Travel Marketing - Research Paper Example

 Table of Contents Executive Summary 1. Introduction 2. Marketing Strategies 2.1 Product offering, competition and customer analysis 2.2 Advertising campaign – medium and communication of message 2.3 Advertising media – public relations and personal selling 2.4 Distribution channels – sales support and ICT 2.5 Market research 3. Recommendations 4. Conclusion References Appendix Executive Summary The past few years have not been easy for the airlines industry on account of the increasing competition and mushrooming of low cost carriers provide the customers with increased value for money. The liberalization policies adopted by countries opened the markets for private airlines operators and this added to the competitive environment within the industry. Further the drop in revenues and profit margins was also on account of sharp increase in fuel prices in the year 2004.The present industry environment provides room for competitive growth and demands a revision of strategic moves to sustain healthy growth. The report provides a comprehensive review of existing advertising and marketing strategies of British Airways followed by a set of recommendations on how to leverage its brand name for maximized profits and increased market shares. 1. Introduction Travel and tourism organizations are part of the service industry that caters to niche clients who are willing to pay the price to avail the services. There are number of aspects that differentiate the marketing theories applied in this sector from conventional marketing practices. The basics of marketing principles may remain the same but the approach to reach the customers of this sector makes it imperative to understand the market environment within which the travel organizations operate. Few years back the airlines industry comprised of only a few leading players who catered to the needs of the travelers across the globe. The organizations operated as public sector units controlled by government regulations. However, with the globalization of economies and liberalization of international markets the sector was privatized. The de-regulation of the airlines sector led to the entry of many private operators. The private operators offered the customers with low-cost flying options in a bid to increase market shares. This led to emergence of low cost carrier airlines that provided the old branded players like British Airways with tough competition and fall in market shares. Another important factor that has led to a crisis in airlines industry is the global economic crisis in the year 2008. This has caused significant drop in revenues and airlines are struggling to survive in such adverse economic conditions. There are numerous marketing and promotional strategies that have been adopted by airlines operators to retain profitability position. This includes withdrawal of some of the basic services and facilities provided to the customers and charging extra for availing these services. These measures have however made a negative impact on the brand value and driven customers to seek alternative brands that provide better customer service and good value for their money spent. “A McKinsey study recently claimed that companies that emerged successfully out of recessions did so by cultivating loyal customers through tough times” (Nigam, 2009). Customers are the key to successful business operations and managerial strategies should focus the service packages keeping in mind the needs and expectations of the targeted customers. The primary requisite of any service company is to provide the customers with what they want and to do it better than their competitors in order to ensure customer return and loyalty (Dale & Oliver, 2005). Marketing strategies have evolved in context of the numerous changes taking place in the business environment and organizations are incorporating new means of promoting their services and communicating with existing and potential consumers. The use of new and innovative technology to support advertising promotions and marketing campaigns has provided the companies with various strategic alternatives to choose from. The organizations to cater to the changing market environment are increasingly focusing on quality, value, relationships and customer satisfaction to gain competitive advantage in the industry (Loudon et al., 2005). Based on this overview and operating environment backdrop the report analyses the present marketing strategies of British Airways (BA) and provides recommendations on increasing the marketing efficiency and effectiveness of its promotional campaigns for the target consumers. 2. Marketing Strategies Businesses operate through continuous strategic planning process of setting goals, assessing performance, taking corrective action, and monitoring results to ensure improved performance and increased productivity. Management must detect problems and identify new opportunities through an effective control and in-depth knowledge of the business environment. The management must have the capability to identify new opportunities and technology changes that can have immense impact on their current business models. Effective strategic management process involves deriving feasible alternative strategies to capitalize on the opportunities and counteract the challenges and problems that may surface. A detailed analysis of the market forces and investigation of the environmental forces impacting the business will provide a stronger platform for devising effective management strategies. 2.1 Product offering, competition and customer analysis The products or services offered by the company relates to the brand existence and positioning of the brand within its customer group. In a changing economic environment the businesses should focus on the service scope, features and additional benefits it provides to the customers as part of the sales package. This is highly critical in defining the volume of sales and increasing market shares within the industry. The product offered in the airlines industry is the flight services that carry passengers from one point to another. The customer avail these services at a cost and rate the services on the basis of value for money, customer service, promptness of services delivered and degree of convenience provided to customers. The airlines companies should always focus their strategies on increasing customer satisfaction since the industry is highly competitive and if the “company does not cater for the needs of a customer; the customer will be able to choose from many others that do” (Dale & Oliver, 2005). The customer identifies the services offered by an airlines company through its brand and convenience associated with the nature of service. The primary activities of British Airways and its subsidiaries is the operation of domestic and international air services for passengers and cargo goods. The products offered by the company focuses on passenger airlines segment and cargo sector that has been designed to provide its customers “with straightforward freighting solutions” (BA, 2009). The range of services offered by the company hence include two distinct segments – Passenger airlines Cargo airlines The vision of the company is to be the world’s global premium airline services (Annual report BA, 2009). A few years back the airlines industry was dominated by major players like British Airways, American Airways or Singapore Airlines. The large scale changes in the business environment have been triggered by the entry of large private operators that offers its customers with low cost flying alternatives. Presently the major competitors of British Airways are Virgin Airlines, Lufthansa, KLM and Air France in the European markets. BA also faces stiff competition from Virgin Atlantic, United Airlines that operates low cost flights in the United Kingdom. The Emirates provides the company with competition in the London-Dubai air route. The customers in the present economic environment have evolved to represent a more educated and well-informed community that is increasingly aware of the changes taking place in the market around them. Moreover, the instant access of information on the Internet or from various other technology media the customer knows the options and alternatives that he has while making a purchase decision. Consumers today are more informed and aware of where they spend their money and this information is availed mostly from online sources. The consumer trends and habits are significant in deciding the marketing strategies for an airlines company. It is important to note that there are many air passengers who do not make the ticket bookings themselves but leave the decision to their travel agents to make the bookings according to their itinery or travel requirements. Hence the travel agents can also be considered as customers for the airlines companies. These travel agents prefer to book tickets with airlines that provide convenient booking procedure and are easily contacted. This applies more to customers in the corporate segment who are planning trips for purely business purpose. The tourist or customers in the “leisure” segment is another vital part of the customer base for airlines companies (Shaw, 2005). The BA customer constitutes of loyal customer groups that have known the brand for years and identify it with a trusted name in the industry. However, the changing global environment has made a visible impact on this trend with the number of BA customers recommending its services others reducing from 61 percent in the year 2006 to 59 percent in the year 2007 (BA, 2008). The unique selling proposition of BA is its brand name that is widely recognized and endorsed by loyal customers flying with the airlines for decades. The exclusive access to Terminal 5 at London Heathrow Airport has lent the airlines a competitive edge in the industry and this reflects the premium brand image held by the airlines company. 2.2 Advertising campaign – medium and communication of message The brand or product positioning of an organization is an essential parameter for successful marketing strategy. This generally constitutes of how a particular product is better and different from its alternatives or choices available in the market. It assesses the functional aspects of the product. It also represents the kind of image the consumer will have on seeing the product on display and distinct its qualities in terms of value and benefits from other competitive brands. The process of brand positioning in the airlines industry begins with the identification of the airlines business strategy. This reflects the image or value that the airline represents to its customers in terms of price, service, comfort and safety standards. The tangible brand values represented by the airlines include punctuality, reliability and frequency (Shaw, 2005). Advertising and creating consumer awareness for the products in the specific markets is essential to carve a market niche. This requires consolidated efforts from the sales and marketing team. Positioning the brand and creating brand awareness of the intended product involves great deal of planning and execution of advertising campaigns that will assist customers in recognizing the brand and creating brand loyalty. Effective brand loyalty strategies include identification of target client group, market acquisition, and understanding client needs and alternatives available in the market. Advertising and marketing campaigns relate to the service features and brand values offered by the company and hence project the image of the airlines to the customers. The whole idea behind such promotional campaigns is connecting with the target customers who are seeking the service attributes offered by the airlines. This was the basic idea that triggered the launch of the Terminal 5 campaign. The Terminal 5 print advertisement campaign (refer appendix) launched by the company in the year 2008 managed to convey a deep message to the customers. This ad campaign was highly effective in promoting the renewed efforts of the company to provide its customers with prompt and effective service. The ad reflects the timeliness of baggage clearance, flight punctuality and prompt services offered by the airlines to ensure customer satisfaction. The advertisement was designed specifically to combat the negative feedback of customers related to delayed flights and increased waiting time for baggage clearance. Such feedbacks had made a distinctive impact on the sales of the airlines tickets. “Airlines must focus on the brand experience, because in today’s environment customers will choose the carrier that provides the best overall value” (DDB, 2009). This is a useful strategy for retaining existing customers and acquiring new customers. Planning an advertising campaign for promoting airlines services is a challenging task since all the airlines provide their customers with similar features and services. The low cost carrier airlines focus their strategies on promoting the service differentiation based on the low air fares to appeal to a certain segment of the market. Legacy airlines such as BA relate to their customers on a more emotional ground that identifies with its existing brand image. However, this alone is not sufficient to retain customer loyalty and needs to be supported by quality service that provides the customers with increased value for their money. The brand positioning thus plays a vital role in creating a successful retention strategy. Effective retention strategies include client segmentation, market acquisition, and customer service. Knowing the clients needs and alternatives available in the market is vital for any brand to position their product or service. Aggressive advertising campaigns launched by the company to promote the brand values held by the airlines have been an integral part of its brand building strategy. The company has integrated latest technology with an effective promotional strategy to capture the growing online commercial activity. 2.3 Advertising media – public relations and personal selling The age-old concept of buying and selling has undergone a sea change in the past decade. The traditional mode where the consumer interacted with the product specialists before making a purchase decision has been replaced by a simple browser that has taken the corporate IT systems to the consumer via the Internet. For the past two decades direct marketing has become extremely popular and extensively used by organizations across the globe. The benefits of direct marketing include extended and personalised consumer reach that evokes immediate response or action from the potential buyer. Direct marketing involve tele-calling, direct mails using brochures or catalogues, direct response broadcasting on television or radio, e-commerce websites, and home shopping networks (Dolak, 2009). The short term objective of the marketing department is to acquire customers while the long term objective translates to retaining the old customers through effective customer relationship management (CRM) strategies. “Reaching and acquiring a new customer is one thing, keeping the relationship healthy and strong over a long period of time is the mark of the true marketing professional concerned with long term health of the organization” (Dolak, 2009). Web based customer relationship management has effectively integrated all modes of communication – web, email, chat, video, voice to serve and support the customers to enhance the total customer experience. Relationship marketing strategies help in strengthening the bonds between customers and the service provider. This is vastly because relational customers tend to increase their use of the services over time. Moreover, experienced customers tend to make fewer demands on the service provider and the service provider too understands the customer well to satisfy his needs. This leaves little room for mistakes and increases productivity. Long term satisfied customers engage in word of mouth recommendations that reduce the need of the company to spend too much on acquiring new customers. “In addition to economic benefits, establishing long term relationships with customers leads to improved levels of trust and commitment. These play a powerful role in consumer acceptance of new service initiatives” (Mudie & Pirrie, 2006). 2.4 Distribution channels – sales support and ICT The choice of the distribution channel involves selling directly to the consumer, selling through intermediaries or using a combination of the both. The final choice of the company will decide the extent of control of distribution of their products or services and the nature of additional cost involved in the process. “The output of a firm’s distribution activities is a system organized to provide a continuing link between the first contacts with the customer, through to the time the order is received and the goods/services delivered and used, with the objective of satisfying customer needs continuously. It encompasses every aspect of the relationship” (McDonald, 2005). In case of airlines services, companies focus on improving their customer reach through new innovative means that appeal to the educated customer base. This involves e-marketing and online booking facilities to enable wider customer reach and improved convenience. Another form of advertising option that is widely gaining popularity is advertising or endorsing the products on the Internet. Most people resort to detailed product research online before making the final purchase decision. Adequate information access about the products over the Internet will result in increased sales. The company has established an online presence that provides detailed flight information and service scope to the customers. Customers today are more informed and aware of where they spend their money and this information is availed mostly from online sources. Keeping this in mind the company provides comparative service features and advantages on the Internet through blogs and forums that enable the customers to realize the service differentiation. Businesses across all industries are establishing their presence online that provides their customers with instant access to information on their products and services, detailed specifications of the desired service and instant interaction through web-enabled tools like live chats and user forums. The online travel business is one of the most rewarding aspects of rising e-commerce applications. Consumers now do not need to visit the ticketing or booking office to make their travel plans. All they need to do is log on to the Internet and access websites that offer online flight ticket bookings, hotel reservations, car rentals and host of other travel related services such as arranging local sightseeing trips and avail special tour packages. Pricing is another important marketing tool just like advertising, promotions and sales. Businesses adopt a dynamic approach while pricing their product or services, since it is a variable component and can significantly impact consumer demand and purchase. Moreover, as McDonald states in his book “Marketing Plans”, pricing is easier to change than advertising campaigns or revamp a sales promotion. The pricing decision taken by the business not only affects its revenue that the company can earn but also have significant impact on consumer demand. The pricing of the product should take into account the marketing profile that the business is trying to establish and the intended image it wants to project to the consumers. If the product or service is highly innovative in the market, it should demand higher pricing from consumers who wish to have it. Similarly, a service that is targeted towards high income customers should reflect that exclusivity in the pricing structure. However, it is also important to realize the impact that the competitive forces will have on the business. There are many competitors in the market who are willing to offer similar kinds of service at lower rates and the quality of work may be equally good. So why should the consumer pay more if they can get similar services at half the cost? This is a pertinent question in deciding the pricing strategy. BA reflects a premium brand that spells high quality service to its customers and hence the pricing is comparatively high to retain the competitive edge in the market. 2.5 Market research Market research is a vital tool used by managers to understand the market dynamics and economic forces driving consumer trends and expectations. Market research provides the managers with an in-depth knowledge and insight into the opportunities and threats existing in the operating market environment and the industry competitive forces that have a significant impact on market share and potentials. The market research process helps the companies to identify potential markets and provide the required data based on which marketing strategies are formulated. A pertinent issue facing the customers today is that of security and safety of passengers on board. The increasing number of single women passengers calls for certain safety measures to be incorporated in the airlines to reassure this segment of customers. BA can initiate this effort through an in-depth market research on the customer views and insights on this issue. A market research activity aimed at finding out the customer opinions and views will enable the company to implement strategic security alternatives and measures to ensure the safety of women passengers on board. A pre-formatted questionnaire having multi-choice questions and open-ended questions can be distributed on board to passengers. The responses filled by the passengers will help the company decide on the steps that can be taken in this direction. The questionnaire can be designed by the Marketing Research Team of the company or outsourced to an external market research agency that can provide BA with the report and recommendations. It should be noted that market research plays an important part in promoting services of an organization. Global markets today offer a great potential for businesses across all industries and organizations are investing in extensive research programs to develop innovative products and services that can reap huge profits under these favorable economic conditions. New markets offer new opportunities to businesses and managers are adopting innovative strategies to widen their access and market reach. These business strategies play an important role in deciding the market share and product positioning in new markets. Extensive market research and analysis of economic forces driving the market in these regions are much required in formulating effective business strategies and establishing market presence. 3. Recommendations Managerial strategies are essential for running a successful business venture in the global perspective since rapidly changing market trends and fluctuating business environment pose many challenges to organizations. Global markets today offer a great potential for businesses across all industries and organizations are investing in extensive research programs to develop innovative products and services that can reap huge profits under these favorable economic conditions. New markets offer new opportunities to businesses and managers are adopting innovative strategies to widen their access and market reach. These business strategies play an important role in deciding the market share and product positioning in new markets. Extensive market research and analysis of economic forces driving the market in these regions are much required in formulating effective business strategies and establishing market presence. Maintaining security and safety standards in the airlines industry is of critical importance. This is a single most issue of concern to the passengers while selecting flights. Gaining consumer confidence in this area is of high priority since the success of the airlines company depends solely on its performance and management of such issues. Breach of safety and security on board is of paramount importance and governments of various countries have imposed strict regulations in this matter. Communicating with the customer on more regular basis and implementing transparency in conveying information is a key factor in ensuring long-lasting relationship with customers. “People are far more likely to become loyal consumers and advocates of your brand if they get a chance to participate in its progress and have sense of shared ownership” (DDB, 2009). BA has implemented information service through smart phones and iphone technology that enables the customers to receive arrival and departure times, book tickets and check in online. The innovative approach has made it more convenient for customers to avail the services of the airlines. The company should hence apply such innovative measures to retain existing customers and acquire new ones. Quality of service and equipment used in the airlines industry has a big impact on the customer perception of the brand and its effectiveness. The driving economic forces that guide the market movements and consumer behavior are significant to the analysis of markets and help the organization to define appropriate strategies to gain competitive advantage. The key to survival in this competitive environment is to maintain distinctive service quality and implement effective customer service strategies to create positive impression on the targeted market segment. 4. Conclusion The airlines industry comprises of industry players who operate in global markets and are increasing their networking routes to accommodate the needs of emerging and developing economic markets. For many decades the nationalized airlines dominated the market specifically the European countries who had “flag” carriers that protected these airlines companies from effective competition through government grants to operate in specific routes. With the liberalization of trade and commerce the skies also opened to the private operators and de-regulation of industry enabled competitive growth. In face of such challenging industry environment there are a few major players who have emerged as market leaders owing to their quality services and expanded network of airline services. In today’s marketing environment, there are numerous and uncountable brands endorsing their products and services. Integrated marketing communications is a strategy that can be effectively used to optimize the promotion and advertising campaigns run for a specific brand or service. The overall objective of this strategy is to project the brand image to the receiver of messages from the company. “Whether the consumer is viewing an advertisement or talking to a call center that is handling the company’s customer helpline, or whether it is the manner in which complaints are handled and service is recovered, there should be little doubt that the communications come from the same company” (Mudie & Pirrie, 2006). A uniformity of service value and brand image will be maintained through each of its customer communication process. Communicating to the customer about what to expect from the services delivered by the company is vital since it helps in establishing realistic expectations. This makes it easier for the company to deliver and meet to the expected standards. References: 1. McDonald, Malcolm. 2005. Marketing Plans – how to prepare them, how to use them. Fifth Edition. Oxford, Butterworth Heinemann. 2. Mudie, Peter and Pirrie, Angela. 2006. Service Marketing Management. Third Edition. Oxford, Butterworth Heinemann. 3. Strategic Management - http://www.csuchico.edu/mgmt/strategy/module1/sld034.htm 4. Contabilizat. 2008. Chapter 8 – International Marketing Research. http://www.contabilizat.ro/file/cursuri_de_perfectionare/management_si_marketing/International%20marketing/cap8.pdf 5. DDB. 2009. Building brand value and influence in the airlines industry. http://www.ddb.com/pdf/yellowpapers/DDB_YP_AirlineBranding_Feb09.pdf 6. BA. 2008. Welcome to terminal 5. http://www.terminal5.ba.com/en/ 7. Nigam, Shashank. 2009. Airlines 2.0: Online technologies take off in a recession. http://www.brandchannel.com/features_effect.asp?pf_id=462 8. Kotler, Philip and Armstrong, Gary. 2005. Principles of Marketing. 10th edition. Pearson Education Inc. 9. Shaw, Stephen. 2005. Airline marketing and management. 5th edition. Ashgate Publishing Ltd. 10. Doganis, Rigas. 2006. The airline business. 2nd edition. Routledge. 11. ATW. Arnoult, Sandra. 2008. Building a brand. http://www.atwonline.com/magazine/article.html?articleID=2351 12. Dale, Gillian and Oliver, Helen. 2005. BTEC National travel and tourism. Heinemann Educational Publishers. 13. BA. 2009. Annual reports and accounts. http://www.britishairways.com/cms/global/microsites/ba_reports0809/overview/where.html 14. Dolak, Dave. 2003. Building a strong brand: brands and branding basics. http://www.davedolak.com/articles/dolak4.htm 15. Loudon, David; Stevens, Robert; and Wrenn, Bruce. 2005. Marketing Management: Text and Cases. The Haworth Press Inc. USA. Appendix - Read More