognising customers at any point of contact
• Integration into supplier systems building deeper relationships and reliance

STA is also considering vertical integration by acquiring one or several suppliers thus giving it more
control over the value chain.

Page number 7
 Advantages
Flight • Aggressive, growing fast
Centres • Simple business model
Trailfinders • Brand reputation
• Knowledgeable staff,
individual productivity
On-line • Offer low prices
• Good on point to point tickets
STA Travel • Global network
• Staff from target market
• Exclusive student products
Disadvantages
• Cheap image
• Only USP Price
• Target older passengers
high • Stuffy image
• No on-line booking facility
• Autocratic ownership
• Little or no interaction
• Poor after sales service
• Not suitable for complex long-haul
bookings
• Productivity (sales per full time
member of staff) is less than
competitors (Flight Centres £375k,

• Brand recognition (target Trailfinders £400K, ST £350k)

market)

Current competitive positioning - STA aspires to position itself above Trailfinders in terms of
expertise and focus on long haul and to close the gap in productivity. Trailfinders on-line offering is
poor and STA might gain competitive advantage by striving to dominate its market position and be
the leading brand both on and off-line instead of its existing strategy of adding the web as simply
another distribution channel.

STA might reposition its product offering away from European short haul flights to Long-Haul
destination, which require more expertise to sell, and are too complex to sell on-line.

Page number 8
The Macro environment - SLEPT Analysis

Social • GAP year travel becoming a “right of passage” for students

Which means that;
• Growth opportunities in both pre and post university travel
Legal • More countries requiring entry visas
Which means that
• Additional revenue opportunity – visa service
Economic • Student debt may impact on travel plans
Which means that;
• Segment and target overseas students
Environmental • Eco tourism is gaining in prominence
Which means that;
• Promote eco tourism providing guidelines and tips in promotional
literature
Political • Long haul destinations more vulnerable to volatile political unrest, war
and acts of terrorism.
• UK Government target to increase student numbers to 7 in 10 school
leavers
Which means that;
• STA’s unique 24 hour global travel help is a competitive advantage
• More students equals greater market potential
Technological • Increase internet penetration in the target market
Which means that;
• All off line services must be made available on-line and marketing activity
upweighted

SWOT Analysis - NB Author’s view only – may contain errors and omissions.

Page number 9
Strengths – Internal (exploit)
• Global network of branches •
• Global brand
• Defined target market
• On-line booking
• Exclusive student airline
contracts
Weaknesses – Internal (minimise)
• Pressure on gross margin
• Poor internal MIS
• Transient customer base
• Individual sales consultant
productivity
Opportunities – External (exploit)
• Internet (e-commerce)
• Retail expansion
• New media
• Improve shopping
experience
Threats – External (minimise)
• Suppliers going direct
• On-line travel providers
• Low cost airlines (Europe)
• War act of Terrorism
• Other competitive threats
Page number 10
Which means that……….
Customer will receive help post travel
• Reassurance to travellers and parents
• Clear understanding of customer base, attitudes behaviours,
lifestyles etc
• Additional convenience to customers. Low cost distribution
channel for STA
• Competitive edge, no other company has these products
• Introduce new products and services, creative pricing which
is not easily copied. Package flight & hotel so flight price
comparisons are more difficult.
• Existing client databases need amalgamating. Ongoing
investment in MIS infrastructure is required.
• Use technology to increase longevity of relationship
(Internet, e-mail, SMS)
• Increase average sales - more value add products.
• Increase unique users
• Develop an on-line marketing strategy
• Improve “stickiness” by providing relevant content
• An opportunity to develop a deeper customer relationship.
• Identify target sites which meet minimum criteria (profile,
potential etc)
• Investigate use of WAP, Digital TV, iTV, SMS
• Larger shops in better locations providing additional services
such as foreign exchange, travel clinic etc. The aim is to
create a one-stop travel shopping experience.
• STA needs to “add value” to all stakeholders
• Increase on line activity
• Focus on long-haul specialisation and decrease reliance on
flight only. Promote other value add products, for example
tours and insurance
• Promote unique 24-hour help line. Reassuring travellers and
their parents
• Invest in core competencies. Build barriers to entry, ongoing
investment in the brand, IT, CRM etc