Marketing communication vanhamme - airlines
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The document summarizes some key facts about the airline industry: - Airlines have very high fixed costs that make up 70-80% of their total costs, and it is difficult for airlines to quickly adjust their costs when demand decreases. - Profit margins in the industry are thin or nonexistent due to competitive pressures and the commodity nature of air travel. - Government regulation has had and continues to have an enormous influence on the industry through infrastructure, taxation, foreign investment rules, and other policies. - Price has emerged as the main driver of consumer choice in deregulated markets as the industry struggles with differentiating its commodity product and service.
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Marketing communication vanhamme - airlines
- 1. Somefacts of life about airlines - The two types of carrier ; oldones and new ones ; have a verydifferent operating costs, mainlydriven by labor - Profit margins are thin or nonexistent - High fixedcosts (70-80% of total) drive decisions - Its hard to match supply&demand o Demand varies temporally, by time of day, day of the week, and season o Product isperishable o Whendemanddeclines, airlinescantremovecostsquicklyenough, or proportional to the decrease o Lowbarriers to entry, and highbarriers to exit Airlines are Capital-intensive, labor-intensive, and energy-intensive The airlinemarketiscompetitive, but the marketsthatsupply the business are eithermonopolies or oligopolies Government influence has been and remainsenormous : - The legacy of domesticregulation - Infrastructure on the ground and in the air - Excessive taxation - Archaiclawsrestrictingforeigninvestment - Continuedregulation of international flying A commodity business, resistingdifferentiation SOME PRINCIPLES OF AIRLINES ADVERTISING - A complex, multifacedproduct but thatoftenappears simple to consumers - Air traveliswhateconomists call a 束 credencegoo 損 : itis impossible to assessqualityat time of purchase - Price now drives decision-making in most open domesticmarkets - The sector tends to becreativelycautious o Humo ris appropriate, but typicallyrestrained - Editorial coveragewillalwayscomplicate the task o How to promote in the same media as disasters and otherbad news - Airlines carry a lot of historicalbaggage, especially for older and infrequenttravelers - Budget are alwaysconstrained o Getting the right mix of tacticalstrategic
- 2. How do US consumerschoose ? Data from a large survey of American Airlines domesticcustomersshowed the followingchoicefactorssumming to 100% : - Price (includingcorporatepolicy), 40% - Schedule, 30% - Loyalty programs (FFP), 18% - Service quality, 12% Proce has clearlyemerged as the key driver in the US, the EU, and increasingly in other parts of the world as marketsderegulate. A COMMODITY BUSINESS The communityproblem continues to the presentday - Transparent pricing, the result of online distribution, drives much consumer choice - 束 Meta-search 損 sites likeKayaK - Codesharing alliances, like Star alliances, sky team, and oneWorld (Americans global partnership) tend to create a generic, flattenedexperience - The rise of low-cost carriers (LCCs) likeRyanAir, EasyJet, SouthWest Airlines, and AirAsia, all offering a simple productfocused on lowprice, are perpetuatinghecommodity perception.