Aviation Industry Marketing Assignment Help

Assessment 2 on Marketing

Introduction

The Aviation industry in Australia has significant importance in the Australian economy as in 2017 it contributed $15.91 billion to the economy and also employed 88,000 Australians across different subsectors (Australian Industry Standards, 2018).  Over the next few years, the industry is expected to demonstrate continuous growth, which could be attributed to the economic growth in Asia. The underlying reason is that by 2030, Asia is expected to be the home to 2/3^rd of the global middle class, which will have disposable income as well. However, it is expected that this market segment will be preferring low-cost airlines and therefore the entire industry is focussing on this market segment (Australian Industry Standards, 2018). However, in comparison to the global market, the Australian domestic market is not expected to demonstrate a continuous growth as evident from a 2.3% decrease in ASK (Available Seat Kilometres) and 0.3% increase in RPK (Revenue Passenger Kilometres) in 2017. Australian airlines are responding to the lack of growth by reducing their capacity (Australian Aviation, 2017).

The not-so-attractive prospective for Australian airlines require that the Australian airlines understand what is not working in their favour and what changes they must undertake. The above problems are faced by Qantas Airlines as well. With a revenue of $15,566m in 2017, Qantas is the third oldest airlines in the world. The company is the flag carrier of Australia and is the largest airline in Australia in terms of fleet size (309 aircrafts in 2017) (Qantas, 2019).

Goi (2009) argued that an effective way for an organisation to adapt as per the changing environment is through its marketing mix. This report aims to develop a marketing mix for Qantas. However, a precursor to developing a marketing mix is to analyse the environment in which the organisation is operating, which is done next.

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Environmental analysis

Gupta (2013) argued that the management of several organisations have realised the significant role which environmental factors play in planning and decision-making so that long-term business goals can be achieved. This can be attributed to the fact that there needs to be a fit between the strategy of the organisation and the external environment. Gupta (2013) recommended that the environment can be understood by using PESTEL tool as done below.

Political- In the aviation sector, political factors play a significant role as it determines if an airline from a country will get permission to use airspace of other country or not. In the case of Qantas airlines, by virtue of it being the national carrier of Australia, it gets support from the government. In addition, the Australian government has cordial relations with other countries, especially in the emerging aviation markets of Asia (Alglas, 2019).

Economic- The Australian economy is not doing well enough to be considered ‘attractive’ for the aviation sector, therefore the domestic aviation industry is expected to have lacklustre performance. However, the international aviation market (especially in Asia) can grow due to increased economic activity and availability of disposable income with people in these countries. Another economic concern for the airline industry is the rising fuel cost which is dependent on several economic factors (Alglas, 2019).

Social- In the emerging markets, there is a rise of a new middle class (Alglas, 2019). In its domestic market, Qantas has built a cultural and emotional bond with the Australians by offering ‘Australian Hospitality’ (Qantas, 2019).

Technological- The aviation industry is rapidly changing due to technological innovations and advancements. The changes are not confined to one aspect of aviation as technology is improving the ticket purchase experience, inflight experience and aircraft performance which play a major role in retaining customers (Alglas, 2019).

Environmental- The aviation industry is often accused of causing significant damage to the environment, due to the emissions. In Australia, there used to be a carbon tax (now abolished), which increased the operational cost (Alglas, 2019). The airline is working on reducing its footprint and is also asking the aircraft manufacturer to design aircrafts with low emissions (Qantas, 2019).

Legal- The airline has to ensure that it operates within the legal frameworks of several countries where it serves. A problem with the above is that the legal frameworks across countries may not necessarily converge. In addition, any problem or inconvenience to the passenger may lead to a legal issue for the organisation as well (Alglas, 2019).

The above insights from the environmental analysis will be used to develop a marketing mix as done next.

Marketing Mix

Based on the insights from environmental analysis, the marketing mix for Qantas Airlines is presented below.

Product-

• There are three main products/services offered by Qantas- the flagship ‘Qantas’ low-cost ‘JetStar’, and a loyalty program
• The target markets for the organisation are the middle-class with disposable income and business travellers, with an increased focus on the Asian market (Alglas, 2019).
• The airline must continue focussing on providing ‘Australian Hospitality’ both for domestic as well as international travellers. This could be attributed to the fact that just by being low-cost, it is difficult to attract customers if there is no differentiation. Therefore, the differentiating factor of ‘Australian Hospitality’ should be the most important feature to increase penetration in the target market (Qantas, 2019).

Price-

• Due to the focus on middle-class passengers, the airline is forced to offer the product at a low cost. This is necessary as many of the traditional destinations for Qantas (the US and Europe) are not as attractive as before. In the emerging markets of Asia, Qantas is still trying to get a stronghold and therefore it must increase its attractiveness for the new customers (Alglas, 2019).
• The flexi-pricing is a common practice in the aviation sector as the price of the ticket depends on several factors including time, distance, route, class, and the gap between ticket booking and travelling. A common practice is that if one airline increases or decreases the price, the competitors follow through, however, there is a delayed response by competitors to increase in price in comparison to the decrease in price. This could be attributed to the fact that price has a major role in the customer deciding which airline to travel by (Malighetti et al., 2009).

Promotion

• An offering by Qantas is the best promotional method possible- one product creating revenue for another product. In the case of Qantas, it is the loyalty program. The loyalty program by Qantas has a valuation of $4 billion which is 50% of the entire group’s valuation (Whitley, 2017).
• The promotional contribution by Qantas loyalty could be understood from the fact that 33% of the credit cards in Australia are co-branded by Qantas. Through its loyalty program, Qantas offers air miles to several credit card operators and supermarkets, who in turn offer it to their customers. Whitley (2017) estimated that the travel points are collected by approximately 50% of the Australian household, which are redeemed after 24 months, thus serving as a promotional scheme across Australia. Whitely (2017) argued that the benefits of the loyalty program are not confined to promotion as the price at which the air miles are sold is much lower than the cost of redemption which means that the company is generating profit in advance.

Place

• As discussed earlier, the technology has ensured that the passengers can book tickets through various platforms like Flight Centre and Sky Scanner.
• In addition, the loyalty program (discussed earlier) is also an efficient way of selling tickets (Qantas, 2019).
• Another channel for distributing tickets is through strategic alliances with the other airlines operating on different routes. A recent trend in the industry is that many airlines are exiting from the non-profitable routes and are looking for strategic partners on these routes. Qantas has strategic alliances with multiple global airlines who sell tickets for Qantas for customers travelling on routes served by Qantas (Alglas, 2019).

Customer Service

• In aviation, customer service is crucial as the experience which a customer has with an airline determines if they will be travelling by the same airline or not. Qantas offers all the services which have now become standard practices- easy ticket booking, convenience, and good in-flight experience (Alglas, 2019).
• In continuation with the above, Qantas has focussed on positioning itself as the ‘Spirit of Australia’ and offers Australian hospitality to differentiate its customer service from others (Qantas, 2019).

Whilst all the components of the marketing mix are important, the important components are the product, customer service and price as explained- the product and customer service are focussed on providing pleasant travel experience to the passengers and the price refers to the cost incurred by the passenger for that experience. If these components change, then there is a strong possibility that the response by the passenger will also change. Another important component is the promotion which is creating value for the company. The remaining component, ‘place’ is somewhat standard across the industry and there is not much scope to vary. The cross effect of each component is presented below.

Based on the above analysis, it can be inferred that Qantas must focus extensively on the product, price, and customer service.