Virgin Blues Market Segmentation - Case Study Example

Content Executive Summary 2 Introduction 3 Issues Involved 3 Market Segmentation 3 SWOT Analysis 4 BCG Matrix 5 GE Matrix 6 Positioning 6 Cost Leader Strategy 7 Service Differentiator Strategy 7 Pricing Strategy 8 Marketing Strategy 8 Conclusion 9 Findings 9 Recommendations 10 References 11 Executive Summary Virgin Blue is a low cost provider eyeing the leisure segment. The recent changes in their strategy to eye the business segment as it is growing and generates extra revenue seem a lucrative one. This will help them to become a differentiator. The company has an aggressive marketing strategy which will help them in becoming a cost leader and differentiator. The SWOT analysis also shows that the company has scope for growth. The BCG matrix and GE matrix reflects the opportunity the business class poses. This has defined the way Virgin Blue is positioning itself in the market. The change in the business model has also made them take strategies towards being the cost leader and differentiator. It has also brought changes to the pricing and promotion methods. The findings further substantiate the growth potential the company has and using the recommendations will help them reap results. The company to ensure this has cut down major cost and is looking towards improving the efficiency. The company by following an aggressive marketing policy can become a cost leader and a differentiator. Introduction Virgin Blue airlines have been in operation since 2000 and with the passage of time it has transformed itself into a cost leader. The company intends to pursue a different strategy by positioning it in between the leisure and business class. For this the company has brought about changes which will help to distinguish it from its competitor. To achieve it Virgin Blue has pursued an aggressive marketing policy. The company has come up with different features to attract customers especially from the business sector. For the leisure sector the company awards reward programs so that it can retain its customers. Issues Involved The issues which are of prime importance for Virgin Blue are Positioning the airlines as a differentiator and cost leader Marketing Strategy to attract more customers and retain the old ones Ways to reduce cost and improve efficiency so that the slogan of the company goes with the pleasure people experience Market Segmentation The issues help to identify the markets Virgin Blue is eyeing. The company is eyeing two sectors. Firstly, “the leisure segment where people are price elastic”. (Bamber, 2006) The company has done well in this segment by “offering very low prices compared to its competitor”. (Bamber, 2006) Second, “the business sector which provides higher revenue by having additional facilities as this segment prefers quality over price”. (Bamber, 2006) Virgin Blue has ensured that it devises its strategy such that it eyes both the segment so that it can expand its reach in different markets. SWOT Analysis The segmentation helps to identify the strength, weakness, opportunities and threats that Virgin Blue has. It is as shown Strengths Huge market penetration and market share Continuous improvements in the facilities provided makes it one of the most sought flights Low cost provider by ensuring proper management at all levels Weakness Fear that the change in business model might backfire and might also loose the leisure segment Not able to position itself either as a cost leader or differentiator since the company is following a mixed strategy Opportunities Expand in new markets Work on a different model to attract more customers from different segments Threats Rapid rise in fuel prices New entrants entering the airline industry BCG Matrix The SWOT analysis helps to identify the BCG Matrix for Virgin Blue. It helps to find areas where the company needs to work on. It looks as follows Market Growth Rate Stars Question Mark Business Sector Leisure Sector Cash Cows Dogs Relative Market Share Here, we see that “leisure sector contributes the most towards the revenue and is the cash cow for the company where as the business sector is a growing sector is a question mark because if the company follow a proper strategy it could become a cash cow else it might”. (Anweshabh, 2010) Virgin Blue thus has an advantage to move up which is seen in the GE Matrix. GE Matrix This helps to identify the key areas of success and discover areas and the strategies which could help Virgin Blue to grow. The matrix looks as follows Business Strength Industry attractiveness High Strong Average Weak In Flight services Branding   Expand its destinations Aircraft fleet of Boeing   Business Service Airline   Medium Flyer Program Ground Service Management   Other Airlines providing same facility   Tie up with retailers Redeem points for tickets   Low     Moving into other sectors  The matrix shows that Virgin Blue needs “to concentrate on the business sector and also look towards increasing its brand presence by having tie ups with other companies which would allow them to expand their reach”. (Kotler, 2001) This will help the company to market irself well and move into other avenues. Positioning The matrix helps to identify the way Virgin Blue is positioning itself. The company with a change in its outlook is looking to position its product “in between the leisure customers who are price conscious and the business class who want facilities even at a higher price”. (Treacher & Pollard, 2004) They are trying to position themselves ‘in between the price leader and differentiator but ensuring that they don’t take any side”. (Treacher & Pollard, 2004) The strategy of positioning has been such that it is both for the business and economy class. The positioning strategy is also reflecting the strategy the company seems to pursue to project itself as a cost leader and differentiator. Cost Leader Strategy Virgin Blue has been differentiating itself as a cost leader. The company has been successful in it by “developing internal branding in areas which it has no relation thereby ensuring that the company gets the best talent”. (Verma, 2006) This has enabled Virgin Blue to get the best talent at the lowest cost. The company on the other hand has ensured that that they don’t use printed tickets; the meals provided in the flight have been done away with, operate a single type of flight and make use of the facilities of the airport on a competitive agreement. Service Differentiator Strategy Virgin Blue has differentiated itself by offering better service. With an aim to eye the business class has brought about necessary changes. The company has kept the first few rows for them. These rows have more leg space; the luggage allowance is more; the middle seats have been done away with and are given access to lounges. This when mixed with the low cost is offering business class more compared to the competitors. This will help Virgin Blue to make easy entry into this segment and differentiate itself. Pricing Strategy Virgin Blue follows “just in time technology where customers get tickets at a lower rate if it is booked in advance as compared to the date nearing the journey”. (Colley, 2001) This strategy is followed by cost leader. This strategy is helping Virgin Blue capture a good market and with technology advancement and penetration of internet it has become a very good option. When compared to the competitor the company prices its tickets “at rates lower to other airlines and at the same time gives huge discounts thereby intensifying competition”. (Tansy, 2004) Consumers who are frequent get it at a lower rate thereby giving them additional benefits. Promotion Strategy Virgin Blue has used various strategies to market the airlines and developed new ways which will help them to capture a chunk of the business sector at the same time enter new markets. The strategies which will help Virgin Blue are To eye the business sector Virgin Blue offers “Corporate Plus fare offers new incentives like access to lounge, baggage up to 32 kg and priority check in”. (George, 2006) This will work well as business class will get more facilities at a lower price compared to other competitors at the same time make their journey memorable. Virgin Blue also offers loyalty programs like “velocity for frequent traveller who will get a free life membership card where they can accumulate points of their travel journey and can be redeemed all the year round”. (Gunter, 2007) This will help Virgin Blue retain its old customers as they can get additional benefit apart from flying. Virgin blue is developing “partnership with online retailers so that consumers have more easy access to the airlines facility”. (Kelly, 2005) This will help the airlines to promote its name with different brand and making customers to associate with the airlines easily. This will ensure that Virgin Blue instead of “relying on the traditional methods has taken advantage of technology” (Kelly, 2005) to promote itself. This will also help the company to enter into new markets with different brand association thereby making it easy for them to expand. Conclusion Virgin Blue by eyeing the low cost segment has been able to capture a good market share. The aggressive marketing strategy and being a low cost provider the company has been able to retain customers. The company has also developed proper marketing strategy to ensure new customers at the same time retain the old ones with reward programs. The business model taken by Virgin blue shows a bright one. The change in business model to integrate the business sector with the leisure one has an opportunity for growth as this sector is growing and are will to pay extra which could help Virgin Blue earn extra. This can help Virgin Blue to move into other markets. Findings Projecting itself both as a low cost provider and differentiator Tactful marketing strategies by having different strategy for the different segment Proper service due to quality manpower both on and off the flight. Recommendations Differentiating the marketing strategy it pursues for the business and the leisure sector so that both this segment feels a part of the company Increase efficiency by ensuring that the flights are on time and ensuring proper maintenance to save cost. References Anweshabh T, (2010), “Differentiating the dogs from the stars”, BCG Matrix, Blue Water Press Bamber, 2006, “Market analysis of Jet Star and Virgin Blue Airlines”, Business Category, OPPaper.com, page 6 Coley A, (2001), Virgin Blue Fire sale wreaks havoc online”, Business News, CBS Interactive, A CBS Company George T, (2006), “New Corporate Plus Fare Delivers Significant Cost Savings to Corporate”, News & Press Release, Virgin Blue Airlines Pty Ltd Gunter P, (2007), “Virgin Blue Velocity Program”, Airline Business Media Partner, Edition 7 Kelly M, (2005), “Virgin sleeps around seeks new partner”, Travel trends, Travel Tech, Blue Water Press Kotler P, (2001), Marketing Management, page 201, 11th edition, Prentice Publication, Upper saddle River, New Jersey Verma M, (2006), “Internal Branding & HRM at Virgin”, Internet & e-commerce, OB Case study code HRM0047P Tansy H, (2004), “Virgin defends price war despite losses”, High Beam Research, Australian Business Intelligence News Wire Treacher K & Pollard J, (2004), “Does Virgin Deliver on Promise”, Marketing Strategies, B & T Today Read More