The Marketing Function

Role of marketing : to satisfy consumer demand at a profit. In order to

fulfill this role, the Marketing Process must ensure that the orgns
products or services meet the needs and wants of consumers, and that
these products or services are delivered at the right price, in the right
place, and at the right time.
Eternal Triangle of Marketing CUSTOMER, COMPANY,
COMPETITION
Circumscribed by Environment; interplayed on by Technology and
Regulatory factors on one side and by Social / Economic factors on the
other

Critical issue : if you can change the shape of the triangle by finding
out how to get closer to customers than the competition can manage to
do, you win; conversely, you lose.
As the environment changes rapidly, the need to constantly re-evaluate
what is needed to win increases

To more effectively determine customer potential and to increase

revenue, transport enterprises need to target potential customers.
The concept of Airline Marketing approach
Production-oriented approach
Sales-oriented approach
Consumer-oriented approach

Customer Focus
..then we have to concern ourselves with :
Defining the customer : customer and prospect,
first-timer, repeat, regular, solus (loyalist),
advocate
Consumer motivation : needs, wants
Customer decision-making roles and processes
Specifier, user, influencer;
Co. decision on travel class, carrier, etc

Needs of different travellers

Short-haul business travellers - safety, punctuality,
convenience, price, comfort, loyalty schemes,
inflight service
Long-haul bus travlrs - safety, comfort,
punctuality, convenience, inflight service, loyalty
schemes, facilities
Leisure trvlrs - safety, price, culture comfort,
inflight service, punctuality, loyalty schemes,
convenience

The Marketing Mix

Customer-focused set of activities directed at satisfying needs and
wants
Integrated/coordinated activities known as the Marketing Mix
The 4 Ps
Product- the tangible or intangible good to be interchange
Place- is the place where the buyer and seller will perform the transaction.
It also refer to reaching the customer.
Price- establishing a fair and reasonable economic compensation for the
good
Promotion- is the information transmitted through communication channel
to possible buyers related to your product

The expanded marketing mix

3 Additional Ps - related to service industry
People- Any person coming into contact with customers can have an
impact on overall satisfaction. Whether as part of a supporting service to a
product or involved in a total service, people are particularly important
because, in the customer's eyes, they are generally inseparable from the
total service
Process- This is the process(es) involved in providing a service and the
behavior of people, which can be crucial to customer satisfaction.
Standardization is a Best Practice
Physical Evidence- Unlike a product, a service cannot be experienced
before it is delivered, which makes it intangible. This, therefore, means
that potential customers could perceive greater risk when deciding
whether to use a service. To reduce the feeling of risk, thus improving the
chance for success, it is often vital to offer potential customers the chance
to see what a service would be like. This is done by providing physical
evidence, such as case studies, testimonials or demonstrations.

The Marketing Process

Market information
Market segmentation
SWOT
Objectives and strategies
Develop and implement plans
Continuously review and correct

Market information
Scan the environment
Travel market overview : mkt size (dom/intl, other modes,
etc), major mkt segments, growths, forecasts, character
Macro-economic environment : eco growth (GDP), eco
recession, money supply, inflationary factors, foreign trade
and investment, foreign currency trends and interest rates,
stock mkt, national BOP
Micro-economic environment : changes in consumer
disposable income, changes in travel expenditures, price
sensitivity, shifts in expenses trends, consumer credit

The Political Environment

Government policies such as travel taxes and ticket taxes

Immigration, visa and passport policies
Financial factors, such as foreign debt and balance of trade
Regulatory legislation that can affect ticket pricing and credit
Govt tourism policies that can stimulate travel
Political stability-instability can impact destination demand
Extensive new security procedures eg post 9/11

The case of South Korea in 1993 - govt began experiencing an increasingly

negative toursim trade balance whereby more Koreans were travelling and
spending money abroad than visitors were spending in Korea. As this was
resulting in a deficit of hard currencies, the govt introduced measures to
discourage travel and spending abroad, including limitations on the amount
of currency which could be taken abroad, tax audits on credit card
expenditures and imported good purchases

Cultural and Social Environment

Urban vs rural lifestyles

Emigration and immigration which could affect seasonal traffic
School vacation periods
Size, race, age, and income of the population
Decision making roles in the family
Demographic and psycho-graphic factors
Demographic shifts
Psychographic shifts

Shifts in Consumer Travel Behaviour

The Old Way

The New Way

How people book Thru travel

agents

Thru internet

How people use

travel agents

For advice,
booking,
ticketing &
rebates

For ticketing &

rebates

How people
travel

As part of a large
group

As individuals or
families

Where people go

traditional
destinations, eg
Paris / New York

adventurous
destinations like
Kilimanjaro /
Brazilian rain
forest

The Technological Environment

Industry highly technology intensive
Aircraft development

Range
Capacity
Weight
Fuel burn, etc

Inflight pax comfort and amenities

Product placement electronic support and enhancement

The Internal Environment

Company mission
Capital structure and access to funds
Assets and advantages
Skills and remuneration levels
Internal relationships

The Competitive Environment

Comparative analysis on the factors mentioned in the previous slide
Maintain updated records of the key changes and events

New routes
New fares
Marketing campaigns
New aircraft launches
Capacity evolutions

Link changes and events in competitor activity to any information

obtained on their traffic and revenue statistics

The Current Regulatory Environment

All countries control their own airspace and domestic airline traffic
rights
Any international routes will involve at least two governments, and
bilateral agreements between these govts have been the process for
regulating airlines
ASAs
Freedoms of the Air
Growing trend towards liberalisation
The tussle between faster liberalisation and the restrictive approach
Airline alliances and the global portfolio, impinging upon traditional
ownership factors
Liberalisation leads to : innovation and product improvement, greater
competition, artificial margins in the business due to restrictive
regulations disappear putting pressure on revenue generation

Marketing Research

The systematic design, collection, analysis, and reporting

of data and findings relevant to a specific marketing
situation facing the company.

MR Programme
Continuous Projects : regular and actionable updates on specific
key trends that are important to your airline

Inflight surveys
Surveys of FFP members
Travel agent surveys
Surveys of internet web users
Enables obtaining mkt profile data dealing with reason for travel, destination,
socio-demographic profiles (age, sex, income, residence, nationality), previous
travel experience, and future travel plans
Buying and usage behaviour eg plng / bkg lead times, internet usage, length of
stay, travel companions
Customer satisfaction ratings for key aspects

Mkt profiling enables more effective mkt segmentation

Buying and usage behaviour readings to design new fare structures eg
APEX attributes
Inflt survey deficiency : needs careful sorting to distinguish amongst FFP
members, corporates, regulars, etc

contd
Special Projects

Address non-regular research objectives

A new route
A business class relaunch
IFE upgrade
Competitor action and unexpected need for counter strategy
There can be planned special projects and unplanned ones

Defining Objectives and Context

The following factors will help determine :
Environmental scanning
Ongoing or new opportunities and threats
Geographical, demographic, economic, political, etc

Competition

Cos performance
Specific missions or product projects
Urgency of results required for decision-making

Research Methods
Qualitative Research
Involves the collection of a significant amount of data from a relatively
small number of people in a fairly unstructured way, usually thru g d or
in-depth personal interviews
Due to the small scale, process can be completed quickly
Provides real insights
Guides in identifying which key issues are important to the customer
Statistically not so reliable, sample being usually too small

Research Methods

..contd

Quantitative Research
Involves the statistical analysis of information provided by surveying a
representative sample of respondents from the target mkt using a
carefully designed questionnaire
Personal interviews
Telephone interviews
Self-completion questionnaires mailed, emailed or distributed during the
travel process such as inflt surveys
Web-based surveys
Techniques above are listed in order of cost

Selecting the right method will depend on the trade-off between cost per
interview and your judgement of the value for money that each method
can deliver for a particular project

In some cases, your objectives will make the choice of method. However,
more often than not a mix works, or one method to start with and
based on that go on the more extensive quantitative route

Research Design
Designing Qualitative Research
Focus groups
Individual depth interviews
Defining the profile of the respondents

Designing Quantitative Research balance between cost per response

and likely reliability and quality of data
Designing samples : target respondent; sample size; sample choice
random / non-random
Choosing the right technique : personal interviews, telephone interviews,
questionnaires distributed, emailed, mailed
Questionnaire design : creating/maintaining involvement, a logical
sequence, maximum clarity, employ relevant questioning methods, test for
completeness, test for ease of processing and analysis

Analysing Research Results

Application of statistical and other tests : stat tools and logic of views
Need to relate results to other known information
Need to apply so what? and which means that to each major
finding
Importance of testing established and new hypotheses
Potential for building models : forecast enablers
Presenting Research Findings
Verbal Report
Written Report

The Lead Up To Marketing Strategy :

Marketing Audit, Segmenting, SWOT
Three steps need to be completed before we reach the key areas of
setting Objectives, determining Marketing Strategy, and preparing
Marketing Plans
Marketing Audit - gathering mkt information
Segmenting the market
Conducting SWOT analyses

Marketing Audit
Internal :

Orgnl structure and functional resonsibilities

Network and routes
Fleet
Operating performance
HR
Fresh initiatives

Competition :
Evaluate and compare on above points
Any additional attributes

Mktg Audit

..contd

Customers
Total market
Volume
Types of traveller
Destinations

Airlines own market

Market share by destinations
Fare type sales

Customer knowledge thru inflt surveys, sales force feedback, special

research projects
Comparative travel by class and pax profile ie vs competition
Comparative trends
Brand related feedback

..contd
Environmental scanning
Political : stability factor, policies
Eco : GDP growth, trends by business sector, per
capita income, currency trends
Social : foreign nationals, ethnic, holiday travel
Tech : innovatives affecting which areas eg internet

Market Segmentation
Segmenting the market means dividing it into different customer
groups that are distinct from one another in order to :
A mkt segment is an identifiable group within a mkt that seeks the same
benefits or has the same needs
Develop and launch new customer propositions that cater for each
segment
Establish the relative attraction of each segment

Airline marketers have used the following segments over the years :
Business travel
Holiday travel
VFR (visit friends and relatives) travel

Business Travel
Needs
Good schedules
Speed
Comfort
Wants
Excellect service
Price sensitivity
Low prepared to pay for
quality, flexibility

Product & Prices responses

Suitable timings, high Fq
Non-stops
Business class, Sleeper cl

Better trained crew, IFE

Hold or increase prices to up
revenue

Holiday Travel
Needs
Package of air+land content
Pre-planned solution
New places to see

Product and price responses

Inclusive tours, airline holiday
programmes
Brochures featuring departures
for a year ahead, guaranteed
bookings
Development of new
destinations

Wants
Security

Tour guides & representatives

Price sensitivity
High low price is key

Cut prices to increase revenue

VFR Travel
Needs
Air fare only
Pre-planned solution

Product & price responses

Individual excursion fares
Advance booking or purchase
featuring flts for a year ahead
Same people and places to see Build up capacity to main
destinations for VFR travel
Wants
Security

Travel insurance, association

membership

Price sensitivity
High low price is key

Cut price to increase revenue

develop new fare concepts

Approach Deficiencies
Over-generalisation
Applying the same yardstick to all : there can be sub-segments pricesensitive business traveller
Holiday trvlrs seeking quality and willing to pay higher

Lack of key information : ie beyond simple journey motivation

Fqy of travel
Travel pattern destinations, seasonality, indiv or group
Decision-making who decides for the travel
Socio-demographics business profile, social class, ethnicity

Individuals & Segments

Ideally, a marketer would provide individual attention ie segment of
one!
Therefore, airlines have FFP a CRM enabler
But the cost and overall burden of doing so, would be impractical
Hence the importance of identifying segments
Using their FFP databases, some airline have identified up to 25
different segments
The question to answer is : how do we make segments that are
sufficiently detailed to establish homogeneity for mktg strategies ?

Segmenting the Business Market

Illustrative parameters :
Value business pax travelling in Y less in value, but may travel more
Motivation travel for business exploration or fulfilling existing
contracts
Travel pattern fqy, no. of destinations
Buying pattern who buys and how
Needs and wants
Satisfaction factors
Influence
Demographics

The Segmentation Direction ..

Further to the listing in the last slide, there are several other
Is there a very specific reason for trip being made, eg religious,
honeymoon etc
Who is paying and deciding on travel class and airline
Individual travel or goup

Based on all of the above factors, airlines have developed broad

master segments as follows :

Market Segments
Business Segments
(sponsored by a co.)
Corporate business trvlrs
Individual business trvlrs
Meetings and conventions
Incentive groups
Ship crews
Labour traffic

Leisure Segments
(Self-sponsored)
Group vacationers
Indiv vacationers
Sports interest trvelrs
Adventure trvlrs
Cruise pax
Eco-cultural trvlrs

Other Segments
(sponsored by an orgn)
Govt workers
Refugees
Non-govt orgns (NGOs)
Teachers
Military

Other Segments
(self-sponsored)
Students
Immigrants
VFR
Religious trvlrs

Segmentation ..contd
Each of the foregoing can be further subdivided to give a more
detailed segmentation for mktg purposes
This is particularly true of the first of the 6 business travel segments.
Corporate business trvelrs - this large segment contains all the
business trvl rerated by large orgns.
Can range from senior execs trvling in F Class down to relatively junior
emps in Y (job status is the main criterion used by these orgns to decide
on the class of travel
Airlines have learnt a great deal thru analysing the customer data from
FFP
This enables airlines to develop and use additional criteria to refinie their
Mkt Segmentation approach, related to individual customer behaviour

Mkt Segments and ensuring relevance ..

Multi-criteria segments approach is useful
The more relevant criteria that can be applied to the segmentation
process, the better; eg adding the criteria of value and destinations
visited to corporate business travel helps fine-tune seg strategy
The significance of relevance - if your airline flies between BOM and
LON, spouses of British executives based in BOM could be an
important segment to define; however, if your airline does not serve
LON, this segment becomes irrelevant
Another test of relevance : how large the segment is in the mkt(s) that
you are responsible for; if this segment accounts for only 2% of the
mkt, it is not going to be as relevant as it would be if it accounted for
52%

Why Segment ?
Benefits of segmentation

Identification of customer needs

Identification of new opportunities
Discovery of new trends
Mktg resource efficiency

Mkt segmentation versus Target segmentation

First segment the mkt and then decide on which segments to target
Focus
Identifying resource requirements
Setting priorities ranking segments

Ranking Market Segments

Try the BCG Matrix
The key to ranking market segments consists of three variables :
The attraction of the segment
Your airlines performance in the segment
The size and growth prospects of the segment
Growth rate
Volume
Operating margins capability

Critical insight to be directed at : with segmentation, we map the

market and decide which segments we want to fight for !

Applying SWOT Analysis

Involves careful consideration of the strengths, weaknesses,
opportunities, and threats in each major target mkt segment
A mktrs balance sheet, with assets on LHS and liabilities on RHS

Strengths
Mkt leader based on share &
approval
Superior schedules & svc
Effective FFP

Weaknesses
Lack of some key routes
Recent punctuality poor
Shortage of account mgt staff

Opportunities
Continued total mkt growth
New fleet = better reliability &
comfort
Be a leader in better ground
service

Threats
Temporary economic downturn
FFP competition
More use of substitutes

Setting Marketing Objectives

Objectives need to be SMART
Specific, measurable, achievable, relevant, and timed

Process often followed :

Total market forecasts

Growth in traffic and revenues
Analyse SWOT outcome
Set target Mkt Share, LFs, etc
Breakdown to mkt regions / routes / flts and repeat the exercise of growth,
MS, LF, margins, etc

Marketing Strategy
Three main forms of strategy
Aggressive : where the objective is to increase mkt share
Defensive : where the objective is to maintain mkt share
Customer focus : where the objective is to obtain customer commitment or
loyalty

With each of the above, a strategic mix is used that focuses attention
on 4 key issues :
Important customer needs and wants that the competition provides for
Important customer needs and wants that the competition does not provide
for
Unimportant customer needs and wants that the competition does provide
for
Unimportant customer needs and wants that the competition does not
provide for

Aggressive Market Strategy

Competition
offer
important

outmatch

do not offer

upstage

Customer
Viewpoint

unimportant

match

monitor
for change

Defensive Market Strategy

Competition
offer
important

Match but build

brand strength

do not offer

Careful use only

Customer
Viewpoint

unimportant

Dont match

monitor
for change

Customer Focus Strategy

Competition
offer

do not offer

important
Customer ->>>>>>>>>>>>
Viewpoint

Respond to
the customer !

unimportant

Airline Examples
In sequence
Virgin Atlantic
British Airways
Icelandair

Customer Focus Strategy requires ..

Direct feedback from individual customers

Involvement of front line staff
A more transparent and responsive orgn

Exploring Strategic Directions

One segment : niche, LCC, Charter, air taxi for corporates
Multi-segment : Elite 1 business travellers, independent holiday
customers, VFR, group holiday customers
Expanding/increasing market position : raising position, requiring an
aggressive or customer focus strategy
Devolving : reducing market position and almost always involves
defensive strategy; the strength of this defence will depend on the
short-term importance of getting revenue and profit from the segment
involved
Selecting strategy

Selecting Strategy

Segment

Suggested Strategy

1.

Elite 1 business travel

Customer focus

2.

Independent holiday

Aggressive

3.

VFR

Strong defensive

4.

Group holiday

Weak defensive

Marketing Plan
The preceding act as inputs to the Marketing Plan
At this stage, we need to analyse the major strategic considerations
related to :

Pax data, eg FFP information

Pax needs and wants segment-wise
Competitor offers and action
Fleet edge
Innovation and ability to upstage (competition)
Optimize resource utilisation, eg not waste on unproductive segment

Nature of Airline Products & Services

The airline product is viewed in the following terms :
Product hardware - features of the product that are mainly to do
with equipment and facilities in the air and on the ground
Soft side of the product - features that are mainly to do with how
an airlines staff treat its customers throughout

Product Hardware
PRODUCT
Scheduling features
A/c type, fqy,
timings, no. of stops
Class of svc features
Inflt : cabin, seat
access, seating,
Catering, IFE
Ground : Chk-in,
lounge, baggage

Supplementary
features
Reservations,
bookings, spl svcs

Airline Products the soft side

Concerns the additional Ps of the mktg mix people and process
Main factors :
The skills, experience and motivation of customer contact staff
The user friendliness of the systems and procedures they have to work
with
The degree of responsibility that they are given to resolve problems on the
spot; also known as empowerment

Customer touchpoints :

Airline web site when planning/researching

Reservations staff when booking
Ground services staff when checking in and proceeding to departure gate
Cabin crew on board
Baggage handlers on arrival
Follow-up email queries regarding Frequent Flyer credits

Product Design
Length of haul
Short haul : first frequency, second timings, third ifs
Medium haul : timings, frequency, ifs
Long haul : ifs, timings, frequency

Length of haul concept

Medium haul : around 2-4 hours
Long haul : more than the above

Non-stop and no. of stop en route

Networked flight connections

Redesigning Cabins
Seats
Specs
Pitch
Premium class seating variations

PSU features
FSC and LCC models

IFE
Cabin features : windows (size, shades, etc), overhead lockers
Section bulkheads
Lavs

Designing Ground Services

Check-in
Departure gate
The greater the e-orientation, the better for both above

Lounges
Baggage handling
Airport sales/ticketing point
Limousine service ?

Product Design & Mktg Strategy

Scheduling features
Class of service features in the air and on the ground
Clarity on service model essential - the FSC LCC conflict

Significance of Brands
What is a Brand ?
A brand is what the customer sees, feels and thinks about one
particular make of product that makes it distinct and preferable over
other similar products on offer
Master Brand / Sub-Brand
Eg Singapore Airlines
S-b are all the individual names that an airline will have for its different
products and services. Eg Raffles Class (Business C); KrisFlyer (name of
SQ FFP)

..contd
Brand positioning - where your brand fits into the market in relation to
competitors brands
Brand image - how the brand is perceived : eastern carriers are exotic,
German carrier is efficient
Brand value - perception of the brands capability to satisfy needs of
the target mkt segment
Brand preference
Brand loyalty
Brand premium
Brand management is the process of building on the strengths of
your brand family - working on the all the above aspects, then
auditing, and modifying as needed

Frequent Flyer Programmes

The basic FFP customer proposition consists of three core elements :
Rewards
Recognition
Relationship

FFP enables the airline marketer to :

Identify and communicate with individual trvlrs

Segment the mkt on the basis of actual customer usage and value
Deliver recognition benefits to the most valuable customers
Build new relationships with the FFP membership base

FFP loyalty schemes

Significance of the Airline Schedule in the

Mktg Mix
Concept : plan the flights and operating patterns of the airlines
aircraft in order to meet the following objectives :

Customer satisfaction
High aircraft utilisation
High load factors
High connectivity
Generate and maximize financial margins
Productivity of human resources

Flight Patterns
Major types :
O-D non-stop
Linear : multi-stop
Triangular : co-destination

Connectivity patterns
Hub and Spoke
Multi-Hub and Spoke

Marketing Mix P - Promotions

To create awareness of the product and its attributes
To form a communication bridge between the airlines product offers
and the target audiences for them
Also referred to as marketing communications
In todays crowded marketplace, airline needs to be effective at
promoting its products to the target audience if it is to be noticed,
understood, and considered for purchase
Market globalisation thanks to deregulation and new technologies
like internet, airlines now have to consider their market as being a
borderless globe that is open 24 hours a day, 365 days per year
Websites and internet bookings are now critical tools

Promotions based on AIDA

Attention : the targeted audience becomes aware of a need-satisfying
offer
Interest : the targeted audience takes interest in the offer
Desire : the targeted audience desires to take advantage of the offer
Action : the targeted audience takes action ie buys the product or
service

Promotional Mix

Personal selling
Advertising
Joint promotions using direct mail
Electronic media

Personal Selling
Benefits of Personal Selling
Focus
Flexibility
Effectiveness

Disadvantage
Expense

Advertising
Types of advertising media

Print media : newspapers, magazines

Outdoor
Broadcast media : TV, radio
Direct mail
Direct e-mail : low cost, personalisation possible, time-to market
Joint promotions : co-branded credit cards, joint mails with cr card
cos and hotels, etc

Effectiveness of Advertising & PR

Selecting the right media
Match with market segments
Combination of media
Expenditure allocation

Using advertising agencies

Track record, versatility, creativity, commitment, purchasing skills

Co-operative advertising
With hotel chains, travel agents, etc

PR

Press conferences and press releases

Media kits : information brochures, CDs, etc
Hosting meals for journalists
Other speaking opportunities

Sales Promotion

Corporate sales
Corporate prospecting
Corporate contract

Role of Travel Agents