Marketing Management That Etihad Airways Has Adopted - Case Study Example

Marketing Management: A Case of Etihad Airways Name Institution Course Date Marketing Management: A Case of Etihad Airways Introduction Etihad Airways is a United Arab Emirates airline founded in 2003 (LLC Books 2010, p. 11). The Abu Dhabi-based has emerged as one of the fastest growing airlines in the world. The airline flies both Boeing and Airbus airplanes with a fleet size of 128 (Etihad Airways 2016). Etihad operates both passenger and cargo services and is the second-largest airline in the UAE. The company currently flies in more than 120 destinations in 90 countries across Asia, Europe, America, Africa and Australia. The airline is also one of the major employers in the UAE having more than 20,000 employees as at October 2015 (Oxborrow 2016). In 2015, Etihad Airways reported revenue totaling $9.02 billion and after-tax profit of $103 million. The success of Etihad Airways is largely attributed to effective marketing management that the airline has adopted over the last 12 years of its existence. This report investigates the marketing management that Etihad Airways has adopted. In so doing, the report will begin by analyzing the airline’s branding and innovation strategy using Brand Architecture–Brand Relationship Spectrum and Blue Ocean Strategy (BOS) models. The second part of the report will analyze the macro environmental factors that affect Etihad’s operations in the UAE. The third part of the report analyzes the marketing mix of the airline. The fourth part of the report will analyze how Etihad understands its consumers and the buying behavior of the airline’s consumers. The report will also highlight how the segmentation, targeting and positioning of the airline, as well as analyze the integrated marketing communication (IMC) mix of the airline. Analysis of the Etihad’s Branding and Innovation Strategy Blue Ocean Strategy Blue Ocean Strategy is one of the models used by managers in analyzing the branding and innovation strategy of a company. The model was developed by W. Chan Kim and Renée Mauborgne in which they noted that firms have the tendency to participate in head-to-head competition in a bid to achieve a sustainable growth and profit (Kim and Mauborgne 2013, p. 3). However, W. Chan Kim and Renée Mauborgne noted that, in the modern day’s overcrowded markets, head-to-head competition leads only in a bloody red ocean as rivals fight for the market share. As such, sustainable success is only achieved not through competition, but by creating blue oceans of unexploited new markets opportunities that are ripe for growth. Etihad Airways is has engages in head-to-head competition particularly with Emirates Airlines for the market share (Bloomberg 2016). However, to achieve a competitive edge over Emirates, Etihad has in recent years invested in technological innovation by investing in environmentally friendly technologies and branding itself as an eco-friendly airline. Source Kim and Mauborgne (2013) Brand Architecture–Brand Relationship Spectrum Source: Davis (2010) Most companies, especially those in the airline industry face high pressure to leverage their brand assets due to the prohibitive cost of developing a new brand. In order to overcome such challenges associated with brand creation, a new model called “brand architecture” which refers to an organizational structure comprising of brand portfolio, showing the roles of the brand and the relationships between brands (Davis 2010, p. 63). The brand relationship spectrum is an example of brand architecture that helps strategists subtly endorse brands, sub-brand and their alternatives. In line with the brand relationship spectrum, Etihad recently rebranded itself by introducing a new design concept dubbed “Remarkable” that involved the introduction of a new design to the airplane consisting of colors that resemble the sand dines in deserts appearing in different lighting conditions (Landor 2016). The innovative and new brand introduced by the airline exudes an aura of luxury and exclusivity, which promises to communicate to the airline customers at every touch point. PESTEL Analysis Political Factors The political environment of the UAE and the world has a huge impact on the operations of Etihad Airways. Etihad, like other airlines has to follow the strict laws and regulations. In particular, the threat of terrorism has resulted in countries where the airline operates, including the UAE to pass stringent anti-terrorism laws that Etihad has to comply with (The National staff 2016). However, the political stability experienced in the UAE makes the market favorable for Etihad. Additionally, the airline has signed a number of agreements with countries in Asia Pacific that is expected to improve trade in the region. Economic Factors The status of the economy of the UAE and the rest of the world has a huge impact on the operations of Etihad. The current state of the economic growth of the UAE provides a good business opportunity for the airline considering that UAE is one of the fastest emerging economies in the world. In 2015, the economy of the UAE grew at about 3.6% and GDP per capita of $599.8 billion (Heritage 2016). The growth of the economy of the UAE means growth in disposable income among the population to spend on travels. Additionally, the heavy investment by the government on Abu Dhabi and Dubai airports that is expected to be in the excess of Dh71 billion in the next two decades will promote the growth of business that will result in good business for Etihad Airways (Heritage 2016). However, the constant fluctuation in prices of fuel impacts negatively on the airline’s profits. Social Factors The growth in the population of the UAE and the world favors business growth for Etihad business as the growth in population is expected to an increase in the number of tourists. For instance, the population of the UAE currently stands at about 9.3 million and is projected to reach 15 million by 2030. Additionally, the increase in the number of emigrants in the UAE has resulted in increased air travels that increased the profits of Etihad Airways. Technological Factors Technological factors have a massive impact on the airline industry. The increased access to the internet has made it possible for travelers to buy their tickets online from the comfort of their homes (Taneja 2016, p. 23). As such, Etihad Airways has to adapt to this trend to be competitive. Additionally, the increased ability of passengers to get information about airlines through the internet has made it easy for passengers to compare airfare and travel (The National staff 2016). Additionally, airlines are increasingly adopting digital communication tools, such as social media and mobile phones for interaction and promoting products and services, and Etihad Airways must also adopt these technologies to remain relevant. Environmental Factors Consumers of airline products are increasingly becoming environment conscious. As such, Etihad Airways and other airlines are forced to minimize their emission and sound pollution in order to attract customers as most customers now prefer flying eco-friendly airlines. The UAE and all the 90 countries where Etihad operates are signatories to the Kyoto Protocol on climate change and have enacted laws that require airlines to minimize their emissions and this affects the operations of Etihad as it has to invest in R&D to ensure compliance (Cole 2013, p. 17). Legal Factors The UAE and all the countries in which Etihad operate have introduced different laws, regulations and quality standards for airline firms to ensure security and safety assurance (Etihad Airways 2016). Etihad must comply with these rules and regulations, which increases the cost of doing business for the airline. Marketing Strategies Marketing Mix To ensure success and competitiveness in the market, Etihad came up with a robust marketing strategy, which has acted at its driving force towards the realization of its objectives and goals. The marketing strategy developed by the airline involved those aimed at achieving the short-term and long-term objectives of the company. For instance, the short-term goal of the airline was to ensure that it breaks even by the year 2011 (Cole 2013, p. 37). The airline intended to achieve this objective by decreasing flight fares so as to ensure the realization of increased sales that is linked with fare reduction. Etihad also came up with its long-term objectives that it hoped would enable it maintain an effective market strategy. The long-term objectives included ensuring an annual growth in profits by 5-10%, increasing customer value by 8-10% by 2015 and opening up Abu Dhabi to the international community. Product Strategy Etihad’s principal products include passenger and cargo transportation. To ensure the achievement of a competitive advantage in the market, the airline has divided its product components into classes so as not only to differentiate from rivals, but also to provide fliers with value that suits them both on ground and in-flight. Etihad’s product components include Diamond First Class, Coral Economy Class, Crystal Cargo, Pearl Business Class and Etihad Holidays. Place Etihad Airways has created offices in over 120 destinations across the globe to serve its customers in all the destinations it flies. The offices serve customers by selling to them tickets and delivering other support services that the customers might need. At the same time, the airline has a strong network of agents in different destinations to serve customers on the airline’s behalf. Additionally, Etihad has introduced online ticketing services that allow passengers to buy tickets at the comfort of their homes. Moreover, the airline has introduced bookings via the mobile phones in which customers can make direct calls to its call center that operates 24/7 (Cole 2013, p. 44). Besides, Etihad has also expanded its selling points by operating ticket selling points in major malls and shopping complexes to ensure ease of accessibility. Promotion To ensure success and to achieve a competitive advantage, Etihad puts a lot of emphasis on promotion to create awareness about its products and services and to persuade customers to choose Etihad as their flight of choice. As such, the airline use a variety of communication tools to create awareness about its brand. First, the airline use media advertising as one of its platforms for product promotion. In this respect, the airline has developed a website, where the airline communicates with customers about its prices and product offerings (Books, LLC 2011, 423). The airline also did launch a TV advertising campaign in 2010 dubbed “He Likes,” that demonstrates the innovation and the comfort that awaits fliers that choose to use Etihad. Additionally, Etihad Airways use social media platforms, such as Twitter, Facebook, WhatsApp, MySpace and Instagram within its digital marketing mix to promote its product offerings. Other than media advertising, Etihad also use sponsorship and loyalty programmes as its promotional strategy. Price Etihad Airways adopts penetration pricing strategy that involves providing its products and services at relatively lower prices compared to its main rivals such as British Airways to gain a large market share. Etihad has been able to offer low prices but still make huge profits by taking advantage of the preferential fuel prices provided to its by the government of Abu Dhabi that owns a significant stake in the airline. People Etihad has more than 20,000 employees at the end of 2015 drawn from more than 120 destinations. To ensure the delivery of consistent quality products and services, Etihad provides specialized training programme for its new staff to equip them with the skills desired to perform their work so as to ensure customer satisfaction, and maintain brand value. The airline also selects the in-crew staff carefully because they represent Etihad’s brand image and the fact that they can act as a source of positive word of mouth. Besides, Etihad’s staff uniform is made by an Italian designer, which looks appealing and stunning, as well as communicating hospitable and welcoming values of Arabian culture. Physical Evidence Physical evidence in the airline industry denotes all that is visible to the passengers and includes the uniforms, airline logo, and lounges, booking facilities, airline seats, space and classes. In this respect, Etihad Airways has come up with well designed offices, uniforms made by famous Italian designers, as well as ensured superior cabin design to provide physical evidence that is appealing to customers and enhancing their perception about the quality of services provided by the airline (Books, LLC 2011, 89). Process Process denotes the systems used in the delivery of services and starts from the time of booking tickets to departure and arrival. Etihad Airways has developed a strong system to ensure the delivery of quality products and services to passengers (LLC Books 2010, p. 15). The systems include establishment of an online information system, booking and scheduling system and an internal IT system to help in the delivery of services to customers. How Etihad Understands Its Consumers and their Buying Behavior The best way for a company to serve its customers better is to be able to understand the needs and the buying behaviors of targeted consumers in the market. In the airline industry, the needs, tastes and preferences of consumers vary from one customer to another. Therefore, to ensure that customers are served better, Etihad use a psychographic segmentation of its market that involves identifying the opinions, behaviors, attitudes, interests, social class and lifestyle of its customers (Books, LLC 2011, 21). This way, the airline has been able to understand the needs and interests of its customers, as well as their buying behavior. At the same time, Etihad usually make follow ups using emails and phone calls to its customers to understand their views of the quality of products and services and what they would want the airline to introduce or change to meet their needs better. Using such information, Etihad has been able to understand its customers and their buying behaviors, thereby resulting in the airline introducing products, and prices that meet their needs. Segmentation, Targeting & Positioning Segmentation Because the airline market is diverse and consists of customers with different tastes and preferences, Etihad Airways has divided its market into different segments to ensure that the needs of each segment are satisfied in the best way possible. Segmentation also helps Etihad identify market risks and opportunities and fulfill its marketing objectives. The first major market segment for Etihad it’s the business travelers and the price sensitive leisure passengers (Books, LLC 2011, p.9). The airline has differentiated these two market segments by catering to their specific needs. For purposes of market penetration, Etihad has also segmented its market according to consumer loyalty. In this respect, the airline uses psychographic segmentation technique that involves identifying the lifestyle, interests, social class, opinions, attitudes and behaviors to divide its market. Targeting Etihad target different groups of customers. These include corporate travelers, upper middle class and middle class customers. In addition, the airline also target price sensitive customers that are served by the Coral Economy class. Positioning Etihad has positioned itself in the airline industry as a premium airline. Integrated Marketing Communication (IMC) Integrated Marketing Communication (IMC) involves the use of both traditional and modern/digital communication tools to market a company brand. Etihad Airways is one of the airlines that have been adopting a variety of marketing communication to promote its brand to the targeted audience. The marketing communication tools include media advertising, sponsorships, loyalty programs, sales promotion, billboards and public relations. Media Advertising Websites Etihad Airways has developed a website, where the airline communicates with customers about its prices and product offerings. The website is user friendly and allows customers to see the products and services that the airline has offered, any new developments, such as new destinations and prices of tickets at http://www.etihad.com. Television Advertising Etihad launched a TV advertising campaign in 2010 dubbed “He Likes,” that demonstrates the innovation and the comfort that awaits fliers that choose to use Etihad (Books, LLC 2011, 29). In addition, the airline has launched many other TV adverts that it runs on major local channels in the UAE and in the international channels, such as Aljazeera and CNN to ensure that it reaches out to a wider audience. Social Media Social media has become a useful marketing communication tool in the airline industry. For this reason, Etihad Airways has taken advantage of the power of the social media as a modern communication tool and uses it to promote its products and services. The airline currently uses a variety of social media platforms, such as Twitter, Facebook, WhatsApp, MySpace, LinkedIn and Instagram as its marketing tool. Source: https://www.facebook.com/etihad.airways/# Sponsorships Etihad uses sponsorship is one of marketing its brand to the world. The airline has been sponsoring many sporting and cultural events in the UAE and the globally. In the UK, Etihad Airways has sponsored the Manchester City football club and the Etihad Stadium in Melbourne, Australia. The airline also sponsors Ferrari F1 team, the Harlequins Rugby football club, Formula 1 grand prix in Abu Dhabi, and GAA Hurling Ireland senior championship (Oxborrow 2016). These events attract hundreds of thousands of fans and participants, thus enabling the airline to sell its brand. Loyalty Programmes Etihad also markets its brand through loyalty programme that involves rewarding long-term loyal customers that include providing them with free flights to the destination of their choice as well as gifts in recognition for their loyalty to the airline (Books, LLC 2011, 33). Public Relations Etihad intends to be an active player in critical public policy debates impacting the global aviation industry. Besides, the airline’s operations act as a facilitator in developing strong relations between Abu Dhabi and the rest of the world (Bloomberg 2016). Direct Marketing Etihad has a team of sales people who promote its brand by word-of-mouth. The sales team also makes phone calls and sends emails and text messages to customers as a way of promoting the company’s brand. Other IMC tool used by Etihad includes sales promotions, and in-store displays, as well as lifestyle magazines for marketing its brand (Cole 2013, p. 48). Conclusion & Recommendations Etihad Airways has proved to be a major player in the UAE airline industry and the world as a whole. Despite having been around for barely 12 years, Etihad has grown to become a global brand with operations in more than 90 countries and 120 destinations. The success of the airline is largely attributed to effective marketing strategies that the company has adopted over the years that include providing diverse products and services to customers at low prices. However, to achieve a sustainable competitive advantage, it is recommended that Etihad become more innovative by adopting new technologies to ensure that it keeps up with the market trend. Second, the airline should consider differentiating itself further from competitors by introducing more unique products and services, such as free Wi-Fi internet services to its fleets and free meals. Additionally, Etihad should consider pursuing cost leadership strategy to enable it keep the cost of operations down so that it can lower its prices further, thus enabling it attract the growing number of price conscious fliers in the market. References Bloomberg 2016, Want to fly in Etihad’s lap of ultra luxury?-Here is how. The National 27 July, viewed 18 August 2016 http://www.thenational.ae/business/aviation/want-to-fly-in-etihads-lap-of-ultra-luxury--heres-how Books, LLC 2011, Airlines of the United Arab Emirates: Emirates, Etihad Airways, Emirates SkyCargo, Air Arabia, Daallo Airlines, RAK Airways, Flydubai, RUS Aviation, Falcon Aviation Services, Kang Pacific Airlines, list of airlines of the United Arab Emirates, Maximus Air Cargo. General Books, New York. Cole, A 2013, Analysis of the Etihad Airways. GRIN Verlag, Berlin. Davis, J. A 2010, Competitive success, how branding adds value. John Wiley & Sons, Hoboken. 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