Marketing Plan for “B Airlines”

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Executive Summary

B Airlines is looking to expand its operations in the European holiday industry by opening 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 in a new marketing concept in the aviation industry. To achieve this, B Airlines will need to create a demand in the holiday industry by providing many destination options, on-flight services, cheap and competitive fare rates.

B Airlines will have to begin the expansion process, a marketing strategy plan that 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 and compete with other airlines. According to the research conducted, B Airline operations’ direct competitors 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 Airlines to provide luxury holidays with little expense.

The market research conducted for the report includes industry trends, market segmentation, and 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.

Introduction

It isn’t easy to define marketing in the single best way. However, two definitions truly capture the critical components:

“Marketing is the process of planning and executing programs designed to influence the behaviour of target audiences.”

• Alan R. Andreasen and Philip Kotler (as cited in Kramer et al., 2010)
  

“Marketing is the art of identifying and understanding customer needs, and creating solutions that deliver 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 attract customers, expand the business, and initiate innovation to match any organisation’s strategic needs. Various marketing concepts are essential to developing a strategic marketing plan for B Airlines 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 marketplace 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.

Market Segmentation

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 various methods such as observations, interviews with travel and airline industry professionals, economic segmentation, future projections based on a marketing plan, and experience within the region and market for planning purposes. The following is an estimate overall market segmentation retrieved from the literature review:

• Business- 16%
• Government and International Organisations- 10%
• Regional (North England) Resident Personal and Leisure Travellers- 26%
• Personal and Regional travelers based in South England- 11%
• Seasonal Holiday travelers- 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:

1. Drop-in business and government travel that is expected during the peak summer holiday travel season
2. A significant portion of season/holiday traffic is carried on flights employing specially chartered supplementation aircraft.

The following chart shows potential markets based on the estimated population in each segment.

Figure 2- Market Segmentation based on Travelling Population

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. It has evolved into one that only makes space for companies in the marketplace who are either major players, such as the names mentioned, or smaller “niche” participants such as Ryan Air Easy Jet. In the airline industry, two specialty 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 by providing services to various European destinations. Easy Jet, on the other hand, has focused on providing lower 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 traveled destinations.

Low fares have become an expectation from consumers due to the extent of airlines’ de-regulation, 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. Specialty carriers are categorised as either “short-haul” or “long-haul”. B Airlines needs to primarily focus on European holiday destinations and therefore should be exempt from servicing long-haul routes due to major carriers being a threat and concentrating on a short-haul market segment that is more suited for B Airlines 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 the per-passenger mile. Short-haul revenues are high enough to develop an extensive business that can reach in the hundred million pound multiple ranges.

Competitor Analysis

The SWOT analysis model enables us 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 airfares
• 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
• Emirates
• 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:

• com
• co.UK
• co.UK
• com

Each of the competitors and their products, brand attributes, and related marketing concepts are described in Figure 6 (See Appendix F). The competitor map highlights the method by which the airline product is bought from consumers. Each of the B Airline’s direct and indirect competitors has unique product items that separate them from the competition. For example, Easy Jet is known for its cheap domestic and international flights. The airline focuses on filling its seats and provides discount rates to travelers that book for at least three months. Easy Jet has also invested in technology by developing a website that gives consumers excess information for holiday adventures and recommends cheap hotels and rental cars in the booking.

Comparison of Air Services

Table 1- Air Services of Competitor Airlines

The graphical display of the market capitalization that each of the competitor airlines holds against B Airline is displayed in Figure 3:

Figure 3- Market Capitalisation of Competitors

*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 each of the airlines’ revenues for the most recent fiscal year.

Strategic Planning Tools

Various strategic tools such as PESTEL, Porter’s Five Model, and SWOT analysis will aid in the holiday destination expansion’s strategic planning. The previous section has discussed the SWOT analysis for B Airlines and can be found in Appendix [A]. Porter’s Five models give us a better understanding of the competitive forces at work. 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 a large capital to sustain any business. There has been a domestic environment saturation due to Easy Jet and Ryan Air limiting the number 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), the brand name is not an important factor for customers any longer looking for savings. Thus, there is a minimal threat for substitute products for a long-haul market in which B Airline works. TOWs Matrix (Appendix E) is another imperative strategic tool that B Airlines needs to use. The PESTEL analysis is an important strategic tool that will enable us to describe the macro-environmental factors used in environmental scanning to develop strategies and make strategically beneficial decisions 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 aircraft 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.

Pricing Strategy

The airline industry is a competitive setting that is continuously changing and influencing the changes in B Airlines. Competition in the market will influence B Airlines into evolving its business model or competitors of the company to adapt its strategy to look for an advantage. However, with a strong pricing strategy and 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 effectively incorporates revenue management to compete with other carriers and low-cost carriers. The proposal would be to take advantage of B Airline’s connecting hubs using its own network. An effective pricing solution needs to collect information and analytics that allow it to respond rapidly and effectively against the fare charges of its competitors.

B Airline should focus on a leg-based origin and destination system to determine tickets’ prices to implement this. It is essential to hire an experienced expert in leg system analyst to maximise revenues. The Airlines can offer a simple fare structure composed of 3 different fare types and vary according to kilometers totaled in destinations from Northern England airports such as Manchester/ Leeds- Bradford. The pricing structure will be attractive to leisure travelers to expand on the holiday package services that B Airlines will provide. The Ansoff Matrix (See Appendix G) can play a critical role in regulating the pricing for B Airlines to determine customer demand and take the airline’s existing customers and introduce them to new holiday destinations. Ansoff’s Matrix relates to four major product-market growth strategies in which B Airlines will focus on 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 its specificity 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) systems. This 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), O&D revenue management, either leg-based or PNR-based, has become a common standard in the airline industry.  To increase the company’s revenue, 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 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 offer connection services for their holiday packages. Figure 5 in Appendix C shows passengers’ distribution 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 and a mix of fare classes sold for each product (Phillips 2005).

Using the simple leg-based system coupled with O&D, the best prices for every 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 are described in the table below.

Table 2- Fare Structure for B Airlines*Prices shown in the table above are applicable for up to 2,000km (includes destinations such as Paris, Lyon, Rome, Dublin, Madrid, etc.)Table 3- Comparing Fare Prices by Season HolidayTable 4- Fare Type DescriptionsProduct and Branding StrategiesB Airlines’ main aim is to establish itself as a niche player in the long-haul market but low-cost fares by providing high-level service and comfort at low prices. 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 successfully retained customers by giving them frequent flyer miles each time they travel. As customers mount miles, they gain specific privileges, including access to airport lounges, upgrades, and free flights. B Airlines will introduce a frequent flyer program that is simple and coherent with the holiday concept. B Airlines will offer frequent flyer internet cash to customers to spend on specific travel websites for holiday packages.

• Promotions Strategies

Offer special holiday promotions to Paris, Madrid, and others 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 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. Those affiliated with B Airlines will be made available to customers.
• Larger carry-on luggage- Increased space on board will allow the airline to accommodate larger carry-on luggage which is a sensitive issue for most travellers who 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 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 suggested draw on the holiday notion that B Airlines is aiming for (See Appendix H).ConclusionThe report features an analysis of the industry and external environment of B airlines. It looks at strategic options that the company can implement to make the new holiday package destinations successful. To survive in this industry’s changing environment, the airline must implement a strong marketing strategy that incorporates various aspects 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 major European destinations. B Airlines should focus on improving and maintaining a high level of customer service and affiliating with hotels and car rental companies to give the customer the ultimate holiday experience and value for money.

Table 2- Fare Structure for B Airlines

*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.)

Table 3- Comparing Fare Prices by Season Holiday

Table 4- Fare Type Descriptions

References

• Aguilar, 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-
• 7_20#page-1
• 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

Appendixes

Appendix A

SWOT Analysis of Airlines B

Figure 4- SWOT Analysis for B Airline

Appendix B

Target Customer Profile

Table 5- Customer Profile

Appendix C

Passenger Seats and Fare

Figure 5- Demand of Seats and Fare Change

Appendix D

Porters Five Forces Model

Appendix E

TOWS Matrix

Table 7- TOWS Matrix Showing Options for B Airlines

Appendix F

Competitors Map

Appendix G

Ansoff Matrix

Figure 7- Ansoff Matrix

Appendix H

B Airlines Logo Suggestions

Figure 8- B Airline Logo Suggestion 1

Figure 9- B Airlines Logo Suggestion 2

Figure 10- B Airline Logo Suggestion 3