FlyHigh Airline Marketing Plan - Term Paper Example

 FlyHigh Airline Marketing Plan Table of Contents I. Executive Summary 2 II. Situation Analysis for FlyHigh Airlines 3 Customer Analysis 3 Competitor Analysis 4 Company Analysis 5 Community/ Climate Analysis 7 III. Marketing Mix 8 Price 8 Place 9 Promotion 9 IV. Budget & Time Line 10 V. References and Bibliography 11 Facing Low-Cost Competitors: Lessons from US Airlines 11 Journal article by Thomas I. Barkin, O. Staffan Hertzell, Stephanie J. Young; The McKinsey Quarterly, No. 4, 1995 11 Mideast low-cost carriers' capacity rises 8.3%. Bindu Suresh Rai, Emirates Business, 2010) 11 I. Executive Summary In today’s business environment, the airlines have become a major global industry, the size of which runs into millions of dollars. Over time, there has been an increase in the number of budget airlines which have managed to compete with the global powerhouses with their cost effective environment. Europe is well known for its holiday destinations which help the airline to fetch a number of business travellers. The last recession has adversely affected the people of the European region and they are losing out on their purchasing power. FlyHigh would be introduced to bring relief to the people who would like to spend less on their travel budget. It would not offer any value added services on board. The booking of the tickets would be made online to minimise the overall cost. Safety, quality and service would be on the top list of priorities in FlyHigh. Promotional activities, initially, would be based more on television and print media. Later on, internet, events and campaigns would be used to propagate it further. Most of these events would be business conferences, sport and cultural events. Association with the travel companies can give FlyHigh an extra edge. Although it is expected that all these expenditures would result in positive return on investment, the overall return on investment could be negative initially. Operation in the airlines industry would require high capital investment. Cost on aircrafts, salary of the employees and other administrative and operating expenses would be huge which can only be recovered in the long run. For this reason, new entrants like FlyHigh cannot expect positive returns on investment at initial stages. Rather, it would have to wait for imminent success which would come slowly but surely. II. Situation Analysis for FlyHigh Airlines FlyHigh is supposed to be a low cost airline with no frills. There have been a number of influential factors behind such plan. In the boom period, many organisations as well as individuals did not bother about their travel budget. On the other hand, in the time of recession, undoubtedly they would prefer to enhance the shareholders’ value by minimizing the total cost incurred which also includes the travel budget. As a consequence, the organisations as well as the individuals would prefer the low budget airlines rather than spending a fortune on the traditional airlines. The market of the budget airlines is thereby now having a higher growth rate than that of the traditional airlines. In the near future, this market is expected to show high prospects of further expansion and earn enough revenue in the aviation industry (Thomas I. Barkin et al, 1995). Customer Analysis The airline is supposed to have the attributes of a low budget airline. The airline would charge for food and beverage onboard. The carrier would sell almost all of its tickets online. The airline’s brand image would be designed to attract the middle and upper middle class travellers who prefer to spend less on their travel, including the frequent travellers who do not want to spend extra on their travelling purpose. The company is expected to use internet extensively for its booking and promotional activities, hence internet users will constitute a significant portion of its target customers. In this case, the size of the consumer base would be around 59 % of the total population of the European region (Miniwatts Marketing Group, 2010). There is no specific age group but the focus would be between the age group of 18 to 50. In most cases, it has been noticed that after the age of 50, people who are now at a senior management level, prefer to have all the pleasures associated with their business trips, which are not provided by FlyHigh. The middle income group would also be taken into consideration as they would not have so much money to spend on their vacations and other required trips. In case of target organisations, the low and midsized organisations would be aimed, as they may not wish to spend much on their travel budget. The customers requiring low airfare, safety, comfort and better service would also be targeted. Competitor Analysis Ryan Air The airline has been using a cost effective model to tap the budget airlines industry. The carrier has no business class and do not provide any additional services to passengers. Ticket booking for this airline is done through the internet and the carrier does not offer any refund on cancellation of tickets. The company has served the passengers better by reducing the turnaround time. In international airports, the organisation outsources its services to reduce service costs. EasyJet This organisation mostly offers services to major airlines. However, this also results in higher cost. The airline has been able to attract frequent fliers and business passengers by using centrally located airports. EasyJet keeps its price a bit higher than Ryan Air as the business passengers do not mind spending a bit more to use the scheduled flights. The airline does not offer any value added services in the flight. Apart from these two there are some other airlines like Flybe which are also established names in the budget airlines industry. Undoubtedly, FlyHigh has to work hard to strengthen its position in the industry. Ryan air and EasyJet are the leading players in the low cost budget airlines industry. Among these two airlines Ryan air can be said to be the key competitor of Fly High. This is the largest low fare airlines across Europe. The airline operates with 31 bases and 825 low fare routes connecting more than 150 destinations. The carrier flies across 26 countries. In 2009, the carrier reported to serve 67 million scheduled passengers. Almost 99 % of the booking is done on online. A major portion of the passengers have started checking in online. Ryan air passengers, who book the tickets online, are mostly from the age limit 25 to 44 working in junior management level. Around 42 % of the journeys through Ryan air has been because of leisure. Around 19 % of the travelling happens because of business purposes (Ryan air, n.d). Analysis of Ryan air Strengths Ryan air has been in this industry since last 20 years and has been able to develop a well recognised brand name. The airline has been flying point to point and is mostly using the secondary airports to minimize the airport charges. The airline has first mover advantage on a number of regional airports. The business model eliminates the necessities of travel agents and 99 % of the bookings are done through online. This has helped the organisation to emerge as cost leader in the industry. The carrier has high seat density. The airline has fast turnaround time (Solvay Business School, 2004). Weakness Due to some undesired incidents Ryan air has been perceived as arrogant by the media. The carrier serves a niche market and so the possibility of expansion is quite less. Ryan air adds a number of charges to its air fare value. Company Analysis The passengers would perceive the airline as a money saving carrier with maximum amount of comfort and ease possible. In such a case, the key competitors would be Ryan Air, EasyJet. Both of these companies are cost effective and are dealing in the budget airline industry. They have already created their brand names in this industry. One of the significant and required characteristics in this aviation industry is the maintenance of safety in the carriers. The respected names have already established their safety standards which are quite high. An average passenger would rather want to travel with a known carrier rather than a new one. So when FlyHigh launches itself, it will need to show some differentiation to attract passengers. The differentiation would be in terms of lower ticket pricing, enhanced safety procedures, and increased comfort, ease in buying tickets or improved total quality management and some other enhancements in their service offering. To achieve a competitive positioning and to sustain the same, the airline would be required to use a number of resources and capabilities. In that case, the airline must focus more on reducing the operating cost. Attracting the customers and retaining them would require FlyHigh to have a committed customer management team. There are not many differentiating factors available which can be used to complement the firm with its right strategy. To reduce the cost, the airline would employ the use of Tier II airports which have less airport excess fees. The organisation would maximize the use of internet to minimize its advertising costs and other operating costs. In short, the organisation should position itself as a total low cost airline, but with optimum level of quality service. The positioning map has been created by using two main parameters; cost and value added services. As Easy Jet operates through centrally located major airports, it incurs a higher cost than Ryan Air. Easy Jet also offers food on demand but the passengers have to pay for it. Ryan Air, on the other hand, does not offer any value added services and operates through the secondary airports, which in turn enables the company to save costs on the airport charges. However, as FlyHigh would be launching its service for the first time, higher costs would be incurred in marketing and other promotional activities. So the cost incurred would be higher as compared to Ryan Air. All of these would be placed at the fourth quartile of the positioning map. In this case, it has been assumed that FlyHigh is starting its business in Europe, and so competitors are taken from this region. Community/ Climate Analysis In the earlier years, many a times, the airlines industry had experienced decline in their margins and yields due to reduced number of passengers. However, the budget airlines have continued to attract a major portion of the passengers. Before entering the aviation industry, it is therefore of utmost importance to be aware of the influential forces in this respective industry. The factors are discussed below: Political and Legal environment The privatisation of the airline industry has intensified the competition. The government has decided that they would not offer any aid to the loss making airlines industry. In that case, FlyHigh would have to be financially strong and at the same time limit itself from taking excessive risk. As per the regulations established back in the year 2003, low cost airlines would have to pay a charge for overbooked or cancelled flights. Economic factors The recent crisis has negatively affected the industry as people across the globe have lost their purchasing power to an extent. However, this, in turn, has proved to be advantageous for the budget airline, as more and more people prefer to save on their travel budget. In the wake of recent economic downturn, government has relaxed the taxes, which would help FlyHigh to keep its cost low. Social and Environment Factors In many regions of Europe, holiday destinations are only a few miles away; so people prefer to take their cars or trains to reach their destinations. However, people are still looking to make optimum use of their time by taking flights to cover the distances. In such a case, FlyHigh would be a great success as it would first start with the secondary airports. Secondary airports tend to be less busy and easier to reach in terms of traffic. In the light of recent environment awareness, less emission from the airlines is required. This can be proved as disadvantageous for the short haul airlines. As these airlines would travel short distances, they would be required to fly more compared to the traditional airlines. So, the short haul budget airlines need to meet the environmental standards. Technological Factors Safety and comfort are two important characteristics in any airline. Aviation is a technology intensive industry. Continual technological advancements towards excellence to offer safety and comfort to the passengers are of much significance. Fly High can eventually enter into collaboration with car rental service to offer a quality car rental solutions to the corporate and leisure passengers. Apart from that, the organisation can collaborate with travel insurance, and hotel reservation agencies to offer a better travel package to their customers. Alliance with an advertisement agency can assist the organisation to advertise about its comfort and services and attract the travellers to flight by Fly High. III. Marketing Mix Product A number of players are operating in the aviation industry. In recent times, more and more airlines are interested in entering the low cost budget airlines (Bindu Suresh Rai, Emirates Business, 2010) Besides, the existing low cost airlines like EasyJet, Ryan Air and other few traditional airlines have also started their own wings of budget airlines. So, it is getting more difficult for the organisations to differentiate on the basis of cost; more precisely it would be tougher for the new entrants in this industry. So FlyHigh would design its products and services in ways that it would show some differentiation in its product specifications. The organisation would offer online booking facilities, internet check-in and few entertainment packages. The carrier would offer other packages like car rental, hotel booking, site visits etc. All these would be designed by keeping in mind the type of passengers who might prefer to spend less on their travel expenditure. Price Differentiating on the basis of cost has been tough in this airlines industry. As specified earlier, the carrier would operate on total cost leadership. As in the first position, the airline would mostly be operating from secondary airports and launch less airfare than the existing ones. While comparing the advertised prices, Ryan Air seemed to have lower pricing. However, it has a number of extra charges and fees attached to it. The pricing would be clearer with the example of flights from London to Madrid. In May, 2009, the advertised price on the Ryan Air website was £74.99 and for the return flight, it came to £17.99, with a total of £92.98. On the other hand, the easy jet pricing for the same were £68.99 and £51.88 respectively, totalling around £120.87. However, this included required taxes and charges. Ryan Air would add certain charges and fees to its advertised pricing. In addition, the airline charges for online check-in while Easy Jet does it for free. Easy Jet travellers will not face any restriction in their baggage limits, while there is a limit of 10kg for the Ryan Air passengers. Easy Jet also offers travel insurance for their passengers. If any traveller does not want that insurance, he or she needs to uncheck the same. Both the carriers encourage booking tickets online using Credit/ debit cards. However, Easy Jet charges £2.95 for using debit cards and £6.95 for credit cards per transaction. Ryan Air charges a flat £5.00 per ticket for any card apart from Electron (Corrigan, 2009). Judging from these, FlyHigh would reduce these charges for customers in keeping with competition. The airline would encourage online booking as well as online check-in at no cost in order to attract customers avoiding extra costs. In such event, the airline can reduce their human resource cost at airports by encouraging more electronic check in. At the same time, the carrier would encourage its travellers to buy ticket online, so that it can reduce its distribution costs of paper tickets. For this, the airline would not charge on the debit cards; however it would put minimal £4 charge for a single transaction on credit cards. Place The airline would be based in European region. Europe is known for its holiday destinations and at the same time the European region has reduced aviation taxes compared to its global counterparts (Kate Purdy, Government Taxes on Rise for Pax; Weekend/Overnight News, 2009). This is a favourable situation for the cost effective airlines, even if they fly mostly through the secondary airports. At the initial stage apart from London, the carrier would be mostly using the secondary airports to save on total airport charges. As aviation is a capital intensive industry, for the new entrants it may become challenging to introduce low airfares but operations based mostly in secondary airports would help to reduce service charges to a minimum. Promotion The promotional activities would be mostly on the internet and other digital media like television. As FlyHigh has only 1 million Euro to spend on its promotional activities, it would focus more heavily on the internet marketing. Apart from this, it would also advertise on television, travel magazines, bill boards, cinemas and news papers. The discussion here would be based on television advertisements. Mission: The mission of the television advertisements would be to attract the prospective customers by letting them know about the distinguishing features of the airline in comparison to other budget airlines. The objective is to attract the middle and upper middle class customers including business and holiday travellers. Means: As advertisement on television would be the initial step of promotional activities, around half of the budget would be kept aside for it. Television is one media which, in today’s competitive world, reaches out to major portion of the population. At the initial stages the advertisements will be shown at frequent intervals. 40% of the promotional budget would be allocated to this as this is an expensive venture. Message: The visual would show a family going out for a holiday with FlyHigh. Emphasis will be given to the ease of purchasing their tickets online and no charge on check-in. Even after flying by air, the family has enough money to spend on holiday post-holiday activities after having travelled with FlyHigh at such low cost. At the same time, preference would be given to comfort, safety and frequency; so that even the business travellers get attracted to the airlines. The advertisement would convey the message of offering the best possible quality service at a lower price. The tagline would be ‘FlyHigh, Save More’. Moment: The promotion would start 2-3 months before the launch of FlyHigh, so that a maximum number of people are well aware of the airline’s activities. As the recession has just affected the economy, people are now more concerned about their savings. Right now, they would like to spend less on their travel budget. So this may be the right time to hit the market with a budget airline. Promotional offers will also be introduced to attract customers. Media: As said earlier, television is one media that is able to reach out to the major portion of the population. People remember visual advertisements, more than the any others. So television has been chosen as the most appropriate media in this instance. Measurement: Number of passengers can be used to measure the success of the promotional activity. After the launch of the airline, for some 5-6 months a research would be carried out on the number of passengers to measure the impact of each of the promotional activities. Passengers will be asked to complete a questionnaire that will specify how they became aware of FlyHigh and reward will be offered, in a form of competition, to those that complete the questionnaire. In this way, the success of each of the promotional activities can be measured. IV. Budget & Time Line Advertisements January February March April May June July August Television 1,00,000 20,000 20,000 20,000 20,000 45,000 20,000 20,000 Internet     50,000 5,000 5,000 5,000 5,000 5,000 Print 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 Events and Campaigns   50,000 50,000 50,000 45,000 45,000 40,000 40,000 Advertisements September October November December Total Revenue ROI Television 20000 20000 20000 20000 245000 269500 0.1 Internet 5000 5000 5000 5000 95000 99750 0.05 Print 15000 15000 15000 15000 180000 189000 0.05 Events and Campaigns 40000 40000 40000 40000 480000 528000 0.1 *All figures in Euro The monthly budget has been created for the year 2011. Television, sponsored events and campaigns are supposed to offer higher return on investment amongst all the other promotional activities. FlyHigh would be sponsoring a number of cultural and sports events to inform more people about the airline brand. Arranging travel campaigns would be a better idea to promote the brand. Promotion through television and print advertisements would start from the very first month. With the brand gaining the desired reputation, campaigns and online marketing can be used for further penetration. Although the direct impact of these expenditures is expected to fetch positive return on investment, initially it will fetch low ROI if not negative. The Return on Investment for this company in the next year would be around - 0.5 %. The retun on investment has been measured by looking at the ROI of the other players in this industry and at the same time, the rising growth rate of this industry has also been considered. Aviation industry has a lot of administration and other operating expenses which can only be recovered in the long run. Eventually, the business is expected to create a high positive return on investment for its investors. V. References and Bibliography Corrigan, D. 2009. Ryanair vs EasyJet Price Comparison 2009. Available at: http://gospain.about.com/od/flightstospain/a/09_ryanair_v_easyjet_business.htm [Accessed on July 19, 2010]. Miniwatts Marketing Group. 2010. Internet Usage in Europe. Available at: http://www.internetworldstats.com/stats4.htm [Accessed on July 19, 2010]. Association of European Airlines. 2010. Research and Statistics. Available at: http://www.aea.be/research/traffic/index.html. FareCompare. 2010. Find a Flight - Compare Prices Fast. Available at: http://www.farecompare.com/flights/Dublin-DUB/London-LON/market.html. Gross, S. & Schroder, A. Handbook of low cost airlines. Berlin, 2007. Facing Low-Cost Competitors: Lessons from US Airlines Journal article by Thomas I. Barkin, O. Staffan Hertzell, Stephanie J. Young; The McKinsey Quarterly, No. 4, 1995 Mideast low-cost carriers' capacity rises 8.3%. Bindu Suresh Rai, Emirates Business, 2010) Published Sunday, March 28, 2010 http://www.business24-7.ae/companies-markets/aviation/mideast-low-cost-carriers-capacity-rises-8-3-2010-03-28-1.73627 Government Taxes on Rise for Pax; Weekend/Overnight News. By Karen Purdy Monday, June 8, 2009 http://www.aviationtoday.com/regions/usa/Government-Taxes-on-Rise-for-Pax-WeekendOvernight-News_32710.html Ryanair. No Date. Ryanair. Available at: http://www.ryanair.com/doc/about/090831_fr_media_pack.pdf [Accessed on July 21, 2010]. Solvay Business School. 2004. Ryanair Plc. Available at: http://solvay.ulb.ac.be/cours/alle/BuspPresRyanair04.pdf [Accessed on July 21, 2010]. Read More