Marketing Strategy for Cathay Pacific Airline - Case Study Example

MARKETING STRATEGY FOR CATHAY PACIFIC AIRLINE By: Professor: Class: University: City: State: Date of submission: Table of Contents Table of Contents 2 Introduction 3 SWOT 4 PESTEL Analysis 5 Politics 5 Economic 5 Social 5 Technological 6 Environmental 6 Legal 6 Marketing Strategies of Cathay Pacific 7 Pricing Strategies 7 Promotional Strategies 8 Segmentation, Targeting, and Positioning 10 Segmentation 10 Market Targeting and Positioning 11 Analysis of Cathay Pacific Airline’s STP 12 Customer Relationship Management versus Partnership Relationship Management 14 Partnership Programs with Channel Members 14 Conclusion and Recommendations 15 References 16 Marketing Strategy for Cathay Pacific Airline Introduction Marketing is an important aspect of every business as it ensures creation of profitable values through focusing efficiently and effectively on different marketing mechanisms. However, the Cathay Pacific Airline, the strategies include segmentation, targeting, and positioning which assist in building the appropriate relationship with the customers to guarantee their satisfaction, stay loyal, and ensuring improvement in the quality brand. From such background, the report aims at discussing various marketing strategies, critically undertake an analysis of various marketing activities, and proper implementation within the airline through application of such concepts. The airline is based in Hong Kong, offering various scheduled services for passengers and carriage of cargoes to different destinations across the globe. In most cases, the airline is abbreviated as CX. Since 1946, CX has been operating in Hong Kong. Through the years, the airline management committed to invest in Hong Kong for purposes of development and being one of the leading institution for the travellers. Through integration with various subsidiaries, CX has had approximately 20,000 people. With the competition within the airline industry, CX ranks third among the profitable airlines; however, it is fourth in terms of operational profit (Cathay Pacific, 2016). Therefore, is important for the airline to undertake proper marketing. Analysis of the CX’s marketing strategies plays important role in understanding the theoretical foundation of the management and practical importance of understanding successful application of the marketing concepts by the airline. The report contains various sections that discuss important phases including planning decision. The major areas addressed are segmentation, targeting, and positioning, customer value, and equity of the institutional brand. SWOT Strengths Weaknesses Presence of the airline within the market for a long time Adequate satisfaction of the customers base The airline carries more than 30 million passengers annually The wide number of aircraft size approximately 140 which allows it maintain the current marketing performance and ensure provision of cargo and passenger flights on regular basis to the customers Operation in more than 110 destinations covering about 35 states The airline relies heavily on the International Onward Moving Traffic The airline also has limited market share associated with extremely high level of competition within the airline segment Based in Hong Kong, the airline experiences historically strong western impact which affects which affects organizational culture and structure The large fleet of the airline require renewal and expansion Opportunities Threats The airline could leverage of the level of dedication set by the customers due to the airline in existence for a long time The airline is popular within the international markets and hold one of the leading positions within the Asian Pacific region Increased customer loyalty and satisfaction due to enhancement and diversification of some services offered The frequently increasing cost of fuel Increasing cost of labour Increasing level of competition within the airline industry which makes it require substantial financial and investment for maintenance of growth Environmental concern among the customers affect business operations especially pollution caused by the airlines PESTEL Analysis Politics One of the external affecting the operations of Cathay Pacific is the government regulations considering the fact that it operates across the borders. Moreover, due to its international operations, the company experiences different policies. As a result, the airline continuously evaluates its political environment and prepares itself for the occurrence of any problem and political issues associated with political factors. Economic There are several economic factors affecting the operations of the company. The major factors that affected Cathay Pacific were the exchange rates and cut back within the commodity trade. In the past years, Hong Kong and other Asian countries experienced economic growth. With the growth of the Asian economies, the Cathay Pacific expanded its operations (Kotler & Keller, 2009, 135). Internally, the airline is doing well. To prevent the occurrence of economic uncertainties, the airline frequently assesses the conditions economy of the countries it operates which to some extent affect the decision making process and purchasing behaviour of the customers. Social To ensure that it remains competitive and relevant to the tastes and preferences of the customers, the Cathay Pacific makes sure that the services it offers to the customers and technology uses in tendering the services suits the needs of the public. Moreover, it makes sure that it has a good working relationship with various sectors within the society. The company has also put numerous efforts in ensuring customer satisfaction to ensure the evolution of better customer relationships. Technological The Cathay Pacific Airline offers innovations within its technological aspects and introduced new concepts to allow it perform competitively within the airline industry. With the rapid changes in technology, the airline is making sure that it updates its services to things that are happening and adjust to such changes. Moreover, the company also provides services that constantly updated in conjunction to the latest technological standard of tendering its services. Environmental Currently, travellers are becoming sensitive to environmental conditions especially pollution within the airline industry. As a result, there are new regulations affecting the operations of the company considering that Cathay Pacific operates an international airline and new sectors influence organizational business sector. Customer acceptance within sustainable business gets critical influencing organizational position in the market. Additionally, the airline provides transparent information and develops innovation meant for the improvement of the sustainable rating. Legal There are several international legislations influencing the operations of the company; nonetheless, with such high regulations, the airline is forced to establish new procedures relevant to industrial specifications. In addition, Cathay Pacific makes sure the coverage of compliance risks and implementation of the mechanism of identifying and protecting the organization from the risks. Marketing Strategies of Cathay Pacific Pricing Strategies Pricing strategy is usually considered as one of the most significant elements of the marketing strategy. Within Cathay Pacific Airline, the pricing strategy assist the airline in the determination of the position with focus on the services and products offered. In addition, the pricing concept also influences various promotional techniques and distribution channels regarding a particular service dimension. Correspondingly, it is observable that the pricing strategy used by the airline company depends on the marketing strategies developed with the focus on particular target market segment. The pricing strategy used by the airline is formulated based on the objectives that defend the company in case there is intense competition of prices and for the adjustment with preferences to the customers. The pricing strategy used by the airline depends greatly on the service quality offered to the potential customers. Several factors determine the variability of the revenue generated through pricing including knowledge of the market and management of the revenues along with the needs of the customers about the cost (Barrett, 2001, 193). For the airline, the pricing strategy is developed based on the institutional structure and feature provided by the customers. Moreover, the organizational pricing policy is formulated based on the preferences and particular requirements specified by the customers, which are categorized into business, first class, and economy service segments. The fare of the economy class usually consist of the usual fare; business and first class services are charged high fares for offering of improved services and facilities. Nonetheless, in such regards, the pricing policies formulated by the company often require approval by the government and International Air Transport Association (AITA). The airline also devised varied promotional and seasonal offers for the acquisition of more segments of the market through satisfaction of their requirements. In addition, the pricing strategy assist the company in the generation of greater profits meant for sustainable growth. Additionally, to maintain the current organizational position and differentiated aviation company, the airline focuses on the provision of varied and promotional offers especially to the potential and frequent customers. The airline to as well make use of the penetrating pricing policies in a bid to create better image of the brand that the competitors with targeting international market segments (Cathay Pacific, 2016). The company has been able to maintain fares in accordance with the cost incurred within the supply process and sustain the current position as an airline leader in terms of the quality of services and products. Therefore, through analysis of the pricing strategy of the airline, it could be stated that while determining the prices of various products and services offered, the Cathay Pacific Airline tend to be greatly dependent on the preferences and needs of the customers, quality, and objectives accomplishable for sustainable growth and development. Promotional Strategies Another important component of the marketing mix is the promotional strategy adopted from the notion of creating proper awareness of the services and products amid the potential customers. With the focus on the similar philosophy, the promotional strategy used by the airline is formulated based on the motivation of informing and influencing the purchase decision of the customers. Such factors could help in spearheading change within the preferences and requirements of the customers about the availability of the better quality of the services and products. Besides, the airline’s promotional strategy as adopted with the aim of expanding the market through targeting new customer segments and improving the current position in the market (Kotler & Keller, 2009, 122). In addition, the promotional strategy enables the provision of varied information on the services and added features that the organization intend to offer to the customers. From such context, using promotional strategy would enable the airline to differentiate itself from the other competitors. The promotional strategy used by the company could be identified as advertisement, offering differentiated services, and special offers. The airline uses advertising media in a bid to keep the customers aware regarding the quality and features of the offered services. The promotional strategies of the airline can be further segregated in both long term and short-term objectives. As part of its promotional strategy, Cathay Pacific Airline has been restructuring its sales agent systems to stabilize the fares. In addition, the company uses promotional techniques such as animated figure and famous characters while building unique image of the brand to meet the needs of the targeted segments. With such concern, the airline designed its promotional theme that states “service straight from the heart” to describe some of the services offered to the customers. Moreover, the company has several contracts with the hotels and travel agencies, which assist in the provision of specila offers to the regular customers and visitors with residential, and accommodation facilities with different packages of the tour. The company improved its catering facilities and other features of promotion over the past years through provision of enriched dishes from the renowned restaurants. These special offers and revised fares are used for promotional strategies. In addition, Cathay Pacific Airline managed to launch personal website for ensuring valuable communication concerning the financial and important information with concerned stakeholders with inclusion of the customers. Besides, the company also sponsors various communal activities with an aim of offering support and acquiring position of the environmental friendly and for the development of the brand image within the airline industry. The promotional strategy of the company could be observed as formulated with the intention of informing the customers concerning the special offers and seasonal fares, which it is to offer. With such aim, the organization uses various mass media promotional methods including the magazines, televisions, internet, and hoarding for the promotion of offers. The promotional strategies used by the company are discounted fares and study tours for various students and learning institutions. There are different short term and long term promotional techniques formulated by the company to improve performance and building institutional competitiveness. Segmentation, Targeting, and Positioning Majorly abbreviated as STP, segmentation, targeting, and positioning represent interlinked marketing activities, which ensure that businesses plan effectively their marketing mechanisms. Segmentation reflects division of the market into various niches while focusing on the homogeneity of the consumers; targeting involves selection if group of customers within the segment to serve; and positioning involves realignment of different marketing activities with an aim of positioning the brand offered by the organization. Segmentation In every organization, the achievement of the desired efficiency is the greatest challenge. However, for CX, mass marketing offers the greatest opportunity of increasing institutional operational efficiency because it yields the lowest cost through creation of the largest potential market. The major challenge of segmentation is the increasing level of diversification and preferences of the customers. Mass marketing is no longer effective to guarantee acquisition of competitive edge. The mass markets often consist of the customers with heterogeneous needs and wants which makes it difficult to satisfy them with the standardized products and services. Therefore, there is need to divide the market into smaller segments while considering the similarity of the needs and wants of the potential customers. Consequently, such practices would enable the market to offer products and services that meet specific needs of the consumers. The majorly used sets of segmentation include descriptive features and behavioural features (Barrett, 2001, 190). The descriptive features include geographic, demographic, and psychographic while behavioural segmentation uses behavioural variables including occasions, benefits, buyer-readiness stage, the status of loyalty, and user status while segmenting the identified opportunities. The choice of segmentation needs to address various contexts of the industries understudies. From the traditional point, the airlines utilize transportation classes in segmenting their customers into business and economy passengers. Consequently, there is need for the airlines to ensure flexibility of their services that suit the needs of the passengers; in most economy classes, there is need for consideration of low-priced services. Moreover, while segmenting the market, there is need to consider the significance of segmentation scheme which most marketers use accessibility, actionable, substantial, measurable, and differentiable for the assessment and evaluation of the scheme. Market Targeting and Positioning Marketing is one of the challenging activities experienced by most airline companies. Therefore, the marketers have the responsibility of identifying various segments of the market and make decision on which the institution needs to target. Airlines could focus on several market targets: concentration of a single market or focus on numerous segments. Other firms could opt for the selection of attractive segments that they consider appropriate of serving a group of customers. To ensure the effectiveness of the marketing target, most businesses tend to choose from various patterns of market selection including market and product, selective specialization, single-segment concentration, and full market coverage. Positioning is the act of designing the image and products that the organization offers to various consumers with an aim of occupying a distinctive place within the identified market segment (Eaton, 2016). Therefore, it is significant to warrant that the marketers develop their point-of-difference (PODs) and point-of-parity (POPs) regarding the competitive edge desired by the institution. Moreover, there is need for the institutional brand and PODs to be strong, contribute to favourable advantages, unique, and various attributes of the business. On the other hand, the POPs are attributes that the consumers consider critical for the delivery of products and services. Therefore, it is important to integrate differentiation into brand positioning to convince the customers that it belongs to the product service and category. Analysis of Cathay Pacific Airline’s STP In a bid to ensure the achievement of the desired objectives, CX identified different seating styles divided into classes: first, business (on the upper and lower decks), and the economy classes. Consequently, such seating arrangements reflect the traditional forms of segmentation, which involved business/economy. Moreover, CX segmented its services based on the travelling reasons. Nonetheless, the traditional airline segmentation involve the economy, leisure, travelling, and seating classes which most researchers consider a traditional method that does not focus on heterogeneity with consideration of the preferences on the customers’ patterns (Meehan, 2016). As a result, most researchers view various forms of segmentation approaches suiting the increasing competition in the airline industry and changing tastes and preferences of the customers. With consideration to different tastes for the products and profiles, it is critical to note that most businesses utilize attitudinal and socio-demographic variability. The features and segments for preferences include price or performance, efficiency or punctuality, comfort, catch all, and flexibility. The airline uses various attributes such as total fare, scheduled flights, flexible services, catering, and efficiency through punctuality, ground services, and frequent-flyer programmes. However, CX utilizes behavioural various which forms the basis of its segmentation activities. Moreover, the airline uses three segments including the holiday and corporate business travellers, and Meeting, Incentive, Convention, and Exhibition (MICE). CX has a marketing campaign identified as Preferred Account Programme (PAP), which majorly focuses on the business travellers; nonetheless, MICE is a promotional strategy which focuses on the MICE travellers. On the other hand, a Holiday traveller is a programme that majorly serves the business unit travelling for leisure. To ensure satisfaction of the needs of particular customers, CX focuses on selective specialization in a bid to market its services. As a result, the institution through the selective specialization, it enjoys the benefits associated with diversification of the business risk for the company. The existing literature found that to attract the customers, the airlines need to focus on service quality to attract the business and leisure travellers. In a study undertaken by IATA revealed that most passengers consider punctuality and scheduling while selecting their airlines. Therefore, businesses need to regard superior service quality as POP to assist with the benchmarking the competitors within the airline industry. While creating a competitive advantage, the airline focused on differentiating itself from the major competitors within the industry in a bid to position itself as one of the Hong Kong favoured airline. In addition, CX continued chasing after the opportunities through ensuring registration as an international airline. The institution launched its comprehensive, integrated media plan that ensures that it builds branding campaign, which it refers to “People and Service.” The campaign aims at highlighting the dedication of the airline company to provision of the outstanding services. The company is focusing on personalities and customers’ philosophies Customer Relationship Management versus Partnership Relationship Management CRM is a process that involves effective management of detailed information of the clients; however, it focuses on the clients at individual level and through various strategies, CX manages all the customers’ touch point with an aim of maximizing the loyalty of the customers. Besides the loyal customers, many airlines are discovering that they need to have strategic partners for effective and efficient delivery of the services. On the hand, PRM involves a process aimed at ensuring proper agreement with various suppliers and channel members and viewing them beyond the customers; viewing as partners in delivering the value to the final customers. Partnership Programs with Channel Members Most airlines are using internet as their channel of distribution. The customers have the opportunities of booking their flights online. Nonetheless, the travelling agencies are key sales channels within the airline industry. Alliance with the other airlines another method of improving the load factor of the airlines. CX is one of the founders of Oneworld, which is an online alliance bringing together 11 airlines that offer a wide array alliance for fare and sales products. Through the alliance, the passengers have ample time to plan their trips in a more flexible since the members offer wide array of schedules, destinations, and routes (McFarlan, Lo, & Young, 2007, 166). On the other hand, partnership shares play critical role in ensuring that CX manages effectively its large customer base. Moreover, there is need to share the fares, schedules, and availability of different travelling agencies so that CX could sell its products and services to the potential clients. However, in 2009, the airline initiated innovative and sophisticated internet booking system with critical feature including fare calendar to various countries that CX operates (Hüschelrath & Mueller, 2012, 214). Moreover, CX showed its effort for developing partnership with the various travel agencies through signing an agreement with Amadeus, which is a renowned travel technology partner and transaction processor. Moreover, in 2010, CX signed a long term Content Agreement with Amadeus with an aim of ensuring adequate accessibility to the agents for effective performance of the airline, availability of schedules, and fares. Through the agreement, Amadeus is a distribution partner of CX that ensure more than 90,000 travel agencies globally within the points-of-sales accesses CX’s content. As a result, there could be realization of the long-term relationships due to associated mutual benefits Conclusion and Recommendations Cathay Pacific Airline positions itself as a Hong Kong based airline and an objective of offering superior services. The airline differentiates its brand from the competitors through passionate staff, services, and offers promotional activities including MICE and PA that targets more profitable business travellers segment. With the existing institutional loyalty programme, the CX aims at improving its profitability through customer satisfaction and loyalty. Through deep cultivation of the long-term relationship with the partners is another method used to acquire the desired competitive advantage. Currently, CX majorly focuses on the promotion of its products within Asia. However, it needs to consider the emerging markets in other countries to create the high level of awareness due to rising availability and influx of tourism across the various continents. Such expansion would assist in capturing the share of large markets. In the previous years, the airline experienced negative forms of publicity; nonetheless, the institution is currently focusing on building positive publicity through developing a competitive advantage and ensuring an increment in the customer base. References Barrett, S. D. (2001). Market entry to the full-service airline market — a case study from the deregulated European aviation sector. Journal of Air Transport Management, 7(3), 189-193. Cathay Pacific. (2016). Sales & Marketing Positions | Careers - Cathay Pacific. Retrieved July 25, 2016, from https://www.cathaypacific.com/cx/en_HK/about-us/careers/jobs-on-the-ground/professional/sales.html Eaton, M. (2016, March 31). Cathay Pacific off tune for latest Hong Kong Sevens commercial - Marketing Interactive | Marketing Interactive. Retrieved July 25, 2016, from http://www.marketing-interactive.com/video/cathay-pacific-off-tune-for-latest-hong-kong-sevens-commercial/ Hüschelrath, K., & Mueller, K. (2012). Market Power, Efficiencies, and Entry - Evidence from an Airline Merger. SSRN Electronic Journal. Kotler, P., & Keller, K. L. (2009). Marketing management. Upper Saddle River, NJ: Pearson Prentice Hall. McFarlan, F. W., Lo, W., & Young, F. (2007). Cathay Pacific. Boston, MA: Harvard Business School. Meehan, N. (2016, April 11). Interview: How Cathay Pacific Remains the World’s Best Airline on Social - Brandwatch. Retrieved July 25, 2016, from https://www.brandwatch.com/2016/04/interview-cathay-pacific-remain-worlds-best-airline-social/ Read More