Consumer Behavior Analysis of Airline Services: A of Qantas Airline Market - Case Study Example

Consumer Behavior Analysis of Airline Services: A Case of Qantas Airline Name Institution Course Date Consumer Behavior Analysis of Airline Services: A Case of Qantas Airline Market The Australian airline has experienced remarkable growth over the last few decades despite the economic volatilities rising cost of fuel. In 2012, the Australian airline market was estimated at $22 billion and is protected to reach $22.1 billion by the end of 2016 (IBSWorld 2016). The growth is expected to be catalyzed by the increased passenger travels and tourism industry. The growth of the industry has made the industry attractive to both domestic and foreign airlines that have entered to grab a share of the market. Qantas is the largest airline in Australia in terms of fleet size, international destinations and international flights. Founded in 1920 (Aulenbach 2007, p. 14), Qantas has grown to become a globe brand flight in more than 20 domestic destinations and more than 21 international destinations across 14 countries. This implies that Qantas occupies position one in Australian domestic airline industry despite high competition it faces from both domestic and international airlines. In terms of market share, Qantas controls 65% of Australian domestic airline market share (Center for Aviation 2015). Qantas main products include the provision of passenger and cargo services to different destinations across the globe (Kain & Webb 2003). The airline has been able to attract a large number of customers that have remained loyal to the company because of the products and services provided by Qantas are of high quality besides the fact that the airline assures passengers of their safety and the safety of their cargoes. In 2015, Qantas carried more than 49.2 million passengers to different destinations across the globe (Center for Aviation 2015). Besides the main products that the airline provides, to increase customer value and experience, Qantas provide additional services to passengers that fly with its fleet of aircrafts that include in-flight entertainment, smartphone support and meals. Product Life Cycle Every product goes through different stages commonly called product life cycle. A product goes through five main stages namely product development, introduction, growth, and maturity and decline stage (Stark 2011, p. 31). Analysis of Qantas product life cycle indicates that its domestic flight services within Australia is at the maturity stage. The airline’s domestic flight services have reached the peak of their demand due to continued usage and customer satisfaction. However, analysis of the industry indicates that the maturity stage is expected to continue into the future considering that airline is still the most effective and preferred mode of transport over long distances. Even as domestic flights are still at the maturity stage, the airline’s paper ticket product is at its decline stage. The airline industry happens to be among the industries that have been affected by the technological advancements that have occurred in the recent past. Accordingly, as new technologies continue to be adopted, such as the Internet, the need for paper ticket to board an airline has declined significantly (Riley 2016, p. 12). As such, to respond effectively to the technological trends in the market, Qantas will not continue offering paper ticketing services by redesigning or improving it, thus would be obsolete. Product Positioning Qantas has positioned its products and services as the best airline service provider with a focus safety, customer service and operational excellence. Positioning itself in this manner has given it an edge over rivals as it makes the airline to be seen by passengers as the best in terms of guaranteeing them safety, quality customers service and operational excellence. Competitors Competition in Australian airline industry is high. Qantas has several direct and indirect competitors that it competes with for the market share. The direct competitors of Qantas are those airlines that it competes with for domestic and international air travel. They include Tiger, Jetstar, Virgin Australia, Ryanair, Singapore Airline, British Airways, Air Asia, Turkish Airline, Etihad, Emirates and South African Airways. Although these airline companies offer stiff competition, Qantas still controls about 40% of the Australian domestic airline market (Riley 2016, p. 7). It is followed by Virgin Australia that controls about 36%, Jetstar 23%, Tiger 3% of the domestic market. In addition to the direct competitors, Qantas also has indirect competitors, which comprises of alternatives of domestic travel. The indirect competitors include trains, buses, cruising and driving. Whereas air travel takes 42% of market share, trains, buses, driving and cruising constitute 17%, 16%, 10% and 15% respectively. As competition gets stiffer in the Australian airline market, airline service providers are changing their strategies to gain a competitive edge over rivals. In particular, most airlines are moving towards low-cost strategy as a way of differentiate from rivals. Low-cost is a market strategy where a company seeks to become the lowest cost producer in a market. Qantas is an example Australian airline that has positioned as a low-cost airline. Others that have also adopted low-cost strategy include Jetstar, Virgin Australia and Ryanair. However, competitors, such as Singapore Airline, BA, Air Asia, Etihad, Turkish Airline and South African Airways all target a niche market with their products and services (IBISWorld 2016). Identification of Target Market Segmentation is an important marketing activity as it enables a company to divide its market according to the needs of customers (Wedel & Kamakura 2012, p. 21; Dibb & Simkin 1996, p. 44). Qantas is a good example of an airline that has used different bases to segment its market according to the needs of its customers, including behavioral, geographic, demographic and psychographic segmentations. First, Qantas uses behavioral segmentation to select its target market. In this regard, Qantas distinguishes the buyers of its products according to purpose, which includes business, leisure or non-business travelers. However, because passengers travel within business and leisure categories for different reasons, Qantas has divided its business segment further to include routine business, emergency business and conferences/seminar business segments. Qantas has also divided its leisure segment further into holiday and visiting friends and relatives (VFR) (Riley 2016, p. 18). The airline also uses demographic segmentation to identify its target market. In this respect, Qantas target mainly travelers aged 18-30 years with low to middle income both male and female. Additionally, Qantas has used psychographic segmentation that focuses on socio-economic status of travelers to identify its target market. Psychographic segmentation caters for individuals’ business people and those seeking prestige and leisure. It is for this reason that the airline has divided its services into different classes, including economy, business, premium economy and first class to cater for middle and high-income earners. Lastly, Qantas has used geographic segmentation to identify its target market. Qantas geographic segmentation includes Australia, New Zealand, Europe and Asia Pacific. Analysis indicates that Qantas targets mainly the middle-class and upper class people with its products. Therefore, to increase its competitiveness, the airline should consider starting to target even low income earners from Africa and the Middle East. Weinstein (2013, p. 24) shows that there has been a growing population of travelers from these parts of the world which offers a business opportunity for Qantas. As such, the airline should consider using its economy and business classes to target this growing segment of travelers. Primary Target Market: Leisure Travelers External Influences Culture and Subculture Every human being has got values that they consider important to their life. Values refers to what a person considers fundamentally important, thus constitutes an important part of their life/identity. Psychologist Shalom Schwartz came up with a value model that has been widely accepted, consisting of ten types of human values. The values include universalism, benevolence, conformity, tradition, security, power, achievement, hedonism, stimulation and self-direction (Atalık, & Arslan 2009, 84). As with the passenger segment, the core value help by this segment include security, hedonism and power. It is true that the values held in the society are consistent with the consumption of airline services. Security is an important value that leisure travelers consider when using an airline service (Bennett 2009, p. 90). Normally, before a passenger can decide on the airline to fly, security normally becomes the first thing they consider when making buying decision for airline service. This shows that this value is indeed consisted with the consumption of the service. Second, hedonism is an important value held by passengers and the society. Baker (2013, p. 71) noted that most people in the society tend to seek pleasure, but also luxurious gratification for oneself. The same applies to the consumption of airline services, where most passengers tend to look at the pleasure or luxury that they are likely to get from using a particular airline service. Additionally, the value of power as held in the society is consistent with the consumption of airline passenger services considering that passengers often seek prestige, social status and dominance, which influences their choice of airline services. Demographic The consumption of airline traveling services is influenced mainly by age and socio-economic status. Regarding age, Murray et al. (2006, p. 58) reports that the majority of airline travelers fall within the age of 18-60 years. These is linked to the fact that people within this age group are active and travel a lot because business and leisure reasons. Besides, socio-economic status is a factor that influences the consumption of airline traveling services. Because air tickets are relatively expensive and cannot be afforded by a significant proportion of the population, only those in the middle and high-income earners buy airline services because of their ability to pay. Internal Influences Needs and Motives The airline services provided by Qantas are positioned to satisfy the diverse needs and motives of customers. Abraham Maslow’s hierarchy of needs theory which states that people seeks the satisfaction of lower-level needs, which once fully satisfied, they no longer get motivated by the continued satisfaction of those needs and begins to seek the satisfaction of higher-level needs. The needs include physiological, security, belonging, esteem and self-actualization (Surhone et al. 2010, p. 107). Qantas satisfies the different needs of passengers. First, the airline provides meals to passengers on board its airlines, which satisfies their physiological needs. Secondly, Qantas has met the security needs of its passengers by ensuring that passengers travel in safe and secure airlines (Riley 2016, p. 31). Additionally, the airline has met the belonging needs of its passengers by being friendly, kind and helpful to the passengers. Lastly, the airline has met the esteem needs of passengers by introducing different classes of airline services to meet the esteem needs of its passengers. Perception Understanding the perception of customers is important undertaking for marketers. Perception refers to the process of organizing, selecting and interpreting stimuli into a coherent and meaningful manner. Perception has strategy implication for marketers considering that consumers usually make their buying decisions based on their perception of the product or service (Zeithaml et al. 1990, p. 94). In this respect, consumers usually perceive the things that they want and try to block those that they consider unnecessary or unfavorable. When a consumer perceives Qantas services to be of quality, reasonable price and that it can meet their needs, then they are likely to proceed to buy the products or services. On the contrary, when consumers perceive airline’s services to be of low or substandard quality, unreasonable price and not able to meet their needs, they are likely not to buy the product. As such, Qantas marketers must ensure that the perception of consumers of a service or product is taken into account when developing a product and service strategy to ensure success. Learning Reasoning and operant conditioning are some of the learning theories in practice. Reasoning is a learning theory that states that people use thinking to recombine and restructure new messages and information to form an association to something. Operant conditioning, on the other hand, is a behavioral learning theory that holds that a reinforced response is likely to be repeated in the event that similar situation arises (De Mooij 2010, p. 42). Considering that leisure travelers which forms the primary target market by Qantas travel exclusively for vacation as they look to have rest, have fun and enjoy their time, operant conditioning would be the most relevant behavioral learning theory for Qantas to use in promoting the airline services. By repeatedly providing leisure travelers with consistently quality products and services, these way airline service providers, such as Qantas will appeal to the leisure travelers that will associate them with quality services, such as comfort, entertainment and fun that they look for in an airline (Riley 2016, p. 52). Lifestyle Airline services appeals mainly to the outdoor adventurers, especially the leisure travelers. The services appeal to this lifestyle considering that Qantas provide comfort, entertainment and fun that Qantas provide. For instance, Qantas provides different classes for passengers that include economy, business, premium business and first class that appeals to travelers looking for adventure and fun (Riley 2016, p. 61). The services provided by Qantas also appeals to business and economy travelers considering that the airline provides for these group of customers as well. Consumer Decision Making Process In the airline service, the types of information that matters most for passengers include safety, prices, service quality and operational efficiency. When making buying decision, passengers usually engage in searching information regarding the prices, quality of services, operational efficiency, reliability and how and ticket prices before setting on a particular airline (Blodgett et al. 1995, p. 33). The type of decision level involved is tactical one considering that consumers are looking for the best service provider in the market that is capable of meeting their needs. Consumers of the airline services evaluate their brands by looking at the quality, safety, reliability, service quality and fares, which they then compare with those of the competitor firms to identify the airline company that meets all their needs with regards to all these aspects (Zeithaml et al. 1990, p. 73). The criteria used in making purchasing decision for airline traveling services, therefore is based on safety of the airline, affordability of the fares, quality of services delivered, reliability and the flight destinations. Post-purchase behavior is also an important aspect that airline service providers must consider to ensure success. Post-service behavior involves a consumer assessing whether the service has satisfied or dissatisfied him or her and this determines whether or not a customer will purchase a product or service for next time (Baker 2013, p. 67). With regard to airline services, post-purchase can occur when a traveler experiences safety issues with an airline, or where the quality of services offered are substandard, as well as when a customer experiences reliability problems with an airline. Because these can make a traveler to discontinue using an airline, it is important to avoid this by ensuring that high safety standards are maintained and that travelers are provided with quality and reliability services all the time. Building brand royalty is important for the success of airline service companies, such as Qantas (Lee & Cunningham 1996, p. 62). For this reason, brand loyalty is promoted by airline service providers such as Qantas through the provision of quality products and services. The companies also promote brand loyalty by ensuring that travelers are provided with safe, comfortable, reliable and affordable prices consistently. Marketing Strategy Qantas has positioned itself as the best airline service provider with a focus safety, customer service and operational excellence. Product Airlines primarily offer intangible offerings that include movements of people and goods (Zeithaml et al. 1990, p. 75). However, tangibility can inject tangibility by serving travelers with meals and drinks. In fact, many airlines, such as Southwest Airline provide tangibility by providing passengers with food and drinks. This augmented offering can be enhanced by ensuring that the meals and drinks are provided free or at low prices than market price. Price Price is a major factor that travelers use in evaluating airline service (Baker 2013, p. 69). However, the price elasticity of leisure travelers is low. This implies that price reduction will not affect their purchasing decision very much because they are mainly concerned about safety, comfort, service quality and reliability. Promotion The leisure travelers that form the primary market segment for Qantas place high value on safety, comfort, service quality and reliability. Therefore, promotional strategy should focus on communicating safety, comfort, service quality and reliability as these would help attract leisure travelers to the airline (Hung et al. 2003, p. 83). Currently, Qantas uses a variety of media channels to promote its brand, including website, social media and magazines and television. These media advertising channels are effective because they enable Qantas reach out to a lot of audience across the globe. For instance, Facebook that Qantas uses to promote its brand has more than 1.5 billion active users, which makes this platform effective for promoting Qantas brand. Place The leisure travelers segment of the market does not have a differing requirement of the distribution system in place at the moment. However, considering their lifestyle, online distribution system would be the most consistent with their lifestyles (Ostrowski et al. 1993, p. 19). This is because leisure travelers enjoy fun and comfort and would find it appropriate when services, such as ticketing are provided online. Evaluation and Recommendation Understanding consumer behavior is important has it has a huge implication on the marketing strategy adopted by a company (Martins 2005, p. 102). Based on the analysis of the consumer behavior in the airline industry, Qantas marketers should ensure that safety, reliability, service quality and prices are taken into account when developing marketing strategy because these factors have a an influence on travelers purchasing decisions. Qantas should also consider enhancing the quality of its service offerings by introducing meals, drinks and free internet services in its fleet of aircrafts to increase customer experience. At the same time, the airline should consider automating its ticketing services to allow travelers across the globe to buy them online. Additionally, Qantas ought to introduce integrated marketing communication (IMC) comprising of media advertising, loyalty programs, sales promotions, and sponsorships to enhance its marketing communication efforts. Conclusion Qantas is the largest airline in Australia in terms of fleet size, international destinations and international flights. The company provides domestic and international passenger and cargo services. However, the report has indicated that the consumer buying decision of Qantas airline services are influenced by a number of factors including safety, reliability, service quality and prices. 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