The Current Marketing Situation of Qantas - Case Study Example

Building Brand Australia Abstract Qantas is an Australian airline founded in 1920 and is the second oldest in airline history. The key marketing strategy that Qantas employs is market segmentation in which it offers diverse products for the diverse needs of travellers. This has proved to be imperative in the context of promoting Australia as a famous destination. The airline offers this by venturing in both full service and low cost travel modes. Promotional activities undertaken by Qantas include use of the Internet, unique in-flight meals as well as the famous in-flight magazine known as The Australian Way. Other strategies include lowering operating costs in order to lower fares and increase travel as well as popularizing discounts and special offers in flights to Australia. Qantas markets itself through various brands that are famous for distinctive services such as Qantas Business Travel and Qantas Holidays. The airline’s website enables online booking and real time feedback that is essential for booking procedures, and this has greatly increased its popularity as well as that of Australia. Introduction Branding is a marketing concept that seeks to develop the attractiveness of a product or service thus diversifying the income streams for the specific brand. Branding is usually done in order to overcome barriers in a competitive environment. As such, branding is seen as a smart marketing approach that strives to develop a unique entity about the product or service. In recognizing the need for Australia to market itself as an international brand, Australian Trade Minister announced that the government would spend $20 million on a period of the next four years to create a new international brand for Australia. This will involve capturing the vigour as well as vibrancy of modern Australia and depicting it to the world. As part of the Building Brand Australia process, organizations are required to propose strategies that will enable them to spread their interests internationally and therefore significantly contribute to the initiative of Building Brand Australia. In recognition of the need to meet the Building Brand Australia initiative, this paper will focus on the strategies used by the Qantas. Qantas is an already established airline having been founded in 1920. The fact the airline conducts long distance flights all over the world puts it in a vantage position to market Australia and therefore meet the requirements of the Building Brand Australia initiative. The paper will focus on the current marketing situation of Qantas, from which a new strategy that is more encompassing will be developed. The objectives of the marketing strategy will also be discussed with a view to promoting Qantas beyond its scope in the international arena. It is noteworthy that the more Qantas invests in other countries, the more it will market Australia as an international brand and therefore help achieve the Building Brand Australia initiative. The other section of the paper will be a thorough analysis of Qantas’s marketing strategy, both at home and in the international markets. Finally the paper will address the various action programs that Qantas has undertaken or which can be taken further in order to appropriately meet the requirements of the Building Brand Australia initiative. Information about Qantas Qantas’ history dates back to 1920 when the airline was registered as Queensland and Northern Territory Aerial Services Limited, shortened as Qantas. Qantas is the world’s second oldest airline. The airline has built a reputation in terms of excellence in safety, engineering and maintenance, operational reliability, as well as customer service (Qantas 2009). At present, Qantas is widely recognized as world’s leader among long haul airlines and is one of the most respected brands in Australia. Its worldwide presence is therefore an incentive to marketing Australia and attaining the objectives of the Building Brand Australia initiative. The airline has a workforce of about 36,000 people working in 151 destinations located in 38 countries. Qantas’s presence is felt everywhere including Australia, Asia and the Pacific region, Europe, the Americas, and Africa (Qantas Media Statement, 2008, Qantas 2009). Qantas operates a wide range of subsidiary businesses. These include other airlines, and operations in specialist markets that include Q Catering and Qantas Holidays. Such unique services are undoubtedly key in promoting the airline and increasing the popularity of Australia around the world. Qantas’s involvement with other airlines around the world has made it on of the most trusted carriers. For instance, it has affiliates in Singapore and Vietnam and aspires to venture in other countries, thus making it a very important brand. The need for high class airlines and the increase in travel for leisure using Qantas services is imperative in making known the various facilities and services that the important Australian market can offer. That Qantas has evolved from an airline using small and fragile biplanes to a giant corporation with giant aircraft such as the latest airbus A380s is a milestone, making Qantas to be closely identified with the history of Australia. Therefore, there is no doubt that anyone reading or watching anything about Qantas will want to come to Australia and this is inarguably the objective of the Building Brand Australia initiative. Still, Qantas aspires to maintain safe operations and to be a leader in innovations in terms of products and their standards, while developing a viable and highly competitive position in the world. Current marketing situation of Qantas Qantas’ popularity is lifted by the fact that the airline has modern and most advanced aircraft that are the preferred choices of most passengers around the world. These include Boeing 747s, Boeing 767s. Boeing 737s, Boeing 717s, Airbus A380s, Airbus A320s, airbus A330s, Bombardier Q400s and Bombardier Dash 8s (Qantas 2009). What identifies Qantas with Australia is the airline’s logo that features a kangaroo. When one looks at the logo, he or she associates it with Australia and undeniably wants to visit Australia to have a view of the rare animal. Qantas market itself as a premium, full service airline that offers many benefits in terms of having a global network and offering a wide range of services in first, business premium economy, and economy classes. These services are offered on both domestic and intercontinental flights. The airline has a wide range of services and facilities including a frequent flyer program, in-flight meals as well as other services in the airport lounges. Qantas also manages full sales on behalf of the larger Qantas Group. One of the most important facilities that Qantas uses in marketing is the online service qantas.com. In addition, Qantas is a founding member of a conglomerate of some world airlines known as Oneworld global airline alliance (Qantas 2009). The Qantas group markets itself under different brands. The airline’s flying services are categorized under two major brand groups namely Qantas and Jetstar although there are other four main divisions: Qantas, QantasLink, Jetstar and Jetstar Asia, which are important in the context of branding Australia as a destination market. There services or facilities that add value to the core flying activities. They include airports, Qantas Catering, Qantas Engineering, loyalty, Qantas Defence Services and Qantas Freight Services. Qantas’s vision is to be a global leader in all the aforementioned services and this has played a role in building trust and loyalty from customers. The strategy used by Qantas has largely been and still is market segmentation. This has included tactics such as “pincer-movement” by establishing low cost carriers to compete in the low cost airlines while also maintaining the full service airline option (Baker 2003, p. 305). Particular interest has been on the growing leisure markets that are popular with low cost services. On the other hand, Qantas has also targeted business travellers by ensuring a steady level of services in the full service category. Qantas has also collaborated with other airlines because of its perceived global attractiveness to customers as well as its steady record of safety. The implication of this is that the airline not only markets itself but also promotes Australia as an important destination. On July 17 2008, Qantas Holiday Limited and Jetset Travelworld Limited shareholders approved a proposed merger with Qantas Business Travel. This move was hailed as an initiative that would create a significant entity that would comprise complementary travel as well as business that are distinct in the respective industry sectors (Qantas Media Statement 2008). The merger would also create well established brands and channels to the market, thus promoting the image of Qantas Group as well as its mother country. Thus there is no gainsaying the fact that the Building Brand Australia initiative will be boosted through the Qantas Group. Being Australia’ leader in travel services, Qantas is likely to attract a lot of travellers to Australia, who intend to use the group’s services in Australia and anywhere in the world (Qantas Fact File 2009; Baker 2003). Through market segmentation, Qantas reaches out to various customers through its diverse products. For instance, Qantas Holidays is Australia’s biggest travel wholesaler and provides holidays to a multiplicity of destinations including Europe, Pacific Islands, South Africa, America, and other popular Australian destinations (Qantas Media Statement, 2008). Through the diverse products offered across the world, Qantas Holidays is definitely a sure way of reaching the world as a means of branding Australia. Qantas Holidays sells a wide range of competitively priced products and services that cover the entire Qantas network. The products and services include deals with partner airlines as well as packages offered by other airlines such as the Viva! Holidays brand. Qantas is therefore a guarantee for attracting both business and holiday travellers to Australia (Qantas Media Statement, 2008). Another marketing channel of Qantas is the Qantas Business Travel group. Qantas Holidays Travel is a corporate travel management specialist that provides a wide array of corporate travel solutions through both local and regional offices (Qantas Media Statement 2008). The system uses state of the art software packages that are specifically designed to automate and manage all the various aspects of the travel booking process. In addition, there are specialist business travel consulting services as well as expense management solutions, which are tailored to specific individual needs of various clients (Qantas Media Statement 2008). In summary, the marketing strategies undertaken by Qantas include target market positioning through segmentation, integrated marketing, and perfect product positioning as highlighted by Kotler et al (2007, p.61). The investment in both full service travel services as well as low cost services is a payoff for the airline in the context of maintaining a line of loyal customers. According to (Baker 2003), differences in pricing and services offered in-flight determine a passenger’s choice of one airline over another, and Qantas has definitely fared well in this respect. Therefore, the airline just needs a modicum of investment in promotion activities to market Australia and therefore achieve the Building Brand Australia initiative. Objectives The aim of the Building Brand Australia initiative is to promote Australia in Global markets. On the other hand, the objective of Qantas is to provide high quality travel services across the world at competitive rates. As a leading provider of diverse air travel services and products, Qantas can easily streamline its objectives to match with the objectives of the Building Brand Australia initiative. Thus, as the airline offers its services, it has to fulfil the objective to promote Australia by offering clear cut products that are unique to Australia. The services and products have to meet the following objectives: 1. To market Australian cultures through a wide variety of strategies such as offering in-flight meals with a blend of Australian cuisine. 2. To promote Australia’s tourism by offering discounts to people travelling to Australia and those using Qantas Holidays services. 3. To market Australia as a corporate destination by providing unique incentives business people travelling to Australia. Such services include in-flight Internet hubs, advanced electronic booking and further investment in state of the art aircraft such as Airbus A380s and Boeing 767s that match corporate travel needs. Marketing strategy Qantas has outlined a broad marketing strategy (which Kotler et al [2007] refer to as a game plan) that is very vital in attaining the group’s objectives as well as those of marketing and promoting Australia across the globe. The marketing strategy that Qantas uses is as outlined next using points from Kotler et al (2007, p. 61). Target market Qantas targets travellers of all classes. Whether one travels for corporate functions or for holiday, there is an appropriate means of travel. This has been enabled through the airline’s investment in both low cost and full service air travel. There are many competitors such as Japan Airlines, REX, Virgin Blue and Singapore Airlines but Qantas still leads in terms of market capitalization (figure 1). Figure 1: Peer comparison Source: Investsmart 2009 Product positioning Qantas markets its products using a multidimensional approach. Cooperate travellers have the opportunity to travel aboard some of the world’s most advanced aircraft such as airbus A380. This is thus a major attraction to investors planning to do business in Australia. For holiday travellers, there is a wide range of attractions that not only promote Qantas but also boost the image of Australia as a travel destination. There are holiday specials, Frequent Flyer Holiday Specials, various event packages and marketing brochures. Qantas also offers a wide spectrum of gift vouchers to people travelling to Australia (Qantas 2009). This has a twofold impact in that it creates loyalty of customers to Qantas and encourages people to travel to Australia for holiday. Product line The products Qantas offers vary depending on the travel class. This is meant suit the diverse needs of travellers (Qantas 2009). Price Qantas’s key strategy is to offer competitive prices and this is achieved through market segmentation (Qantas 2009). Distribution outlets Qantas has offices in 38 countries and this puts it in the best position to promote Australia to travellers from the respective countries (Qantas 2009). Sales force Qantas has dedicated sales teams in all countries where it has offices (Qantas 2009). Service The services of Qantas are both domestic and international. The airline has invested in services that promotes as leading airline air travel an indisputably a reason for people to travel to Australia. Domestic flights are featured by a selection of high quality meals that highlight the best of Australia’s dishes. The menus are inspired by Neil Perry and include a continental breakfast, hot meals and seasonal soups. The meals are prepared to cater for the needs of all travellers, whether Australians or foreigners in the county (Qantas 2009). International dining involves meals that are prepared onboard to feature real taste. Qantas offers a unique restaurant style dining experience in which travellers indulge in 8-cousre meals and select their own preferences. The services are tailored to cater for the needs of every individual traveller and this makes Qantas a popular brand, a sign that further translates to a better image of Australia. Integrated marketing communication Qantas uses a variety of marketing channels to communicate to customers. The in-flight magazine called The Australian Way serves this purpose effectively. While promoting Qantas, the magazine also features the various activities in Australia such as the Australian Open Tennis 2010, Aussie Spring Breaks, Luxury on Sale, Top 10 Online Holiday Destinations, MAMMIA MIA!, Edinburgh Military Tattoo, Gold Coast Getaways, and Jersey Boys. The magazine also features other destinations but is a very important tool to meet the objectives of the Building Brand Australia initiative as a marketing tool for places and events in Australia (Qantas 2009). Sales promotion Sale promotion is facilitated through agents in various countries as well as online. Synchronous The Qantas web site qanta.com enables travellers from all over the world to make online bookings. This is supported by sophisticated software that enable user to have real time feedback about booking procedures (Qantas 2009). Research and development Qantas has been involved in intensive research and development activities one memorable one being the signing of an M.O.U. between the airline and the University of Adelaide. The research is aimed at enabling students from across the world studying at Adelaide to have a state of the art aviation industry practice (University of Adelaide). This is thus a major attraction for students from the world over to study at the university. Marketing research In order to attract business travel, Qantas has invested in research in the same in what it reefers to as “Good for Business.” The research has facilitated innovations in business travel products that are a major boon for the Building Brand Australia initiative. There are discount programs, the American Express Qantas Corporate Card, Corporate Airfares Agreements and other incentives that promote business travel to Australia (Qantas 2009). Action programs Action programs to promote Qantas and market Australia will be based on the fact that the recent times have seen the airline’s sales revenues increase as shown in the comparison between 2007 and 2008 statistics (Table 1). Table 1: 2007 and 2008 statistics December 2008 December 2007 Change $m Change % Sales and other income 6,919 7,785 134 Up 2% Net profit for the half year attributable to members 210 618 408 Down 66% Source: Qantas Airway Limited 2008, p. 24 Table1 shows an increase in sales but a decline in profit attributable to members. Hence, there is an implication of high expenses over the period covered. See the appendix for more statistics. Marketing will therefore aim at increasing sales while ensuring that expenses remain at a manageable level. The action program will entail a series of activities that address the questions raised by Kotler and others (2007) such as what needs to be done? When will it be done? Who will do it? And How much will be spent? (Kotler et al 2007, p. 63). In August 2009 the management of Qantas announced a major plan that will involve cutting down on cost of operation. This is after the realization of the fact that demand for air travel seems to be on the increase. Thus over the next four year, the airline plans to cut down costs by as much as $1.5 billion, starting with about $500 million in 2009. This is projected to make a major impression on the airline, with prospects that travel to Australia and other destinations will improve greatly. As the increase is realized, it will be a leeway for promoting Australia as an all-important destination. One major cost reduction measure implemented by Qantas is the Q Future, plan that enabled the airline to record a net profit of $117 million in financial year 2008/2009. A decline in costs translates to lower fares for passengers, hence more travel and this is perfectly in line with the objectives of the Building Brand Australia initiative. How Qantas will use the “Brand Australia funds create a new brand for Australia. The government will spend $20 million over the next four years in an initiative to market Australia. As a leading airline, Qantas is best placed to market the country by creating and developing new brands in its services. According to King (1997), Qantas has been promoting its Queensland resorts and promoting the destination as a whole. The destination includes the properties owned or leased by Ansett (King 1997, p. 59). Qantas has also been popular with promoting other islands. For instance, the Hamilton Island is large and the only one that has an airport that serves jet planes Ansett (King 1997, p. 59). Qantas will invest in the tourism sector by ensuring that attractive sites such as the Hamilton Island are made advertised as popular holiday destinations the world over. A common phenomenon on international trade is that countries support free trade when their airlines have a greater access of the market but oppose it when the airline seems to be losing the market share. Qantas has a large share of the aviation and is therefore worthwhile for supporting Australia’s trade overseas and attracting investors to Australia (King 1997, p. 56). Funds allocated to Qantas will be used to brand Australia’s airports in order to attract more international flights. Given that Qantas is a member of the oneworld airline alliance, promoting Australian airports will be a boon to attracting other giant carriers such as British Airways, American Airlines, Finnair, Cathay Pacific, Japan Airlines, Malev, Mexicana and others. This may increase competition but it will also be a guarantee of more travels into Australia. Mechanisms such as hub-and-spoke deals will be helpful in lowering competition while still maintaining a high number of travelers using services in Australia. Qantas will employ a variety of other strategies including changing the look of its magazine (The Australian Way) order to have to have more features on Australia and Australian companies. The funds will be used to expand the magazine’s scope and create more advertising space for various Australian companies. If international travelers read about Australia’s natural attractions as well as companies, they will definitely have a reason to travel to Australia for holiday or business. Conclusion As it has been discussed, the Building Brand Australia initiative is meant to market Australia as a famous hub for both tourism and business. One of the ways to do this is to encourage travel to the country. Through the initiatives put in place by Qantas such as value addition to travel services while still remaining very competitive, this objective will easily be attained. As it has been discussed Qantas is involved in promoting various places and activities in Australia through its unique in-flight meals, flight routes, in-flight magazine, and tremendous services to mention but a few. All these are key in selling Australia and hence attaining the objectives of the Building Brand Australia initiative. References Baler, M. J. 2003 (ed.), The marketing book (5th edition), Butterworth Heinemann, Oxford. Investsmart 2009, Qantas Airways Limited, Available from http://www.investsmart.com.au/company_profile/summary/default.asp?function=print&SecurityID=QAN&ExchangeID=ASX (22 November 2009). King, B E M 1997, Creating island resorts, Routledge, Sydney. Kotler, P., Brown, L., Adam, S., Burton, S. & Armstrong, G. 2007, Marketing. (7th ed.), Pearson Education Australia, Sydney. Qantas 2009, available from http://www. qantas.com.au (22 November 2009). Qantas Airway Limited 2008, Qantas Airway Limited and Controlled entities, Available from http://www.qantas.com.au/infodetail/about/investors/2008HYResults.pdf (22 November 2009). Qantas Airways Limited 2009, Preliminary monthly traffic and capacity services, Available from http://www.qantas.com.au/infodetail/about/investors/trafficStats/August2009.pdf(23 November 2009). Qantas Fact File 2009, Qantas at a Glance, Available from http://www.qantas.com.au/infodetail/about/FactFiles.pdf (23 November 2009). Qantas Media Statement 2008, Jetset and Travelworld Limited shareholders vote in favour of merger with Qantas Holidays & Qantas Business Travel, Available from https://www.qantas.com.au/agents/dyn/qf/info/pdf/JTGMerger170708.pdf (23 November 2009). The Sydney Morning Herald August 19 2009, Qantas to cut costs by $1.5b over three years, Available from http://www.smh.com.au/business/qantas-to-cut-costs-by-15b-over-three-years-20090819-epky.html (23 November 2009). University of Adelaide 2009, Qantas signs agreement for engineering alliance, Available from http://www.adelaide.edu.au/news/news28821.html (22 November 2009). Appendix QANTAS AIRWAYS LIMITED Abs 16 009 661 901 PRELIMINARY MONTHLY TRAFFIC AND CAPACITY SERVICES AUGUST 2009 Source: Qantas Airways Limited 2009, p. 2 Read More