Brand Image of Ryanair and Easyjet Low Cost Airlines - Literature review Example

Literature Review Contents Literature Review 3 Reference List 19 Bibliography 22 Literature Review Research Rationality Branding and brand value is a crucial component business for all the profit making concerns. The long run commercial success of an organization considerably depends on its brand image in the market. The dissertation tries to compare the brand image of two popular low cost airlines in the market, namely Ryanair and easyJet. The primary research questions that will be addressed in the literature review are: To evaluate the importance of brand management in the current dynamic business world To analyze the need of brand management in the low cost airline industry To estimate the potential customers of low cost airlines To compare the brand image of Ryanair and easyJet To analyze the customers perceptions about the brand value of the two companies To critically analyze and compare the business performance of Ryanair and easyJet Definition of Branding A brand is a type of word, logo, mark, symbol, sentence or a combination of all these that are used by companies for distinguishing their product or services from other rivals in the market (Aaker and Keller, 2000). For a service generating organization brand name is the actual name of the company. On the other hand, for a physical product producing firm brand name is often different from the product name of the organization. Branding is the process through which a company creates a unique image and name for a product in the mind of its potential buyers (Aaker and Keller, 2000). This image is portrayed through the advertising campaigns of the concern. Through the process of branding, a company tries to differentiate its products and services in the market and tries to attract most loyal buyers. Brand Image and Brand Management Brand is regarded as a valuable asset possessed by an organization (European Parliament, 2007). Brand is one of the primary sources of differentiation in the present times and its value forms an integral part of the marketing strategy for any profit making business organization. All product and service providing organizations require analyzing factors that influence consumers’ purchasing intentions (OCass and Grace, 2004). Consumer-centric marketing initiatives and sustainable differentiation are practiced by firms based on demand patterns exhibited by potential customers (OCass and Grace, 2004). It is claimed by scholars that brand image of an organization considerably affects the utility level experienced by customers. There are numerous researches on the concept of branding for tangible products, but very little literature is found to be available concerning branding of services (OCass and Grace, 2004). However, it is proved that the theories and implications of branding are applicable for both service and goods brand. Researchers have claimed that factors such as, advertising, public relations, perceived value, brand attitude, country-of-origin, self-image congruence and usage intensions, primarily affects the brand value of an organization (Park, 2007). Consequently, companies should try to enhance their brand position and value provided to potential customers. This is because demand created by the potential customers of an organization is relatively inelastic in nature. These customers are buyers with strong willingness and adequate purchasing powers to create demand for the products of an organization (Park, Robertson and Wu, 2004). Hence, the above context implies that perception of potential customers towards an organization, indicating its image, is a crucial aspect of business. This is because long term marketing strategies of a company that are implemented for enhancing its brand image (Parasuraman, Zeithaml and Berry, 1988). Researchers have claimed that successful brand management by an organization substantially depends on its brand equity (O’Connell and Williams, 2005). The brand equity of an organization helps to develop strong attributes, which positively influence the consumers’ decision making process (Aaker and Keller, 2000). Experts believe that brand management is an indispensible activity for all modern business firms and its significance has increased with time due to augmented degree of rivalry in nearly all major industrial segments (Calderon, Cervera and Molla, 1997). This is because good brand management activities are able to differentiate products and services produced by an organization from that of the market rivals, which in turn increases loyalty of the customers towards the former. If the number of loyal customers of a company increases, then in the long run, its market share and revenue improves owing to rise in demand faced. As a result, several researchers state that brand management should be considered as a rare source whereby an organization can enhance its core competitiveness in business (Park and Srinivasan, 2010). Furthermore, brands are considered to be an important source of capital for many organizations. From the above context, it is proved that if brand management of an organization is successful, then increased sales can be experienced in long run. Some researchers have claimed that the firms belonging to service providing industries, such as, hospitality, distinguish their services from that of the competitors through the process of branding (Rangaswarry, Burke and Oliva, 1993). Moreover, in the service providing industry, company’s name acts as the main brand. On the other hand, in the product manufacturing industries, brand refers to the product’s names, not the firm in general. Experts opine that customers’ awareness regarding the brand value of an organization and its associated degree ultimately influences perceived quality experienced by consumers (Werther and Chandler, 2005). Such perceptions may in turn generate loyalty within a consumer towards the organization. It is also believed that strong brand values provide customers with a better perception regarding intangible products and services of an organization. If a business firm acquires superior brand value and image in the market, then it faces lower threats of external market competition (Andersen, 2000). Higher customers’ loyalty along with increased sales and profit can be experienced by a company by establishing superior brand image. Hence, the above context points out that greater degree of competition have forced firms to seek new strategies by virtue of which core competencies can be improved (Rivera-Vazquez, Ortiz-Fournier and Flores, 2009). Furthermore, it is seen that higher competency can be experienced by a company only with the help of superior brand image among loyal customers. Need for Brand Management in European Low Cost Airline Industry A research study conducted by The Economist Group has stated that since 1990, demand for low cost airlines in the European continent is increasing in a multiplicative manner. Companies such as, Ryanair and EasyJet, are rapidly acquiring the market demand share that was once enjoyed by popular multinational airline companies, such as, British Airways and Lufthansa (Voss, Tsikriktsis and Frohlich, 2002). Figure 1: Growing Popularity of Low Cost Airlines (Source: The Economist, 2011) The above graph presents the result obtained from a research conducted by The Economist Group. It can be observed that demand for budget airlines is gradually increasing in Europe. Researchers claim that the effect of growing popularity for low cost airlines in the European continent is regional in nature (Barney, 1991). Researchers have stated that individuals in the European continent are trying to cut down their expenditure, which is subjected to increasing uncertainties across the economy (Clark and Melancon, 2013). After the recession in 2008, aggregate employability and real purchasing powers of European consumers have declined. This decline has ultimately lowered demand for the products and services with premium prices. On the other hand, demand for inexpensive products with good quality increased (Georgi and Mink, 2012). However, it should be noted that increased demand for budget airlines in the European market have ultimately augmented the level of competition faced by low cost airline companies. Companies like EasyJet and Ryanair have become potential market rivals. Few scholars believe that the low cost airline industry in Europe is facing monopolistic competitive pressure (Grover and Malhotra, 2003). Researchers have suggested that since 1990, low cost airlines have completely transformed the European air travelling experience (Quazi, 2001). After the deregulation process, the European Union has encouraged larger number of entrants within the European airline industry, thereby lowering monopolizing powers of the large airline companies. Such a process has helped to enhance the level of competition prevailing among low cost airline companies operating in the European continent. The new firms that entered within the industry were known as the low cost airline companies. Since their inception, these companies had become very popular in the European regional airline market because of low travel fairs. Lower fair for air travelling had improved demand created by the existing air travellers as well as were able to attract new customers in the market. These buyers were individuals who could not previously afford to purchase air tickets due to high prices charged. Thus, over time, level of competition within the airline industry of Europe has been found to increase. Figure 2: Increased Competition between European Low Cost Airlines (Source: Warren, 2012, pp. 8) The above table presents the result obtained from a research study elaborating the extent of competition faced by low cost airline companies within the European continent. Some scholars believe that these companies strongly implement differentiation strategies for attracting a larger base of potential customers (Warren, 2012). Hence, each firm tries to acquire greater number of core competences in trade for leading the competitive industry. It has been previously proved that an organization experience increased differentiation with the essence of an improved brand image. As a consequence, the low cost airline companies in Europe, such as, EasyJet and Ryanair, aim to augment brand image in order to secure a wider base of customers (Burmann and Zeplin, 2005). Potential Customers of Low Cost Airlines The most likely customers of these airline companies are individuals with less discretionary spending power. Some researches state that students who are studying in the universities of Europe are potential customers of the low cost airline companies. This is because disposable income level of the students is primarily low compared to that of the working professionals. Students in the European universities often need to travel short distances within Europe and hence, they prefer to avail the less expensive airline travelling options (Burmann and Zeplin, 2005). Ryanair Airlines Brand Image Ryanair Ltd is a popular Irish low cost airline company operating in Europe. The company was founded in 1985 and its headquarters are located in Swords, Dublin, Ireland (Ryanair, 2014). In 2013, the company was termed to be the largest European low cost airline carrier. The company has rapidly expanded scope and scale of its business after the deregulation process. At present, Ryanair provides services across 28 countries of the European continent (Ryanair, 2014). The company claims to provide the most affordable airline services to customers. Besides that, it even promotes the European tourism industry. The firm has declared that it not only tries to provide low cost air travelling services, but also offers the most inexpensive service in the market. The firm ensures that safety issues of the customers are not compromised. Ryanair proudly states that its flight scheduling punctuality, efficient baggage handling system and green eco-friendly policy in business are superior to that of potential market rivals. The CEO of the company, Michael OLeary, has openly declared that customer’s services are gradually evolving (Ryanair, 2014). Currently, through marketing strategies adopted, the company attempts to convince the public that services offered are being improved. The activities conducted by the company directed at customer management are communicated through social media sites, primarily Twitter. The company aims to enhance its revenue by almost 40% with the help of such activities. Moreover, the company has mentioned that despite providing additional customers services, services will remain inexpensive (Ryanair, 2014). It is found that the company primarily desires to improve trade in terms of customers, brand value and social media publicity (Ryanair, 2014). Market Segmentation for Ryanair Through market segmentation strategies Ryanair tries to focus on its most potential buyers and frame its marketing strategies only according their requisites. The company segments its customers through demographic segmentation approach. Under this regime, Ryanair tries to capture leisure customers (Ryanair, 2014). Thus its target clientele are the young non professional students of European universities or households of European communities. In terms of income demographics, Ryanair targets to sell its services to the middle and low middle income ground of customers (Ryanair, 2014). Thus, minimization of selling price, at the cost quality is one big strategy of the firm. Customers Perceptions about Ryanair Airline Many researchers consider brand image to be a set of diverse values and associations, which is formed in minds of the customers through marketing communication and other aspects of an organization (Smith, 2013). Prices of the goods and services provided by a company, promotional activities and productivity level of the employees determine its brand value or image in the market. Moreover, the existing style of leadership in an organization also influences brand image in the market. Good brand image ultimately carves the path for brand equity and customers’ loyalty for an organization. Experts state that brand image of the low cost airline companies such as, Ryanair, is inferior to that of the popular international airline companies operating in the European aviation industry. Even so, Ryanair has successfully achieved a competing position in the market, despite lacking a superior brand image in the market. The company is known to be the largest budget airline carrier in the European industry. Due to issues concerning customer services, the company is facing threats of losing profit in long run. It is found that market share of the organization is declining due to less attention paid towards providing customer care service as well as low brand value. Hence, the organization has publicly claimed to work upon brand image for the purpose of sustaining and enhancing its dominant market position. In 2013, the company mentioned in the annual report that business constitutes 15% of the aggregate demand created in the European aviation industry (Ganusauskaitė, 2014). At present, the firm desires to considerably enhance brand image as well as increase its market share up to a level of 20% (Ganusauskaitė, 2014). Studies have shown that perception of the customers about brand value and market position of the company is rapidly changing over time (Ganusauskaitė, 2014). It should be noted that a large section of these potential customers are young university students. Consumers often desire to purchase the low cost air services of Ryanair because their consumption utilities are enhanced by no-frills strategy followed. These buyers prefer to avail less expensive services of the company at the cost of non-essential service features (Ganusauskaitė, 2014). It is observed that university students with less purchasing power avoid such expensive comfort services and desire to avail Ryanair’s services. In addition, researchers point out that consumers often want to avail the company’s services because of its rational operational processing system. The company permits online ticket booking and check-in system, thereby lowering the time required during the travelling process. The customers of the company need to carry only their passports while travelling. Young students appear to prefer services offered by Ryanair, given that its operational process involves less time. Furthermore, the “first come first serve” seat allocation process introduced by the company is also preferred by a large number of customers as this system lowers the time required for allocating seats (Grover, 2010). The consumers’ utility is augmented with the point-to-point travelling system incorporated by the company (Davis, 2002). The flights of Ryanair are faster than that of other companies in the industry. The flight schedules are frequent in nature as Ryanair chooses to use the secondary less congested airports of Europe. Nonetheless, several researchers have suggested that certain groups of consumers dislike availing the time and cost efficient services of the company due to poor comfort providing services. Customers often face problems while travelling on Ryanair flights because of poor seats, congested flight interior and scarce leg rooms. Many individuals avoid travelling in the flights of Ryanair because of inefficient services. In reality, the company recruits inadequate workforce for maintaining low operational cost. At the same time, it is also claimed that many workers are forced to serve on a temporary basis in Ryanair. The company invests limited time and money in training, which in turn helps to render the employees more productive. As a result, existing employees of the organization are least interested and motivated at work. Such low employee morale reasons the inferior services provided to customers. The promotional activities of the company are primarily based on its low airfare services; but recently, the consumer authority of Netherlands has claimed that Ryanair’s advertisements are often misleading and inappropriate in nature (Davis, 2002). The consumer’s utility against the brand image of Ryanair has declined because of its increasing commitment failures to business stakeholders. Despite such problems, the potential consumers of Ryanair avail its services because of low ticket fare (Davis, 2002). Presently, experts have suggested that the company utilizes drip-pricing strategy in business . It attracts customers with low air fare services, which in reality, becomes expansive after including several additional charges, encompassing baggage carrying expense and many more. Some research reports have indicated that 70% of the potential customers of Ryanair are budget travellers; this group is likely to include students of the European universities (Davis, 2002). From the above literature analysis, it would be correct to conclude that consumers prefer to travel in Ryanair flights because of low costs offered, less time consuming services and attractive advertisements. Then again, the company appears to be gradually losing brand value because a number of potential customers have realized its strategic drip pricing strategy in business. Many buyers dislike travelling on the flights of Ryanair because of poor in-flight customer service, incorrect word-of-mouth promotions and weak stakeholder’s commitment. As a consequence, the analysis proves that Ryanair’s image is moderate to its potential clientele. Though officials of the organization are making effective attempts to enhance the brand image for all potential customers, yet the loyal customers perceive that its brand value is declining with time. Research studies conducted by Telegraph Newspaper Company have reflected that customer services are worst in Ryanair in comparison with 100 biggest brands of Europe (Smith, 2013). Consumers believe that knowledge, attitude and abilities of the employees in Ryanair are not adequate, which is why they are unable to resolve problems in critical situations. These potential service users have stated that the organization assigned more importance to price than customers’ service quality. Some individuals had even claimed that the employees are often rude and hostile to customers. The research findings proved that a proportion of customers preferred to pay more amount of money so as to avail better services (Smith, 2013). EasyJet Airlines Brand Image EasyJet is a popular British low cost airline company that was founded in 1995 (EasyJet, 2014). The headquarters of the company is located in London. The company claims to be the leading airline company of Europe. The airlines are distributed across 600 routes in Europe and business operations are spread across nearly 30 countries of the continent (EasyJet, 2014). EasyJet provides affordable airline services of superior quality to customers. The company has declared that ensuring safety and comfort of the travellers is the chief trading motto. Nevertheless, some researchers have pointed out that market share enjoyed by EasyJet is smaller (7%) than that of Ryanair. As a consequence, EasyJet is known as the second largest budget airline company operating in Europe (EasyJet, 2014). Figure 3: EasyJet lagging behind Ryanair (Source: Parker, 2012) The above presented results have been obtained from a research study conducted by Bloomberg and Financial Times. The study proved that EasyJet is presently lagging in trade in comparison with business conditions of Ryanair. As a result, EasyJet is implementing active measures in order to augment brand value in the market, thereby gaining a wider base of loyal customers. The company has been making attempts to improve its brand status in the low cost airline market. The firm appeared to have enhanced brand worth primarily to its target customers. The company has realized that superior entrepreneurial skills and persistent innovation activities can help to augment brand value within the market (Parker, 2012). Quality of service delivery is also an important aspect of business for EasyJet. Market Segmentation for easyJet The most potential buyers of easyJet are leisure as well as professional working travellers. Thus, through demographic segmentation, the company targets to sell its products to youth and middle aged professional workers of Europe. easyJet aims to sell services to middle, lower middle and rich income earners (EasyJet, 2013). Thus qualities along with price are equally important factors for the company. Customers Perceptions about EasyJet Airline Figure 4: Growing Popularity of EasyJet Airlines (Source: EasyJet, 2013) Though EasyJet is the second largest low cost airline company in Europe, yet strength of its potential customer base has considerably increased over last few years. Many consumers prefer to avail the company’s services, given that its airline routes are wider than that of Ryanair. Unlike most of the airline companies, the EasyJet airlines travel across 388 routes. Convenience, low cost and care are the three primary business strategies of the organization (EasyJet, 2013). EasyJet has its own employee training academy, where workers are appropriately trained to provide superior, high quality services to the travellers. The weight related restrictions on baggage carried by the travellers are claimed to be lower for EasyJet. Unlike Ryanair, EasyJet offers superior quality in-flight entertainment and refreshments to the fliers. Consequently, consumers avail the airline services of EasyJet because of additional comfort services that are provided along with the low fares. It was found that Ryanair primarily uses the secondary less congested airports for its services. While EasyJet aircraft are primarily scheduled to operate from several major airports in Europe. Consumers often prefer travelling in the EasyJet airlines as the services offered are speedy and involve less time for major operations (EasyJet, 2013). Many experts have claimed that “EasyJet bridges the gap between Ryanair and British Airways” (EasyJet, 2013). Such claims prove that brand prestige and popularity of EasyJet is less than that of British Airways, but it is always more than Ryanair. Figure 3: Customers Perceptions regarding EasyJet (Source: EasyJet, 2013) The above presented research analysis shows that general customers of Europe consider care, convenience and costs involved in the services of EasyJet to be better than Ryanair. Individuals claim that services provided by British Airways exhibit greater convenience and care, but are more expensive than low cost airlines in Europe. Similar to Ryanair, customers seem to be attracted towards the services offered by EasyJet owing to the strategic means of commercialization. Researchers have indicated that the advertisements of EasyJet are interesting and distinctive in nature (Sharma and Patterson, 2000). In addition, the company incorporates a strong physical evidence for its brand, which helps in attaining greater popularity among the potential buyers. Certain young individuals in Europe are very conscious about protecting and preserving the environment and consequently prefer to avail the services of EasyJet, given that the organization maintains the Carbon offset Scheme as well as adheres to the accredited standards as per the establishments of United Nations (Sharma and Patterson, 2000). Hence, from the above context, it can be stated that EasyJet shares a high brand value in the market without encountering excessive problems, which are commonly faced by low cost airline companies such as, Ryanair. Some research reports have pointed out that though the aggregate revenue of Ryanair is increasing with time, yet profitability is falling at a steady rate (Dobrin, 2013). Some officials of the organization have claimed that soaring prices of petroleum in the international market has lowered the aggregate surplus. In contrast to such aspects, commercial profit generated by EasyJet is notably improving in a repetitive manner. Certain estimates have suggested that the aggregate revenue of EasyJet has increased by 6.1% in 2013, while that of Ryanair has enhanced by only 5% (Dobrin, 2013). Customer Perception Difference The differences in customers’ perceptions regarding the brand image and value of EasyJet and Ryanair are difficult to quantify (Dobrin, 2013). The customers perceive that business strategies of the two companies are not similar. Ryanair tries to maximize revenue earnings in terms of number of seats filled in flights. On the other hand, EasyJet ensures that it is able to provide services in major European airports. In general, consumers believe that Ryanair targets the leisure travellers through its marketing strategies. As a result, the company is able to specifically focus upon providing low priced services (Dobrin, 2013). Such individuals are potential customers of Ryanair owing to the least expensive airline services offered. On the contrary, consumers have realized that the marketing strategies of EasyJet are mainly targeted at the business as well as leisure travellers. Hence, individuals with the purchasing power to afford services, that are superior to those offered by standard low cost airlines, but are inferior to those of the full time airlines, are found to be the potential customers of EasyJet. Since Ryanair provides services primarily to the non-working individuals such as university students, their flights are primarily scheduled in secondary airports of the country. However, business officials prefer availing the services of EasyJet because their flights are scheduled in the minor as well as major airports. EasyJet’s services are available in primary airports of Paris CDG and Madrid. Critical Analysis It has been critically analyzed that demand and utility level of the consumers not only depend upon price, but is also influenced by factors such as, prices of substitutes, product quality and customers taste and preferences. Ryanair is regarded as the most popular low cost airline of Europe. The potential customers of the organization consider its brand value to be high because of less expensive services offered (Saha, 2009). In reality, the real income level and discretionary spending powers of most individuals in the European continent had declined after the recession in 2008. Hence, utility of the buyers was significantly enhanced through the efficient low cost services provided by Ryanair. Most consumers apparently believed that services provided by Ryanair are less expensive than those of other low cost airline companies such as, EasyJet. In reality, rational buyers have pointed out that the final price quoted for an air ticket of Ryanair becomes high, after including additional costs charged for the extra services. As a result, many consumers avail the airline services of EasyJet as they are aware of the drip-pricing strategy adopted by Ryanair. Furthermore, researchers had claimed that demand and utility level experienced by the consumers significantly depends of services provided by an organization (Forgas, et al., 2010). The literature review has proved that several potential customers of Ryanair are not satisfied with its service delivery system. From the above context, it can be said that individuals have perceived their utility from services offered by Ryanair to be gradually declining because of its inferior service quality, which in turn is lowering the brand image in the markets of operation. If the company does not improve quality of service, then the dominant market position cannot be sustained in future. Researchers have stated that switching costs of the consumers have become significantly low in Europe’s airline industry because degree of market rivalry is high (Forgas, et al., 2010). In addition to that, detrimental impacts created by the recession in 2008 appear to be gradually declining. The level of per person discretionary spending powers among consumers residing in European countries is improving with the essence of expansionary fiscal and monetary policies. Also, discretionary spending power of the consumers in Europe is increasing. Consequently, many potential consumers of Ryanair are now found to avoid its services because they prefer to pay higher for availing services of superior quality (Forgas, et al., 2010). Leisure travellers, students of the European universities and non-working professionals such as households are the potential customers of Ryanair. Hence, from the above analysis, it can be said that Ryanair is presently losing its popularity among the Scottish and other European university students. Such decline in popularity entails the same in brand value and image of the company (Forgas, et al., 2010). The literature review has shown that the aggregate revenue of EasyJet is lower than that of Ryanair. Even so, it is also noted that growth rate of revenue experienced by Ryanair is lower than EasyJet. In addition, trading profitability of the former appears to be declining relative to the latter. All such factors prove that over time, brand value of EasyJet can improve to a greater degree compared to Ryanair. Several consumers perceive the brand value of EasyJet to be superior to that of Ryanair because the former’s flights are available in many prominent airports of the European continent (Kim and Lee, 2011). At the same time, consumers also perceive that services provided by EasyJet are superior in comparison with those provided by the employees of Ryanair. Researchers have suggested that customer’s perception regarding a company’s brand value not only depends on prices of the services offered, but also takes into consideration certain other factors such as, service quality, facilities, reliability and safety (Sutcliffe, 2001). Figure 6: Factors influencing Customers Purchasing Intensions (Source: Diggines, 2010) A research report stated that customers’ perceived brand value of an airline company depends on certain specific attributes. The most important attributes are presented in the table above. The research study claimed cost (27.6% weightage) to be the most important variable influencing consumers’ purchasing intentions related to airlines. The numbers denoted the value provided to each factors in the research. The literature review conducted has indicated that the costs of travelling in flights of Ryanair are apparently lower than that involved in availing the services of EasyJet. Perhaps this is the reason why price sensitive consumers prefer using the services of Ryanair than that of EasyJet. Even so, the customers’ purchasing decisions related to airlines also depend on certain factors such as, service provision. It is found that the consumers often consider the brand value of EasyJet to be better than that of Ryanair owing to superior customer services. The in-flight comfort, basic customer service and internal corporate culture of EasyJet are regarded to be better than those of Ryanair. Therefore, considering these factors, the brand image and recognition of EasyJet can be stated as superior to that of Ryanair (Martínez and Pina, 2005). The companies operating in the low cost airline industry of Europe face cut-throat competition. The literature review has proved that an organization will be able to lead the competitive market through superior brand management system (Sutcliffe, 2002). Brand image of a company is considered to be a growth driving force. From the literature review, it is clear that brand image of a company is directly proportional to the cost of services offered in the market (Williamson, 2008). This implies that the consumers perceive a company’s brand value to be superior, primarily if selling price of products or services offered is high. As a result, popular airlines offering expensive travelling services, such as, British Airways and Lufthansa, enjoy high brand value in the market. On the contrary, brand image of the low cost airlines such as, EasyJet and Ryanair, are way inferior to that of scheduled airline companies in Europe. Since EasyJet is claimed to bridge the gap between a low and high cost airline company, its brand image for the potential clientele is superior to that of Ryanair. 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