Qantas Versus Virgin Australia Airlines - Research Paper Example

Analysis of Marketing Mix: Qantas versus Virgin Australia Airlines Student’s Name Course Professor’s Name University City State Date Analysis of Marketing Mix: Qantas versus Virgin Australia Airlines Executive Summary Marketing mix is the set of tactics and actions that companies use to promote their products or brands in the market. The goal of the report was to analyse the marketing mix between Qantas and Virgin Australia Airline. The study used case study as the research method while the data was collected from secondary documents. Secondary analysis was conducted to determine the marketing mix between Qantas and Virgin Australia Airlines. The result shows that despite the fact that Qantas has a stronger brand; Virgin Australia has been having a better marketing mix thus gaining the edge. However, both the companies need to improve their marketing mix to ensure sustainability. The managers of the airlines can, therefore, use the study findings to improve their marketing mix and profitability. Table of Contents Executive Summary 2 1.Introduction 4 2.Literature Review 5 2.1 Background 5 2.2 Market Mix Evolution 5 3.Research Methodology 6 3.1 Case Study Method 6 3.2 Data Collection 6 4.Presentation of Findings 7 4.1 Analysis of Data 7 4.1.1Qantas Airline 7 4.1.2 Virgin Australia Airline 8 4.2Reflection on Findings and Implications 10 4.2.1 Qantas Critique 10 4.2.2 Virgin Australia Critique 12 5.Conclusions and Recommendations 13 Reference List 15 1. Introduction Marketing mix is a main model in marketing and is defined as a set of marketing tools that a business practices to realise its marketing goals in the target market. It is, therefore, made of four pillars of marketing decisions: place, promotion, price, and product. The marketing mix, also referred to as the 4Ps, is a common framework for decision making in marketing management and it was first published 1960. However, when it comes to marketing of services, an extended marketing mix is often used. It usually has 7 Ps which adds physical evidence, people, and process to the initial 4Ps. In some of the instances, ‘Performance’ is added thus forming 8 Ps instead of 7 Ps. The goal of the study is to analyse the market mix of Qantas and Virgin Australia Airlines. Qantas is the largest Australian international and domestic airline. It was found in Queensland in 1920 and initially registered as the Queensland and Northern Territory Aerial Services Limited, abbreviated as QANTAS (Qantas). Today, Qantas is one of the strongest Australian brands and is known as the leading long distance airline in the world. It has established its status for excellence in customer service, engineering and maintenance, operational reliability, and safety. It also owns Jetstar Airways which is a low-cost airline that operates in both domestic and international services. Virgin Australia Airlines, formerly known as Virgin Blue Airlines, is the second largest airline in Australia. It is the largest airline, based on fleet, to use the brand ‘Virgin.’ The airline was established in 1999 and it is based in Bowen Hills, Brisbane (CAPA Centre for Aviation 2015). Virgin Australia Airline became second largest airline in Australia after the collapse of Ansett Australia in 2001. Today the airline is directly serving more than twenty-nine cities in Australia from the Sydney, Melbourne, and Brisbane hubs. The major sections of the project report are introduction, literature review, research methodology, presentation of findings, and conclusion and recommendations. The research methodology is divided into case study method and data collection. On the other hand, the presentation of findings segment is divided into data analysis and reflection sub-segments. 2. Literature Review 2.1 Background Marketing mix concept plays a crucial role in marketing. According to Goi (2009), market mix helps translate marketing plan into practice. The 4 Ps is the basic concept in market mix since the additional Ps have not yet achieved consensus on agreement and eligibility over their practical application. Marketing mix has been evolving over decades (Londhe 2014). However, the common thing over these decades had been ‘value.’ In explanation, the customers enter into the marketing process to seek for “value” while the marketers focus on the “valued customer” (Londhe 2014, p. 335). The evolution of the marketing mix theory has seen several question in modern marketing answered compared to the traditional theories. Factors in the marketing mix significantly absorb the customers (Pour, Nazari, & Emami 2013). Upon deciding on the market group, the product is introduced in the market through developing the suitable promotion, place, price, and product. The four items are to be mixed or combined in suitable proportions so as to attain the marketing goal. 2.2 Market Mix Evolution Marketing mix has gone through significant changes over years. Neil Borden is the first person to have used the term ‘marketing mix’ in 1949 (Pour, Nazari, & Emami 2013). The executive is the ingredients mixer who follows the recipe, adapts it recipe based on the ingredients available, and invents or experiments with ingredients that no one else has ever tried (Mei 2011). Borden argued that it is important to take consideration of the firm needs when building the marketing program (Borden 1964). The marketer needs also to take into consideration the behavioural and then bring in the marketing elements with keen interest on the key resources. The first person to suggest the use of 4 P’s of place, product, promotion, and price was E. Jerome McCarthy (Pour, Nazari, & Emami 2013). The 4 P’s are today the most common variables used today in constructing marketing mix. McCarthy argued that the four variables are critical in crafting marketing strategy and developing a marketing plan (Yudelson 1999). The mix variables can be changed in the long term but not in the short term since it is difficult to modify the distribution channel and product over a short period. Albert Frey developed another set of marketing mix variables in 1961 and classified them into two categories: the process and the offering variables (Pour, Nazari & Emami 2013). The ‘process’, also known as the ‘method’ variables included development of new product, strategy formation, marketing research, distribution channels, publicity, personal selling, sales promotion, promotion, and advertising (Pride 2011). The ‘offering’ concept entails the price, brand, packaging, service and product. In the recent development, Bernard Booms and Mary Bitner developed a model made of seven P’s. They added the variable of ‘people’ to the existing ones so as to recognise the significance of the human element in marketing aspects (Goi 2009). They also added ‘process’ to show that services, as opposed to physical products, are considered to be processes upon purchase. 3. Research Methodology The study used case study as the research design. The case study research design has changed over years as an investigative tool for given situations. It is often deployed in social sciences and business subjects. It is important in testing theoretical models through implementing them in real time situations. 3.1 Case Study Method The study took Qantas and Virgin Australia Airlines as the case studies. It involved an in depth study of the marketing mix of the two aviation companies in Australia as opposed to sweeping statistical analysis. The study method aimed at narrowing down of the marketing mix study into the bases of the two companies (Yin 2013). As a result, it enabled a complete answering of the question of analysing the marketing mix of two competitors within the same product-market domain. It gave the suitable indications and allowed for further elaboration and creation of an hypothesis. The case study research design also helped to test whether marketing mix as a theory applies on the real world. 3.2 Data Collection The study used secondary data collection method to collect the information. The data was collected from both internal and external sources of Qantas and Virgin Australia Airlines. The internal sources used included the sales report, financial statements, and company websites (Vartanian 2011). The external sources used included the business journals, business magazines, online articles, and information from the government departments. The data was analysed through secondary data analysis. 4. Presentation of Findings 4.1 Analysis of Data 4.1.1Qantas Airline a. Product Competition in the aviation industry has seen Qantas pay more attention on product planning. The products are developed to attract new customers in the industry and retain the current ones. Profitability is given very high priority in the case of Qantas Company. The products that Qantas deal with include freight containers or the passenger travelling accommodations. Basically, the company offers a range of premium travelling arrangements (Qantas). The range of travelling arrangements offered by Qantas includes premium economy, international economy, international business class, and first class. There are varied kind of seating arrangements in the light services and amenities and meals are provided in each of the classes. The domestic flights have distinct economy and business classes. It has also got spate in-flight entertainment service for the customers. Its other brand, Jetstar also has low cost flying arrangements. The company also try to associate its products with better services with the information on the flight available online or can be received from the firm via short message services. The company has also tries to increase the number of more advanced and sophisticated aircrafts to its fleet at a constant interval. It has also invested more on the in-flight entertainment thus a boost to the company. It provides its customers with the best connecting flights globally and has one of the most popular programs for frequent flyer in the world (Qantas). Qantas is also deemed to be one of the most leading brand names in the industry thus attracting millions of customers. The company slogan, logo, and history also distinguish it from its rivals in the industry. It also has a better tracking system for its freight. In addition, the company have safer containers and offers quickest routes globally. b. Price Qantas often use ‘cost plus margin’ method in pricing its products. Markets that have higher demands encourages Qantas to increase it prices. It also uses competitive pricing methods in some of the market segments in which competition in high. Furthermore, Qantas uses penetrative pricing for its low cost airlines. It also has fair pricing services that are used to ensure flexibility of customers (Qantas). Qantas also provides the price discounts through disguise and does not portray them as actual discounts. This ensures that the perception of the customer prices is maintained. Qantas also offers low pricing for the new destinations. It also has a frequent flyer program that issues fantastic benefits to its customers. c. Promotion Qantas advertises it products and services through magazines, brochures, billboards, billboards, and advertisement among others. The advertisements are used the purposes of brand promotions and branding. The company also uses direct marketing to send messages to its customers. Messages send to the customers are usually customised as per the needs of the customers so as to reach them at the personal level (Qantas). The strategy has always worked for Qantas so far and it has been more effective compared to using mass media to reach the customers. The company uses sales promotions during the low seasons and direct selling to reach the corporate customers. It complements the process through the use of emails, blogs, and social network for marketing so as to get close to the customers. Furthermore, it engages in public relation activities and sponsorship of activities such as event art, sports, and programs related to entertainment. The company also sponsors and involves itself with several charitable programs (CAPA Centre for Aviation 2015). d. Place Qantas conducts direct sales over the counters at the airports. It also has its own retail outlets that help in the quick ticket sales. The company has started using internet more increasingly thus has hastened the sale of the tickets through the company websites and other travel sites (Qantas). Mobile phones and telephone can also be used to buy tickets. It also uses the travel agents as intermediaries to sell its tickets to the potential and usual customers (CAPA Centre for Aviation 2015). 4.1.2 Virgin Australia Airline a. Product Virgin Australia Airline offers domestic and international operations to its customers. Such services include business class, premium economy, economy, international long-haul operations, international business class, international premium economy class and international economy class (CAPA Centre for Aviation 2015). The inflight amenities include food and beverages, inflight entertainment, and members lounge facility. It also has a credit card in partnership with the National Australian Bank. Virgin Australia has a strong brand name thus a great market repositioning. It has free-Wi-Fi on board and offer free Samsung Galaxy Tablets on international routes. b. Price Virgin Australia Airline is cheaper compared to Qantas thus growth in its number of customers. During economic recessions, it reduces its flights thus stimulating demands and reducing costs hence increase in profit margin. Its fair prices are categorised into business elite, saver, saver elite, flexi, premium, premium elite, and business. It is also flexible and allows for booking cancelations (CAPA Centre for Aviation 2015). c. Promotion Virgin Australia uses promotions new, modified and already established services. Some of the methods used in promotion include web media, television board casting, magazines and print media. It passes information through issuance of the company performers and overviews to the consumers and investors. Virgin Australia also promotes itself through rebranding and issuance of loyalty programs such as a frequent flyer program, unique benefits for their members, reward seats for annual family trips, and baggage allowances. Virgin Australia conducts its major promotions through sponsorship. The first rugby team it sponsored was Rabbitohs. In the sponsorship, it made slight changes on one of its Boeing 737-800s that had an Ausralian flag to Rabbitoh’s flag (CAPA Centre for Aviation 2015). It is also the official sponsor of the National Basketball League and the title sponsors of the team in the league known as Brisbane Bullets. Its slogan ‘Now you are flying’ is a promotion tool that attracts may people. It is also a sponsor of AFL clubs such as Greater Western Sydney Giants and Gold Coast Suns. It also engages in corporate social responsibility services and have environmental, renewable jet fuel, carbon offset, sustainability governance, stakeholder engagement, reporting, and sustainability at Virgin programs. d. Place It has more routes, planes, and flights thus the increase on the number of customers. The sale of the tickets online is convenient, quick and easy, environmentally friendly, and efficient. The company also manages its service offering through monitoring the number of flights in the market (CAPA Centre for Aviation 2015). This ensures that the demand in the market is met without over-supplying. Since they consider their services perishable, they sell the extra seats at a cheaper price with an attempt to minimise losses. 4.2 Reflection on Findings and Implications 4.2.1 Qantas Critique Qantas marketing practices have a number of flaws. Since it was started approximately a decade ago, it has been a leading premium airline in the globe. However, in the recent years, it has been sinking in lower ranks globally based on the preference and profitability. The increasing competition has seen several of the airlines focusing strongly on their product strategies. The airlines have been engaging in creative and innovative services and products so as to ensure success of their brands which is not the case of Qantas. In explanation, Qantas have limited wide body crafts thus making them fall behind the global world-class counterparts such as Emirates and Qatar (Goi 2009). The wide-bodied aircrafts ensure enhanced comfort levels for the customers and increases privacy. Introduction of the worldwide destination calls for the customisation of meals for every customer but the company has not been able to customise the concepts until today. The economy class of Qantas have also occasionally complained of inappropriate services offered by the in-flight crew of the company. There have also been increased in cases that related to flight delays and luggage losses to and from the world-wide destinations. Inadequate health arrangements has also seen the older customers suffer as some of the flights do not have health safety measures as promoted. Qantas issues in-flight experiences such as movies, games, audio books, CDs, radio, television programs among others. In addition, they offer telecommunications, mobile usage, internet surfing and flight entertainment. However the provision of these services has always been below satisfactory level. In explanation, loss of mobile or internet connection midair have often been reported while the personal demands such as video or audio-on-demand and kids entertainment is often lacking. The magazines are also limited in numbers and the ground services have often been criticised of not living to the level of the promises given by the brand. The company’s lounges need full or partial revamping so as to strengthen the name of the brand and attract additional customers (Londhe 2014). Even though Qantas is a One World Alliance member, it still has some inadequacy as far per the consideration of the world renowned airlines. The connecting flights of the company can be better arranged to ensure connections with other airlines. There are a number of routes that Qantas is serving despite inadequate demands and need to be corrected immediately to ensure efficiency. Jetstar, Qantas’ low cost airline, was intended to offer no-frills services but is more of a regular airline thus at times so confusing to the customers hence leading to the loss of the perspective and valuable customers. The high quality and simple products that Jetstar is associated with is often not delivered as expected (Qantas). The services offered to the business customers need to be intelligently crafted. More attention should be paid on the better quality aircraft, luggage losses, flight delays, and queues at terminals. Further efforts should also be put in place to ensure transparency, consistency in company messages, great customer relationships, and certainty that was previously associated with Qantas. The pricing strategies of Qantas also need to be looked into and efforts should be put in place to attract more customers and ensure that the global financial turmoil do not affect the airline. The recent financial losses of Qantas are a direct result of the global turmoil and loss of customers. The premium prices that Qantas charge are too high even for the strongest of the brand image thus making the customers to opt for the airlines that are fairly priced. Qantas need to pay more attention in building a strong brand and reducing prices while maintaining a lower profit margin. It also need to portray the changes as for the benefits of the customers through frequent flyer and issue offers instead of discounts since the latter tarnishes the brand of the image. The pricing should always be kept competitive even in the markets that have huge demands. This will nullify the chances of additional airlines entering into the consideration set of the consumers and enable the customers from the lower price set segments to experience Qantas. Qantas has less often used penetrative pricing in the past thus allowing some of the growing markets to be lost. It should, therefore, use it so as to gain ground. The current years have seen price skimming become more difficult hence Qantas should concentrate on the penetrative pricing and strong imaging. The company also need to be more cautions when it comes to promotions expenditure. The recent ‘Re-positioning’ campaign of the company as ‘Spirit of the Australians’ was criticised as a vain exercise and a waste of money. Qantas has failed to maximise the utilisation of the internet in promotions despite it being a low-cost medium (Qantas). It should not only focus on the introduction of the internet ads in the sites of strategic partners or other sites that the target audience visit. It should also increase the number of flash ads, rich content, pop-down, and pop-up ads. The blog of Qantas is also less attractive, and the customers do not get adequate response due to its ineffectiveness. The Facebook page of the company has also been considered mechanical and impersonal hence the tagging the ‘dying octopus’ (Mei 2011). Qantas television advertisements are usually thrown to the public without the target of a particular audience. The billboards used by the company are inadequate and not places in strategic locations. The ads on the magazines are also inadequate in numbers and not properly hitting at the target audience. The sales promotion should be used annually, and frequency of using direct marketing should be increased. The company should also engage on stronger public relations activities and correct events sponsored. Qantas also forgets to maximise the use of Below the Line activities such as tourism fairs, exhibitions, conventions, and expositions among others (Pour, Nazari, and Emami 2013). In addition, its direct sales counters are often considered to be made of long queues at the airports while the services are slow and not customer-friendly. Qantas’ retail outlets do not have the atmosphere that makes the customers comfortable since it has inadequate number of experts. Its models also do not maximise the use of internet sales despite it maximising profits since the costs are at the minimum. The internet travel sites are not also enthusiastically used to sell tickets. The sales via telephone have also experienced a slowdown in the recent past. 4.2.2 Virgin Australia Critique Virgin Australia Airlines has a better market mix compared to Qantas. It, therefore, have less shortcomings when it comes to marketing. Most of its marketing shortcoming is linked to how they handle customers in uncontrollable situation. For instance, in 2003 a man with disability was removed from a flight since the staff though he was drunk. In 2005, the airline was found guilty of a discriminating flight attendants based on age with preference on the younger groups. In 2006, the company had a controversy on the policy regarding people with disability. In 2007 the company attracted another controversy when one of its staffs at the Adelaide Airport ordered a passenger to remove his shirt because it had the slogan “Number One Terrorist” and an image of George W. Bush. In 2011, the company was fined $110,000 for going against the anti-spamming rules in which the consumers complained of not being able to unsubscribe from the mailing list of the airline. The airline also faced a legal action in which the Australian Competition and Consumer Commission was the plaintiff, and the case was on drip pricing. The airline management should ensure that the customer services are improved this is in agreement with the Pride (2011). 5. Conclusions and Recommendations Reliable marketing mix has made Virgin Australian Airline to overpower Qantas in the market. However, both airline have been doing good only in the domestic network and has been experiencing under-performance in the international networks. Virgin has often experienced profit growth at the expense of Qantas. The challenge that saw Qantas introduces Jetstar so as to compete Virgin Australia airline due to its focus on the domestic market. In response, Virgin has been turning to the international market to eliminate the challenges. The competition between the two companies has been stiff with Virgin Australia gaining while Qantas is losing. The solution, therefore, has been for the companies to strengthen their international market presence. The recommendation for the companies to increase their domestic and international market can also be categorised into Product, Price, Promotion, and Place. Based on Price, the companies need to revamp their branding campaigns so as to develop stronger brands. Quality should be enhanced so that they can retain their old customers and new friends gained. Privacy should also be enhanced in the plan through introduction of planes with lesser seats per row and maximisation of the leg-space and pushback. The washrooms also need to be made larger and the meals customised as per the request of the customers. Consistency also need to me maintained in every class and the loss of luggage and flight delays eliminated. The health arrangements on-board should be excellent, and the assistance for people with disability should be top class same to the expectant mothers, young travellers and infants. There should also be medical service to address any mid-air emergency. The mobile check-ins also needs to be smarter and faster and strategic alliances with One World Partners need to be strengthened so as to develop unbroken networks in the world. They should also develop additional in-flight entertainment system and options such as Oryx; ensure there is uninterrupted power outlet, internet, and mobile services; and audio-video on demand services. Premium lounges need to be revamped and the South American sky need to be furthermore covered for the case of Qantas. Both airlines should focus more on the developing world with penetration pricing. The frequent flyers also should have more customer benefits while quality of the services and benefits should be increased to ensure brand loyalty. The two companies need to strengthen their brand more so as to penetrate the international market. Based on price, the companies need to adopt the penetrating pricing strategy so as to gain new customers and win back the lost ones. The Qantas and Virgin brands can easily penetrate the developing nations market, but this will be based on pricing strategy and quality service. In the low demand markets, the airlines need to loss leader pricing tag and engage in multi-unit pricing for the case of the corporations. Market skimming should also be cut down and restrained to only the markets with high demand. The very high demand segments, however, should have prestige pricing. There are several adjustments that can also be made on the promotion practices of the companies. The promotions should be not only strong but also well thought out and should be conducted through selected television ads and focus on the target segments. Focus should also be places on the internet ads on the business and travel related sites and other popular sites that the target audience visit such as Google and Yahoo. Ads and posters should also be placed on the sites of the strategic partners. In addition, there is need for additional rich content ads, flash ads, and pop-up and pop-down ads. There is also need for revamping social networking. In explanation, the pages used should be attractive, customer-friendly and informal to enhance customer participation. The online community need to reach through sites such as Twitter and Facebook. This will ensure that the customers can give their views and give the company the less known facts. The social sites should also announce the latest happenings while the blogs should be more informal and focusing on airline related aspects to win its customers. The airlines should also have their billboards at strategic positions while newsletter sending and email marketing should be given a boost. The public relations activities should also be stronger and further engage in sponsorship activities and participation on fairs, conventions, and expos among others. Lastly, the airlines need to focus on place. For instance, the direct sales counters should ensure faster and better customer services. The retail outlets should also have better colours, design and ambience. The companies should also associate themselves with popular sites so as to ensure greater sales. The travel agents should be given rewards and awards for pushing sales and the sales through telephone should be give adequate attention. 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