Marketing Mix Analysis of Qantas Airlines Limited - Case Study Example

Marketing Mix Analysis of Qantas Airlines Limited Name Institutional Affiliation Date Executive Summary This paper presents a report on the marketing mix and service gap analysis of Qantas Airlines. Qantas is the largest and most successful passenger airline in Australia. The analysis shows that Qantas has embraced all the seven Ps of marketing as core aspects of its marketing communication strategy. Through its marketing mix, Qantas aims to engage its customers in fruitful relationships for long term success. Analysis of the airline’s service gap reveals modest variations between expected service quality and actual service quality. Addressing these variations will make the Qantas brand more sustainable despite perennial challenges in the industry. Table of Contents Executive Summary 2 Table of Contents 3 3.1 Definition of service quality gap 13 3.2 Analysis of Qantas Service Gap with Respect to Product 13 3.3 Recommendations 14 References 16 MARKETING MIX ANALYSIS OF QANTAS AIRLINES LIMITED 1. Introduction The objective of this paper is to provide a detailed analysis of the marketing mix and service gap of Qantas airlines. Established in 1920, Qantas has the honor of being the oldest continuously operating airline in Australia and the second oldest in the world. The airline provides air travel services (passengers and cargo) both in the domestic and international markets. Qantas has a wide customer base in Australia due to its large number of frequent flights to major cities across all states and territories. It operates a low-cost subsidiary branded Jetstar. Qantas commands a market share of over 60% in Australia making it a key industry player with near monopolistic powers (Qantas Airlines Limited, 2016). Domestically, Qantas’s main competitors are Regional Express Airlines, Skywest Airlines and Virgin Australia. In the regional market, Qantas competes with Air China, Emirates, Singapore Airlines and Cathay Pacific. Despite the stiff competition in the domestic and regional markets, Qantas is very popular among Australians because of its well established brand name and quality of services. Being a public company with impressive stock performance in the Australian stock exchange, Qantas’s marketing objective is to maximize shareholders’ return in the short and long terms. Accordingly, the company has aligned its marketing mix strategies to meet this objective (Qantas Airlines Limited, 2016). 2. Marketing Mix Analysis Marketing mix refers a set of actions, tactics and strategies a company implements to promote its brand in the market and attract customers. Regardless of the industry a company operates in or nature of business, the marketing mix contains seven important elements: product, price, promotion, place, people, physical evidence and process. The seven elements influence each other and can lead to success when handled well (Kyrgidou & Hughes, 2010). The section that follows describes each of these elements of the marketing mix as relates to Qantas airlines. 2.1 Product Strategies Product describes the set of attributes and corresponding benefits to attract and satisfy Qantas’ customer needs. Qantas’s primary product is passenger air travel services, while the secondary product is the transportation of cargo. As the largest domestic airline in terms of flight capacity and financial capability, Qantas has the most comprehensive air flight services in Australia. The company offers scheduled flights to many parts of the country and beyond. With an increasingly competitive landscape in the air travel industry, Qantas attaches a lot of attention to product planning. Different product categories have been developed to appeal to and attract different customer segments. These categories can be described as premium economy, international business class, domestic business class and international economy (Snyman & Kruger, 2004). The above product categories are differentiated through seating arrangements, amenities and in-flight meals. The company augments its product offerings with in-flight additional services such as entertainment and flight information which can be accessed through online platforms or short text services. Customers can watch movies and news or listen to their favorite music while in travel. In addition, the company has a policy of adding up new and sophisticated aircrafts to its fleet at regular intervals. Information about route frequency, aircraft type, number of stops or direct flight and time of departure and arrival is communicated to customers timely to facilitate travel planning and other pertinent arrangements (Qantas Airlines Limited, 2016). 2.2 Pricing Strategies Qantas uses the strategy of cost plus margin to price its products. Under this strategy, the company calculates the cost of production and then adds a profit margin. The profit margin depends on the market forces of demand and supply as well as competitors’ offers. In order to attain its profitability objective and remain sustainable, Qantas monitors its competitors’ pricing strategies to determine the most optimal pricing levels. Due to stiff competition in the domestic market, Qantas has introduced Jetstar to offer low cost services. The introduction of Jetstar has enabled Qantas to compete successfully with Virgin Australia, which is also positioned as allow cost carrier (Qantas Airlines Limited, 2016). In comparison with rival airlines, it can be noted that Qantas air travel services are priced lower than what most competitors offer but change frequently depending on factors such as demand. For example, Qantas flights in the domestic market cost on average about $10 than what Virgin Australia charges. Qantas occasionally gives promotional discounts in flight fares especially during periods of subdued demand or when there is need to match competitors’ offers. The company also uses the pricing strategy of loss leading to penetrate new markets or attract new customers. Through these aggressive pricing strategies, Qantas has attained strong competitive advantages over rival airlines in both the domestic and regional markets (Qantas Airlines Limited, 2016). 2.3 Promotion Strategies Promotion refers to the strategies Qantas use to communicate with its customers and create a positive brand image (French, 2009). Qantas uses a combination of five different promotional strategies: advertising; publicity; sales promotion; opinion leaders and personal selling. Advertising: Qantas has partnered with local and international advertising agencies to create messages for television, newspaper, radio, magazines, posters and brochures. Qantas is known for launching the most expensive advertisements in Australia. Unlike its rivals, Qantas uses direct advertising as opposed to blanket advertising. All these advertising strategies have made the Qantas brand popular among its customers. Sales promotion: this strategy involves short-term inducements targeted at specific consumer groups.For example, when Qantas launched Jetstar, it released one hundred thousand tickets for $49. This strategy was an instant success and enabled the company to appeal to price-conscious consumers. Personal selling: this strategy involves sales representatives who market and sell directly to businesses, travel agents and government agencies. Personal selling is a major contributor to ticket sales for Qantas. Publicity and opinion leaders: this promotional strategy is used to enhance the image of Qantas among the public. It includes news releases, press conferences, celebrity endorsements, brand ambassadors and interviews. The company also sponsors social initiatives such as cultural activities to increase public awareness about its concern for community welfare (Qantas Airlines Limited, 2016). 2.4 Place Strategies Qantas’ place strategy is based on the reasoning that no matter how its services are, purchase can be constrained if they cannot be accessed easily by customers. In this regard, the airline has invested heavily in its distribution systems to enhance efficiency in customer service. The company uses two main distribution strategies: direct sales and indirect sales. The direct sales strategy involves sale of tickets through the company’s fully owned travel centers, telephone sales centers, airport ticket sales and the internet. In the recent years, the internet has emerged as an important distribution channel for Qantas. The company sells about 70% of its tickets via online platforms. Online booking capabilities have been revamped and are available in over 30 countries and seven languages (Qantas Airlines Limited, 2016). Under the strategy of indirect distribution, Qantas has maintained strong relationship with several retail agencies and other intermediaries in the air travel and hospitality industries. These agencies include the American Express, Harvey World Travel, Flight Centre and the Community Travel. The company allows these agencies to market and resell its products to their customers. Qantas has also partnered with leading hotel chains in Australia, which enhances its booking and ticket sales. The company gives discounts on bookings made via travel agencies to encourage increased bookings (Qantas Airlines Limited, 2016). 2.5 People Strategies Qantas’ success in the intensively competitive air travel industry is partly as a result of its innovative human resource management practices. Qantas consider its employees to be the most important strategic assets and a therefore a vital component of its profit chain model. The company’s workforce comprises of over 35,000 employees who offer different specialized services ranging from customer service to logistics planning and marketing. In order to facilitate communication within the company, Qantas has adopted the vertical reporting structure. This allows employees to report directly to their seniors, which is important for rapid execution of commands. A key aspect of Qantas’ human resource practices is employee training and development. Qantas spends over 250 million dollars annually in proving training opportunities for its employees. This is far greater than what most of its competitors spend in training their workforces. In addition, the company offers generous salaries and benefits to encourage an environment of loyalty, high job satisfaction and motivation. The company has also implemented various flexible work arrangements to enable employees work comfortably. Its recruitment policies are based on the principle of diversity, which means that the company employs employees from different backgrounds. This has made Qantas one of the most liked employers in the world. On an annual basis, the company receives thousands of job applications, majority of which are turned down due to lack of opportunities (Qantas Airlines Limited, 2016). 2.6 Processes Strategies Qantas has implemented various processes to ensure that its services are delivered in the most effective and efficient manner, and that employees are able to work optimally. In the aviation industry, customers judge airlines by how customer friendly and efficient their processes are. It is for this reason that Qantas launched the Q Bag Tag, which allows passengers to drop their luggage at the check-in point without having to attach temporary tags. The Q Bag Tag has an additional advantage of allowing baggage to be tracked with ease (Qantas Airlines Limited, 2016). Another process that Qantas has implemented to enhance efficiency is the online booking platform. Customers can log in to the company’s website, select desired flights and make payment from the convenient of their homes or office. This process is so popular among Qantas customers that it accounts for over 60% of the company’s ticket sales. The process is illustrated in the flowchart below: Figure 1: Process chart for online booking of flights 2.7 Physical Evidence According to the service scape model, physical evidence describes the ambience and physical attributes of the place where a company and its customers interact (Reimer & Kuehn, 2005). Qantas’ business decisions regarding customer service are influenced by several physical aspects related to the company’s corporate environment. The main aspects of the company’s physical evidence include the Qantas signage, its terminals, interactive website, 24-hour call Centre, uniforms, the luxurious Boeing and Airbus aircrafts and spacious lounges. Qantas provides uniforms to all staff to enhance professional appearance. The uniforms are attractively and creatively designed to reinforce the airline’s popular brand image. Qantas also uses the strategy of signs, symbols and branding to enhance its physical evidence. In its offices, every item is labeled with the Qantas logo, which exudes self-esteem and confidence. All these aspects make customers feel appreciated and valued by Qantas (Qantas Airlines Limited, 2016). 3. Service Gap analysis 3.1 Definition of service quality gap The conceptual model of service quality is a market survey instrument for assessing actual or potential gaps between the services offered and customer’s expectations. The model is based on the understanding that customers not only want high quality products but also excellent customer services. Marketing executives conduct service quality analysis to identify and close gaps for enhanced competition. Service gap analysis is of strategic significance in the air travel industry. Airlines are faced with increasing competition and rapidly changing customer needs. To remain competitive, players in the industry must develop proactive strategies for monitoring customer expectations to align their marketing strategies appropriately. As such, delivering high quality services that promise superior value is an ongoing concern for any successful business organization, especially in the aviation industry (Reimer & Kuehn, 2005). 3.2 Analysis of Qantas Service Gap with Respect to Product i. Gap between management and consumer expectation of quality: due to readily availability of substitute products (from competitors) and rapid change of consumer expectations, Qantas management does not always perceive precisely what consumers’ expectations are. The management may perceive customers to be price driven and not customer service driven, but in reality this may turn out not to be the case. ii. Gap between service quality specification and management’s perception: Qantas management may have a correct perception of customers’ needs but may fail to set the right performance standards because customer preferences change quite often. iii. Gap between service delivery and service quality specifications: Qantas personnel are well trained and willing to implement the company’s service quality standards. They take time to listen to customers and serve them in the most effective manner. iv. Gap between external communications and service delivery. In the aviation industry, customers’ expectations are influenced by messages communicated by a company’s representatives and adverts. Qantas takes pride in its carefully designed and targeted external communications, which serve to enhance customer relationships. v. Gap between expected service and perceived service: this gap arises occasionally because customers are bombarded with lots of conflicting information from different competitors. Nonetheless, Qantas communicates regularly with is target customers and assures them of the best services. 3.3 Recommendations The foregoing service gap analysis shows evidence of variations between Qantas perceived and expected service quality. To close these gaps, it is recommended that the airline’s management takes appropriate measures to make its product offering more appealing to customers. In particular, the airline should focus more on the role of physical evidence as an influencing factor in product perception. In the airline industry, physical aspects such as aircraft type, customer service processes and other factors play a critical role in influencing customer expectations. Therefore, Qantas should make fundamental improvements in these aspects in order to maintain its competitive advantages in the industry. It is also recommended that Qantas reviews its pricing strategies to improve perceptions about its services by customers. Pricing of products is a very sensitive issue in the passenger aviation industry. It is for this reason that airlines are competing in terms of prices. Although Qantas has introduced a low cost subsidiary (Jetstar), it is not able to compete effectively in all market fronts, especially in foreign flights. Even within Australia, Jetstar faces stiff competition from Virgin Australia and other airlines that have priced their services cheaply. To survive this competition in the long-term, Qantas will have to overhaul its current pricing strategies in order to appeal more to the economy customers. 4. Conclusion Qantas embraces the 7 P’s of marketing as integral elements of its marketing mix. The airline’s marketing objective is to communicate to its customers about what it offers and how its services are different from those of competitors. Qantas achieves this by carefully addressing each element of the marketing mix. Through these elements, the company develops marketing strategies to support its business objectives in both the short-term and long-term. As shown in the analysis, Qantas attaches a lot of importance on its product attributes. Being a national leader in a very competitive and dynamic industry, it is of great concern that Qantas takes proactive measures to protect its market niche while also exploiting new opportunities for growth. Analysis of service gap shows that although Qantas offers high quality services, there are considerable differences between perceived quality and expected quality. By taking steps to address these gaps, Qantas will significantly improve its brand appeal and the ability.   References French, S., (2009). Critiquing the language of strategic management. Journal of Management Development, 28 (1): 6 – 17. Kyrgidou, L.P. and Hughes, M., (2010). Strategic entrepreneurship: origins, core elements and research directions. European Business Review, 22 (1): 43- 63. Qantas Airlines Limited (2016). About us. Retrieved from http://www.qantas.com/travel/airlines/business-travel/global/en Reimer, A. and Kuehn, R. (2005). The impact of servicescape on quality perception. European Journal of Marketing, 39(7): 785-808. Snyman, R and Kruger, C. J., (2004). The interdependency between strategic management and strategic knowledge management. Journal of Knowledge Management 8 (1):5–19. Read More