Transcript in Airline Marketing

Aviation Management
College
AIRLINE MARKETING
Product Analysis
In
Airline Marketing
Aviation Management
College
Product Analysis
In
Airline Marketing
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
What is the Product of Airline Business?
- An intangible one
Product Analysis
In Airline Marketing
Aviation Management
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1. Product Life cycle
a)
-
Introductory stage
New product
Less promotion
60% to 70% failure
Eg., Concord, Boeing 717, Airbus 318
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
1. Product Life cycle
a) Introductory stage - success factors
- Relative
- advantage – better, value for money
than the replacement
- Compatibility – gradual change vs. radical change
- Complexity – easy to use or to adapt
- Divisibility – with smaller steps or trial basis
- Communicability – easily understood, and
accepted
Aviation Management
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Product Analysis
In Airline Marketing
1. Product Life cycle
b Growth Phase
- Sales accelerate
- Advertising & promotion bare
fruits
- Benefits from imitation buying
AIRLINE MARKETING
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
1. Product Life cycle
b
-
Growth Phase - challenges
Production rates increases to meet demand
Competitors are responding with rival product
Operating cost increases with sales and
production
- Balance growth between meeting demand &
over production/expansion
Product Analysis
In Airline Marketing
Aviation Management
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AIRLINE MARKETING
1. Product Life cycle
c)
-
Maturity stage
Sales begin to slow down
Most people have got it
Market saturated with competition
Market changes from growth to
replacement
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
1. Product Life cycle
c) Maturity
stage – responding to challenges
- Developing and introduction cost have been
recovered
- Still able to make profit at lower prices
- Enjoys economies of scales
- Production efficiencies
- Increase financial flexibility
Product Analysis
In Airline Marketing
Aviation Management
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1. Product Life cycle
c)
-
Maturity stage- challenges
Use R&D to produce new product
Replace product before abandoning
Produce for other
AIRLINE MARKETING
Product Analysis
In Airline Marketing
Aviation Management
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AIRLINE MARKETING
1. Product Life cycle
d)
-
Decline stage
Market stop buying
A lot of rivals
Stop producing and slowly withdraw
from market
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
1. Product Life cycle
d) Decline stage – challenges
- R&D during maturity stage – going concern
- Replacement available before declining stage
- Product introduction at declining stage
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
Product Life Cycle in Aviation Industry
1. Boeing 737
- started 1960 737-100 sales was poor
- 1972 financial crisis worsen situation
- Continue R&D 1970 produced 737-200
- Sold 200 planes in 10 yrs
- 1980 maturity stage & competition A320
- Early 1980 introduced -300,-400,-500
- Until 1990 sold 2000 planes
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
Product Life Cycle in Aviation Industry
1. Boeing 737 - cont
- 1994 threat from A-319,318,321
- Launch 737-600,-700,-800,-900
Product Analysis
In Airline Marketing
Aviation Management
College
-
AIRLINE MARKETING
Product Analysis
In Airline Marketing
Aviation Management
College
-
AIRLINE MARKETING
Product Analysis
In Airline Marketing
Aviation Management
College
-
AIRLINE MARKETING
Aviation Management
College
Product Analysis
In Airline Marketing
Product Life Cycle in Aviation Industry
PLC of Frequent Flyer Programmes (FFP)
-1981 introduction by AA
-1990 Growing with millions of members
- 2000 Maturity, other Airlines join in
- now moving to Decline stage,
AIRLINE MARKETING
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
Product Life Cycle in Aviation Industry
Frequent Flyer Programmes-Declining Signs
- irresponsible employee; unnecessary travel
- point awarded to corporate x-individual
-points converted to corporate discounts
-Points can be collected from other airlines
- Points can we accrued by other source
Aviation Management
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Product Analysis
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AIRLINE MARKETING
Product Life Cycle in Aviation Industry
PLC of Leisure & Vacation Market
a) Introductory stage attracts innovators
- High disposable income
- Well-educated
- Adventures, willing to try new purchases
- Status conscious
- Showy characters
Aviation Management
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Product Analysis
In Airline Marketing
Product Life Cycle in Aviation Industry
PLC of Leisure & Vacation Market
b) Growth stage of Innovators
-New destination
-Exciting adventure
-Interesting events
-Good package
-Image advertisement
-High price
AIRLINE MARKETING
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
Product Life Cycle in Aviation Industry
PLC of Leisure & Vacation Market
c) Maturity stage of Innovators
-More people are joining the package
-Affordable to the mid-low income travelers
-Becoming crowded and noisy
Aviation Management
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Product Analysis
In Airline Marketing
Product Life Cycle in Aviation Industry
PLC of Leisure & Vacation Market
d) Decline stage of Innovators
-Product become old-fashioned
-Lack privacy and exclusivity
-Operators concerned with volume
-Service and quality declining
-Market full of laggards
AIRLINE MARKETING
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
Product Life Cycle in Aviation Industry
PLC of Leisure & Vacation Market
e) Introductory stage attracts Laggards
- the last to adopt an innovation.
- typically tend to be focused on “traditions”,
- lowest social status, lowest financial fluidity,
oldest of all other adopters,
-in contact with only family and close friends,
Aviation Management
College
Product Analysis
In Airline Marketing
Product Life Cycle in Aviation Industry
PLC of Leisure & Vacation Market
e) Introductory stage attracts Laggards
AIRLINE MARKETING
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
Background
- US Boston Consulting Group 1963
- Using product range & portfolio
- Using 2 variables:
- a) The size of total market
- b) The share of the market or market share
Product Analysis
In Airline Marketing
Aviation Management
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AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
i)
WILDCAT - Characteristics
-
Product with low market share
The overall market is growing
Invest to increase market share
Using ‘4 Ps’ of Marketing Mix
Product Analysis
In Airline Marketing
Aviation Management
College
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
i)
Wildcat - Using ‘4 Ps’ of Marketing Mix
-
Product specs equal or better
Competitive pricing
Advertising & promotion activities
Using the right distribution channels
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
Product Analysis
In Airline Marketing
Aviation Management
College
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
i)
Wildcat – in Airline Marketing
-
Airline route as product; frequencies,
connections, package
International market; image & status,
withdrawal, an advantage to competitor
and difficult to re-enter
-
Product Analysis
In Airline Marketing
Aviation Management
College
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
ii) THE STAR - Characteristics
-
Product has good market share
The market is growing
The best product to the firm
The product produce max profit
Need to spend heavily to defend market
Product Analysis
In Airline Marketing
Aviation Management
College
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
ii) STAR – product investment
-
Advertising & promotion
Pricing strategy; competitive
High volume sales
Thin profit margins
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
ii) STAR – in Airline Marketing
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Aero-engine market powering large jet aircraft
Players: GE, Pratt & Whitney & Rolls
Competition is intense
Spend large sum to defend market
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
ii) STAR – in Airline Marketing
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Spend large amount on continuous product
development & improvement program.
Stiff pricing sometimes sold below cost
Profit from sales of spares & lifetime product
support
All with huge sales revenues, often thin margins
Product Analysis
In Airline Marketing
Aviation Management
College
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
ii) STAR – for Cost Leader Airlines (LCC)
-
Intra European route & Asian regional routes
Attracts new players
Growing market
Competitive pricing
High sales revenue
Low profit margins
Product Analysis
In Airline Marketing
Aviation Management
College
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
iii) CASH COW PRODUCT – characteristics
-
Product have good market share
Market is in maturity stage (not growing)
Market not attractive to new entrants
A major source for profit because no/less
spending to protect market share
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
iii) CASH COW PRODUCT – in Airline Marketing
-
-
Smaller engine market; a monopoly by The
Tay of Rolls-Royce
Fokker & Gulfstream jets, stagnant market
Now Fokker has gone bankrupt from 1996
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Managing a Product Portfolio – Boston Box
iv) DOG PRODUCTS – characteristics
-
Low market share
Market is small & not growing
Ready to discontinue product
No spending, money used for other product
Aviation Management
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Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
A marketing tool created by Igor Ansoff and first
published in his article "Strategies for
Diversification" in the Harvard Business Review
(1957).
The matrix allows marketers to consider ways to
grow the business via existing and/or new
products, in existing and/or new markets
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
There are four possible product/market
combinations. This matrix helps companies
decide what course of action should be taken
given current performance. The matrix consists of
four strategies:
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
1, Market Penetration
Here we market our existing products to our existing
customers. This means increasing our revenue by, for
example, promoting the product, repositioning the
brand, and so on. However, the product is not altered
and we do not seek any new customers.
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
1. Market Penetration
(existing markets, existing products):
- company enters/penetrates a market with current
product
- by gaining competitors' customers (part of their
market share).
- other ways include attracting non-users of your
product or convincing current clients to use more
- with advertising or other promotions.
- on is the least risky way for a company to grow.
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
2. Market Development
Here we market our existing product range in a new
market. This means that the product remains the
same, but it is marketed to a new audience.
Exporting the product, or marketing it in a new
region, are examples of market development.
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
2. Market development
- (new markets, existing products):
- established product in the marketplace can be
targeted to a different customer segment,
- as a strategy to earn more revenue for the firm.
- Eg.,, Lucozade was first marketed for sick children
and then rebranded to target athletes.
- developing a new market for an existing product.
- the market need not be new in itself, but the
market is new to the company.
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
3. Product Development
This is a new product to be marketed to our existing
customers. Here we develop and innovate new
product offerings to replace existing ones. Such
products are then marketed to our existing
customers. This often happens with the auto markets
where existing models are updated or replaced and
then marketed to existing customers.
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
3. Product development
(existing markets, new products):
- developing new products for to the same market
- old product but new to the company
- Eg., McDonald's within the fast-food industry, but
frequently markets new burgers.
- when a firm creates new products, it gain new
customers for these products.
- new product development, a crucial business
strategy for firms to stay competitive.
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
4. Diversification
New products to new customers. Two types of
diversification,
a) Related diversification - remain in a market which
we are familiar. Eg., a soup manufacturer
diversifies into cake (food industry).
b) Unrelated diversification - we have no previous
industry nor market experience. For example a
soup manufacturer invests in the rail business.
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
4. Diversification
- (new markets, new products):
- Virgin Cola, Virgin Megastores, Virgin Airlines,
Virgin
- Telecommunications are examples of new
products created by the Virgin Group of UK, to
leverage the Virgin brand.
- This resulted in the company entering new
markets where it had no presence before
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
4.
Diversification
Federal Express (FedEx):
-
door 2 door service,
smaller shipments
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
4. Diversification
Market completely new products to new customers.
Two types of diversification,
a) Related diversification - we remain in a market or
industry which we are familiar. For example, a
soup manufacturer diversifies into cake
manufacture (i.e. the food industry).
b) Unrelated diversification - we have no previous
industry nor market experience. For example a
soup manufacturer invests in the rail business.
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING
Balancing Risk & Opportunity – the Ansoff Matrix
Aviation Management
College
Product Analysis
In Airline Marketing
AIRLINE MARKETING