Marketing strategy and planning Essay

 

A marketing approach by Easy-jet airlines on the low cost UK airlines industry; The marketing strategy and planning concepts aimed at making strategic marketing approaches through industry analysis and comprehensive marketing stratagems.

 

 

 

 

 

 

 

 

 

 

 

 

 

Abstract

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The UK airline industry is dynamic and rapidly growing. New players and marketing strategies are entering the market increasing the competitiveness of the industry while at the same time forcing the prices to go down. However, a number of factors are forcing the low cost (no frills) approach to fail in making in roads for various companies. Energy costs, eco-policies and taxes have forced the lowering of the prices further to hit a snag. Subsidising and changing the market approach through consumer behaviour analysis, strategic marketing and planning and cognitively approaching profits and market share policies is the methodology easy jet is using to consolidate more gains in the market while increasing its market share. This high profile approach is dynamic and needs to be examined so as to further seek ways to add on the implementation of these plans and methodologies successfully.

Introduction

Soaring fuel costs, the EU emissions issues which is an impending business storm, fleet competition, expansion and rapid over capacity problems are forcing many companies to shift profit policies and market stratagems has shifted the corporate goals of the players in the industry. The policies and the eco system legislation is forcing those companies seeking insulation against business storms to seek green transport policies and marketing methodologies (Mintel Reports, 2007).

Consumers of the industry services are unlikely to do away with their now consummate jet-set lifestyles. According to Mintel (2007), any shift towards greener travel modalities will be impelled by economic dynamics and drives not the corporate ethics. The low-cost carriers ‘green’ purges are not market drivers but just dynamic efficiency drives employed as cut-throat marketing strategies.. The major issues affecting the low cost industry is the increasing costs of energy and the burden of taxes.

To make gains and better approaches to counter the pitfalls, low cost players are seeking to maintain the cheap ticket approaches, making sure they raise their ancillary revenues which include in-flight sales, charges and add-ons, and also expand into accommodation and transfer services, in order to cope with the economic and legislative storms so as to consolidate profits and market share (Mintel, 2007).

The market demographics, problems, unpredictability, impeding financial, stocks and consumer confidence storms are loop holes within the sector which once easy jet seeks to change them into advantages to increase its potential in the market, will pummel its strategic growth capacity. This paper analyses, and explains the basic marketing strategy and planning that easy jet should use in this perspective and make inroads in the no-frills policy market.

History of the low cost air line industry

The UK low cost airline industry has been competitively growing and has led to the easing of monopolistic legislation in the airline industry. It has revolutionised the market through increasing the capacity of air passenger transport. The industry has however been dogged by controversies and hurdles. Companies have grappled with rising competition, soaring fuel prices impending EU emissions policies and an increased demand for better and fair prices.

The players have integrated the country, making smaller and accessible. Many cities within the UK and outside the UK are more accessible based on low cost and efficiency of the air transport as created by the industry.

This has made this industry to make history as the biggest airline story. It has made the European short haul travel over the past decade to become lucrative and profitable. The industry has seen Europe become tighter and well integrated, making socio-economics of the region to become competitive and capacitated.  Over the past decade, up to 40 entrants have debut the industry making it more competitive and interesting. Over 40 carriers have entered the market and as fast as they entered, disappeared. The rapid growth and strategic marketing approaches enacted by various corporations using secondary airports is seen as the onset of the success of the industry.

The industry drivers are the wealthier socio-economic society which makes several trips in a day. The no- frill market is driven by this socio-economic group which has various interest and homes within Europe. This has made the service and products offered within the flights to be more attractive and appealing so as to up the competitiveness of the players and retain the clientele (Mintel reports, 2007).

 

UK low cost airlines industry environment

The UK low cost airline industry environment is becoming more competitive due to growing demand for low cost airfares and related services. The environment is dogged by issues of carbon emissions per passenger kilometre and damned tax proxies. Eco policies are becoming a threat to the cost of service delivery and better fleet demand. Besides, fears of old fleets, taxi time and airport facilities cost are preying on the profits of the low cost airline industry players.

The expense in delivering the services is hitting hard on the players profits. Rising fuel costs are biting on the profits and reducing the competitiveness of the companies. The fuel prices are inhibiting the reduction of prices while the policy is ‘no-frills’. The airport taxes are downplaying the chances of consolidating the profits.

Companies are seeking cutting cost measures to consolidate gains made per passenger seat. Ground facility use, excess catering and avoiding hub airports are the commonplace measures the dynamic players like easy jet are adopting to consolidate more profits. These business environment challenges are resulting to creation of marketing strategy and plans so as to maximise sales and profit targets and subsidising costs.

The environment is competitive based on the fact that, low cost airlines make up to 25% of air travel in the UK and Europe. However, the players are making inroads on subsidising and advertising to increase sales and bag more market share. This is not easy, owing to the fact that other major players are posing threats to survival and profit margins of the low cost airline companies.

Cheaper prices from the major players as well as better product and service portfolio are increasing becoming a threat. Easy jet has changed strategy focus and is focusing on sustenance of its enviable profits in the no-frills market. Approach to the market on the long term is the commonplace forecasting strategy; but the environment is sensitive to international dynamics.

The environment is marred by inept marketing stratagems where the advertising companies are projecting the problematic aspects of the players and pushing for more overt analysis of company profiles and services. The impact of these proxies is ‘problematic and controversial customer attitudes and declines in market share, competitiveness, and an upsurge in hostile takeovers by established and liquid players (Jane Bainbridge, 2007).

Waning enthusiasm, and cognitive dissonance is ambushing the industry. Rynair which has a negative portfolio is grappling with its waning popularity. Other companies are seeking to repose the market confidence on their services while new comers are coming in with fixed prices and much lower costs making the market to oscillate to new trends and consumer demands.

Industry competition and low cost opportunities for consumers are increasing the struggle to make benefits in the industry. The no-frills policy has been overtaken by the rail industry. The domestic rail operators are going head to head with low-cost carriers on issues of efficiency and environmental friendliness pushing the customers further into indecision on both safety and availability of the air transport services.

These dynamic demographical aspects of the airline industry environment and hurdles are pitting the players on a difficult situation. Profit margins are becoming smaller by day as entrants seek better services and cheaper prices so as to establish themselves in the market. The established players have fallen out with the consumers due to these tight competitive aspects of the environment.

 

Strengths and weaknesses of low cost competitors

The strengths of the competitors are minimal based on the competitive nature of the industry. Revolutionising the air transport has been Rynair, British airways and other companies’ objectives since 2002. Rynair had a significant clout after its debut but it is currently in corporate crisis. It is having profound market share problems, as well as shift of customer interests in the company services, a problem shared by most companies in the market.

Within the domestic low cost airline industry, Rynair has been the company to watch. Latest market shock based on factors like September 11th, plummeting stocks and all time lows in ticket prices have impacted on the competitor’s fiscal health and abilities to stay put in the market. Though Rynair says that seat prices have gone back to normal, it’s apparent that the policies and profit issues are biting in its boardroom.

Flybes strengths lies within its market approach; the company has based its marketing campaign in the green market under the banner ‘Low-cost, but not at any cost’.It is using ECO labeling scheme, so as to allow customers to make proper choice’s on aircraft and airport. This eco labels rate in terms of take-off and landing emissions per seat, fuel consumption and noise. This makes the approach a competitive edge for the company. The option is a variety based on a consumer behavior approach.

Jet2 and Rynair remain established and famous after flying quite a substantial number of passengers over the years. They have discounted services and destinations for holiday and leisure destinations. This is the strength in terms of attractive and easily saleable products. However, the weakness of Rynair is its belief that lower costs are the only competitive advantages in the economy. However Ryanair debut was based on an aggressive pricing strategy.

The competitors face a much bigger problem in their market approach. Most of them including Flybe, BA and Rynair entered the market through a low coat stratagem so as to gain a competitive advantage. The methodology was void of strategic long term stamina due to lack of comprehensive approach and insulation against impending competition. This is based on the argument in the industry that ‘low costs are advantage in the short-haul economy sector since air travel is effectively a commodity’.

Major players like British airways and Rynair are still lowering costs, which will enable them to keep on lowering fares aggressively so as to remain competitive. Fares at British air fell by 7% and then rose by 5%. Tough the price proxy is the competitive strength of the major player’s; it is a risky investment due to the dynamic nature of well established low cost players like Easy jet. This low fare policy is becoming a weakness that is slowly overtaking growth due to increasing costs of service delivery.

Competitive advantages of Easy-Jet co.

Each of our competitor’s is experienced, wants to stay in power, seeks to retain his market position and is aiming at increasing his strength. We need to understand the predictability and freedom to abandon the market by the competitor. Easy-Jet is competitive due to its approach to keeps costs low through elimination of the unnecessary costs and ‘frills’ characterized by traditional airlines. The company has fully implemented ICT based ticketing methods (e-ticketing). Using the internet to reduce queue’s of buying tickets. It was the first company to sell a ticket online. This has reposed confidence in customers and made it a culture.

Maximizing use of its fleet to reduce the unit cost, ticket less travel and gaining efficiencies through rapid turnaround times, and progressive landing charges agreements with the airports has put the company in good stead. Notably, the company is most reputed for its no-frills compliance. Apart for such corporate perspectives, easy jet has warm image in the market than other competitors (SF Slater, 1995).

Easy-Jet strengths and competitive advantage mainly lies within its belief that; demands for short haul air transport are price elastic (If prices for flights are reduced, more people will use air transport. Traditional concepts point out that airline traffic grows if the economy grows and that cutting prices will only lead to a decrease the industry revenues. Besides, it is becoming the second most popular travel site where over ten million seats have been sold online.

Our portfolio and market approach is creating a better image in comparison with other players. Our projection to invest 6.6 million pounds for a long term capital item as the development of a safe, reliable, and efficient air traffic system, which is aimed at ensuring capacity exists in the air and on the ground significantly positioned our image as a serious company.

Fleet expansion and more consumer attention has propelled our image and shadowed other player’s perspectives as major players. Our approach has an appeal in comparison to other companies.

We have dressed our management as tax collectors in protest at the government’s “tax trap” Based on the fact an average carrier emits 27% more per passenger kilometres than within its own ‘Environmental Code, our eco policies reflect on conformity hence give more confidence on both the environment lobbies and our customers. This approach has given our image and market share mileage in the competitive industry.

Instead of setting our reduction targets, we emphasise on a commitment to avoiding hub airports, long holding patterns and lengthy taxi times, whilst minimising use of ground equipment and excess catering this consolidates more gains through the cutting cost policy. We are increasing our performance capacity by operating a fleet of largely modern, higher-efficiency fleet with an age bracket of 2.3 years. We have called for competitors fleets to be limited to aircraft no more than 20 years old.

These improvements and increased productivity, capacity to perform and also our attention to customer needs as well as our environment safety, our strength is growing every day. Our low cost-no-frills prices are most attractive and are the most attractive and surely no-frills prices. Our e-ticketing and free document travel has eased the clientele burden of coming for tickets in offices, but instead they come with email copies of the air tickets. This is our strength and progress.

Recommendations for Easy-Jets market share over the next 3 years

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We are relentlessly seeking modalities to counter the “weaker market conditions”, However, our seat capacity is projected to grow by over 15% within and beyond 2007. This will increase our profitability and revenue as well as our market share. In pursuit to keep the load factor at a manageable level we are reducing lead-in price cost while increasing our advertising and promotional processes and ventures.

Our approach on this is based on the fact that, reduced lead-in fares and strong promotion are integral in maintenance of passenger base growth. Our pride is that the ancillary gains have significantly contributed to seat yields and our overall performance as a company in a highly competitive market. Our projection on the short term is to make our pre-tax gains rise up to 50% over a spread timeframe of 2007 and beyond.

The perspective in gaining a more solid market share is through a diverse representation of our service and industry performance and capacity. We have identified explicit expressions of our diversification of our services as a brand that is poised to become something between an online tour operator and a commission-based travel supermarket.

The company objective is to spread its market share portfolio further and become more established, popular and well insulated against impending business storms. The most essential is to up our marketing campaigns so as to consolidate our profile and portfolio within the customer lines. This way we will become a choice of the market and will be able to partner and competitively perform as an industry leader.

This is pre-determined by the experience of our Marketing/Sales department. We need to add up more experienced executives who have contacts in the industry, familiar with advertising and promotion, personal selling capabilities, general management skills and a history of profit and loss responsibilities. This way, we will have the capacity to reach and establish corporate relations with both our competitors, stakeholders of the industry and the clientele (Gary M. Olson, Thomas W. Malone, John B. Smith, 2001)

The marketing and pubic relations perspective will be capacitated through increasing the capacity and the ability to generate good publicity as measured by past successes, contacts in the press, quality of promotional literature and market education capabilities. We need more informative and ‘convincing on-spec ads and profiles’ so as to bag more customers and increase our clientele potential.

We need to put in place competent methodologies in our sales promotions through more discounted prices and special prices spread over occasions and week periods. The effectiveness of our sales channels should depend on our history of relations, the extent of channel utilization, financial stability, reputation, access to prospects and familiarity with what we are offering. This puts us on good stead against rising costs of fuel and labour (Hal Rosenbluth, 2007).

We need our advertising capabilities including media relationships, advertising budget, past experience, how easily the special air fares can be advertised as well as our commitment to advertising these services and prices, will help the dynamic market to shift perspectives and attitudes from the commonplace market and opt our services as a better placed brand with more appeal and clout in comparison with the rest (GS Day, 1999)

The most essential is the implementation of modalities to increase our capacity in sales capabilities including efficiency and presence and quality of the personnel, availability of our services in the market and the location of our service and products outlets, a visible ability to show the benefits of our services and special offer plus a competent sales support.

This way, we will up our sales as well as our market share. However, we need a more diversified portfolio. The appropriateness of the prices we offer relates to competition, price sensitivity of our prospect and our offer benefits and competitive edge, this facilitates our growth through increased sales. This can be consolidated more rapidly through acquisition of a strategic partner or a merger. However, we can also buy another player through a hostile take over or through a hedge funds approach or strategically buying another company (Leigh L Thompson, 2004).

An acquisition will increase our market share since we will have taken over the market of the latter and our aim will be to increase the capacity and also improve on the standards and status of this market by strategically making the clientele more comfortable and participatory in our new venture. This market will be incorporated in our existing one though under the legislation of the parent company which then will be our subsidiary (McDonald, 2002).

Role of marketing in the immediate future

The role of marketing in the future is based on identifying the potential to penetrate the market and sell, past or present consumer prospects, growth of or company, competition, growth rate of the industry and the demographics. We should consider subsidies, safety, efficacy and operational regulations, licensing requirements, materials access restrictions and price controls so as to rid legal and legislation hurdles in all our operations and ventures.

According to Deborah L. Knox and Sandra S. Butzel,(2007), marketing strategies correlate with trends and development. The no-frills policy has been helped through by the on-line approach by most players. Easy jet adoption of creating the online booking culture in the organization has manifested the trends of e-culture in the marketing polices and perspectives of the company. An aggressive internet based service provision and marketing base will up the market share capacity.

Demographics within the context of marketing support of impact on the potential based on factors like age, education and location and fiscal background of consumers. Our prospects within our marketing perspective are to become more profitable. As such, we are prepared to pay more to make sure we provide more attractive and the best solutions to consumer needs.

Our sales potential depend on the marketing stratagem. Its ability to reduce the timeframe for consumers to make decisions on buying our services is integral. The purchase decision is dependent on quality assurance in our services, the number of people involved in the decision, the urgency of sale or offer and the risk involved (MJ Polonsky, 1995).

We need more customers to be convinced that using our services is worth their money. The role of our marketing strategy and plan is convinced and increase the willingness of the clientele to pay for product value. This is determined by their knowledge of our prices, their immediate potential to pay and their requirements for characteristics such as quality, durability, and consistency, ease of use and dependability on these services.

Sources

MINTEL REPORT (2007) No-frills/Low-cost Airlines – UK – July 2007

Jane Bainbridge (2007): Cheap flights expand reach; Marketing. London: Apr 4, 2007. pg. 30,

Daniel Rogers (2007): Easy jet; Haymarket Business Publications Ltd. Apr 4, 2007 marketing. London: Apr 4, 2007.

BA vs. budget airlines: Ba.com uppance for no-frills? Marketing Week. London: Jun 23, 2005. pg. 28

Leigh L Thompson: Making the team. A guide for managers; Prentice Hall: 2004.

Hal Rosenbluth,(2007): The Customer comes Second and Other Secrets of Exceptional Service.{p 37}

Gary M. Olson, Thomas W. Malone, John B. Smith: Coordination Theory and Collaboration Technology: Lawrence Erlbaum Associates: Mahwah, NJ 2001 p 673

MJ Polonsky (1995) – JOURNAL OF BUSINESS ; INDUSTRIAL MARKETING,

www.ingentaconnect.com

GS Day,(1999) Market driven strategy: Free Press, p 56-135
SF Slater (1995) – Issues in conducting marketing strategy research:Journal of Strategic Marketing, www.informaworld.com pp- 3-37

JK Ryans Jr, DA Griffith, DS White, (2003): Standardization/adaptation of international marketing strategy: International Marketing Review, www.emeraldinsight.com pp 21-107

Deborah L. Knox and Sandra S. Butzel,(2007): What is corporate vulture; Life Work Transitions.com: Putting Your Spirit Online, http://www.lifeworktransitions.com

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