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Airline Marketing

Module-01

Introduction to
Airline Marketing

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Coverage

Module-01 : Introduction to Airline Marketing


• What is Marketing?
• Definition
• Marketing Mix
• Stages in the application of Marketing Principles to
Airline Management

Introduction

Needs, Wants and Demands


• Needs: A state of felt deprivation of some basic satisfaction ;
examples - Food, Clothing, Shelter, Belonging etc.
• Wants : Wants are desires for specific satisfiers of the deeper
needs. Needs are few and wants are many .
• Demands : Demands are wants backed by ability to buy and
willingness to buy

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What is Market?
• Market is an actual or nominal place

 Where forces of demand and supply operate, and

 where buyers and sellers interact (directly or through


intermediaries) to trade goods, services, or contracts or
instruments, for money or barter.

• It offers an environment that allows buyers and sellers to meet


and trade or exchange goods, services, and information

• Thus, at a market, any type of trade takes place.

What is Market?
Definition:
• A market is any place where the sellers of a particular good
or service can meet with the buyers of that goods and service
where there is a potential for a transaction to take place. The
buyers must have something they can offer in exchange for
what they buy (transaction)

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What is Market?
• Thus, a market brings together two players:

 Existing and potential Customers on one side

o who share a particular need or want

o who might be willing and able to engage in exchange

o to satisfy that need or want

 Supplies on the other side

o who have the product or service that satisfies the


particular need or want of the customers

What is Market?
• Markets include mechanisms or means for
1) determining price of the traded item,
2) communicating the price information,
3) facilitating deals and transactions, and
4) effecting distribution.

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What do we Market?

 Goods
 Services
 Events
 Experiences
 Personalities
 Place
 Organizations
 Properties
 Information
 Ideas and Concepts

Marketing

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Marketing
What is Marketing?
• Marketing is communicating the value of a product, service or brand
to customers, for the purpose of promoting or selling that product,
service, or brand.
• Marketing techniques include
 choosing target markets through market analysis and market
segmentation
 understanding consumer behavior and
 advertising a product's value to the customer

Marketing
What is Marketing? (Contd.)
• Marketing is not about providing products or services; it is
essentially about providing changing benefits to the changing
needs and demands of the customer
. . . . P. Tailor – Learnmarketing.net
• Marketing is the process of planning and executing the
conception, pricing, promotion, and distribution of ideas, goods,
services to create exchanges that satisfy individual and
organizational goals
. . . . . American Marketing Association

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Marketing
Aim of Marketing
• To establish, maintain, and enhance long term relationships
with customers at a profit so that the objectives of the parties
involved are met
• In short, marketing
 consists of attracting, developing, and retaining profitable
customers
 is the process of understanding, creating, and delivering
profitable value to targeted customers better than the
competition

Marketing
Definition:
• Marketing is the human activity directed at satisfying human
needs and wants through an exchange process
. . . . PHILIPS KOTLER (1980)
• Marketing is a social process by which individuals and groups
obtain what they need and want through creating and
exchanging products and value with others
. . . . . PHILIP KOTLER (1991)
Note:
From 1980s to 1990s, the emphasis changed from human activity to
social process

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Marketing
Definition
• Marketing is the Management process responsible for identifying,
anticipating, and satisfying customer requirements profitably
. . . . UK Chartered Institute of Marketing
Note:
 “Anticipating” emphasizes the fact that marketing is a dynamic
discipline where customer requirements are in a constant state of
evolution and change
 More relevant to airline industry where successful airlines are
those who anticipate the change and are ready for it when it
occurs rather than trying to catch up with the change;
• Example – legacy airlines versus challenges thrown open
by low cost airlines

Summary
• Definitions of marketing includes following core concepts :
 Needs , Wants and Demands
 Products
 Value & Satisfaction
 Exchange & Transaction
 Markets & Marketers

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Types of Marketing
1) According to Tangibility, Standardization, Storage, Production,
Involvement:
• Goods Marketing : Eg. Mfg company
• Service Marketing : Eg. Banking sector
2) According to nature of Contact, Information, Process for
purchasing and Delivery
• Mass Marketing : Eg. Sony
• Direct Marketing : Eg. Magazine
• Internet Marketing : Eg. Flipcart.com

Types of Marketing
3) According to Geographic area, extent of Distribution, Network:
• Local Marketing
• Regional Marketing
• National Marketing
• International Marketing
• Global Marketing
4) According to Customer/ Consumer
• Consumer Marketing – is the marketing activity targeted at the
individual or the family directly; identifying consumer for a
particular product is fairly easy and straightforward
• Industrial Marketing – is the marketing activity involving
business-to-business or firm-to-firm marketing

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Types of Marketing
4) According to Customer/ Customer (Contd.)
Industrial Marketing (Contd.)
 Market research studies are rather difficult and identification
of customer is not straight forward as
 the decision making process in a firm for procurement is
complex (example - a capital equipment)
 involves many people & each person has his own agenda
 Interaction among decision makers is through
Decision-Making Unit or DMU

Airline Marketing

Airline Marketing

Industrial Marketing Consumer Marketing

Airline Marketing
• Airline marketing is more complex as it includes both Consumer
Marketing and Industrial Marketing
• Example
 Industrial Marketing : Business air traveler, air freight services
 Consumer Marketing : Leisure air travel
• Special skills are required to understand this process

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Marketing Mix

Marketing Mix
History
 The term marketing mix was coined by Neil Bordenn in his
article “Concept of the Marketing mix”
 The marketer, E Jerome McCarthy, proposed a four Ps
classification in 1960
 Robert F. Lauterbom proposed a four Cs classification in 1993

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Marketing Mix
History (Contd.)
 Traditionally, the marketing mix was developed for the fast
moving consumer goods sector, and there were 4 Ps: Product,
Price, Promotion, and Place (or distribution).
 As service sectors have become more aware of marketing, this
marketing mix concept was found inadequate; hence it has been
expanded to include: People, Process and Physical Evidence (7Ps)
 Indeed, the goods-service continuum demonstrates that very
few products are purely goods and very few purely service.

Productivity & Quality is being promoted as the 8th P of marketing. This P


asks “is your offering to your customer a good deal?” This is less about you as
a business trying to improve productivity for cost management, and more
about how the company passes this onto its customers

Marketing Mix
Definition
Marketing mix is about putting the right product or a combination
thereof in the place, at the right time, and at the right price.
• The Marketing Mix is like the artists palette. The artist mixes
the prime colors (mix elements) in different quantities to deliver
a particular final color. Every hand painted picture is original in
some way
• Same is true in marketing mix. The offer you make to your
customer can be altered by varying the mix of elements i.e.,
customizing your offer to your customer by varying the mix
elements.

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Marketing Mix
• To do this effectively, you need to know every aspect of your
business plan.
 Example - for a high profile brand, increase the focus on
promotion and desensitize the weight given to price.
• The marketing mix is predominately associated with the 4P’s of
marketing, the 7P’s of service marketing, and the 4 Cs theories
• Various principles are used in the application of the right
marketing mix

4Ps of Marketing Mix


4 P’s of Marketing Activities:
• 4 P’s of Marketing
Product Price
a) Product Target Market
b) Price
c) Place Promotion Place
d) Promotion
• 4P model tells us the application of marketing principles and
decisions to be taken in respect of
 Product to be offered and the Price to be charged
 Method of marketing communication to be employed
in order to persuade the people to buy the product
 Distribution channels which will provide a link between the
customer and the product

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4Ps of Marketing Mix
4Ps of Marketing (Contd.)
• Product : its identification, selection, and development
• Price : determination
• Place : selection of a distribution channel to reach customer
• Promotion : strategy for development and implementation
. . . . . McCarthy
Product

4Ps of
Promotion Price
Mktg.

Place

4Ps of Marketing Mix

Marketing
Mix (4Ps)

Product Promotion
• Variety • Sales promotion
Price Place
• Quality • Advertising
• Functionality • List price • Channels
• Discounts • Coverage • Personal selling
• Design • Sales force
• Features • Allowances • Channel members
• Payment period • Assortments • Public relations
• Safety
• Brand name • Credit terms • Locations • Direct marketing
• Packaging • Strategy (skim, • Inventory • Strategy (Push /
• Sizes penetration etc.) • Transport Pull)
• Services • Seasonal pricing • Warehousing • Marketing
• Warranties • Bundling • Distribution communications
• Returns • Discrimination centers budget

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4Cs of Marketing Mix

4Cs of Marketing
• Product : Customer value / solution
• Price : Customer Cost
• Place : Convenience
• Promotion : Communications

Marketing Mix (4P’s) - Product

Product Decisions

Branding Quality Features

Benefits offered
We must remember that Marketing is fundamentally about
providing the correct bundle of benefits to the end user.
“Marketing is not about providing products or services; it is
essentially about providing changing benefits to the changing
needs and demands of the customer”

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Marketing Mix (4P’s) - Product

Products versus Services


Products Services

• Tangible offerings • Intangible offerings

• Described in terms of - • Described in terms of -


dimensions, materials, physical elements + sensory,
tolerances & performance aesthetic & psychological
standards etc. benefits

Products & Services offerings must support the company’s business


strategy by satisfying the target customers’ needs & preferences

Marketing Mix (4P’s) - Pricing

Penetration

Skimming

Pricing Strategies Competition

Product Line
 Pricing is the only mix which
generates a turnover for the organisation.
Bundle
 The remaining 3P’s are the variable cost for
the organisation.
Psychological
 It costs to produce and design a product, it costs to
distribute a product and costs to promote it.
 Price must support these elements of the mix.
 Pricing is difficult and must reflect supply and
demand relationship.

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Marketing Mix (4P’s) - Pricing
Penetration Pricing
Penetration pricing is a marketing strategy used by businesses to attract
customers to a new product or service. Penetration pricing includes
offering a low price for a new product or service during its initial offering.
The lower price helps to lure customers away from competitors.

Skimming Pricing
Price skimming is a pricing strategy in which a marketer sets a
relatively high initial price for a product or service at first, then lowers
the price over time.
It is a temporal version of price discrimination/yield management

Competition Pricing
Competitive pricing is setting the price of a product or service based on
what the competition is charging. This pricing method is used more
often by businesses selling similar products, since services can vary from
business to business, while the attributes of a product remain similar

Marketing Mix (4P’s) - Pricing


Product Line Pricing
The process used by retailers of separating goods into cost categories in
order to create various quality levels in the minds of consumers.
Effective product line pricing by a business will usually involve putting
sufficient price gaps between categories to inform prospective buyers of
quality differentials.
Bundle Pricing
In a bundle pricing, companies sell a package or set of goods or
services for a lower price than they would charge if the customer
bought all of them separately. Common examples include option
packages on new cars, value meals at restaurants and cable TV
channel plans
Psychological Pricing
Psychological pricing (also price ending, charm pricing) is
apricing/marketing strategy based on the theory that certain prices
have a psychological impact. Retail prices are often expressed as
"odd prices"

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Marketing Mix (4P’s) - Promotion

Advertising

Public Relations

Promotional Mix Sales Promotion

Personal Selling

 A successful product or service means


Direct Mail
nothing unless the benefit of such a service can
Internet /
be communicated clearly to the target market. E-commerce
 An organisations promotional mix can consist of
combination of all

Marketing Mix (4P’s) - Place

Place

Direct Distribution Indirect Distribution

Manufacturer Manufacturer Manufacturer

Retailer Wholesaler

Consumer
Retailer
Consumer

Consumer

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Marketing Mix (4 P’s)
4P’s of Marketing
• The marketing mix principles are controllable variables which have
to be carefully managed to meet the needs of the defined target
group.
• All elements of the mix are linked and must support each other.

a) Product b) Price

d) Place c) Promotion

Marketing Mix (4P’s)


4P’s of Marketing
Optimisation of results calls for tradeoff between the 4Ps
• Relationship between Product and Price – Tradeoffs are obvious;
product enhancements are incorporated only when they fetch higher
price or increased market share
• Relationship between Place and Price - tradeoffs is with respect to
distribution channels – whether to be a retailer or a wholesaler etc.?
 Example - charter carriers are sold in wholesale basis like Tour
operators whereas business travel is basically a retail marketing
requiring enlistment of travel agents, high promotional profile
like advertising, frequent traveler programme etc.

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Marketing Concepts

Marketing Concepts
There are FIVE competing concepts under which organizations
conduct their marketing activities:
A) Production Concept
B) Product Concept
C) Selling Concept
D) Marketing Concept
E) Social Marketing Concept

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Marketing Concepts
A) Production Concept
• Under this, the company produces and sells more and more
• Premise - Product practically sells it-self
• Consumers will favour those products that are widely
available and low in cost
• Therefore, increase production and cut down costs
• Profit is build through volume

Marketing Concepts
B) Product Concept
• Here, the emphasis is on producing and selling quality products
• Premise - Product practically sells itself, if it gives most quality
for money
• Buyers admire well-made products and can appraise product
quality and performance
• Consumers will favour those products that offer the most
quality, performance, or innovative features
• Therefore, improve quality, performance, and features
• This would lead to increased sales and profits

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Marketing Concepts
C) Selling Concept
• Consumers have normal tendency to resist
• Follow aggressive selling and promotion efforts
• Making sales becomes primary function and customer
satisfaction is secondary
• Consumers, if left alone, will not buy enough of company’s
products
• Therefore, promote sales aggressively
• Profits are built through quick turnover

Marketing Concepts
D) Marketing Concept
• “Love the customer, not the product”
• Learn what customer wants
• Sell what customers want (satisfy needs of customers)
• Key to achieving organizational goals consist in determining
the needs and wants of target markets and delivering the
desired satisfactions more effectively and efficiently than
competitors
• Build profits through customer satisfaction and loyalty

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Marketing Concepts
E) Societal Marketing Concept
• Here, Marketing concept and Society’s well being are
considered together
• Following three considerations are balanced while setting
marketing policies:
 Customer’s want satisfaction
 Society’s well being
 Company’s profits

Marketing Concepts
E) Societal Marketing Concept (contd.)
• The societal marketing concept holds that the organization’s
task is
 to determine the needs, wants, and interests of target
markets
 to deliver the desired satisfactions more effectively and
efficiently than competitors
 in a way that preserves or enhances the consumer’s and
society’s well being
• It addresses conflicts between consumer’s and firm’s short run
wants and long term welfare

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Types of Selling

Types of Selling
1) The Instant Buddy
• Sales people who use this approach are warm and friendly,
asking questions and showing interest in their prospects
• They try to connect on an emotional level with a prospective
customer

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Types of Selling
2) The Guru
• They are more logical and less emotional
• They position themselves as problem-solvers, able to answer
any question and tackle any issue that the prospective buyer
lays before them
• The Guru approach requires hard work, learning the relevant
information and keeping up with changes in the industry

Types of Selling
3) The Consultant
• This approach combines the “Guru” and “Buddy” approaches
• It requires a great deal of time and effort on a salesperson’s
part
• Sales person must be knowledgeable and able to make an
emotional connection with the prospects
• Successful sales persons can reap huge benefits

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Types of Selling
4) The Networker
• The dedicated networker maintains a web of friends, co-
workers, salespeople from other companies, customers
and former customers, and anyone else he meets
• A strong enough network will create an ongoing flow of
warm leads that can provide most or even all on the
salesperson’s needs

Types of Selling
5) The Hard Seller
• Hard selling involves getting someone to buy a product
even though he doesn’t want or need it
• No ethical salesperson should use a hard sell approach
• The result is customer who never buys again and, sooner
or later, a bad reputation for the company as a whole

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Services Marketing

Service Sector
Service Sector
• The services sector has been growing at a rate of 8% per
annum in recent years
• More than half of our GDP is accounted for from the
services sector
• This sector dominates with the best jobs, best talent and
best incomes

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Service Sector
Service Sector
• “There are no such thing as service industries.There are only
industries whose service components are greater or less
than those of other industries. Everybody is in service.”

. . . . . . . Theodore Levitt-

What is Services?
• It is the part of the product or the full product for which the
customer is willing to see value and pay for it.

Service Sector
What is Services?
• It is the part of the product or the full product for which the
customer is willing to see value and pay for it.
• Services :
 Are Intangible.
 Do not result in ownership.
 May or may not be attached with a physical product

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Physical Goods Vs. Services

Physical goods Services

Tangible Intangible

Homogeneous Heterogeneous

Production and distribution are Production, distribution and consumption are


separated from consumption simultaneous processes
A thing An activity or process
Core value produced in the buyer-seller
Core value processed in factory
interaction
Customers do not participate in the
Customers participate in production
production process
Can be kept in stock Cannot be kept in stock
Transfer of ownership No transfer of ownership

Note: Most products have service component; they could be


• Equipment based
• People based – varying skill levels

Physical Goods Vs. Services

• Most products have service component; they could be


 Equipment based
 People based – varying skill levels
• Services could meet
 Personal needs – haircuts, tuition, massage parlours
 Business needs – courier services, office cleaning services,
delivering fresh flowers

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Physical Goods Vs. Services

• Characteristics of Services:
 Intangibility
 Inseparability
 Perishability
 Variability
• Qualities of Services
 Search qualities
 Experience qualities
 Credence qualities

In services, the last experience remains uppermost in your mind.


Therefore, it is not enough to be good, you have to be consistently good

Service Marketing Mix (7P’s)


7P’s of Marketing
• For service marketing, 4P’s are found to be inadequate to define
marketing mix.
• Apart from 4P’s of consumer marketing mix (Product, Price, Place,
and Promotion) 3 more P’s namely People, Process, and Physical
Evidence are added

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Service Marketing Mix (7P’s)
7P’s of Marketing
People- covers both target market and people directly related to the
business
Process – refers to the systems and processes of the organization -
uniformity of offerings, service delivery, service consumption etc.;
process affects the execution of the service
Physical Evidence - In the service industries, there should be physical
evidence that the service was delivered. Physical evidence also pertains
to how a business and it’s products are perceived in the marketplace,
the ambience, mood or physical presentation of the environment etc.

Airline Marketing

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Stages of Airline Marketing
• Traditionally, the 4P’s marketing mix was developed for the fast
moving consumer goods (FMCG) sector
• Services are deeds, processes, and performances
• Service Sector:
 is distinguished from products mainly because they are generally
produced at the same time as they are consumed, and cannot be
stored away or taken.
 It is not about simply reaching out to Customers with the right
Service. But, it is also about creating that right desire to utilise
the Service
 Hence, an enhanced marketing mix needs to be deployed.

Stages of Airline Marketing

RAINBOW OF SERVICE MARKETING MIX

PHYSICAL
PRODUCT PRICE PLACE PROMOTION PEOPLE PROCESS
EVIDENCE

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Stages of Airline Marketing
• The “4Ps” model is a powerful one, and describes much of what an
airline must do if it is to apply the principles of marketing in order to
achieve business success; but it does not give complete description
• Being a service industry, 7P’s model (Product, Price, Place, Promotion,
People, Process and Physical Evidence) is more suitable for Airlines

Stages of Airline Marketing


• A more comprehensive application of marketing for airlines consists of
the following seven interlinked stages:
1. Customer
2. Marketing Environment
3. Strategy Formulation
4. Product Design and Development
5. Pricing and Revenue Management
6. Distribution Channel Selection and Control
7. Selling, Advertising, and Promotional Policies

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Stages of Airline Marketing
1. Customer
The Airliners should gather
• knowledge about current and future customers
• Information should cover
 market size,
 demographics,
 customer requirements,
 attitudes,
 future size of the market,
 future changes in customer needs etc.

Airlines seek this information through


Market Research and Market Analysis

Stages of Airline Marketing


2. Marketing Environment
• Nature of marketing policies vary according to the constraints
and opportunities provided by the external environment
• Political, Economic, Social, Technological and environmental
(PESTE) analysis is employed for analyzing a firm’s marketing
environment
• PESTE analysis helps to identify and isolate those factors in the
external environment which will have a significant impact on
the formulation of sound marketing policies and to assess their
implications.

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Stages of Airline Marketing
3. Strategy Formulation
• Strategy is a plan of action designed to achieve a long-term or
overall aim
• Marketing inputs are essential to define marketing strategies
and policies.
• This strategic direction must identify
 the firm’s goals and objectives,
 the markets in which it will participate and
 the methods it will employ to ensure successful exploitation
of market potential.

Stages of Airline Marketing


4. Product Design and Development
• Product design is the process of creating a new product
to be sold / provided by a business to its customers
• A very broad concept; essentially it relates to the
efficient and effective generation and development of
ideas through a process that leads to new products

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Stages of Airline Marketing
4. Product Design and Development (contd.)
Ideas

Ability

Customer Requirements

Functional Specifications

Product Specifications Scope for


Scope of Design and
Product Engineering
Design Review
Development teams
team Test Market

Introduction

Evaluation

Stages of Airline Marketing


4. Product Design and Development (contd.)
Evaluate opportunities and
select the best product idea

Get feedback to refine


the product concept

Make sure the product performs


and appeals to consumers
Focus of team members
Involved in design

Design with
manufacturing in mind

Build and test


Prototypes

Ramp up production
and run market tests

Launch the product

Evaluate the product

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Stages of Airline Marketing

4. Product Design and Development (contd.)


• In a systematic approach, product designers conceptualize and
evaluate ideas, turning them into tangible inventions and
products.
• The product designer's role is to combine art, science, and
technology to create new products that other people can use.
• Their evolving role has been facilitated by digital tools that now
allow designers to communicate, visualize, analyze and actually
produce tangible ideas in a way that would have taken greater
manpower in the past.

Stages of Airline Marketing

5. Pricing and Revenue Management


Revenue Management
• Revenue management is the use of pricing to increase
the profit generated from a limited supply of assets
• Revenue management generally deploys differential
pricing based on customer segment, time of use, and
product or capacity availability to increase profits
• In airline pricing, this technique is most common

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Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


Revenue Management - Example:
• Assume the relation between Demand (D) and price (p) is
given by the equation:
D = 1,000 – 0.5 * p
• Revenue generated for different prices is tabulated below:

Price Demand Revenue


$250 875 $218,750
$500 750 $375,000
$750 625 $468,750
$1,000 500 $500,000
$1,250 375 $468,750
$1,500 250 $375,000

Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


Revenue Management is most effective when
• The value of the product varies in different market
segments (Example: airline seats)
• The product is highly perishable or product waste occurs
(Example: fashion and seasonal apparel)
• Demand has seasonal and other peaks (Example:
Function halls)

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Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)

Marketing Sales

Finance

Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


Price Strategy
• Airlines should develop, analyze, and optimize price strategies
by combining internal revenue management data and
external market data across customers, products,
geographies, and channels.
• Covers
a) Price Management
b) Deal Management
c) Contract Management
d) Incentive and Rebate Management
e) Regulatory Compliance Management

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Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


a) Price Management
• Covers management of the entire pricing life cycle from
strategy to execution,
• Serves as the pricing engine and system of record.
• Implement sophisticated pricing rules and guidelines to
enforce pricing consistency across geographies and
transactions, resulting in accurate, real-time pricing and
improved margins.

Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


b) Deal Management (DM)
• Involves development and optimization of deals and
contracts to maximize revenues by
 integrating deal and opportunity tracking,
 offer development, pricing, and contract compliance
to drive more accurate pricing, contract terms, and
performance metrics.
• DM is a step prior to Contract s and involves Sales/ Marketing people
• It is a strategy or tool that gives companies the ability to define deal
parameters – including customers history, product status, discount level and
operational constraints – that should be considered in the sales review
process, in the hope of maximizing company margins, profits, revenue and
market share

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Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


c) Contract Management (CM)
It helps to
• improve execution of pricing and incentives strategies
on contracts,
• capture and enforce pricing policies, and
• manage the entire contract life cycle from offer
development to contract compliance.

• Contract management is the process of managing contract creation,


execution and analysis to maximize operational and financial performance
at an organization, while reducing financial risk.
• Important since Organizations encounter an ever-increasing amount of
pressure to reduce costs and improve company performance

Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


d) Incentive and Rebate Management
• Covers a wide range of customer and channel
incentives, by monitoring, processing, calculating,
and approving incentive payments based on
 contract terms,
 direct and indirect sales,
 product utilization,
 customer eligibility, and
 other performance data.

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Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


e) Regulatory Compliance Management
• Airlines are required to enforce compliance with
statutory and financial regulations and their revenue
recognition policies by calculating and reporting
mandatory government prices, best price

Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)

Low
duration & flexibility

Leisure No
Travelers Demand
Sensitivity to

No Business
Offer Travelers
High

High Sensitivity to Price Low

Customer differentiation in the airline industry

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Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


Differential Pricing
 “Build fences” to prevent business travelers from
moving from the bottom-right box to the top-left box
• Require weekend stays and early booking
 The more fare classes, the more fences required

 Other factors:
• How many of each type of ticket to offer?
• How much to price for each ticket

Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


Market Segmentation

• For a specific time and flight (origin to destination),

• Different products designed and priced to target


different market segments

• Products feature different restrictions

 Non-refundable

 Available up to 21 days before the flight etc.

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Stages of Airline Marketing

5. Pricing and Revenue Management (Contd.)


Booking Control

• Allocate available seats to fare classes

• Set limits on the number of seats that can be allocated to


lower fare classes

Requires:

• Sophisticated algorithms

• Basic criterion: Equal marginal revenues in each class

Stages of Airline Marketing

6. Distribution Channel Selection and Control


• Once an overall strategy has been selected, the next
three stages should follow on logically.
• Today’s aviation industry offers airlines many possible routes
to success (and, interestingly, many different ways in which
they can fail).
• What matters is that a clear strategy is selected and pursued
steadily over the long-term
• Each possible strategic option will result in a requirement for
a linked set of Product, Pricing and Distribution decisions.

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Stages of Airline Marketing

7. Selling, Advertising, and Promotional Policies


• As we have learnt, the words “Marketing” and “Selling” are
not synonymous.
 “Marketing” describes a total philosophy for running an
entire business.
 “Selling” is the concluding stage of a correctly-applied
Marketing process, whereby customers are persuaded to
buy the firm’s products.

Stages of Airline Marketing

7. Selling, Advertising, and Promotional Policies (contd.)


Two strategies
• Marketing orientation – a strategy where firms sell something
to someone which is made available in response to a
well-researched and well-understood customer need.
• Production Orientation – a strategy where firms make what
they liked making, or found it easiest to make, and then
persuade reluctant customers through high pressure selling to
buy these less-than-ideal products

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Stages of Airline Marketing

7. Selling, Advertising, and Promotional Policies (contd.)


• Customers have a wide choice
• Persuading them to exercise this choice in a particular way
requires the use of professional skills of high order

SUCCESSFUL AIRLINES

Are those that accept that the principles of Marketing provide a


framework for all they do, and set out to apply these principles as
widely and as rigorously as possible

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End of Module-01(A)

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