Airline Marketing of the FutureAirline Marketing of the Future

The advance of science and technology is so fast that new inventions, new equipments, new systems and new processes are to facilitate the lifestyle of man into consumption of product and services of far more quality and quick delivery. The increased popularity of e-tickets and the emphasis on Web site utility, more and more consumers are using the Internet as their primary method of purchasing tickets, and are going direct to the airline sites to buy. Bigger aircrafts can now carry heavier payloads which means increase in revenues and staying the company fit in a more competitive industry. New market segments have been tapped and even intensive market segmenting has been done to identify and service new market to gain competitiveness and lead. Due to these changes in business management and aid of technology, taking a glimpse to the future will always be possible. And from there, new marketing approaches and tactics are developed to mend the unsatisfiable satisfaction of man.

Extended Marketing Mix

Airline Marketing Mix is composed of the 4 P’s model. This is the traditional Marketing Mix Model that is primarily directed and useful for tangible products. Product – development. Pricing – strategy. Pipeline – distribution & on-line. Promotion – branding & increase sales. The Traditional Marketing Mix Model was primarily directed and useful for tangible products.

Are these 4 P’s enough? Due to tough competition in the industry, as it will be more tougher to compete in the near future because of multinational alliances among airlines, marketing strategies also have been developed to initiate core and distinctive competitiveness. The 7-Ps model by Booms Britner is more useful for services industries and arguably also for knowledge-intensive environments.

The Three Extra P’s

PeopleThis is human resource management. It includes all people directly or indirectly involved in the production to the delivery of the service or product. The new tend is empowerment of the human resource. In a world of competition, we need to have knowledge workers being empowered as a new management approach. Looking at the other side of the coin is the consumers which is the barebone why we are doing business (on a marketing perspective). Getting closer to the consumers add significant value to the total product or service offering.

ProcessThis involves the procedures, mechanisms and flow of activities from the production of the product to which product/service is consumed. Customer Management Processes comprises the manner of how factors of production are manufactured into final product until to the consumption of clients. Through the process, lots of inputs are being deployed which are fruits of market research. In this way, satisfying, not just the needs, but the wants of the consumers are well-adhered.

Physical EvidenceThe ability and environment in which the service is delivered, both tangible goods that help to communicate and perform the service and intangible experience of existing customers and the ability of the business to relay that customer satisfaction to potential customers.

Airline Industry Breakthroughs Trigger New Approach

The current down to earth breakthrough man has to contend with is the advent of very large commercial aircrafts, composite aircrafts made of fewer parts, pilotless aircraft, alternative fuel for aviation. Since all products are affected by costs, high technology products with most likely high price will be tougher sell to target markets. The prospect of marketing the new era products will just within the limits of consumer with high purchasing power. These new products will require a new marketing approach.

Intensive Market Segmentation

Intensive market segmentation is targeting market into the submarket based upon different needs or product or preferences of the identified group of target market of the submarket. Offering better services and being more responsive to changing customer needs creates new in-depth marketing tactics to identify this needs because of focus on a segment of a submarket.

Example:

Blue Ocean Strategy is the development of uncontested market space that makes the competition irrelevant rather than competing within the confines of the existing industry or trying to steal the customers from rivals. This strategy has brought a new wave of sub-industry in the airline industry through the introduction of low-cost carrier to a new market segment.

Future of Industry Structure

The alliance or network of big carriers has always existed but the service industry of low-cost carriers has showed a remarkable change in the structure of the industry. Catering to non-business passengers and price-conscious passengers has set the low-cost airline to another side of the industry. What could be striking if there will be a possibility of low-cost carrier companies merge and also form an alliance. This could be a possible threat to the network airlines. However, if alliance then shall be formed by the low-cost carriers, extra cost will be

necessary for operations and may affect strategic pricing as they will be incurring costs and possible regulation of pricing among members will surely be at stake. Another issue would be the carrier ownership and control, currently prescribed on a national basis in the vast majority of bilateral air services agreements. It is an anomaly unique to the aviation sector in the global economy, restricting both capital infusion and access to markets. New marketing tactics will then be necessary if such alliance may come to the low-cost carrier industry.

Co-existence and Competition

As more and more countries produce low-cost carriers, the dilemma of losing the fight of these giant airline companies could one issue. However, there is no such thing to worry in the future because of the co-existence relationship while in the direct or indirect competition. The network airlines and the low-cost airlines will both thrive.

Low-cost services influence competitive market. They make profits because of catering a new market segment with at low-cost operations. However, network carriers appear to have successful response to low-cost strategies by maintaining high fared passengers and rely on its advantages such as bigger share of the market, frequent flyer programs and better services in order to maintain adequate revenues. Continuing to link to the spoke city with its network provide local passengers who wish to travel beyond the hub city in other city-pair markets adds to competitive alternatives.

For the marketing managers, there is no need to fret because both sides will be available for you to tweak. The only problem is which side you are going to work for.

Global Distribution System and its Deregulation

A Quick History

The four major GDS’s are Galileo, Sabre, Worldspan, and Amadeus, though there are other GDS operating systems, these are the main drivers. As the industry evolved, it became clear that the existing regulations needed to be updated or eliminated. Over time, some GDS’s were no longer owned by airlines. Additionally, the rise and growth of the Internet led to alternative distribution channels (ADS). A key statistic to note is that 88 percent of all reservations were booked by a GDS in 1983. By 2002, only 53 percent of all reservations were GDS-created.

Deregulation will enable the GDS companies to offer more competitive pricing and packaging alternatives to attract more travel suppliers, which may result in more content for end users. By 2009, the GDS’s should be in a position to provide those seeking to purchase travel with one single place to obtain a complete array of the lowest fares and rates, thus eliminating the need to search multiple sources.

In the field of business travel distribution, the widespread opinion on what the impact of deregulation of the GDS’s appear to suggest deregulation will generate benefits similar to those created by the deregulation of the airlines. By increasing competition and obliging GDS’s to diversify their revenue streams, deregulation will provide improved technology and new products from which hotels and the individual business travelers will benefit.

Some Changes to Expect

• GDS’s will be free to decide how to return display results. Previously, systems were prohibited from biasing displays in favor of a hotel or group of hotels.

• Some systems may de-list smaller suppliers, which will be unable to generate fees of sufficient size. In turn, these suppliers will have to find alternate channels of distribution.

• Third party agreements. Systems will partner with entities that deliver additive or exponential value. For example, a GDS may ally with a company using relational databases in order to release inventory at select times at select prices.

• As inventory availability, rate information, and content becomes more fragmented, agencies will be able to provide value to travelers by offering intensive information whether online or off

- alternative travel information processing will be possible through combining a central agency and GDS. On possible complication is the disintermediation from the suppliers to end-users.

SOURCE:

Zapanta, Avelino. 100 Years of Philippine Aviation, 1909-2009: A Focus on Airline Management.

Friedman, Thomas. The World is Flat

Mercer mgt consulting company

Air Transport World Magazine

Business Travel Coalition, GDS Release

FTBA, GDS and the Future of Travel Management

websites on airline management & transportation marketing