Low Cost Airlines
Ryanair The major airlines are facing very difficult pricing strategy decisions in these tough air-travel times. Pricing strategies vary widely. Some airlines offer no-frills flights and charge rockbottom prices (easyJet, JetBlue, Skybus). Others offer luxury and charge higher prices to match (Virgin, Silverjet, Eos, Singapore Airlines). But most airlines haven't yet figured pricing out, leaving air-travel passengers generally grumpy when it comes to the topic of airline ticket prices. That's right, Michael O'Leary, chief executive of Ireland's Ryanair, Europe's most profitable airline, wants to make air travel free. Not free as in free from regulation, but free as in zero cost. By the end of the decade, he promises, more than half of our passengers will fly free. The remarkable thing is, few analysts think his prediction is far-fetched Ryanair already offers free fares to a quarter of Its customers. Even without free flights, Ryanair has become one of Europe's most popular carriers....
EasyJet Staying Ahead in the Pricing Game In July 2008 the budget airline easyJet announced that it would have to cut flights over the coming winter period because it was expecting its pre-tax profits to drop by 45 percent due to higher fuel expenses. The company explained that oil prices had increased over the past few months and added more than 365 million to its fuel bills for the year. easyJet had been able to offset around half of the additional costs by increasing its revenue and by cutting costs. It was expecting to produce a profit of between 218 million and 237 million, rather than nearly 400 million as it had in the previous year. easyJet had responded in the same way as competing budget airline Ryanair had by cutting back on its capacity at Stansted Airport in the U.K. and trimming back the winter schedule. The airlines had effectively reduced the number of flights during less profitable periods, thus enabling them to switch aircraft from poorly performing airports to more...
A key objective for Internet marketing is the online revenue contribution. This is a measure of the extent to which a company's online presence directly impacts the sales revenue of the organisation and can be used to influence resource allocation to the online channels. Online revenue contribution objectives can be specified for different types of products, customer segments and geographic markets. For example, in 1997, low-cost airline easyJet set an online contribution objective of 50 by the year 2000. This established a clear vision and resources could be put in place to achieve this. EasyJet now has an online revenue contribution of 95 . Forrester (2005) provides benchmark figures of direct online revenue contribution for different sectors in the US (forecasts for 2010 are in brackets)
The word system, as applied to products, is a post-World War II phenomenon. Two related forces were responsible for the emergence of this phenomenon (a) the popularity of the marketing concept that businesses sell satisfaction, not products and (b) the complexities of products themselves often call for the use of complementary products and after-sale services. A cosmetics company does not sell lipstick, it sells the hope of looking pretty an airline should not sell plane tickets, it should sell pleasurable vacations. However, vacationers need more than an airline ticket. Vacationers also need hotel accommodations, ground transportation, and sightseeing arrangements. Following the systems concept, an airline may define itself as a vacation packager that sells air transportation, hotel reservations, meals, sightseeing, and so on. IBM is a single source for hardware, operating systems, packaged software, maintenance, emergency repairs, and consulting services. Thus, IBM offers its...
Airlines' frequent flyer programmes are aimed at heavy users who, because they are business travellers, also buy expensive tickets. British Airways Executive Club blue card members get free AirMiles each time they travel and other priority benefits when booking and checking in. As usage mounts, Club members are upgraded to silver and gold cards, each giving extra benefits and services. Almost all airlines offer similar incentives, but since benefits mount with usage, it pays the frequent flyer to be loyal. Some operators share their schemes to provide wider benefits to the regular traveller. American Express's Membership Miles scheme integrates Air France's Frequence Plus, Austrian Swissair's Qualtflyer, Virgin's Freeway and Continental Airline's OnePass together with a string of hotel chains and car rental firms. Continental's scheme is already bundled with others, so with it comes Air Canada, BWIA International Airways, Malaysian Airlines and Cathay Pacific.
A further reason for downward pressure on price is that companies looking to compete online may discount online prices. For example, easyJet discounted online prices in an effort to meet its growth objectives of online revenue contribution. Such discounts are possible since there is a lower overhead of processing a customer transaction online than for phone transactions. Note that there may be a danger in channel conflicts resulting from this approach.
Long length of exposure to an ad is one major advantage of indoor forms. The average ride on mass transit is 45 minutes, allowing for plenty of exposure time.12 As with airline tickets, the audience is essentially a captive one, with nowhere else to go and nothing much to do. As a result, riders are likely to read the ads more than once. A second form of exposure transit advertising provides is the absolute number of people exposed. About 9 million people ride mass transit every week, and over 9.4 billion rides were taken in 2001, providing a substantial number of potential viewers.13
Frequent Flyer Perks or Bribes The incidents reflect tensions between employers and SAS over the frequent-flyer programme, which, companies say, inflates ticket prices, restricts competition and encourages staff to make unnecessary trips in order to amass bonus points. Public organizations have declared that the benefits constitute illegal inducements when offered to business travellers, and have issued instructions to employees banning private use of frequent-flyer benefits. In the private sector, personal use of bonus points has also been deemed unlawful unless sanctioned by the employer. Ulf Frankc, of the Stockholm-based Institute Against Corruption, a private watchdog, said 'Giving private benefits to business travellers is just like sending them a cheque. The law is absolutely clear, it is corrupt behaviour.' vene because the frequent-flyer programme was a private contract between airline and traveller. The parliament is among a growing number of public and private sector...
We need to remember that an Internet marketing strategy is a channel marketing strategy which defines how a company should set channel-specific objectives and develop a differential channel-proposition and channel-specific communications consistent with the characteristics of the channel and consumer usage of it. The Internet marketing strategy determines the strategic significance of the Internet relative to other communications channels which are used to communicate directly with customers at different customer touchpoints. Some organisations such as low-cost airlines will decide to primarily use virtual channels such as the web site and e-mail marketing for delivering services and communicating with customers. Others may follow a strategy where the use of face-to-face, phone or direct mail communications remain important for the time being.
If you're a travel agent or use one, you've received messages from tour groups offering huge discounts for not-quite-sold-out travel packages.1 Experience with broadcast fax has taught them they can still earn a commission the last practical moment offering the empty berths.
Thanks to the Internet, today's consumers are finding it easier to communicate with companies. Most companies now invite prospects and customers to send in suggestions and questions via company Web sites. Beyond this, rather than waiting for an invitation, consumers can search out sellers on the Web, learn about their offers, initiate purchases, and give feedback. Using the Web, consumers can even drive transactions with businesses, rather than the other way around. For example, using Priceline.com, would-be buyers can bid for airline tickets, hotel rooms, rental cars, cruises, and vacation packages, leaving the sellers to decide whether to accept their offers.
He or she is willing to pay based on the value placed on the product. Usually it is very difficult to identify that value for each customer. As discussed elsewhere the Internet may assist in this price customization in the way it provides an auction environment for a number of products, airline tickets especially. It is necessary, however, to segment the market in a water-tight fashion to prevent trades between customers with high value perceptions and customers whose value perceptions are lower. One of the most effective and practical ways of price customization is to use a multidimensional approach to pricing which involves using a multiple price parameter, multiperson pricing or price bundling (Simon and Butscher 2001). Suppose, for example, Buyer A is the one who is willing to pay the most for a Ryanair ticket and Buyer B the one who is willing to pay the next lower amount and so on. The market clears at any price between that which Buyer B and Buyer A are willing to pay, provided...
The campaign put the Hoover name on everybody's lips - but for the wrong reason. What happened The promotion was a ploy dreamed up to tempt people to buy a new appliance. It seemed to have the advantage of raising cash on extra sales, at a time when the UK market for household appliances was depressed, with costs that did not have to be incurred until later, in the form of heavily discounted air tickets, when the appliance market would have improved. Hoover's mistake was to expect many consumers to be attracted by the promise of free flights, but to be deterred from redeeming their air tickets by the offer's small print, which lays down conditions about available dates for flights and choice of hotel accommodation, including one-application-per-household restrictions. Unfortunately, the company had miscalculated, although, according to a company lawyer for Hoover European Appliance Group, no fewer than three sales promotions agencies were involved in originating and costing the...
Companies can use sales promotion techniques in a number of ways to contribute to franchise building. Rather than using a one-time offer, many companies are developing frequency programs that encourage repeat purchases and long-term patronage. Many credit cards have loyalty programs where consumers earn bonus points every time they use their card to charge a purchase. These points can then be redeemed for various items. Most airlines and many hotel chains offer frequent-flyer or guest programs to encourage repeat patronage. Many retail stores have also begun using frequency programs to build loyalty and encourage repeat purchases.26
Premium brand National (radilionaity catered to business travelers, whereas Atomo Rent-a-Car has been getting 90 percent ul ils business Irom leisure travelers. After the two merged, the dual Alamo National logos were plastered on everything from airport shutile buses to workers' polo shirts. Customers ol both Alguno and National had problems distinguishing between the brands, even though National's cars typically rent lor to 20 percent more than Alamo's. After all, the customers had to stand in me same line behind the same airport counter, receive service- Irom Ihe same rental agenis, ride the saine shuttle tuses, and drive tars Irom the same llee . National was most hurt hy the lack ol differentiation at these key (ouchpaints. and its market share fell 5 to 10 percent. Interestingly, after consolidate of the brands, shuttle bu frequency improved 33 percent and btisiness travelers were given evert more options io bypass the rental counter eniinely, Stilt in surveys, National renter...
For example, information from its Life Style Study was used by DDB Needham's creative department in developing an advertising campaign for Westin a few years ago. The agency's Life Style Study showed that the younger business travelers the luxury hotel chain was targeting are highly confident, intelligent, assertive, and classy and considered themselves to be winners. Rather than using the traditional images that feature buildings and golf courses, the creative team decided to brand the users by playing to their ego and reinforcing their strong self-image. The ad campaign used the tagline Who is he she sleeping with Westin. Choose your travel partner wisely (Exhibit 8-6).
During tough economic times, credit is scare and product purchases that usually require credit such as automobiles and major appliances will likely be postponed. More generally, one survey of consumers found that approximately twice as many consumers were planning to cut by 20 percent their expenditures on clothing, personal care, home furnishings, and travel than were planning to cut by 20 percent expenditures on food, education, housing, and health.5 Whatever your line of business, tough economic times will have an effect on your financial results. However, if you run a furniture store or travel agency, you can expect tough economic times to have a more negative effect on your business than if you run a food store or work for a university. If you provide several products or services, you may be able to find some that have a more stable financial performance during an economic recession than do others.
EasyJet created a market niche when the company set out to cater to the cost-conscious, plan-it-yourself traveler with self-proclaimed cheap flights. EasyJet called itself Europe's leading low-cost airline, marketing to low-budget, no-frills customers with the tagline The Web's favorite airline.
Lastminute.com was an early leader with its development of a web site which operated as an online travel agent and retailer (see Figure 10.9). The company founded by Martha Lane Fox and Brent Hoberman in 1998 has recently been acquired by Travelocity and Sabre Holdings. The valuation achieved by the company at its float was seen by many at best as very unrealistic - its paper value exceeded the value of longstanding established travel agents like Thomas Cook Plc. Many dismissed last-minute.com's valuation as being an indicator of the absurdity of the dot-com phenomenon and dismissed excessive investment as irrational.
A contribution to business profitability is always the ultimate aim of e-commerce. To assess this, leading companies set an Internet contribution target of achieving a certain proportion of sales via the channel. When easyJet (www.easviet.com) launched its e-commerce facility in 1998, it set an Internet contribution target of 30 by 2000. They put the resources and communications plan in place to achieve this and their target was reached in 1999. Assessing contribution is more difficult for a company that cannot sell products online, but the role of the Internet in influencing purchase should be assessed. Discounted cash flow techniques are used to assess the rate of return over time.
Positioning consists of one two or perhaps three benefits that customers want and that you can provide at a level
Positioning is tailored to the needs of your target segment. For example, a car rental service targeted for business travelers might position itself as providing the quickest check-in service at airports. A car rental service targeted toward people who need the use of another car because theirs is being repaired might position itself as offering the convenience of bringing a car to your home. Walk into any restaurant the positioning and target market should be clear just from their d cor, their menu, and the appearance and attitudes of their waitstaff because all should be tailored to the needs of their target customers.
Despite the range of opportunities for using new online communications tools, traditional communications using offline media such as TV, print and direct mail and others shown in Figure 8.1 remain the dominant form of investment in marketing communications for most. As we will see in the section on the communications mix at the end of this chapter, even organisations which transact a large proportion of their business online continue to invest heavily in offline communications. Consider the travel sector where both travel suppliers such as BA, Thomson and easyJet and intermediaries such as Expedia and Opodo transact an increasing proportion of their sales online, but are still reliant on offline communications to drive visitors to the web to transact.
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Model, which many people believed would become the dominant model for pricing, but is now seen as another variation on well-established pricing formulas. Their approach works well with airline tickets because accurate, timely information about the best prices is hard to get, and the seats must be sold before the fight. But customers must be willing to put up with the inconvenience of not being able to choose their airline or time of day they will fly. These conditions are less likely to apply to B2B firms, so 67 percent of them didn't see any impact.
There is no longer one Coca-Cola there is Coke Classic, New Coke, Diet Coke, Vanilla Coke, and Cherry Coke. Ford stopped only producing its Model T when General Motors surpassed it today Ford produces more than 20 different models of cars. In the services industry, airline companies fight to prove that they offer different products than their competitors by offering a bonus to frequent flyers, more leg room in their business class, classier meals, friendlier airline attendants, or simply more practical schedules.
Letenkar.cz (translated air tickets guide ) is a Czech website dedicated to air travel. Website presents new routes of airlines, new bases of low cost airlines, special promotions and general air travel news. According to the interviewee, affiliate program from travel agency Invia.cz is the best source of revenue for this website. 2 Invia (www.invia.cz) is the biggest online travel agency in the Czech Republic
Among the major industries that first deviated from fixed pricing were the airlines. Now, no one on a single airplane has necessarily paid the same price as anyone else. Early bookers and groups get low prices and late bookers get high prices. There are also frequent flyer upgrades and other perks. This deviation is called marginal pricing or dynamic pricing.
'It's a matter of trying to get under the skin of real people,' says Tim Brown, European director of Ideo, a product development company. For example, watching a travel agent set up a conference call by arranging a speaker phone for each person and putting the handsets together demonstrated how she equated one phone with one person - an insight Ideo used in its advice on phone software to AT&T, the US telecoms operator. Finding the right people to watch is critical for techniques that involve observation of a few individuals or households. In contrast to conventional market research, where consumers are chosen because they fit squarely in the middle of particular categories, consumers picked for shadowing are intended, as Mr Brown says, to 'hit the edges'.
Ainpliitrion, which started as a travel agency in 1957, was now a large travel and shipping business - 'your ultimate hosts in Greece'. The head office of Amphitrion is in Constitution Square, a prestigious business area in the centre of Athens. It also has branches in Tokyo, Washington, DC, and Toronto as well as other Greek offices in Athens, Crete and Piraeus, The largest part of the touring business was for executives and employees of businesses who bought their tickets from the agency branch of the business. These clients also bought family holidays and travel. In 1993 the biggest part of the clientele was middle and senior executives and, sometimes, their secretaries and assistants. Only some 10 per cent of sales came from 'drop-ins', people who casually dropped in at one of Amphitrion's travel offices. Mr Mitsiou had first started thinking about his teenager tour after a meeting with other agents at an International Convention, in Milan, in September 1993. He had had a...
A visitor could obtain specific information about the plantation tours in two basic ways. First, the tourist might contact a travel agent either specifically inquiring about a plantation visit or wanting general information on the attractions available in the New Orleans area. The travel agent would then provide information and make reservations for the
One of the fastest-growing areas of sales promotion is the use of frequency programs (also referred to as continuity or loyalty programs). American Airlines was one of the first major companies to use loyalty programs when it introduced its AAdvantage frequent-flyer program in 1981. Since then frequency programs have become commonplace in a number of product and service categories, particularly travel and hospitality, as well as among retailers. Virtually every airline, car rental company, and hotel chain has some type of frequency program. American Airlines has nearly 44 million members in its AAdvantage program, while Marriott International has enlisted more than 18 million business travelers into its Rewards program.
Cost leadership should not be confused with low prices. Low costs allow companies to lower prices if they choose to penetrate markets but they can also be used to produce profit which in turn is used for investment purposes that contributes to maintaining market dominance. Low-cost airlines offer low fares by aggressively controlling costs. They cut out the 'frills' - in-flight meals and allocated seating and they promote Internet reservations and payments. Typically they fly from secondary, lower cost airports distant from main centres of population. Two low-cost airlines dominate the European market - easyJet (1.1 million passengers) and Ryanair (1.5 million passengers). Ryanair continues to use secondary airports while easyJet has moved to primary airports such as Gatwick in the UK. Low-cost airlines fly their aircraft for more hours than traditional carriers. Using daily use as a measure, easyJet and Ryanair both obtain about twice the productivity of the larger, more traditional...
Budget Airline Travel
Hot-Tips! From Great Low-Cost Airline Tickets To Today's New Travel Rules This Ebook will give you tips and techniques for planning your Discount Travel Plan for your Vacation. There are a TON of things to think about, but this Guide will begin to walk you through the steps.