Marketing Strategies Used by Ryan Air - Report Example

MARKETING STRATEGIES due: Introduction A marketing strategy is a model that permits an organization to concentrate scarce resources on the best chance to maximize sales and hence attain a maintained competitive advantage. This paper will discuss the particular marketing strategies used by Ryan Air to help the company recover from the annual profit loss. A company’s marketing strategy outlines the manner in which it will satisfy the wants and needs of the clients. It can include operations such as sustaining relationships with employees, supply chain partners, stakeholders and shareholders. In other words, the marketing strategy is the schedule of how the company will employ its abilities and strength to match the wants and necessities of the market. The marketing strategy consists of two schedules that each comprises of two aspects, that is, market mix and target market. To have a marketing strategy, the company must choose the right combination of the two aspects. The correct combination enables the company to develop a well-defined competitive advantage over its competitors (Ferrell & Hartline, 2012, p.17). Brief history of Ryanair Ryanair is an international airline that began in 1985 and ran as a family business. It is presently has its bases in twenty-six European countries and has six hundred and ninety-four routes. The company comprises of one hundred and thirty-three aircrafts. In addition, the organization employs one thousand and four hundred staff and flies an estimated fifty-two million passengers. It also flies 80% passenger loading on aircraft. Furthermore, it has five main bases in London (Stansted), Brussels (Charleroi), Bremen, Marseilles, and Madrid. The goal of the Ryanair is to provide exemplary customer service that is simple at low-cost fares (Box & Byus, 2007, p.65). The branding strategy A brand has its individual perspective on the product group. Crucial brands have a dominating position in the market and grasp specific places within the product class. The conception and the position boost the brand and feed the changes that are executed for corresponding the brand’s products with its standards. It is the conception that gives grounds for the brand’s actuality and the purpose of it being in the market. In addition, it gives the brand the guideline of the life cycle (Kapferer, 2012, p.32). Ryanair has succeeded in developing an international brand that does not relate to the country of origin. Nevertheless, the company’s brand image is inferior and is perceived as customer unfriendly brand. The company has many times shielded itself in the UK because of the customer affiliated complaints. The bad image resulted because the CEO, Michael O’Leary has been recorded referring to customers as ‘idiot’. Such comments have degraded the image of the company. As a way of improving the brand name, the company has appointed a new chief marketing representative Kenny Jacobs. The new appointment aims to move the company towards caring perspective that will look into the needs of their clients. It has worked well for the company because the YouGov’sBrandIndex confirms that the Ryanair’s ratings have increased since the adoption of the new approach. In addition, the quality, reputation, buzz and the brand impression has gone up more than five points. A brand image is fundamentally the relations that will devote to the brand. For example, if you ask individuals what comes to mind when they think of Ryanair, they might say ‘customer unfriendly’ ‘cheap’ and ‘disrespectful’. These words represent the relations clients have about the brand. There are various ways of making a positive impression on a brand in a low cost and efficient manner. There are three ways to achieve that include word of a mouth, premiums and publicity. From this perspective, the new Ryanair chief marketing representative has put the company on the right track. Creating a customer friendly service is one of the major ways of boosting the company’s image. The customers use word of mouth to tell others about the company’s services. If the services are friendly and good, it will leave a positive impression on individuals. The positive impression encourages clients to share their zeal with others. In modern society, the common form of a word-of-mouth trend is viral marketing. Product development The ‘product’ in the airline industry refers to something that is intangible and has many faces. In marketing, the procedure of product development, innovation and management are continuous and never end (Shaw, 2011, p.163). When a product is new to the consumer, the company has enough time to promote and advertise the products because few people are aware of them. The introduction level is very critical because if the product passes that stage, they are successful in the market. In case the product fails, the results are minimal sales and withdrawal from the market after a short while. The theory of marketing by Rogers suggests that for a long-term success of a product some characteristics are vital (Shaw, 2011, p.166). Complexity A product may not be successful because of the difficulty in use, for instance, one that needs the consumers to spend much time and effort to familiarise themselves. Compatibility The invention can be a failure because of incompatibility with the existing moral and ethical standards. Relative advantage The new product must have better value-for-money than the ones from competitors. It enables the clients to accept the risk of utilising them. Communicability It is hard to persuade a consumer to buy a product or service if the benefits of it cannot be expressed to them efficiently. Divisibility Clients are easily convinced to engage in short steps compared to big steps that are riskier. The small step acts as the trial and the triumphant completion permits confidence to develop. Price Ryanair is aware that the price is the key principal of its brand. The price is the major factor that differentiates its product and services from the competitors. The company view the price more significant than the product. The Ryanair has been able to satisfy the expectations of the clients through its product performance as a no-nonsense point-to-point discount product (Poulfelt & Andersen, 2013, ch.3). It has enabled the company to gain confidence in people and is considered ‘best in class’ compared to competitors. Ryanair employs the concept of discount product to develop its product. In this concept, the company embraces ‘no frills, low cost’ approach that has enabled it to execute various costs cutting inventiveness. The company’s product consists of discount air travel and simple fare package. According to Baker (2004, p.127), clients assess the value proposal in terms of relative value and not the ticket price. The price reflects the value of a service or a product. The psychological zone of pricing is the belief that if a product is expensive, the consumers avoid it because they are of the view that it is not just to pay the price. If the rate is too low, the consumers are of the opinion that the value is suspicious, and they do not buy the product. For a company to succeed in unfolding the psychological zone it must adopt a demand-led pricing strategy, for example, company is Ryanair. The company adopted the demand-led pricing approach to recognise a large, under-served customer base in specific the leisure traveller. Ryanair divided the travel market to identify the critical values of the leisure traveller. The company discovered that the values included punctuality and price, hence, executed a plan to provide on-time flights and low prices. Through this, the company developed a triumphant high-volume/low-yield business model (Baker, 2004, p. 129). In order to appeal to the price-conscious clientele, Ryanair chooses to compete on routes served by large, full-price carriers, for instance, Lufthansa and Air France. The company took advantage of the fact that these airlines are highly subsidised and have insufficient incentive to minimise their operating costs, maintaining the consumer prices high. Ryanair can give prices up to 80-90% cheaper than the flag carriers on many routes. It achieves this through the elimination of non-value-added items such as utilisation of major airports, meals and allocated seating. The low-cost base gives the company a remarkable obstacle to competition from big airlines with high fixed costs (Baker, 2004, p. 129). Marketing communications Communication in marketing is the channel a company selects to communicate with stakeholders and its clients. The communication is customer oriented and not media. It is because the objective of communication is to reach the specified target audience in contrary to media selection. In addition, communication plays a crucial function in informational, attitudinal and behavioural objectives. In information objective, communication creates awareness that increases sales. On the other hand, attitudinal objectives play the role of relating the brand to the user type, connecting feelings with brand use and developing brand attitude that results in loyalty. The behavioural objectives help in generating trial and repeat purchase. Ryanair acknowledges that a creative communication mix is an important aspect of success because to attain demand of its services people must have enough information about the product. For a customer to consider the airline as his/her choice, they must be aware of the preferences, name, reputation and product being offered (Mayer, 2007, p. 7). The marketing communications utilises advertising, direct selling, websites, sponsorship, social media and advertising. In contemporary world, the surfacing of social media is viewed as the ‘marketing revolution’. The social networks like twitter, Facebook and microblogs are technologies that promote communication. These technologies enable massive online engagement to individuals from all backgrounds with access to the internet connection. The social media is considered as a critical aspect of airline industry. It is because it gives the travel company and peers participation in decision-making. Ryanair has endorsed the use of internet as a way of communication. According to Mayer (2007, p.7), the company’s home page commenced in January 2000 and has increased the share of online-bookings. It is a proof that the company’s website receives 180 million visits in a year, and a total of 99% of all bookings are made online. The company’s success is as a result of its cheap internet fares and the special homepage promotions. Ryanair guarantees clients that all the bookings made online are the cheapest available online. Advertising strategy Ryanair uses the advertising strategy to strengthen its brand name in the market. In addition, the company employs advertising approach to share their exciting innovations to the public. According to Degun (2015, para 2), the company launched an advertising campaign named ‘low fares. Made Simple. The media used included press, outdoor and digital activity, and three TV spots. The company paid £7 million to Dare advertising agency for the Pan-European campaign. The company also advertises in newspapers but received a lot of criticism from the public. An example of adverts that triggered strong emotions is one printed in ‘The Independent’ and ‘The Daily Telegraph’ that showed a woman in pants and bra. The title of the advert was ‘RED HOT FARES & CREW!!!ONE WAY FROM £9.99’. The advert was banned because it was considered to associating the crew members with sexual suggestive conduct (ASA, 2015, para 8). Ryanair has engaged in digital and airline marketing to exploit the massive increase in customer utilisation of digital methods such as social and mobile media. In addition, the company has increased the use of twitter and You Tube to engage clients directly and advertise their brand in an exciting, friendly and fun way. Customer experience A customer experience is the set of interactions between a client and the company, product or part of the business that arouse a response. The experience is mainly personal and suggests the consumer’s engagement at various levels. The experience is evaluated based on the customer’s expectations and the reaction coming from the engagement with the company or a product (Schmitt, 2011, p.9). In every business, a customer is a significant part and is a valuable asset. A company develops when it gains customers and enlarges through maintaining them as well as gaining new ones (Schmitt, 2013, p.1). The customer experience management is the procedure of strategically managing a customer’s whole encounter with a company or a product. The customer experience management gives value to customers through conveying interactions, information and service that result in captivating experiences (Schmitt, 2013, p. 18). According to Schmitt (2011, p.9), the clients do not participate in rational choice but they are motivated by emotions. The encounter may be as a result of communications, sales relationships, packaging and products. In addition, the experience may be as a result of offline and online operations. Ryanair has now embraced the theory of customer experience management through creating of friendly environments. The strategy began after the bad customer experience the company encountered in its operations. As argued by Mail Online (2014, para 1), Ryanair clients complained of poorly designed website and customer service. In other instances, clients complained of hidden charges that were inconveniencing. In addition, the airline’s app was difficult to use especially to download mobile boarding passes. As a result, Ryanair came to a conclusion that transformation was the way forward and appointed a new marketing director and initiated a programme known as ‘always getting better’. The transformation was aimed at improving the company’s activities as well as the customer experience. For example, an individual can bring extra baggage for free, easy way to make changes to booking and reserve a seat for free. In addition, the company introduced ‘Business Plus’ tickets that gave the ability to move from one flight to another in different airports in the same destination country. The change is possible up to forty minutes before departure at no cost. The ‘Business Plus’ will comprise of access to the FastTrack security lane at specified airports, for example, Manchester and Stansted (Williams, 2014, para 5). In their endeavour to enhance its customer experience, Ryanair has reduced the harsh penalty charges for clients who did not bring the printed boarding pass (Williams, 2014, para 10). According to a report by Ryanair Holdings PLC (2014), Ryanair recorded profits that increased by 32%. In addition, the load factor and average fares increased by 4-5% in first half of the year (Ryanair Holdings Plc, para 2). The increase is as a result of customers enjoying the enhancements that the company has undertaken. Public relations strategy Public relation is the process of building favourable relations with the organisation’s different publics by receiving good publicity, heading off and handling unfavourable stories. In addition, the public relations build a presentable ‘corporate image’. The public relations deal with a wide range of associations with internal and external stakeholders. The objective of public relations is to sustain the goodwill with all the important partners. The activities of public relations include the printing of the organisation publications. In addition, publishing of newsletter on personnel promotions, special announcements to external stakeholders and employees. Furthermore, public relations engage in community operations, for instance, sponsors local sports, aiding private educational institutions and clean-up drives. Moreover, it is the responsibility of the public relations department to hold exhibits and displays at trade shows. Likewise, public relations promote special events, for example, music, sports and other activities indirectly or directly. In addition, the department produce videos and films to give information on the company, services and products. The Reichheld theory of customer retention uses a hierarchy of loyalty. The loyalty to the customer is through the objective of designing customer value as a priority that is followed by loyalty to employees and investors. The figure below illustrates the loyalty-based cycle of development. The illustration proves that the relationship between the investors, customers and employees is critical to increasing value of the service for the clients. From this point of view, Ryanair considers public relation function in crisis management and as a component of the promotional campaign. As a matter of fact, Ryanair allocates 30% of the marketing budget for public relations for the purpose of enlarging its market. The company receives complaints about its promotions and advertising. Through public relations, the company gives a public apology that is covered by the media gives it a chance to advertise its brand. It is a habit by the airline to give provocative advertisement or statements as part of the public relations strategy in order to receive priceless advertising that strengthens its brand. From the perspective of customer retention, Ryanair tap the talent and efforts of employees to add value to the client at low prices. In addition, the company partners with major airports to receive more opportunities aims and enhanced returns for shareholders competencies. Cost leadership strategy A cost leadership business model is founded on a combination of business level strategies and cost leadership to compete for clients in one or few market sections. Focused cost leaders focus on a limited market section that is defined by the product line or geographically. A company using the focused cost-leadership strategy competes against the cost leader in the market section where it can run at no cost disadvantage. The fact that there no cost disadvantage in its market section, the focused cost leader work on the value creation line, hence, earns more profits. The strategy of low-cost leadership increases the market share by lowering costs compared to its competitors. A company applying the low-cost leadership approach seeks effective facilities and employ tight controls. In addition, an organisation follows cost reductions to generate services and products more effectively than the rivals. The strategy focuses on the stability instead of seeking new opportunities or taking risks for growth and innovation. In this case, Ryanair focuses on the low-cost airline in Europe and began by providing low-priced flights between London and Dublin. There was no other company that was a cost leader in the European market; therefore, the company was capable of expanding its operations rapidly (Hill, Jones & Schilling, 2014, p. 171). According to Hoskisson, Hitt, Ireland & Harrison (2012, p. 149), Ryanair employs low-cost leadership strategy by making its flight crew members purchase their uniforms. In addition, it provides a bottle of water to customers at a fee. In addition, there are no check-in counters at the airport as all the passengers are expected to check in online. Moreover, the flight attendants utilise flight time to maximise revenues through selling products, for instance, digital cameras. Throughout the period, the company has taken pleasure in strong profitability. Differentiation strategy The differentiation strategy focuses on how to differentiate their services and products from competitors. The strategy can minimise contention with opponents and eliminate the risk of substitute products because clients are loyal to the organisation’s product. Ryanair uses the strategy to maintain its cost and uniqueness. The airline flies to restricted number of European countries. In addition, Ryanair does not fly into major airports that are too costly because of the expenses of operating in major cities and landing rights charges. In the event, the airline advertises a flight to Milan, Italy; its destination is normally near Bergamo Orio Al Serio Airport that is about 25 miles from Milan. Moreover, the airline has one class seats that enable it to hurry the boarding procedure. In addition, it minimises turnaround time of the aircrafts and sustain the simplicity of the activities (Ahlstrom &Bruton, 2010, p.140). Ryanair can offer cheapest fares that other airlines cannot match. There are various factors that enable it to maintain fares at low price. The airline flies short, frequent flights with a maximum of 500milesto minimise costs. In addition, the company makes much profit through minimisation of maintenance, service arrangement, spare parts and aircraft type (Ahlstrom &Bruton, 2010, p.140). Conclusion All in all, the success of Ryanair comes from various marketing strategies it employs. For example, the strategy of using information communication technology has assisted in the company’s operations. An estimated 98% of the bookings are made online on Ryanair website. The use of internet to make bookings is easy and convenient for customers. It is because the client just books the flight online and obtains a confirmation number which is printed with all the particulars and use it in the flights. Ryanair website is one of the most visited travel sites in the world. The clients can get information about promotional discounts as well as special offers that permit them to travel. In some instances, the customers just pay the airport costs and other discounted services like hotel booking and car rental. The internet site has also developed into a full-blown virtual tour operator and full-blown online travel agency that utilises the most efficient selling methods. Excellent examples of effective selling techniques include bundling and bulking strategies, daily pricing, promotional offers, discounts and promotional offers. The introduction of no frills or low fares strategy has enabled the company to attract more customers to use their services. In addition, the company can make more revenue from the sale of drinks and food served in the cabin. The airline has also been on the forefront in creating awareness of its reputation, name and brand. The company allocates a lot of the marketing budget for sales promotion and advertising strategies. These strategies assist in triggering interest and awareness because of their effectiveness in reaching large groups of potential consumers. Furthermore, the coordinated utilisation of sales promotion, advertising and public relations has the impact of pushing the product brand in the market segment. Likewise, the cutting down of costs on staff uniform by making it the responsibility of the employees helps the company to save much money. In addition, the fact that food and drinks provided in the cabin increase the revenue collected. All the measures put in place by Ryanair to minimise expenses directly increases the profits. Finally, with the transformations happening in the company, their services have changed to be client friendly, which has enabled it to regain customer’s confidence. The sales are increases through the satisfaction of clients who recommend the services of the airline to other potential customers. 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