Turkish Airlines Current 4Ps Marketing Policies - Essay Example

?Turkish Airlines is the official carrier of Turkey and was established in Ankara on 20 May 1933 (Turkish Airlines, 1996 . The airline was formed under the directives of Ministry of Defense of Turkey and initially served the primary purpose of being a national carrier (Turkish Airlines, 1996-2012). It wasn’t until 1955 when the airline was given the label of “Turkish Airlines” by the state (Turkish Airlines, 1996-2012). The airline, initially owned by the government, was privatized through the sale of 25% of its shares in 2005 (Turkish Airlines, 1996-2012). As of today, almost 51% of its shares are owned by the public, whereas, the remaining are retained by the government. Over the years the company has flourished to the extent that, in 2008 it was named as one of the fastest growing European carriers in terms of traffic and seating capacity (Turkish Airlines, 1996-2012). At a time when the global recession caused other European airlines to cut down their operations, Turkish Airlines managed to demonstrate steady growth in terms of its passenger traffic and seating capacity. The company has over 127 carriers in its fleet and flies to over 145 international and 41 local destinations (Turkish Airlines, 1996-2012). Istanbul is primarily considered to be its gateway to various Middle East destinations. The company’s overall business strategy revolves around expansion and development of its operations. As part of recognition for its strategic efforts, it has been labeled as a four-star airline (Skytrax, 1999-2011). The company, therefore, is now eyeing the five-star segment and is enhancing the quality and service of its carriers in order to enhance customer experience. An essential part of its overall strategy, therefore, is inevitably the marketing strategy. Holistically, the company is aiming at creating greater brand awareness amongst its target market and to position itself differently from competitors in terms of reliability, safety and quality. The company is targeting the attainment of crucial values such as customer safety and quality service as well as providing value for money. Therefore, the focus of this airline is to provide low cost fares with unmatched quality of customer experience. The 4P’s for the company involve the Product (airline service), Price (fares), Promotion and Place (destinations in this case). As far as the product is concerned, the company has targeted its airline service to a wide range of segments. The company’s primary target market is the leisure customers who make up a vast chunk of its overall passengers. The secondary market is the corporate segment, comprising of business executives and corporate individuals. Such customers require corporate discounts (that are perhaps endowed to them by their organizations) since they travel is high volumes. Turkish Airlines has kept this trend in mind and has offered quantity discounts in markets where a large number of multinationals are located. There are several MNCs in Europe such as Shell, Delloit, Deutsche Bank etc that have high volume of business travelers. The company derives a major chunk of its revenues from the “leisure” segment, as opposed to the business segment. According to a research, 54% of the company’s market share is derived by “leisure” segment, whereas, 32% is derived from “corporate” segment. A common terminology used in aviation is that of the load factor which is described as the relation between the aircraft’s lift capability to its weight. Turkish Airline’s load factor has declined over the years, from a rate of 71.5% to 71% (Centre for Aviation, 2010). The company is now taking steps to ensure that its load factor increases, especially during the peak summer period. An efficient load factor of approximately 77% is ideally looked upon as a healthy sign since it shows that the weight is being efficiently utilized through passenger traffic. A crucial aspect of Turkish Airline’s marketing policies has been a focus on Turkish tourism, of which Istanbul is a highly profitable part. Istanbul has been the hub of majority of business and other travel into Turkey, primarily because it is located between two continents: Asia and Europe (Oxford Business Group, 2012). Hence, Istanbul provides an excellent gateway and connectivity between both the continents. A vast chunk of economic activity is attached to Istanbul as it is the hub of majority of land and sea routes. The city’s economic activity further strengthened when new markets flourished in the 1980s in the city (Pamuk & Freely, 2006). It has been estimated that Istanbul employs approximately 20% of Turkey’s labor force and contributes 38% towards Turkey’s industrial activity (BizTradeShows, 2012). The fact that Istanbul is a popular tourist destination is facilitated by various support systems for tourists such as five star hotels and business activities for professionals. More importantly, Istanbul has been the hub of major international conferences of leading global associations, thus attracting thousands of foreign tourists. To add to that, Istanbul is home to offices of various MNCs which further attracts business travelers. Furthermore, the city has had a rich, cultural heritage due to which it was labeled as the “European Cultural Capital in 2010” (Bedding, 2010). This has opened up new venues for Turkish Airlines and the airline has already capitalized on this opportunity to become the ambassador for Istanbul which is reflected in its advertisements as well. An interesting fact related to Istanbul is that it attracts a lot of passengers in transit. There was a 6.4% increase in the volume of in-transit passengers in 2009 compared to 2008 (ACI Europe, 2011). Turkish Airlines has captured this opportunity by attracting these passengers through their exceptional quality of service and in-flight experience such that these passengers prefer flying with Turkish Airlines for their future travel. As far as the premium customers segment is concerned, Turkish Airlines has constantly embraced promotional tools such as free offers, enhanced in-flight experience and world’s best cuisine to capture the hearts of these customers. The company has therefore promoted value for money; in other words, premium quality service and experience at a price lower than its competitors. A critical aspect of marketing in airlines is the travel experience with the airline. Turkish Airlines is aware of the fact that a single unpleasant experience with the airline can divert customers to its competitors as majority of the airlines have positioned themselves very closely in terms of airfares. Therefore, the differentiating factor for Turkish Airlines is the various aspects of the product (airline) itself, which includes the seats, comfort, space, in-flight entertainment, as well as the add-ons such as the chauffeur services and hotel stays. Interestingly, Turkish Airlines has capitalized on the strengths of its competitors when it comes to effective marketing of its service. It has been observed that business in natural reserves such as oil and gas has flourished in Tashkent, Baku, Tehran, and Almaty to name a few (Turkish Airlines, 2010). Europeans who are doing business in this are often compelled to fly to these places. The company’s major competitor in Europe, British Airways, does not fly to any of these places. Other airlines such as Lufthansa and BMI provide narrow coverage to only a few areas. The company has effectively captured this business segment by featuring celebrities (including sports celebrities) in their ads which reaps its desired results with those businesspeople who are stuck in their busy routine and who want a comfortable journey back home. They are confronted with the option of either using Turkish Airlines or using a local carrier such as Iran Air etc. It is not surprising, therefore, that in the midst of competitors who poorly differentiate themselves, the celebrities used by Turkish Airlines (be it Kevin Coster or FC Barcelona) attract many customers. Turkish Airlines started the use of celebrities in its advertisements ever since its major tragic crash in 2009 or Flight 1951 (Youlten, 2010). Hence, the company used expensive celebrity endorsements in order to cover up its safety lapses over the years. A deeper look into Turkish Airline’s marketing in India reveals that the company pursued an aggressive strategy in this region. The airline offers a Turkish Corporate Club, which is an add-on service that comes with the basic service (the flight), that specifically caters to the needs of the business class. Members of this club enjoy advantages such as discounted tickets, allowance for additional luggage, earning reward points, benefits of using special check-in counters for business people at various international airports as well as flights that are free from penalty (Turkish Airlines, 1996-2012). Apart from this facility, Turkish Airlines has also come up with special reduction in airfares for students who wish to travel to Europe and U.S. As part of its marketing strategy in India, the company has joined hands with PVR cinemas in India whereby the airline offers two tickets free of cost to young travelers (India PRwire, 2011). Another significant aspect of the airline’s marketing strategy has been the introduction of new destinations in its existing portfolio in 2011. Turkish Airlines offered approximately 11 new international destinations in the same year which increased its total number of destinations to 180 (Youlten, 2010). Most importantly, however, is the fact that the airline industry in Europe was largely regulated at the time Turkish Airlines was created. Thus, a major barrier to entry was the government itself. However, in the aftermath of the oil price surge in 1970s, the industry subsequently became deregulated. This led to the entry of a plethora of airlines, largely competing on the basis of price and no-frills. There was no control over airfares and airlines saw this as an opportunity to enter into a price war. Also, the chances of customers switching amongst airlines (as mentioned earlier) were significantly increased. In view of this situation, Turkish Airlines had to come up with the strategy of introducing frequent flyer options since customer retention was the main objective. Under this program, tickets free of cost were issued to those who flew a certain number of miles (Turkish Airlines, 1996-2012). Therefore, the options available to customers increased, while at the same time airfares were significantly reduced which resulted in high switching costs for travelers. Turkish Airline’s major competitor in Turkey today is Pegasus which constitutes a share of 18% in the market, as opposed to Turkish Airline’s share of 54% (Caskurlu, 2011). Pegasus can be thought of as a market challenger as it checks Turkish Airlines closely and assesses the latter’s marketing strategies in order to find loopholes and build upon them. Pegasus’s marketing strategy is based on a no-frills concept and its tactics are far more aggressive in nature than those of other competitors. Thus, Pegasus offers rock bottom fares but without in-flight services (Caskurlu, 2011). On the other hand, Turkish Airlines has positioned itself as an airline known for both quality and low prices. Not only does it offer in-flight entertainment but is well known for its superior quality in-flight catering. Consequently, Turkish Airline’s fares are slightly higher than those of its competitors; however, it justifies these high fares by offering superior quality of service. Turkish Airlines, therefore, has differentiated itself significantly from its competitors. The products offered by the airline’s competitors are also highly differentiated. For instance, Atlas Jet serves the regions of Europe-Antalya with the aim to offer leisure to price conscious customers (Caskurlu, 2011). The target market for Pegasus, on the other hand, comprises of the Turks as well as citizens of Central and Northern Europe who intend to fly to Istanbul (Caskurlu, 2011). Pegasus and Atlas Jet, as part of their aggressive marketing strategy, provide flights during time slots that Turkish Airlines does not offer (Caskurlu, 2011). As far as pricing is concerned, Turkish Airlines has to comply with certain regulations within the Turkish Airline industry, of which a critical regulation is that which makes it mandatory for airlines to use 4 bands of prices for each flight (Caskurlu, 2011). The base fare is based on promotional offers or discounts which serves as an incentive for travelers to inquire from the sales department for further information (Caskurlu, 2011). It was important to note, however, that the above policies are not free from flaws. The company used its celebrity endorsements at a time when its reputation was endangered by accidents and lack of safety of its passengers. According to industry experts, Turkish Airlines has a spotty safety track record despite its position as being Europe’s number 3 carrier. It has witnessed 3 major deadly accidents. This is due to internal management culture that lends itself to safety hazards. According to subsequent investigation into the issue, the pilots were blamed for the accidents as they lacked sufficient knowledge regarding automation mechanism in aircrafts. This is an underlying management and training issue since the company does not invest enough resources and effort into developing an understanding of collision threats amongst pilots. Turkish Airlines needs to go beyond the traditional understanding of engine failures in its training activities- it needs to holistically consider other potential threats as well. Its aggressive growth strategy is in a way a self-defeating strategy because, in order to quickly fill the cockpits with pilots, the company is bypassing the required training for its crew (Pazstor, 2011). Today’s young pilots (which the company boasts of having) shall become tomorrow’s captains. However, if they remain inexperienced, chances are that failures shall occur time and again resulting in deadly accidents (Pazstor, 2011). Using marketing campaigns to cover up for flaws arising in the area of passengers’ safety is a point worthy of criticism. Another significant issue is that of the management psyche. The company has not changed or attempted to improve upon its strategies and training procedures in the aftermath of the deadly accidents in the Airline’s history (Pazstor, 2011). This reflects the fundamental problem of management in the company; that of not improving upon one’s failures. Therefore, there is a fundamental problem with the service (product) itself in this case which overshadows the other aspects of the marketing strategy since the core product is the foundation for the other Ps. As far as the pricing strategy is concerned, the company has effectively priced its tickets and has attempted to obtain a unique position compared to its competitors who are playing in almost the same segment. Turkish Airlines, therefore, has adopted effective segmentation strategy and has captured majority of travel to and via Istanbul, which is the heart of Turkey’s tourism. The company’s successful marketing strategy is evident in the fact that its ratings are constantly improving and the airline is now viewed as a value-for-money airline. This in itself in an accomplishment; the airline has been able to position itself effectively via the 4Ps mentioned above. However, a major threat to its success is intense competition in the European Airline industry. Ever since the demise of government regulation, there have been many new entrants in the airline industry in Europe, which simply means that Turkish Airlines cannot sit back; it needs to constantly innovate to sustain its competitive edge in the market. A significant component of this sustainability shall be constant innovation in its marketing strategy. However, the most crucial aspect of any brand is the promise that it makes. In the case of the airline industry, all players have an implied promise in terms of customer safety and reliability. To this end, Turkish Airlines does not have a very strong track record which means that no matter how successful its marketing efforts are, it is not offering what it is promising which seriously puts all its marketing tactics on a backburner. To conclude, Turkish Airlines does have a very promising future, especially since the company has massively restructured and repositioned itself in the pursuit of an aggressive growth strategy. 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