Justification for Revising Marketing Strategy for Qatar Airways - Assignment Example

EXECUTIVE SUMMARY Qatar Airways has been enjoying a reputation for luxury and is the flag carrier of the of Qatar. The airline offers carrier services across different destinations across the globe. It offers different classes of service supported by excellent in-flight comfort, convenience and entertainment. The airline is continuously undergoing growth and expansion into newer destinations. With the marketing objective to enhance its brand image and brand preference in the underserved markets, an analysis of the macro- and micro-environment has been conducted. The current marketing policies have been reviewed and the report recommends involvement with the social media with a renewed focus. Allocation of marketing budgets have been recommended. Table of Contents Contents EXECUTIVE SUMMARY 1 1. Introduction 1 1.1 Background 1 1.2 Qatar Airways 1 1.3 Current Marketing and Promotion Policies 2 1.4 Report Objective 3 2. Competitors and Situation Analysis 3 2.1 Porter’s Five Forces 3 2.2 SWOT 6 2.3 Justification for revising marketing strategy 9 3. Recommended Marketing Strategy 9 3.1 Marketing Objectives 9 3.2 Segmentation 10 3.3 Targeting 10 3.4 Positioning 10 3.5 Marketing Mix variables 11 3.6 Application of social media 13 3.7 Recommended social media strategy for Qatar Airways 14 4. Marketing Budget 17 5. Contingency Plan 19 6. Conclusion 19 1. Introduction 1.1 Background Marketing is no more a mere functional discipline but for most managers it now centers on identifying and satisfying customer requirements (Hooley, Piercy & Nicouland, 2009, p3). Recent challenges to marketing functions from sources as diverse as McKinsey Consultants make it imperative that marketing reflects new development and market opportunities. The effectiveness of marketing is ascertained based on how effectively a marketer is able to reach out to customers and fulfill customer needs and expectations better than competitors. Airlines too have been competing against each other through different marketing techniques. 1.2 Qatar Airways Qatar Airways, the flag carrier of the state of Qatar, headquartered in Doha-Qatar Airways Tower, was found on 22nd November, 1993 (Qatar Airways Fact Sheet, 2012). Qatar Airways is one of the few international airlines that are able to reach over 133 destinations worldwide like Africa, Middle East, South Asia, Europe, North America, South America, Far East and Oceania with a fleet exceeding 128 aircrafts (Qatar Airways, 2013). The airline operates a hub-and-spoke network linking over 100 international destinations from its base in Doha. Offering of First Class, Business Class and Economy Class services, supported with in-flight entertainment and superb first class service for all classes, have led Qatar Airways to be ranked as one of the few airlines in the world to achieve the 5-star rating. Qatar Airways has an internet booking engine but apart from that it now allows free download of mobile app on to any smart phone for greater convenience. This mobile app enables smart check-in for flights, fare finder, flight status information, global contact information and offers numerous payment options (Qatar Airways, 2013a). They offer the lowest fare finder facility both through the website and the mobile app which displays various options across different dates. The airline also takes corporate social responsibility seriously. They are committed to give back to the community they serve – they are committed to protecting the environment and go beyond the current industry practices for fuel and environmental management. They are also actively engaged in reducing the aviation industry’s impact on global climate change of noise, local air quality, waste and non-renewable resources (Qatar Airways, 2013b). These would help improve carbon footprint. 1.3 Current Marketing and Promotion Policies Qatar Airways engages in e-commerce and e-marketing through its website. The airline sells goods and services via the internet and also uses the internet as an important channel for marketing and distribution. They are able to update their information in real time and stimulate immediate purchase transactions. Further, Qatar Airways implements the use of technology to enhance all its business functions. QA has been engaged in sponsorship of Sky News Weather through five different viewing platforms which enables the airline to reach a desirable and affluent audience via multiple touch points (Sky Media, 2013). The airline aims to continue with this sponsorship. As the world is going digital, Qatar Airways has also kept pace with the changing practices. The airline recognizes that it is not sufficient to rely on the traditional media and hence they have a strong presence on the social media. QA has been named the ‘best emerging airline in social media for 2013’ by leading aviation marketing consultancy, SimpliFlying (Press Release, 2013). The social media campaigns undertaken by QA are considered to be well thought and planned aimed at achieving multiple benefits for the airline. QA also claims to be engaging with the connected traveler through the social media platform. The airline uses 14 different social media platforms to assist, inform and engage its customers. However, the major promotion media used by the airline include advertising through the television and the print media, newsletters through travel agents and tour operators, sponsorships and exhibitions, through airline bodies and industry groups (Reji, 2013). While the newsletter is also available through their website, it can be made available to a higher audience through the social media. 1.4 Report Objective However, with the ever-changing consumer dynamics and the turbulent business environment it has become essential to evaluate the current marketing policies and incorporate changes in these policies if required. Thus, an evaluation of the macro- and micro-environment would help recommend improvements to the existing marketing policies. These include a SWOT and PESTLE analysis of the airline sector in which Qatar Airways operates. 2. Competitors and Situation Analysis Several factors and variables can impact organizational performance particularly in a business environment full of uncertainty (Kotter & Schlesinger, 1991). To devise an effective marketing strategy, it is imperative to understand industry competition and profitability and this requires analyzing the industry’s underlying structure in terms of the five forces that shape competition (Porter, 2008). Porter’s five forces that shape industry competition have been analyzed below. 2.1 Porter’s Five Forces Threat of New entrants Threat from new entrants is low in the region because this is a capital intensive industry and besides, consolidation is taking place in the industry. Besides, QA being a state supported carrier, government regulations could hinder entry of new carriers. Moreover, with the three major carriers in the region focusing on aircraft and route additions, over-saturation may deter any new airline from making an entry. This is because the existing companies have high brand value and enjoy high customer loyally. Bargaining power of Suppliers This is low for QA as it has outsourced repair and maintenance of non-flight critical activities to CHEP Aerospace Solutions (Grahame-Clarke, 2012). Since the aircrafts are owned by the airline and not leased in, the bargaining power of suppliers is low. QA has outsourced other functions also such as accounting and recovery services, which gives them access to industry standards and best practices (Nair, 2005). There are no charges in switching costs and hence the bargaining power of suppliers is low as far as such services are concerned. However, the airline has placed orders for aircrafts and there are just two suppliers globally – Boeing and Airbus, which places bargaining power in the hands of these suppliers. These limited suppliers have a control over the market. Bargaining power of buyers Buyers or the consumers in the airline sector comprises of the customers. QA offers the same sectors as other airlines in the region. The only differentiation is its focus on narrow bodied aircrafts that enables the airline to serve thinner sectors. To this extent the buyers may not find an equivalent product but overall consumers face few switching costs in changing the airline. As of now, QA offers excellent service and that makes it the preferred airline but consumers are price sensitive and QA needs to be flexible on its pricing strategy. The bargaining power of the intermediate customers or the travel agents or tour operators is low as QA uses the web and mobile apps for extending its reach to the end customers directly. However, competitors approach the same agents and hence QA needs to have some exclusive programs established with travel agents and tour operators. Competitive Rivalry The two main competitors are Etihad and Emirates in the region and competition is high among the carriers. They are equal in size and power, fly common routes and compete against fares. They have invested in airport expansions and in offering premium services (Air Trends, 2011). All airlines have been using technology to enhance their business and attract customers through service enhancement. The exit barriers are high in the airline industry and rivals are highly committed to the business Therefore, competitive rivalry is high as far as product is concerned. Threat from substitutes Threat from substitutes is high as low-cost carriers are emerging in the region. This can severely impact airline profitability because switching costs to the substitute is low for the customers. Other well established brands operating in the region include British Airways, Lufthansa and KLM, apart from the Gulf carriers. Analysis of Five Forces While the airline faces no threat from new entrants or suppliers, the bargaining power of customers is high. Customers face few switching costs in changing airlines so QA must have a strategy to lock-in the customer by way of loyalty bonus points or air miles that can be used for subsequent travel. Threat from substitutes is also high and hence it is hence essential that QA differentiates itself from the industry through product performance and marketing, without which it risks in terms of profitability and growth potential. 2.2 SWOT Components of a marketing plan include an analysis of the company’s strengths, weakness, opportunities and threat (SWOT), market segmentation based on targeted marketing, positioning and marketing mix. However, SWOT is an important foundational element of the marketing plan as it can help increase market share based on an effective marketing strategy. Strengths QA enjoys five star ranking and has the youngest and most modern fleet, and is the fastest growing airlines in the world, apart from being among the top ten flight entertainment providers (Nair, 2005). QA serves each of its destinations with the appropriate aircraft type. Thirty percent of QA flights are served by narrow bodies which enable the carrier to serve thinner routes, thereby giving the airline a competitive edge since competitors such as Emirates focuses on wide-bodied aircrafts while Etihad on a combination of narrow and wide-bodied aircrafts (UBM Aviation, 2010). Fifty percent of the airline is owned by the state and hence the airline is assured to strong financial support for growth and expansion. QA has projected addition of 12 new destinations every year for the next five years (Cornock, 2013). Offers exclusive safety, security and enhanced customer service Engages in intensive marketing campaigns to sustain its brand image QA is the only Gulf airline to have joined a global airline alliance – oneworld Alliance, which enables its customers to benefit from almost a thousand airports in over 150 countries with 14,000 daily departures (Press Release, 2013). It has also been named the Best Airline in the Middle East for the seventh year in a row. Weakness Some European countries, having a protectionist attitude, do not permit the airline to operate in their countries as the airline is from the Gulf region. Moreover, the airline relies heavily on international onward moving traffic and it has very limited domestic traffic (Reji, 2013). QA needs to work more on brand awareness at the global level. Flight prices are higher than competitive airlines in the region. QA adopts the values of the State of Qatar, which leaves a negative perception on the global customers. Qatar Airways ranked second in the leisure travel market (22% of the market share against Emirates Airlines with 49 percent market share). It also does not appear to meet customer expectations, according to a comparative study on positioning strategies of selected airlines from the Middle East (Surovitskikh & Lubbe, 2008). Opportunities Expansion into areas of high population such as East Asia, which could help overcome the threat of market saturation in the region. The tourism boom in Qatar can help the airline achieve high sales. QA is also contemplating setting up a low-cost carrier because of competition from regional budget carriers (Glass, 2008). QA’s tying up with OnAir to provide in-flight mobile phones could help boost sales and enhanced customer experience (Travel Daily Media, 2013). National carriers form a link between the State and the world and hence QA has the opportunity to build an international corporate image Partnership and alliances with other international airlines will help achieve a global brand image More brand building and marketing can increase brand recall Threats QA faces stiff competition from carriers in the region such as Etihad and Emirates, both of which have similarly ambitious growth plans, evident from their aircraft orders (Cornock, 2013). This is likely to lead to over-saturating the marketplace, which may restrict the ability of QA to grow and expand in the region. Unstable and soaring fuel prices leads to hedging by many carriers which pose a threat, in addition to technology applied by many airlines. Deregulation has eased the way which will allow easy duplication of services. New market entrants may penetrate into the market share of Qatar Airlines. The airline is also threatened by its rigid pricing structure. Analysis of SWOT Qatar Airways has several advantages over its competitors such as focus on emerging markets and use of narrow bodied aircrafts enabling it to operate in thinner sectors. It is the only Gulf carrier to have global alliance. However, it relies on international onward moving traffic and faces still competition from the regional carriers. 2.3 Justification for revising marketing strategy An analysis of the five forces that shape the industry and the situational analysis reveal that Qatar Airways faces tough competition in the sector. While it has several awards to its credit, certain weaknesses could hinder future growth. The airline needs to step up its marketing strategy and take advantage of the changes in technology. The image that QA currently holds includes world class, luxurious, hospitable, efficient, quality-oriented, and cultural diverse (Reji, 2013).The key points of differentiation could be product performance, advertising, website and e-commerce, on-line reservations and on-board services. This report focuses on recommending changes to the marketing strategy. QA has been awarded as the ‘best emerging airline in the social media’ which does not imply that it has made the best use of the social media. There are instances from other airlines which QA can emulate to enhance its competitive position. 3. Recommended Marketing Strategy The growth strategy adopted by QA differs from its competitors – while it may remain smaller in total size than its competitors, its objectives is to overtake the rivals in the number of destinations served (Mayasandra, 2011). The airline’s mission is to serve the underserved markets where others dare not venture into. Based on this, the marketing objectives have been defined. 3.1 Marketing Objectives For Qatar Airways it has become essential to build a strong brand identity globally particularly in emerging economies. Therefore, the marketing objective of QA should be to create awareness and preference in these economies through co-creation of brand stories with active consumers over the next five years. In addition, the objective is to raise awareness of Qatar Airways as a premium 5-star airline. 3.2 Segmentation Latent class segmentation should be applied where customers are segmented based on their perception of the brand (Bond & Morris, 2003). Consumers being conscious travelers know the value of research they are entitled to. Segmentation based on their perception gives a better cluster solution which is more robust than segmentation based on attitudes. Consumer expectations are not homogenous and expectations influence perceived service quality (Diaz-Martin, 2000). Hence segmentation based on expectations could help the airline develop differentiated marketing strategy and reap benefits. 3.3 Targeting Targeting implies renouncing a large number of potential customers because the focus is not in selling seats but focus is no satisfying customer needs and wants. The airline should focus on elite customers from emerging markets because this is where it needs to build a strong brand image. At the same time, the older customers cannot be ignored and hence strategy to keep the loyal customers also has to be in place. Targeting is essential to decide on the advertising budget and investment in promotional activities. 3.4 Positioning Positioning strategy is adopted to ensure airlines differentiate themselves from competitors and are positively perceived by their potential and current passengers. The elite customers or the high-priced segment is sensitive and conscious of the brand image that the airline carries. The very purpose of alliance with Oneworld Alliance is to serve the niche markets so that the customers can connect from the commercial airlines network to remote destinations, and onto their private jet service (MEBA, 2012). Based on the above segmentation, targeting and positioning, the marketing mix elements for Qatar Airways has been proposed. 3.5 Marketing Mix variables Qatar Airways should integrate its marketing communication across different platforms which will help manage customer relationships to drive brand value primarily through communication efforts (Dyer, 2011). This is a data-driven approach and focuses on identifying consumer insight aimed at developing the right strategy. The right strategy would include the right combination of online and offline media channels for a stronger consumer brand relationship. Merely having a dedicated social media department does not serve the purpose. Integrated marketing replaces the traditional 4Ps by 4C’s – consumer, cost, convenience and communication. Consumer not Product In the airlines sector the product (flight) is the same in most cases. Most airlines offer premium on-board service, on-time flights and good connectivity. Hence product differentiation is difficult. Airlines can enhance their services by understanding consumer needs and wants. Thus the product characteristics must match what the consumer wants to buy. In this sector, consumer would like an enhanced “buying experience” (Dyer, 2011). Since the focus on this report is to create brand awareness and preference in emerging economies, the product for this market should also be based on customer needs. This may require prior market research to gain insight. Cost not Price The price of the flight ticket is only part of the cost incurred by the consumer. He may incur other costs in terms of booking costs, travel costs to drive somewhere. Thus, bundling airport transfers on select routes where transportation is scarce, should be adopted as the strategy. On international travel usually booking charges are waived, and this is highly recommended for Qatar Airways as well. Convenience not Place The consumer seeks convenience in buying, which should reflect in different stages of the buying experience. For instance, the consumer should experience ease is accessing the buying portal, transaction service time, hours of availability and physical or virtual location. Thus, information, price calculators, destination planning and other relevant information should be available through the corporate website, through social media pages and even through mobile apps, which is the most convenient for the elite customers who decide on their travel in minutes. All this add to the convenience that customers seek. Communication not Promotion Promotional generally covers advertising, promotion, personal selling and publicity. Qatar Airways has been engaging in extensive online advertising campaigns. It receives publicity through sports and other event sponsorships. However, what is required is an integrated communication strategy entails different media working together to communicate a unified message to engage customers. These would include non-traditional messages and the same message is reached to the customer through different media throughout the day reinforcing the previous message. Thus, communication messages through different media should include online advertising campaigns, search engine optimization, global television campaigns and sponsored advertisements on search engines such as Google. Search engine optimization is an important part of their online marketing strategy. In alliance with external partners and service providers, QA website can also include destination guides which can be very useful for potential consumers when they for information on places they wish to visit. In recent times, there has been a shift away from the traditional media and towards the digital media. Social media is a cost-effective but powerful means of collaborating, communicating and keeping in touch with all the stakeholders. 3.6 Application of social media The focus of airlines in recent times has been on the use of social media to communicate integrated messages. The social media has increasingly been adopted by airlines following the failed Christmas day attack in 2009 on Delta Airlines (Kirby, 2010). While all airlines too extra steps to communicate security measures through the traditional media, several airlines went beyond the traditional media. As social networking methods enable interactivity not possible through the traditional channels, airlines started communicating through platforms such as Facebook and Twitter. Social media allows airlines to respond to the concerns and queries of customers in real time. Social media is also used by airlines to create awareness, to reinforce preference, to gain consumer insight, to deliver customer service, to track operation al performance or simply to sell a product (Kirby, 2010). QA is active on 14 social media platforms but it needs to revisit its social media initiatives. Its focus is more on Facebook through which it announces sponsorship events organizes raffle. QA sponsored FC Barcelona Asia Tour by launching a contest for fans on Facebook to celebrate the airline’s support for the team’s visit to Bangkok, Thailand, Kuala Lumpur and Malaysia. QA had run the competition on this platform from July1 to July 31 and this fetched the airline hundreds and thousands of new fans (Qatar Chronicle, 2013). However, merely having a presence on the social media is not enough. Adoption of social media requires a strategy formulation. Merely using the social media for customer support and service is not sufficient; it should be simultaneously used to promote the brand. The airline must know how to use the social media than merely having presence on several social media platforms. This is because social media has led to a dynamic shift in how people interact and communicate. Social media is an online platform that facilitates content sharing, collaboration and interactions (Coyle, Smith and Platt, 2012), a platform which enables users to freely send, receive and process content for use by others (Aula, 2010). Companies use social media extensively to build brand awareness and brand equity (Palmer & Koenig-Lewis, 2009). Social media offers the opportunity to do in-depth research at virtually no cost (Falkowl, 2011). 3.7 Recommended social media strategy for Qatar Airways Social media strategy for QA has been defined based on attracting elite customers from the underserved markets, including the emerging economies. Social media is a powerful, yet very cost-effective method to maintain customer relationships and enable the customers to have more active engagement with the brand. Since the marketing objective is to create awareness and preference in emerging economies, the social media strategy has to be formulated in advance which includes knowing the target audience, their media consumption habits and their preferences. Customer Engagement Customer engagement can be enhanced through starting a program to connect with the customers. For instance, once the passengers check into their QA flight and share the fact on Twitter, they should be rewarded with gifts after verification. The customers from the emerging economies should be encouraged to share their photos on Flickr which would enable relationship building among customers. A discussion board on Flickr can be a very effective method to generate interest in the airline and its destinations. QA floats contests on social networking sites but these would not be attractive to the elite customers. Personalized customer service QA does respond to queries on Facebook but there is no signature except for the name of the airline. Team members handling Facebook responsibility should sign in their names when they respond. As of now, QA signs in and responds on Facebook as “Qatar Airways”. Personalized audience experience is essential to make communication effective, promote trust in customer relationship. Since QA aims to enhance its services in emerging nations, the Facebook team members should be allotted duties over specific airport operation groups. The team members should be able to converse with fresh and relevant travel-related content with the customers of the region. Collaborative social media strategy Collaborative social media strategy implies that avid travelers, brand fanatics, bloggers, employees and corporate customers must all be involved (Brown, 2011). In addition, the offline media partners should also be engaged in social media strategy. Internal collaboration would include investor relations and legal department as well. To involve employees, QA should undertake special training programs on social media and content creation. They need particular training in managing customer relationships. Social media and customer relationship teams should also be integrated. This strategy would send out integrated messages to existing and potential customers and ensure no distortion takes place. To reinforce collaboration, QA should start its own blog, where customers are encouraged to be involved. This blog should be the hub for all news, videos, and photos concerning all marketing activities, destinations, promotional offers, special offers for bloggers. From this blog, QA should provide links to different social media platforms such as Facebook, Twitter and YouTube. This makes communication integrated and thereby promotes a relationship of trust between the airline and its customers as well as employees. QA is adding new destinations frequently and this requires awareness. Creating a ‘micro site’ whenever a new destination is launched, makes it easier to create awareness. While the destination should be blogged about on the corporate blog, a link to the ‘micro site’ should be provided from the blog. Employees should be encouraged to write on the official blog about their own experiences in employment with the airline. When they narrate positive experiences at QA, about their life, their colleagues and the work environment, it serves to enhance the brand image of the airline. To promote such behavior, employees that engage in blogging should be rewarded. However, while entering the blogsphere, QA should be cautious that astrosurfing should not be employed where the airline could create an artificial grass root buzz fir its products (Wyld, 2008). When this is discovered it could result in negative publicity harming the brand and damaging corporate credibility. Crisis management through social media Managing the brand is not limited to understanding consumer needs and wants or responding to their queries and concerns. It also entails managing social media crises particularly when negative comments escalate into a crisis that threatens the brand (Hennig-Thurau, Hofacker & Bloching, 2013). It is very convenient for customers to articulate negative experiences through social media but the impact would depend upon how the airline is able to handle the crisis. Once a crisis develops, effective strategic reaction requires an integration of brand management and individual customer management. Thus, if flights get disrupted due to circumstances beyond control, as the Ash cloud affected travel across Europe in 2010 (De, 2011), it is imperative that QA should be prepared to handle such crisis. QA should be able to provide responses to customer queries in real-time and enable re-booking through social media. Thus, while the social media has several advantages, it has its pitfalls too. 4. Marketing Budget Marketing budgets should never be curtailed during downturns although most organizations make this mistake. In fact it is during recession that it makes more sense to boost marketing and stimulate demand (Real, 2009). Long-term success lies in building brand awareness and marketing should be the tool used to attract passengers. Downturn should be used as an opportunity to grow and expand the brand presence in underserved markets. Global Television campaigns are year-on-year rolling campaigns and hence cannot be curtailed. Forty percent of the overall marketing budget has to be allocated to this. Online advertising campaign is critical to the stated marketing objectives and thus 15 percent should be dedicated for these campaigns. Search engine optimization is not very impressive given the shift towards social media. Hence not more than 5% should be allocated for this. Sponsored advertisements on search engines While sponsored advertisements on search engines such as Google get just 25 percent of the clicks, but Google is an important source for information for customer and hence adequate budget has to be allocated for sponsored advertisements on search engines. This should not exceed five percent. Sports events sponsorships Sports sponsorship is an important part of the existing strategy of QA and they have been using the social media for this. This should be retained but not through floating of contests but new strategies of customer engagement should be employed. Fifteen percent of the marketing budget should be allocated for this. Social Media Social Media is a new challenge and although QA has been doing social media, their strategy needs to be revised and investments made. However, social media is cost effective and much can be achieved with very little investments. Thus 20% of the overall marketing budget should help design a very effective social media campaign. Summary of Marketing Budget Allocation Global Television Campaigns 40% Online Advertising Campaign 15% Search Engine Optimization 5% Sponsored advertisements on search engines 5% Sports events sponsorships 15% Social Media 20% 5. Contingency Plan It is expected that with special focus on a planned social media strategy the airline would be able to achieve its objectives. While it already has presence on the social media, it needs to be refined. More aggressive social media campaigns could lead to brand enhancement and awareness of the airline in the emerging economies. This will likely portray QA as a luxury airline and elevate brand perception. Contingency plan should include reliance on the print media for certain emerging nations where internet proliferation has yet not occurred. 6. Conclusion With the highly competitive business sectors, the airline sector too, has been impacted. This has led airlines to shift away from traditional marketing techniques and use the digital methods to step up marketing. Qatar Airways is a 5-star airline and offers premium first class and business class service across the globe. It adds two new destinations every year and is currently pursuing serving the underserved markets with a focus on emerging economies. Its competitive position has been ascertained in this report through competitor and situation analysis. These analyses have formed the basis of the recommended marketing strategy including segmentation, targeting and positioning strategies. With the marketing objective to create brand awareness and brand preference in underserved markets and emerging economies, the report recommends a renewed focus on social media strategy which should personalize the buyer experience. 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