Principles of Marketing at Ryanair - Assignment Example

Ryanair Principles of Marketing 1. Briefly explain the ‘Augmented product’ model and analyze the approaches to building brand and customer loyalty of Ryanair. Ans. There are three levels of product in total that include: The Core Product, the Actual Product and the Augmented Product. The non-physical part of the product is called the Augmented Product. There is lots of added value included in it, for which one may or may not give a premium. So when one buys a car element of the augmented product would be the warranty, the other one would be customer service support offered by the car's manufacture and any after-sales service offered as well (Marketingteacher.com, 2009). In the case of Ryanair the actual product is the airline journey and the augmented product is the food bought during the flight. Thus the Augmented product offers added consumer benefits and services, warranty and customer training. The augmented product can be critical to success of the core product. Ryanair is a low cost carrier since 1985 and lower prices, functional benefits and schedules were at the crux of its appeal. It was just about getting from one point to another as rapidly and efficiently as possible at lowest possible cost. But still Ryanair became brand although that wasn’t their intention at the offset. On the basis of customer perceptions regarding monetary value and reliability of service, the functional benefits of price and schedule are evaluated. So it is something beyond the simplicity of a cheap ticket. The low prices and reliability is to build trust, loyalty, and confidence in customers. Ryanair has recently announced intentions to open a chain of Ryanair hotels. It is possible that in the future the cost of the ticket will be free, and profits will be generated from all the other brand extensions that it has invested in. Ryanair is building its brand from the proof points of low cost, no frills and effective scheduling. When comparing Ryanair and easy Jet, the former has been able to gain the edge in terms of a truly price driven benefit. THE IRISH government is facing a call to investigate the safety of Ryanair. The International Transport Workers Federation claims the no-frills carrier's corporate culture "does not make safety its first and overriding priority" (Chris, 2007). This shows that Ryanair is not really concerned about its customers. Ryanair is best known as a low-cost operator, but its performance as an airline in terms of departure and arrival times is also a feature of the business (John, 2008). The job of brand for low cost carriers is significant but these brands must work at a functional level and support all vital emotional connection between consumer and brand. This makes building customer loyalty challenging and so we see consumers switching carriers on the basis of price. There is an opportunity for airline brands to add more dimensions to the value for money concept as price will always be at the core for airlines. This in turn increases the bond with consumers. Ryanair can do brand extension and increase differentiation. Thus the purpose of brand is significant in the airline industry and there is still room for airlines to think more like brands and less like operations. Ryanair has to have a deeper understanding of the influence of its intangible assets. By recognizing its potential strength, it can break out of the clouds and truly fly high (Lizzy, 2007). 2. Analyze and evaluate the effectiveness of target marketing and market positioning of Ryanair using informing frameworks covered on your marketing course. Ans. Ryanair has implemented a different marketing strategy to make the company survive in the competition and to be able to gain competitive position in the airline market.  In order to position itself in the marketplace Ryanair constantly reduces its costs to offer the lowest fares possible and remain profitable.  It offers minimum service standards and low prices for short distant flights.  Ryanair’s goal is to meet the needs of travelling at the lowest price.  Ryanair prioritizes features like frequent departures, advance reservations, baggage handling and consistent on-time services which remain important to its target market although it has eliminated extras like in-flight meals, advanced seat assignment and free drinks. Ryanair uses a cost reduction strategy to achieve its goal of having a competitive position in the airline industry. Its cost reduction strategy depends on fleet commonality, contracting out services, airport charges and route policies, managed staff costs and productivity and managed marketing costs. Ryanair has used only one kind of plane which limits the cost for staff training, maintenance services and facility of obtaining spares. Ryanair has been able to gain capacity and reduces the average age of fleet which means savings on maintenance costs by using Boeing 737. Aircraft handling, ticketing, handling and other functions are outsourced by Ryanair to third parties. To reduce their expenses, engine and heavy maintenance are also contracted out and the staff of Ryanair carries out routine maintenance.  Ryanair uses airports, where the traffic is not jammed and fee is lower. This enables it in getting favourable access fees. Ryanair has no cost related to connecting passengers as it provides only a point-to-point service.  The company pays special focus to on-time departures because it results in maximizing aircraft utilization. Ryanair pays its staff on reasonable salary but has a performance related pay structure which urges employees to maximize the number of sectors flown daily. As a result it controls productivity and keeps staff costs down.  Ryanair advertises mostly on its website with its logo “Ryanair.com, the Low-Fare Airline”. It is also advertised in national and regional Irish and UK newspaper, on radio and on television. Other than cost-reduction strategy, Ryanair used Porter’s generic strategies to position itself in the marketplace that include cost leadership, differentiation strategy and focused differentiation. First, Ryanair offers the lowest cost of fare than its competitors. It has also become a focuser because it concentrated on a narrow customer segment which include Irish and UK business people or travellers who could not afford to fly major airlines. The company’s major goal is to provide a no frills service with low fares intended to stimulate demand. Currently Ryanair has shifted generic strategies to become more of a cost-leader not only in terms of passenger volumes but also the lowest cost operator in the airline industry. It has shifted from a full service conventional airline to the first European low fares, no frills carrier. Ryanair is situated somewhere between a cost leader and a focuser although we can consider it was closer to a focuser. The major problem with such niche strategies is that they involve many risks; the most common is that the niche can get saturated and competitors invade the segment. It did not have to distinctly define its strategic position as Ryanair was the only European no frills airline. It used mix focus and cost leadership and was confused about which one it wanted. But a decision had to be made as competitors started blooming. Michael O'Leary, the CEO decided to pursue cost leadership. It was a successful strategy and by 1997 Ryanair was floated on the Dublin Stock Exchange and on NASDAQ. A short time ago, no frills Irish carrier Ryanair was valued at more than twice the figure accorded to BA. This represents an astonishing achievement, considering a decade ago the airline narrowly escaped bankruptcy itself. But those days are far, far away for combative CEO Michael O’Leary, who through 2002 watched his airline’s profits swell by 59 percent. Add to this a consistent pattern of earnings growth plus the highest operating margins in the industry, and it does not take long to realize exactly why BA was tempted to join in. There is little doubt that O’Leary’s confrontational personality has ruffled more than a few feathers amongst his rivals. But for the man himself, any criticisms of him or his airline are viewed as frivolous and ultimately futile attempts to divert Ryanair from its core mission: to be the “Wal-Mart of the airline business” (Emerald, 2004). Ryanair has also used expansion strategy to position itself in the marketplace. Since its operation began it has been known to be an airline which launches new routes. The company acquired Buzz in February 26, 2003 which has enabled it to gain immediate access to11 new French regional airports and made Ryanair the largest airline operating at London Stansted Airport.  Ryanair carried on its expansion by opening two new Continental European bases with low-fare flights from Milan Bergamo and Stockholm. Other then all this the company’s website has helped it to position itself in the global market (Kathy, 2008). 3. Use the Ansoff ‘Directions of Growth’ matrix to critically appraise the marketing strategies used by Ryanair to grow the business. Ans. The Ansoff matrix tells the product and market choices that are available to an organization. The markets are defined as customers, and products as items sold to customers. The Ansoff matrix is also known as the market/product matrix. It is also referred as the market options matrix that examines the options available to the organization from a general perspective. The market options matrix differs from Ansoff matrix as it not only presents the options of launching new products and moving into new markets but also involves exploration of possibilities of withdrawing from certain markets and moving into unrelated markets. Ansoff matrix is a useful way for looking at possible strategies to reduce the gap between where the company may be without a change in strategy and where the company aspires to be. Ansoff matrix focuses on the firm’s present and potential products and markets. By considering ways to grow through existing products and new products, and existing markets and new markets there are four possible product-market combinations: market penetration, product development, market development and diversification. Ryanair seems to successfully attract and penetrate the markets by offering its products in a most affordable and reasonable price. Its product refers to its services offered in flights and the most important of them offering a low-fare scheme. Ryanair is the No.1 on-time airline beating Easy jet every week since 2003 (M2presswire, 2009). Ryanair became the leading airline all over Europe so it forces itself to define further its development and its expansion and made them known internationally this required divergence of employees and culture. Ryanair having its operations in different locations and destinations has diversified people and management in which they operate. The success of making them unite and one is a main factor to further penetrate and develop their products to existing and new markets (Antonio, 2008). 4. Briefly explain the importance of ‘people’, ‘physical evidence’ and ‘process’ in services marketing and analyze how these elements of the marketing mix are addressed by Ryanair. Ans. People, physical evidence and process carry great significance in services marketing. People are the most vital part of any service. Services are produced and consumed at the same time and aspects of the customer experience are altered to meet the individual needs. People tend to buy from people that they like thus the attitude, skills and appearance of all staff need to be up to the mark. Some ways in which people add value to an experience as part of the marketing mix are training, personal selling and customer service. Physical evidence is the material part of a service. Consumer tends to depend on material cues as there are no physical attributes to a service. Some examples of physical evidence include: Packaging, Internet/web pages, Paperwork, Brochures, Furnishings, Signage, Uniforms, Business cards, building etc. Process is an element of the extended marketing mix. There are many perceptions of the idea of process. One view is that process is a means to achieve an outcome, for example to achieve a 20% market share a company implements a marketing planning process. Another view is that marketing has many processes that integrate together to create an overall marketing process like telemarketing and Internet marketing can be integrated. One other view is that marketing processes are used to control the marketing mix. Process is an element of service that sees the customer experiencing an organization’s offering. It is something that a customer participates in at different points in time. For Ryanair the People are its pilots and the cabin crew. Pilots are hired when they are young as pilot cadets. They work very hard and get early promotions so move on after 10-years or so to further their careers. While cabin crew pay to get their uniforms cleaned. They get training on their own. These people are primarily responsible for passenger safety as well as ancillary revenues onboard. Ryanair is tough with its own employees. Their working hours often get close to the legal limits, and their trade unions receive no official recognition (Rhoades, 2007). The Physical Evidence for Ryanair is their planes. They pay as little as possible for their aircraft. Aircrafts are the most expensive asset that an airline has. Ryanair buy aircrafts when other airlines don't want them so it gets huge discounts, for example after September 11th. Aircraft manufacturers cannot stop a supply chain quickly. If orders are cancelled or delayed, this is when to avail discounts. There are many processes of Ryanair. There is no check in. Passenger simply shows his passport and gives his reference number. Passenger has no right to select a preferred seat as it is first come first served. This increases speed. It has no air bridges. Passenger walks to the aircraft. Baggage is deposited directly onto the terminal quickly but if his bag is broken there is no high level of customer service. Ryanair is one of the strategic marketing successes of the last decade. The low cost strategy that Michael O'Leary employs is remarkable and industry changing. It has looked closely at all aspects of it markets and operations to serve the industry and customer expectations in a unique way. In this way Ryanair has applied the marketing mix (MarketingTeacher.com, 2009). Bibliography Lezzy (2007): The Role of Branding in Airline Industry, Retrieved on 9th August 2009, from http://www.brandchannel.com/brand_speak.asp?bs_id=175 Kathy (2008): Ryanair Case Study Analysis, Retrieved on 9th August 2009, from http://ivythesis.typepad.com/term_paper_topics/2008/02/ryanair-case-st.html Marketing Teacher (2009): Ryanair Case Study, Retrieved on 9th August 2009, from http://www.marketingteacher.com/case_study/ryanair_case_study.html Antonio (2008): Ryanair’s Ansoff Matrix, Retrieved on 9th August 2009, from http://ivythesis.typepad.com/term_paper_topics/2008/07/ryan-airs-ansof.html Chris (2007): Safety of Ryanair, Retrieved on 12th August 2009, from http://search.ebscohost.com/login.aspx?direct=true&db=nfh&AN=7EH2778205000&site=src-live M2Presswire (2009): RYANAIR NO 1 Customer Service Statistics, Retrieved on 12th August 2009, from http://search.epnet.com/login.aspx?direct=true&db=nfh&an=16PU1369881980 Emerald (2004): Industrious times at British Airways and Ryanair, Retrieved on 12th August 2009, from Journal, Strategic Direction John (2008): The attractiveness and connectedness of ruthless brands: the role of trust, Retrieved on 12th August 2009, from European Journal of Marketing Rhoades (2007): Employees come first at high-flying Southwest Airlines, Retrieved on 12th August 2009, from Human Resource Management International Digest Read More