Aviation, Aerospace or Airport Industry Essay Example for Free

Aviation, Aerospace or Airport Industry Essay In order to assess aviation, aerospace or airport industry practice to the field of Marketing I have chosen to focus on the aviation industry and the marketing practices they have adopted in order to deal compete effectively in the current recessional environment.   This document focuses on the 4 P’s of Marketing (Kotler, 2008) and discusses how airlines have altered their approach to Product, Price, Place and Promotion in order to continue to successfully compete and respond to the changing needs of their customer base.    One company in particular, Southwest Airlines, will be explored in more detail with the marketing practices forming the basis for further exploration of the key themes. The Aviation Industry The events of September the 11th coupled with a growing economic recession have created an extremely challenging environment for the airline industry.   Forecasts produced by the Civil Aviation Authority indicate that the situation may not improve for quite some time with passenger traffic not expected to fully recover in the next five years (Figure 1). Figure One:   Actual and Forecast Traffic (m) 2007-2012 Fiscal Year No. Passengers Domestic (US) No. Passengers International (US) No. Passengers Total (US) 2007 577.8 53.6 631.4 2008 (F) 590.4 54.2 644.7 2009 (F) 610.9 54.9 665.8 2010 (F) 639.8 56.4 696.3 2011 (F) 626.7 56.7 683.4 2012 (F) 576.8 50.8 627.6 In order to deal with this airlines are significantly altering their marketing practices and methods of distribution in order to operate more efficiently and competitively.   Major changes have been observed over the past couple of years with some of these constituting complete overhauls of the traditional operation of the industry.   Southwest Airlines is an airline which has strongly positioned itself on â€Å"being different† through all elements of its service and product. At its core is its mission, which specifies that the airline is dedicated to â€Å"the highest quality of customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit†.   At first glance the concept of â€Å"high quality† and â€Å"low cost† appear to contradict one another.   However, Southwest airlines maintain that this is not the case and they have not compromised on quality or safety.   Awards such as â€Å"Triple Crown† which is awarded for low customer complaints, flight timeliness and baggage turnaround times, indicates that this may indeed be true. In order to better understand the key industry trends and how airlines have attempted to use these to their advantage, it is worth considering the marketing mixes of aviation companies such as Southwest Airlines and assessing how these have been altered in order to attract and retain a diminishing customer base. Marketing Practices Product The product element of the marketing mix concerns offering the right product to the right target market.   The products on offer through the airline industry have changed significantly over the past twenty-five years. Flying, which at one point was exclusively for the wealthy, has become more accessible and today there are a large numbers of airlines that cater for even larger numbers of customers.   In order to compete in this environment airlines have invested significant amounts of money in distinguishing their products and services from their competitors. For Southwest Airlines, this has entailed differentiating their product through redesigning the service their provide to customers.   Although, on the surface, their â€Å"no frills† concept appears very simple, delivering it in a way that doesn’t negatively impact customer experience is somewhat of an art.   In order to successfully implement this business model Southwest airlines have invested significant amounts of money in understanding their customer needs and motivations and used this as the basis for their value proposition. Through researching their customer base they have been able to identify which services were not valued above price by the customer and have eradicated them, thus lowering their operating costs and passing these savings directly onto the customer.   In addition to that, the involvement and support of their staff is paramount.   This is achieved through the company culture, a family orientated set up which promotes teamwork and values employee’s opinions and suggestions for improvement.   Southwest Airlines have recognized that employee participation and support is critical to the achievement of their aspirations and have successfully build a team of 29,000 with the lowest turnover rate in the industry. Price Since the deregulation of the airline industry in 1978, the airline industry has become highly price sensitive and many customers will generally purchase from the most competitively priced airline, viewing separate company’s offerings as perfect substitutes.   In order to maximize the profit from each flight, many airlines operate a variable pricing approach that is based on the needs of individual customers.   This approach attempts to identify and separate those customers who are concerned about price from those who are willing to pay more in order to attain a seat on the flight. As well as partitioning flights into first, business and economy classes, airlines attempt to maximize their revenue by offering a mixture of full price and discounted tickets within these segments.   Using detailed information related to market trends, forecasts and seasonal variations the major airlines implement inventory management approaches that help to define the demand and subsequent price for each seat on the flight. More than 90 percent of the tickets sold by U.S. airlines are now discounted (Costello 2001) and in the last twenty years flight prices have dropped by approximately 75% (Miller, 2007). According to a renowned marketing strategist, David Aaker (2001), one of the ways in which companies can successfully compete in a price sensitive marketplace is to offer higher value to their customers.   This view is supported by many theorists, many of whom believe that the industry is currently â€Å"giving away† flights (Marketing Week, 2003, p.35).   This view however, is challenged by the success of low cost airlines such as Southwest (US), JetBlue and Ryanair (UK) who have redefined their value propositions by stripping down their services in order to offer rock bottom prices. In order to competitively price their offering Southwest Airlines focused on streamlining their operations.   The idea behind this was simple, by lowering their costs, Southwest could offer reduced prices to their customer base.   This was achieved by removing services that were not valued in the eyes of the customer, such as physical ticketing, amenity kits, onboard snacks and seat reservations.   The customers get what they pay for and pay for what they want. Place Airlines predominantly operate through two distribution systems; the ticket and the flight. The Ticket Historically ticket sales were conducted through travel agents and brokers who liaised with the customer on an airline’s behalf.   However, in recent years the growth in popularity of the internet as a medium through which flights can be booked has led to increased levels of direct relationships between the airline and the customer base during the ticketing stage.   Through interfacing directly with the customer many airlines have reduced their distribution costs by as much as 10% (Miller 2004) and have subsequently been better placed to compete on a price basis in the marketplace. The Flight Marketing practices relating to the flight itself have also seen changes in recent years.  Ã‚   Historically, the flight represented a direct relationship between the customer and the airline but the increasing trend towards inter-airline alliances such as Star (United Airlines, Virgin, BMI, Thai etc.) Oneworld (American Airlines, British Airways, Quantas etc.) and SkyTeam (Delta Air Lines, Air France, and AeroMexico) has transformed the distribution channel from direct to indirect with airlines placing trust in their competitors to service the customers appropriately. Although this may be perceived as a risky approach, the benefits gained from such agreements are of significance.   Through forming partnerships airlines can gain additional routes, marketing power and global presence.   Southwest Airlines have gone one step further in the design of their place strategy.  Ã‚   Through focussing of the short-haul domestic market in the US they have ensured that the average duration of their flights is less than one hour.   This increases their probability of meeting desired time schedules and subsequently directly improves customer satisfaction. Promotion One of the most popular marketing tools within the airline industry is the frequent flyer program.   Airlines reward loyal customers by giving them extras such as upgrades, additional luggage allowance, priority booking and access to business lounges.   Such programs are clearly very popular with approximately 25% of Americas belonging to at least one loyalty program. (Costello, 2001, p.B9). The customer experience itself represents another key area in which aviation companies strive to successfully promote their offerings.   Areas of the operation such as baggage turnaround, timeliness of flights and numbers of customer complaints are measured through Key Performance Indicators and communicated openly to customers and employees. The understanding here is that high service quality will lead to happier customers, higher sales and higher profits. (Czaplewski, Ferguson, Milliman, 2001, p.14-17). Southwest Airline’s latest promotional program is Ding, a real time notification system that informs their customers of the latest offers and developments.   The messages communicated to customers are carefully targeted and segmented and utilize SMS and email systems to deliver the communication directly to the right customer. Conclusion In order to be successful in the current market, airlines need to develop a deep understanding of their customer base.   Through understanding their customer’s motivations, hot buttons and unmet needs (Aaker, 2001) they can develop marketing practices which allow them to compete in this demanding environment. The market is seeing significant changes as companies develop different approaches to increasing their sales or lowering their costs and a carefully designed and implemented marketing mix is critical to success in this environment. References Czaplewski, A.; Ferguson, J.; Milliman, J. Southwest Airlines: How Internal Marketing Pilots. Success, Marketing Management,   2001, p. 14-17 Costello, J. (2001, November 6). Gounded: Airlines Attempt to Win Back Former Frequent Flyers International Civil Aviation Authority, Airline Traffic Forecasts and Financial Trends — 2006 to 2008, I, January 2007. Miller, W. (2004, August 16). Airlines take to the internet. Industry Week, 248(15),   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   130-133. Retrieved March 23, 2008 from ProQuest database. Newsweek. (2003, September 18). Good times in the skies. p. 58. AAker, D, 6th Ed, 2001, Strategic Market Management Kotler et al, 13th Ed, 2008, Marketing Management www.Southwest airlines.com