Embed Size (px)
Citation preview
AN IINTEGRATED MARKETING APPROACH
FOR A MEINIUM-SIIZEI)
S UTH AFRICAN AMILIN
IIN A ER GULATEID MARKET
N. LOUW MAY 1996
AN INTEGRATED MARKETING APPROACH FOR A MEDIUM-SIZED
SOUTH AFRICAN AIRLINE IN A DEREGULATED MARKET
by
NICOLAAS SALOMON LOUW
A dissertation submitted
in fulfilment of the requirements for the degree of
MAGISTER COMMERCII
in
MARKETING MANAGEMENT
of the
FACULTY ECONOMIC AND MANAGEMENT SCIENCES
at the
RAND AFRIKAANS UNIVERSITY
SUPERVISOR: PROF. J.A. BENNETT
MAY 1996
ACKNOWLEDGEMENTS
I would like to express my sincere appreciation and gratitude to the following persons and
organisations which contributed to this study:
Prof. J. A. Bennett, for his assistance and constructive criticism.
Comair, for granting me this study opportunity - may the next 50 years be
as successful as the previous.
Mary Smith, for proof-reading the dissertation.
My father, for his valued comments and assistance.
(i)
TABLE OF CONTENTS
LIST OF TABLES
LIST OF FIGURES
GOAL AND OBJECTIVES OF STUDY 1
1.1 INTRODUCTION
1.2 THE RESEARCH PROBLEM 4
1.3 GOAL AND OBJECTIVES 4
1.4 RESEARCH METHODOLOGY 5
1.5 DIVISION OF CHAPTERS 6
THE MACRO AND MARKET FORCES AFFECTING AIRLINES
IN SOUTH AFRICA 10
2.1 INTRODUCTION 10
2.2 THE MACRO ENVIRONMENT 12
2.2.1 The economic environment 13
2.2.1.1 The South African economy in a world and regional context 14
2.2.1.2 Economic indicators 17
2.2.1.2.1 Economic growth 17
2.2.1.2.2 Inflation 18
2.2.1.2.3 International capital flows 19
2.2.1.2.4 The exchange rate 19
2.2.1.2.5 Economic policy issues 20
2.2.1.3 Tourism and air travel 21
(ii)
2.2.2 The social environment 23
2.2.2.1 Demographics 24
2.2.2.2 Socio-cultural aspects 28
2.2.2.2.1 The changing role of women 28
2.2.2.2.2 The increasing importance of leisure 29
2.2.2.2.3 The rise of singles 29
2.2.2.2.4 Changing sexual attitudes 30
2.2.2.2.5 A growing interest in health consciousness 3 I
2.2.3 The physical environment 31
2.2.4 The international environment 33
2.2. 5 The institutional environment 34
2.2.6 The technological environment 41
2.3 THE MARKET ENVIRONMENT 47
2.3.1 The South African air travel industry 48
2.3.1.1 The South African air travel industry in a world context 48
2.3.1.2 The South African air travel industry in a regional context 51
2.3.1.3 The domestic South African air travel market 52
2.3.2 Comair - a medium-sized South African airline 55
2.3.3 Domestic and regional competitors of Comair 58
2.3.3.1 Air Botswana (BP) 59
2.3.3.2 Air Namibia (SW) 60
2.3.3.3 Air Zimbabwe (UM) 60
2.3.3.4 Nationwide (CE) 61
2.3.3.5 Royal Swazi National Airways (ZC) 61
(iii)
2.3.3.6 SA Express (SAX) 62
2.3.3.7 South African Airways (SA) 62
2.3.3.8 Sunair (BV) 66
2.3.3.9 Zimbabwe Express (Z9) 67
2.4 SUMMARY 67
3. MARKET SEGMENTATION, MARKET TARGETING, MARKET
POSITIONING AND THE DEVELOPMENT OF A MISSION
STATEMENT 72
3.1 INTRODUCTION 72
3.2 MARKET SEGMENTATION 74
3.2.1 Advantages and disadvantages of market segmentation 75
3.2.2 Criteria for effective market segmentation 76
3.2.3 Segmentation of the domestic South African air travel market 77
3.2.3.1 Market segmentation sources for the domestic South African
air travel market 78
3.2.3.2 Segmentation based on purpose of trip 79
3.2.3.3 Segmentation based on demographic, geographic, and
economic characteristics 80
3.2.3.3.1 Demographic segmentation 81
Ethnic group 83
Gender 84
Age 84
Marital status 84
(iv)
(v) Home language 84
3.2.3.3.2 Geographic segmentation 85
Provincial distribution of the domestic South African
flyer 85
City distribution of the domestic South African flyer 86
3.2.3.3.3 Economic segmentation 88
Income 88
Lifestyle measurement (LSM) of the South African
flyer 90
3.2.3.4 Segmentation based on airline user status 92
3.2.3.5 Segmentation based on buyer needs and benefits sought 95
3.2.3.6 Segmentation based on psychographic characteristics and lifestyle 95
3.2.3.6.1 Responsibles
97
Characterising trends
97
Marketing implications
98
3.2.3.6.2 Brandeds
98
Characterising trends
99
Marketing implications
99
3.2.3.6.3 Innovatives
100
Characterising trends
100
Marketing implications
101
3.2.3.6.4 Self-motivateds
101
Characterising trends
101
Marketing implications
102
(v)
3.2.3.6. 5 Segmenting the South African air travel market
according to the 1992 White Sociomonitor 103
3.2.3.7 Segmentation based on price variables 104
3.3 MARKET TARGETING 105
3.3.1 Evaluating market segments 106
3.3.1.1 Segment size and growth 106
3.3.1.2 Segment structural attractiveness l07
3.3.1.3 Airline objectives and resources 107
3.3.2 Selecting market segments 108
3.4 MARKET POSITIONING 110
3.4.1 The importance of market positioning 111
3.4.2 Development of a positioning strategy 112
3.4.3 Anticipating competitive response 114
3.5 DEVELOPING A MISSION STATEMENT 115
3.6 SUMMARY 116
4. THE ROLE OF THE MARKETING MIX (PRODUCT AND DISTRIBUTION)
AS A COMPONENT OF AN INTEGRATED MARKETING APPROACH 120
4.1 INTRODUCTION 120
4.2 THE AIRLINE PRODUCT AS A COMPONENT OF THE MARKETING
MIX 123
4.2.1 Characteristics of the airline product 125
4.2.2 Developing a competitive airline product 128
4.2.2.1 The airline product and customer value 129
(vi)
4.2.2.2 The airline product and customer satisfaction 130
4.2.2.3 The airline product and quality 132
4.2.3 The airline product and branding 135
4.2.3.1 Brands as part of the booking process 136
4.2.3.2 The usage of differentiators in brand-building 138
4.2 . 4 Loyalty programmes as a component of the airline product 139
4.2.5 Future airline product trends 140
4.3 DISTRIBUTION AS A COMPONENT OF THE MARKETING MIX 142
4.3.1 Distribution channels in the air travel industry 143
4.3.2 The role of travel agencies in the airline distribution channel 145
4.3.3 The role of central reservations systems (CRSs) in the airline
distribution channel 148
4.3.4 New trends in the airline distribution channel 153
4.3.4. l Electronic ticketing and self-service ticketing machines 153
4.3.4.2 The changing role of travel agencies 157
4.3.4.3 The changing role of CRSs 157
4.3.4.4 The changing role of passengers 158
4.3.5 Direct marketing and the airline distribution channel 160
4.3.5.1 Major tools of direct marketing 160
4.3.5.2 Advantages of direct marketing 161
4.3.5.3 The development of integrated direct marketing 162
4.3.5.4 Developing a database marketing system 162
4.3.5.5 Major decisions in direct marketing 164
4.4 SUMMARY 165
(vii)
5. THE ROLE OF THE MARKETING MIX (PRICE AND PROMOTION)
AS A COMPONENT OF AN INTEGRATED MARKETING APPROACH 169
5.1 INTRODUCTION 169
5.2 PRICE AS A COMPONENT OF THE MARKETING MIX 169
5.2.1 Airline fare structures 171
5.2.2 Air travel pricing and demand 172
5.2.3 Airline costs and pricing 174
5.2.4 Airline productivity and pricing 175
5.2.5 The pricing process 176
5.2.5.1 Influences on the pricing of airline products 176
5.2.5.2 Pricing objectives 178
5.2.5.3 Pricing strategies 178
5.2.6 Air travel pricing and yield management 180
5.3 PROMOTION AS A COMPONENT OF THE MARKETING MIX 181
5.3.1 Advertising 182
5.3.1.1 Setting advertising objectives 183
5.3.1.2 Deciding on the advertising budget 184
5.3.1.3 Deciding on the advertising message 186
5.3.1.3.1 Message generation 186
5.3.1.3.2 Message evaluation and selection 189
5.3.1.3.3 Message execution 189
5.3.1.4 Deciding on media 190
5.3.1.4.1 Deciding on reach, frequency, and impact 190
5.3.1.4.2 Choosing amongst media types 191
(viii)
5.3.1.4.3 Selecting specific media vehicles 193
5.3.1.4.4 Deciding on media timing 194
5.3.1.4.5 Deciding on geographical media allocation 194
5.3.1.5 Evaluating advertising effectiveness 195
5.3.2 Public relations (PR) 196
5.3.2.1 Advantages and disadvantages of PR 196
5.3.2.2 Developing a PR plan 197
5.3.2.3 Implementing a PR programme 199
5.3.2.4 Measuring the effectiveness of PR 199
5.3.3 Sales promotion 200
5.3.3.1 The purpose of sales promotion 200
5.3.3.2 Sales promotion techniques used in air travel 201
5.3.3.3 Developing a sales promotion programme 202
5.3.3.3.1 Establishing sales promotion objectives 202
5.3.3.3.2 Selecting sales promotion tools 203
5.3.3.3.3 Planning a sales promotion programme 205
5.3.3.3.4 Implementing and controlling the sales promotion
programme 206
5.3.3.4 Evaluating sales promotion 207
5.3.4 Personal selling 207
5.3.4.1 Advantages and disadvantages of personal selling 208
5.3.4.2 Sales force objectives 209
5.3.4.3 Sales force size 209
5.3.4.4 Managing the sales force 210
(ix)
5.3.4.4.1 Recruiting and selecting sales representatives 210
5.3.4.4.2 Training sales representatives 211
5.3.4.4.3 Directing sales representatives 212
5.3.4.4.4 Motivating sales representatives 213
5.3.4.5 Evaluating sales representatives 214
5.4 SUMMARY 215
6. PRESENTATION OF FINDINGS OF EMPIRICAL RESEARCH 219
6.1 BACKGROUND 219
6.2 RESEARCH GOAL 220
6.3 RESEARCH METHODOLOGY 221
6.4 QUALITATIVE RESEARCH 224
6.4.1 Qualitative research objectives 224
6.4.2 Defining the qualitative research universe 224
6.4.3 Qualitative research findings 225
6.4.3.1 Decision-makers and influencers in choice of airline 225
6.4.3.2 Importance of airline attributes 226
6.4.3.3 Positioning of domestic airlines 229
6.4.3.4 Frequent flyer packages 230
6.4.3.5 Travel agents: Suggestions for improved service from airlines 231
6.5 QUANTITATIVE RESEARCH 232
6.5.1 Quantitative research objectives 233
6.5.2 Defining the quantitative research universe 233
6.5.3 Quantitative research findings 233
(x)
6.5.3.1 Profile of participants 234
6.5.3.2 Importance of airline attributes 237
6.5.3.3 Positioning of domestic airlines 239
6.5.3.4 Awareness and usage of domestic airlines 246
6.5.3.5 The role of price 250
6.5.3.6 Frequent flyer packages 252
6.6 SUMMARY 255
7. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS 261
7.1 INTRODUCTION 261
7.2 OVERVIEW OF STUDY 261
7.3 A SWOT ANALYSIS OF COMAIR 275
7.4 CONCLUSIONS AND RECOMMENDATIONS 277
7.4.1 The development of a customer-oriented approach 277
7.4.1.1 The role of Comair management 278
7.4.1.2 The role of Comair staff 280
7.4.1.3 Increased awareness of traveller needs 282
7.4.2 The development of a differentiated Comair product 283
7.4.3 The development of a coordinated market and communication strategy 285
LIST OF REFERENCES
APPENDIX
A: Quantitative research questionnaire
LIST OF TABLES
3.1 Demographic data of domestic South African flyers 82
4.1 The top four international computer reservations systems (CRSs) in
North America and Europe in 1992 148
5.1 Advertising media alternatives 191
5.2 Four difficulties facing sales managers 213
6.1 Participants according to organisation size 222
6.2 Participants according to region of origin 222
6.3 Participants according to airline used during previous 12 months 222
6.4 Demographic data of quantitative research participants 234
6.5 Frequency of travel, all participants versus Comair travellers 236
6.6 Area of residence and organisation size, all participants versus
Comair travellers 236
6.7 Importance of airline attributes 238
6.8 Airlines participants will never use, and reasons why 245
6.9 Awareness of domestic airlines 246
6.10 Usage of airlines 247
6.11 Number of airlines used by participants 248
6.12 Usual airline of Comair travellers 249
6.13 Awareness of price according to airline flown (Comair versus
non-Comair travellers) 250
6.14 Awareness of Johannesburg-Cape Town return fare 251
6.15 Loyalty created by SAA's Voyager programme 253
6.16 Awareness of frequent flyer programmes 253
6.17 Importance of frequent flyer incentives
255
7.1 An internal and external SWOT analysis of Comair (from a marketing
perspective)
276
LIST OF FIGURES
2.1 The external environment of an airline 12
2.2 GNP per capita, South Africa and other countries 15
2.3 Projection of overseas visitors 1990-1999 23
2.4 Human Development Index, worldwide (1994) 27
2.5 Racial composition of South Africa, SAA, and Comair 39
2.6 Primary cause factors of accidents 45
2.7 World shares of aviation 49
2.8 Air travel maturity per trip 50
2.9 The African air travel market 51
2.10 Share of capacity - domestic airlines January 1996 53
2.11 Domestic air routes - January 1996 54
2.12 Percentage business generated by Comair's routes 57
2.13 Comair routes and market shares 58
3.1 Steps in market segmentation, targeting, and positioning 73
3.2 Provincial distribution of domestic South African flyers 86
3.3 City distribution of domestic South African flyers 87
3.4 Income grouping of domestic South African flyers 89
3.5 Frequency of travel amongst domestic South African flyers 94
3.6 Psychographic segmentation of the domestic South African market 103
3.7 Five forces determining segment structural attractiveness 108
4.1 The marketing mix in context of the marketing system 121
4.2 The different levels of the airline product 124
4.3 Continuum of evaluation for different types of products 127
4.4 The five distribution channels of the airline product 143
5.1 The pricing tripod 170
5.2 Forces of and barriers to communication 188
5.3 Sales promotion techniques used in air travel 204
6.1 Average market shares on domestic jet routes (1\1995-6\1995) 223
6.2 Attribute associated with airlines 241
6.3 Domestic airlines in relation to weighted airline attributes 242
6.4 Personification of domestic airlines 244
6.5 Membership of frequent flyer programmes 254
7.1 The current and proposed role of marketing in Comair 279
GOAL AND OBJECTIIVES OF STUDY
1.1 11NTRODUCT11ON
The deregulation of the American air transport industry in 1978 created a turning point
for air travel worldwide. As a growing number of governments endorsed the policy of
deregulation, national airlines in those countries now had to face competition, and could
no longer rely on protective legislation to ensure their survival (Meyer, Oster, and
Clippinger 1984:3). A major effect of deregulation was the sudden importance passengers
gained. Travellers in countries with a deregulated air travel industry now often had an
option of two or more airlines serving destinations they wished to travel to, and airlines
in such an environment were forced to find innovative ways of persuading travellers to use
their services, instead of competitors (Shaw, 1990:2).
The importance of marketing in ensuring an airline's survival thus grew, as successful
airlines realized that they should ideally design airline products around the needs and
expectations of travellers; that easy access to the airline product needs to be provided;
that the airline product should represent value for money; and that the benefits offered by
a specific airline has to be communicated to the market. Deregulated air travel markets
were, as a result, quickly propelled into a stage where airline brands; differentiated
products; and passenger loyalty; became important survival tools (Rapp and Collins,
1990:218). However, these variables relate more to the external perceptions of an airline
product and many airlines had to change internal aspects of their operations, to facilitate
the perceptional changes they desired in their market environments.
Deregulation thus required successful airlines to review both market perceptions of their
products, and internal organisational components supporting these views, through
developing a fully "integrated" marketing approach that could assist them in surviving the
volatile dynamics of a competitive environment.
The domestic South African air travel market, partly as a result of the impetus created by
the American deregulation experience, was deregulated in 1991, followed shortly by the
deregulation of the international South African air travel market. Marked differences exist
between the South African and American air travel markets. Apart from an obvious
difference in size (the South African air travel market represents a mere 1 percent the size
of the American market - UN Civil Aviation statistics, 1992), only one government-
owned carrier, South African Airways (SAA), had been allowed to operate on major
domestic and all international routes for more than 60 years. The result is that five years
after deregulation, SAA still dominates the domestic air travel market as well as virtually
all international routes, and it is questionable whether deregulation has succeeded in
creating a really free and competitive air travel environment. Of the six airlines (serving
major domestic routes) that entered the domestic air transport market after deregulation,
two privately-owned airlines (Flitestar - April 1994, and Phoenix - September 1995) had
to close down, the demise of Flitestar (accusing SAA of anti-competitive behaviour)
probably being a more serious blow to the goals of deregulation. Flitestar was the only
new entrant that challenged SAA's supremacy head-on. The remaining four airlines, SA
Express, Sunair, Nationwide, and Comair, have up to now, been successful to various
degrees.
Both Sunair and SA Express, however, are either fully or partly owned by the government
(with the inherent advantages), whilst Nationwide has an almost insignificant presence (+-
2 percent market share) on the Johannesburg-Cape Town route alone. This leaves Comair
as SAA's only large, fully privately-owned, competitor'.
Q
The discrepancies that exist between the goals of deregulation and the current structure
of the South African air travel market, however, are usually not noticed by domestic air
travellers, who have become more sophisticated consumers with a growing awareness of
travel options available. This trend has forced all domestic South African airlines intent
on surviving to become consumer driven. SAA managed to build a brand valued in the
marketplace during the years of its monopoly, gained a wealth of airline expertise,
provides an extensive domestic route network as well as frequency, and has vast
(compared to the other domestic airlines) funds available to spend on marketing and
product enhancement. These advantages that SAA has, increases the importance of other
domestic airlines, and especially privately owned airlines, to focus on traveller needs and
expectations. The current dynamics of the deregulated air travel market therefore requires
domestic, and especially privately-owned airlines, to fully embrace an integrated marketing
approach (with traveller needs and expectations as the focal point), to be able to survive
in an increasingly sophisticated consumer market against the backdrop of an "uneven"
playing fields.
1) For the purposes of this study, Comair will represent a medium-sized South African
airline .
1.2 THE RESEARCH PROBLEM
The research problem is that Comair has yet failed to develop an integrated marketing
approach, and that such an approach, because of market dynamics, has become a prime
tool in ensuring the airline's long-term survival.
1.3 GOAL AND OBJECTRVIES
The overall goal of this study is to provide a medium-sized South African airline with the
theoretical framework and necessary research and analyses, in developing an integrated
marketing approach in a deregulated environment.
The objectives of the study are :
to analyse the macro and market variables that could impact on the marketing
efforts of a medium-sized South African airline.
to assess a medium-sized South African airline's marketing efforts (in response to
external variables) using existing theories and the airline's own set objectives.
to link the marketing efforts of a medium-sized South African airline to internal
variables, to be able to provide a truly "integrated" analysis of all marketing
activities.
to provide broad guidelines for future marketing activities undertook by a
medium-sized South African airline.
5
1.4 RESEARCH. METHODOLOGY
To assist in achieving the goal and objectives of this study, empirical research was
undertaken in May 1995, to establish information necessary for Comair to act upon
prevailing market conditions, and facilitate a change in the airline's then marketing efforts.
The goal of the research, set by Comair's top management was to determine how
frequent SAA economy class business travellers could be persuaded to switch to Comair.
The universe of the research, as a result, was defined as frequent (six or more annual
trips) domestic business travellers, travelling economy class. The research methodology
viewed as most appropriate was the following:
O
A qualitative phase comprising five focus group sessions (including one session
consisting of travel agents). A trained and experienced moderator led the group
discussions using a specific guideline and agenda. The qualitative phase was
completed first to assist in developing a stage two (quantitative leg) questionnaire.
O A quantitative phase involving 200 personal in-home interviews, conducted in
Johannesburg, Cape Town, and Durban, by experienced field workers using a set
questionnaire.
A spread of participants working for small, medium, and large companies, during both the
qualitative and quantitative research legs were ensured.
6
Secondary research comprising literature such as newspaper articles, books, local and
international magazines, and other publications were included in the study, as well as
statistics obtained from Comair, the All Media and Product Survey (AMPS),
Sociomonitor, Department of Civil Aviation, United Nations, International Air Transport
Association, and the Central Statistical Services.
1.5 DIVISION OF CHAPTERS
This study has been divided into seven chapters. A brief synopsis regarding the contents
of each chapter follows .
Chapter 2
Chapter 2 is divided into two sections, each investigating the main components of the
external environment of a medium-sized South African airline. The first section analyses
the six megatrends comprising an airline's macro environment: the economic; socio-
cultural; physical; international; institutional; and technological environments. The impact
and relevance of these megatrends to a medium-sized South African airline, as well as
current trends, are discussed.
The second section examines the market environment of a medium-sized South African
airline.
7
The South African air travel industry is discussed in a world, regional, and domestic
context, the reasons behind choosing Comair as the focal point of the study are explained,
and the carrier's history as well as its competitors are reviewed. Due to space constraints,
both air travellers and travel agents are studied in separate chapters (chapter 3 and 4
respectively).
Chapter 3
This chapter analyses, and applies where possible, the different methods of segmenting the
South African air travel industry .
A geographic, demographic, and psychographic profile, of the South African air traveller
are given, and flyer characteristics such as travel frequency, as well as purpose of trip -
both important air travel segmentation variables, are studied.
The second section of chapter 3 deals with criteria airlines need to employ when selecting
target segments, and the third section with the importance of an airline "fitting" itself to
the selected target segments in such a way as to set it meaningfully apart from other
airlines - in other words, the "positioning" of the airline in the marketplace.
Chapter 3 lastly reviews the role of a mission statement in communicating the airline's
"positioning" to both air travellers and airline employees, and its function as a logical
conclusion of the process of segmentation, targeting and positioning.
8
Chapter 4
The first section of this chapter examines the role of the airline product as a component
of the marketing mix. The different levels of the airline product, its characteristics, and
the importance of customer value, customer satisfaction, and quality, when designing the
airline product, are discussed. The section concludes with an analysis of the importance
of airline "branding", and a look at future airline product trends.
The second part of the chapter peruses the role of distribution as a component of the
marketing mix, with specific reference to the role of travel agencies and central
reservations systems. New trends currently impacting on the airline distribution channel,
thus changing the current roles of travel agencies, central reservation systems and
passengers, are then considered. This is followed by a review of the function of direct
marketing in the airline distribution system, its advantages, and the development of
integrated direct marketing and a database marketing system.
Chapter 5
The remaining two components of the marketing mix, price and promotion, are analysed
in, this chapter. The first section of the chapter discusses air travel demand, the costs in
providing air transport, productivity, and other influences in air travel pricing. Pricing
objectives and strategies are then deliberated, followed by examining the role of yield
management in air travel pricing.
9
The second section of the chapter analyses the fourth component of the marketing mix:
promotion. Promotion in turn comprises four variables: advertising, public relations, sales
promotion, and personal selling. Each of these promotion "tools" is analysed discussing
the function, investigating related advantages and disadvantages, examining the setting
of objectives and choice of strategies, studying the development of an action plan, and
reviewing the necessity of evaluating results.
Chapter 6
Chapter 6 comprises a presentation of the findings of the empirical research.
Chapter 7
This chapter gives a brief summary on each of the preceding chapters, followed by a
SWOT analysis applied to the internal environment of Comair. The research findings
(representing external perceptions of the Comair product) are then related to the internal
analysis to offer "integrated" conclusions and recommendations.
10
THE MACRO AND MARKET FORCES AFFECTING
AI LINES IN SOUTH AFRICA
2.1 INT ODUCTION
An airline and the external environment which in it operates, are open systems, and they
influence each other reciprocally. It follows then that an airline cannot exist successfully
if it is out of pace with its external environment. Any alteration in the present status quo
of an airline's external environment can be considered as a change, a movement towards
instability, and a shift towards the unpredictable. Changes usually cannot be measured,
it causes insecurity, and originates from a number of interrelated external factors. These
shifts and changes are often also occurring rapidly, and an airline is therefore constantly
exposed to change. The result is that an airline continuously encounters a "new" external
environment, with the following types of trends:
Trends which represent opportunities for the airline.
Trends which pose particular threats to the airline.
Trends which may appear but which hold no implications for the airline (Marx and
van der Walt, 1989:33).
Unfortunately, most of the difficulties experienced by airlines when responding to the
external environment are not related to the actual adjusting, but are for management to
change preconceived ideas and beliefs. These ideas and beliefs have the potential to
render a specific airline product irrelevant to the needs of its target market when
circumstances change.
11
Management specialist Drucker (Kotler, 1994:2) encapsulates the importance of airline
managers being open-minded and receptive in a changing environment, when he stated
that an organisation's winning formula in one decade might be its undoing in the next.
A well-known example of an airline (and its management) that responded positively to its
external environment, is Carlzon's "marketising" of SAS airlines. When he took over as
president of SAS in 1980, the airline was failing to satisfy the needs of its target market.
Within four months, major changes initiated by Carlzon, including major product
adjustments, were implemented within the airline, leading to a marked increase in full-fare
traffic on SAS, at a time that price cutting and zero growth were taking place in the air
travel market (Kotler, 1994:25).
Marketing plays a very important role in the adjustment of an airline to its external
environment, but examples unfortunately abound of organisations that suffered "marketing
myopia" when viewing their external environment. In the 1970's, the most powerful US
organisations included General Motors (GM); Sears; RCA; and IBM. Today, all four are
struggling to remain profitable. GM kept on producing large cars despite smaller sizes
being desired; Sears was caught between fashionable boutiques and discount department
stores; RCA never mastered the art of marketing; and IBM ignored new customer needs
(Kotler, 1994:2). Corey (Kotler, 1994:1) summarises the function of marketing in a
changing external environment by stating: "Marketing consists of all activities by which
a company adapts itself to its environment - creatively and profitably".
ACRO-ENVIRONMENT
Physical Environment
Economic Environment
Institutional Environment
ARKET ENVIRONMENT
International Environment AIRLINE
Competitors
Air travellers
Technologica Environment
Travel agents
Socio-cultural Environment
12
The external environment of an airline consists of two "sub-environments", as illustrated
in figure 2.1, displaying an interplay of forces with potential powerful impact on air travel.
Airlines should therefore be aware of trends and happenings in their external environment,
as these could affect their survival in a volatile industry.
FIGURE 2.1: THE EXTERNAL ENVIRONMENT OF AN AIRLINE
SOURCE: Adapted from Middleton, V.T.C. (1993). Marketing in travel and tourism. Oxford:Butterworth and Heineman.
The next section is devoted to an analysis of these two important environments which a
medium-sized South African airline operates in.
2.2 THE MACRO ENVIRONMENT
The variables that exist in an airline's macro-environment, are often fittingly referred to
as "megatrends".
13
The individual airline has very little control over these, despite their potentially severe
impact on its existence. Because of an airline's lack of power over these variables,
awareness of changes and trends in this environment is particularly important.
Adjustments necessary for an airline to survive, can only be made once a macro
environment trend has been perceived and acknowledged. The following six "sub-
environments" constitute the macro environment of an airline:
the economic environment.
the socio-cultural environment.
the physical environment.
the international environment.
the institutional environment.
the technological environment.
Each of these "environments" is subject to a more detailed discussion in the ensuing
sections.
2.2.1 The economic environment
No product can be bought without the necessary monetary means. The purchasing power
of an airline's customers is largely a by-product of a country's economy. Due to the
expenses involved, and being a derived demand, air travel especially, is very sensitive to
the economic climate of a country.
It is therefore important that any airline marketing activity should seriously consider the
forces at work in this environment and be aware of major trends.
14
Specific attention needs to be given to macro-economic conditions that influence the state
of the economy such as the Gross Domestic Product (GDP), whether the economy is in
an inflationary or recessionary period, interest rates, unemployment levels, and so forth,
as the economic environment can and does change very rapidly. The effects of these
changes could be far-reaching and could frequently require changes in an airline's
marketing strategy. Even a well-planned marketing strategy can fail in the event of a rapid
business-decline cycle (McCarthy and Perreault, 1993:122). Airline marketers should, in
addition, be aware of trends in consumer buying patterns as leisure travellers' purchasing
power provides the broad framework for, and eventually translates into ticket sales
(Kotler and Armstrong, 1991:66).
2.2.11.1 The South African economy in a world and regional context
South Africa is considered to be a higher middle-income country, with a Gross National
Product (GNP) per capita in 1994 of 3 010 US Dollars (higher middle income group: $2
896 - $8 955). Figure 2.2 compares the GNP per capita of South Africa with those of
other countries (Luxembourg - $39 850, and Mozambique - $80, respectively being the
world's richest and poorest country, based on 1994 GNP per capita). In 1994, South
Africa had the sixth highest income per capita in Africa, after the Seychelles ($6 210),
Gabon ($3 550), Mauritius ($3 180), and possibly Libya and Reunion - statistics
unavailable, but estimated to be upper middle-income countries (World Bank, 1996:18).
However, with regard to the size of its economy, South Africa can be considered a
regional giant.
30 000
25 860
25 030 -
21 650
20 000 - 18 410
15 000 - 13 190
10 000 - 8 060
5 000 - 4 010 3 520 3 010
2 650
USA UK Argentina Malaysia Russian Federation
Hong Kong New Zealand Mexico South Africa
US
DO
LL
AR
S 1
994
15
The South African economy contributes 77 percent to the SADC region's GDP
(comprising the economies of Angola, Mozambique, Botswana, Lesotho, Namibia,
Malawi, Swaziland, Tanzania, Zambia and Zimbabwe), whilst Angola and Zimbabwe, the
region's two second largest economies, contribute 6 and 5 percent respectively (South
African Development Bank, 1990).
FIGURE 2.2: GNP PER CAPITA, SOUTH AFRICA AND OTHER COUNTRIES
SOURCE: Adapted from World Bank.(1996). World Bank Atlas. Washington D.C.
Income per capita and the size of a country's economy, however, does not always reveal
the full economic picture regarding the cost of living in a certain country.
16
Several barometers could be used in this regard. In a study quoted by the South African
Institute for Race Relations (April 1995:6), it is mentioned that one kilogram of bread
based on the weighted average of 12 occupations) requires 10 minutes of work (to be able
to buy it) and a hamburger and a large portion of chips (comparable to MacDonald's
BigMac) 45 minutes, in Johannesburg. The average time for 47 cities ranging from
Lagos, to Toronto, Bangkok, and Zurich, is 23.9 minutes (bread) and 69.2 minutes
(hamburger and chips) respectively. New Yorkers would have to work 14 minutes for
one kilogram of bread and 23 minutes for a BigMac, while inhabitants of Nairobi 44 and
177 minutes respectively. Based on these statistics, the cost of living in South Africa
compares favourably with other countries worldwide. Although the above statistics
exclude other important expenses such as transport and accommodation (and stops short
from a full-scale comparative economic study), it could possibly indicate that South
Africa's cost of living allows the higher income groups more disposable income to spend
on air transport than for example Kenyans, but less than New Yorkers.
Another prominent characteristic of the South African economy that should be
highlighted, is the country's racial disparity in income distribution - considered by most a
legacy of the "apartheid" era. Although the gap has narrowed between 1980 and 1990,
it is still huge: The average income per White household in the metropolitan areas of
South Africa in 1990 was R71 598 per annum, the corresponding figure for Asians was
R26 918, Coloureds R22 642, and Blacks R11 682 (Bennett, 1995:199). This
discrepancy has given rise to South Africa's economy - having both First and Third world
characteristics - being described as a "dual economy", with mainly the White community
falling in the former, and the Black community in the latter category.
17
The Coloured and Indian communities fall somewhere in between. Apart from being the
least educated and least wealthy population group, the Black community is also the worst
afflicted by unemployment - 41 percent of Blacks are estimated to be without a job
(Stengel, R. 1995:40).
The following section discusses certain of the economic indicators most often used, when
analysing a country's economy.
2.2.1.2 Economic indicators
Airline marketers should be aware of the economic indicators discussed below, as they
reflect changing economic trends with a potential impact on air transport.
2.2.1.2.1 Economic growth
Every country's economy has a natural cycle which is not determined by politics.
Economic policies and politics, however, do determine the range of this economic cycle.
South Africa has a +-3 percent growth ceiling, due to a high import propensity and a lack
of foreign direct investment (FDI). This means that imports from abroad increase during
a time of economic growth and eventually exceed South African exports. When this point
is reached (at a +-3 percent growth rate), the economy, as a result, slows down again. In
order to attain a higher growth ceiling, the South African economy needs to be
restructured, so that it can lower its dependence on imports while increasing exports
through producing competitive products (De Wet:1995).
18
South Africa is presently drawing close to the upper turning point of its economic cycle.
The growth rate for 1995 was +-3 percent, while 1996 in all probability will still be a good
year, with a growth rate similar (or higher) to that of 1995. However, the South African
economy is predicted to start entering a cyclical downturn again in 1997, with a projected
economic growth rate of 1 to 2 percent during that period. The lower turning point of the
South African economic cycle is estimated to occur in 1999 (De Wet:1995). It is the
experience of the South African air travel industry that both leisure and business travel
decline during periods of recession. A higher growth ceiling (and therefore a higher,
lower turning point), will contribute to sustained air travel even during cyclical troughs.
2.2.11.2.2 Ikillataon
The average inflation rate for South Africa during the 1985-1994 period was 14.2 percent
(World Bank, 1996:18), whilst the inflation rates for our main trading partners, most
notably the USA and UK, were 3.3 percent and 5.7 percent respectively. World inflation
(including the inflation rates of our main trading partners) currently appears to have
slowed down, and is presently below 3 percent. Although South Africa's inflation rate has
decreased to a low of +-6.5 percent (November 1995), it will have to drop even further
to be on par with those of our main trading partners (De Wet:1995).
As with other products, inflation causes the price of air fares to rise in response to
spiralling fuel, catering, and salary costs.
19
2.2.1.1.3 international capital flows
Despite short-term capital inflow into South Africa, the possibility exists that little foreign
direct investment is likely to happen. South African investments currently have a low
return on investment due to low productivity, a rigid labour situation, low profits, and
high risks. International capital currently favours countries such as the USA, China, and
other places in the Far East. Barring foreign investment, virtually no aid and little
development finance are given to developing countries these days - the majority of what
is given being channelled through to Russia and Eastern Europe (De Wet:1995).
Foreign investment, through stimulating job creation and contributing to the economy, has
a benign effect on air travel (being a derived demand product). The transport of
professionals, consultants, and executives, to investment sites and between major cities,
could often grow a route substantially (e.g. Richards Bay and the ALUSAF project).
2.2.1.2.4 The exchange rate
The Rand's current decline against other currencies is likely to continue until South
Africa's inflation rate reaches 3 percent (De Wet:1995). At the time of writing (26 April
1996) the Rand Dollar exchange rate was R4,44; whilst the Rand Pound exchange rate
was R6,673. A weaker Rand has the following effect on the South African air travel
industry:
It becomes cheaper for foreign visitors to visit the country when the exchange rate
favours them, and this aspect has the potential to attract more foreign visitors.
20
O A poor local currency serves as a stimulant for the domestic tourism market as it
becomes too expensive for the local market to travel overseas. Domestic travel
is then often considered a viable option.
O
Overseas marketing of South Africa, by the South African Tourism Board
(SATOUR) and local businesses (e.g. hotels and game resorts), becomes more
expensive with an unfavourable exchange rate (Bennett, 1995:200).
O The cost of leasing and buying aircraft becomes more expensive, as in many cases
the payments have to be made in international currencies such as the Dollar or
Pound (Flitestar's leasing payments had to be made in US dollars, hastening the
demise of the airline due to a progressively weaker Rand).
0
Aircraft fuel becomes more expensive, increasing the cost of air fares.
2.2.1.2.5 Economic policy issues
The South African government, from an economist's point of view, presently has both
positive and negative trends with regard to economic policies. The positive trends (April
1996) can contribute to a restructuring of the South African economy, thus raising the
lower turning point of the economic cycle. The current positive trends are:
A maintenance of monetary discipline through high real rates of interest, and
slowly declining nominal rates.
An attempt at fiscal discipline - although difficult, the situation is unlikely to get
out of hand.
The government is favourably disposed towards privatisation.
21
O Less protection is provided to South African goods due to agreements reached at
GATT (General Agreement on Trade and Tariffs) and the World Trade
Organisation.
An attempt to uplift the level of literacy, education, and training, across the board.
A consistency and stability in policy (De Wet:1995).
The current (April 1996) negative trends that could adversely affect the South African
economy are:
Socialistic undertones with regard to education, health, land, and labour issues.
An inability to curb crime and violence.
A standstill in many areas of the civil service.
Taxes and government expenditure are still too high.
A strong desire to act against big business.
Several state and semi-state monopolies still exist.
An inability to implement RDP projects (De Wet:1995).
As a derived demand product, air travel growth is dependant on a healthy and growing
economy. Since economic growth is facilitated by sound governmental policies, the air
travel industry will be affected by the government's treatment of and solutions to the
country's economic problems.
2.2.1.3 Tourism and air travel
This section deals with tourism as an individual component of the South African economy,
due to the industry's interrelationship with air transport. Tourism is currently one of the
22
major contributors to the South African economy (the fourth biggest forex earner in 1993,
after manufactured goods, gold exports, and mining), and the government is increasing
its efforts directed at stimulating this industry as a source of revenue. Tourism constituted
6 percent of the world GNP in 1993, compared to only 3 percent in South Africa
(SATOUR, 1994a). The Explore South Africa campaign launched by SATOUR in 1995,
and the World Rugby Cup (June 1995), contributed to South Africa's growing popularity
as a tourist destination, and are followed by more promotional campaigns in 1996 and
1997. Cape Town, in addition, is a contender in a bid to host the Olympics in 2004.
SATOUR predicts that overseas visitors to South Africa will increase to two million by
the year 2000 as presented in figure 2.3, due to a growing interest in the country after the
lifting of sanctions. An increase in tourism will have a beneficial effect on air travel both
to and within South Africa: SATOUR's annual report (1993) records that 82 percent of
all overseas visitors in 1992 used air transport as a travel mode to South Africa. These
travellers often utilise domestic air transport to reach favourite South African tourist
destinations such as Cape Town and game reserves in Mpumalanga from Johannesburg.
An increase in tourism arrivals will therefore have a positive result on the traffic volumes
of domestic airlines.
The promising future of tourism in this country, however, will have to be supported by
maintaining political stability, curbing violence, and resolving certain other industry issues
such as the improvement of service standards.
1991 1992 1993 1994 1995 1996 1997 1998 1999
8 000 000
7 000 000
6 000 000
LL 0
5 w
000 000
D D 0 4 000 000 Z
3 000 000
2 000 000
23
FIGURE 2.3: PROJECTION OF OVERSEAS VISITORS 1990-1999
SOURCE: Adapted from SATOUR(b). (1994). Projection of overseas visitors. Pretoria .
2.2.2 The social environment
Kotler and Armstrong (1991:62) define demography as: "the study of human population
in terms of size, density, location, age, sex, race, occupation, and other statistics". The
demographic environment is of major interest to airline marketers because it involves
people, and people make up air travel markets.
24
2.2.2.1 Demographics
The South African population comprised 40 435 300 individuals in 1994. The average
annual growth rate of the population during 1991-1994 was +-2 percent, while illegal
emigrants from neighbouring countries grow the population a further 0.5 to 1 percent
annually (De Wet:1995). Almost half the population resides in urban areas, whilst 33
percent of the population participates in the country's economy. The median age of the
population is a young 21 years (South African Development Bank, 1990).
One of the most prominent features of the South African population is its cultural
diversity. Four main racial groupings exist: Blacks, comprising 76.1 percent of the
population; Whites 12.8 percent; Coloureds 8.5 percent; and Asians, 2.6 percent (Central
Statistical Services, 1994:3). However, even within these main ethnic groupings, several
diverse cultures can be found. The Black community is divided between nine major tribes;
the White community consists of a 57.5 percent Afrikaans majority, a 38.7 percent English
component and several other smaller communities (e.g. Greek, Portuguese, Jewish,
German, etc.). The Coloured community is divided between the Griquas (mainly of
Hottentot-European descent) and the Cape Malays (with diverse Far East origins - slaves
brought to the Cape); while the Asian community consists of Indian Tamils, Hindus, and
Muslims, originally from several parts in India (five different languages are still spoken by
older generation Indians). A small (+-20 000) Chinese community is found in the country,
the majority of whom were born here (Central Statistical Services, 1994:7, and Bureau
for Information 1995:5,6).
25
As a result of this cultural diversity several languages are spoken in the country, 11 of
which are now officially recognised, although English and to a lesser extent Afrikaans,
is widely used as the lingua franca between the various communities.
With regard to religion the nation appears to be more homogenous. The majority (+-70
percent) of the population are affiliated to one or other Christian church, while the
remainder do not profess any religious involvement except for small minorities supporting
the Hindu, Islamic, and Jewish faiths. However, the Christian umbrella covers numerous
churches with widely diverse views such as the staunch Calvinistic Dutch Reformed
church, and independent Black churches blending traditional beliefs with Christian
doctrine (Central Statistical Services, 1994:9).
Apart from the above linguistic and other cultural aspects, the South African racial
communities also differ with regard to average age, urbanisation, growth rate, human
development and other variables. The level of education as well as the human
development in South Africa are cases in point:
Education is an important facilitator of economic growth and has become a
priority for the new government. Since the April 1994 election, more funds have
been allocated to education whilst segregated schooling has been abolished in an
attempt to provide equal education opportunities for all children. The
government's recent focus on education is warranted, statistics show that the
country's education level is in dire need of attention.
26
In 1991 only 11.3 percent of the South African population qualified for a Matric,
any higher certificate, or a degree. This percentage is spread unevenly between
the different population groups: The White community is the most educated - 44.7
percent having a Matric or higher qualification, followed by the Indian community
- 21.8 percent, the Coloured community - 7.8 percent, and lastly, the Black
community - 5.9 percent (South African Institute for Race Relations, April
1995:5). While only 3.2 percent of the South African population has a degree or
similar education, 20 percent of United States citizens are college-educated - the
highest college-educated citizenry in the world as well as the most powerful global
economy (Kotler, 1994:157).
Human development is a measurement of individuals' ability to live a long and
healthy life, to communicate, to participate in a community, and to have sufficient
means to be able to afford a decent living. The Human Development Index (HDI)
is often used to measure human development in a given country. Any
measurement above 0.8 is considered to be a high level of human development
(HHD), 0.5-0.8 is considered to be the medium human development range
(MHD), and below 0.5 indicates low human development (LHD). Figure 2.4
compares the level of human development in South Africa with that of other
countries (also depicting the FEDI of each South African racial community).
0.932
0.840
0.90
0.836
0.679 0.677 0.670 0.663 0.644
0.513 0.500
0.425
0.252
cr so, v p- 4, 4, c.,° 4 .‘ + 4, * t 0 cot'
._:_,0 `fit` ,.‘ 9 _ • b 0.4 e
co A,
0 4 ,,, * .0P Nqf' 0 0 b e
4' co co
4,
0.8
High Human Development
Modium Human Development
0.4
0.2
0
a°tee 41,
0 4. gb
° e q <0° yo
Humon Development
0.6
o Ola ,.- ----0.47.0
27
FIGURE 2.4: HUMAN DEVELOPMENT INDEX, WORLDWIDE (1994 )
SOURCE: Adapted from Central Statistical Services(a).(1995). October Household Surve y. Pretoria.
Several cultural issues have influenced the South African air travel industr y in the recent
past, such as the usage of languages, SAA is now using Black languages on board whilst
using less Afrikaans (antagonising many Afrikaners), the promotion of SAA's "ubuntu"
corporate culture, and so forth. This is onl y the beginning of a trend. A long-term growth
in the non-White component of the air travel market is projected, while affirmative action
efforts will contribute to a more culturall y diverse airline staff component.
28
These trends will increasingly require airline marketers to become sensitive to cultural
issues, necessitating a multi-cultural approach both internally (e.g. a more "open"
environment) and externally (e.g. more complicated media and advertising strategies).
2.2.2.2 Socio-chhural aspects
Belch and Belch (1990:57) state the following with regard to socio-cultural aspects:
"Marketers must take into account the core cultural beliefs and values that exist in the
countries or regions that compose their marketplace. Marketers must constantly monitor
the socio-cultural environment in order to spot new opportunities or to identify new
threats. They must monitor social trends and changes in consumer values and respond to
these through their marketing and promotional programmes".
As part of the international community, South Africa (and domestic air travel) is affected
by global as well as Western socio-cultural trends. The following are some of the more
important worldwide trends.
2.2.2.2.1 The changing role of women
Worldwide, women are demanding and experiencing greater opportunities in all spheres
of life: at work, at home, and in social settings. They are increasingly seeking independent
lifestyles, wanting fewer children, more fulfilling careers, and a recognition of their
individual capabilities (Allvine, 1987:116). In 1960, women comprised 23 percent of the
South African work force, growing to 37 percent in 1987. During 1969 to the early
eighties, the number of White women filling managerial posts increased from 6.75 percent
to 14 percent (Marx and van der Walt, 1993:63).
29
Women played a major role in South Africa's transition to democracy, are now well-
represented in Parliament, and are progressively earning and controlling more purchasing
power than in the past. Due to the growing number of female travellers, airline marketers
will increasingly have to focus on this segment, designing products and packages that suit
the tastes of these flyers.
2.2.2.2.2 The increasing importance of leisure
With growing prosperity and improved standards of living, a new work ethic is developing
in the Western world. Workers are looking for interesting and dignified jobs, and would
rather have a shorter working week, more holidays, and longer paid vacations. As a
result, leisure has become a huge growth industry in the USA (Allvine, 1987:120). Partly
due to greater affluence, and partly due to an increase in the importance of leisure, touring
foreign countries have become a popular holiday option for many Europeans, North
Americans, and Asians. South Africa is currently one of the most popular African
destinations, and the resultant increase in tourists has had a positive impact on the
domestic air travel industry.
2.2.2.2.3 The rise of singles
Similarly to women, singles are a growing market segment, especially in the Western
world. Partly a product of sexual freedom and expanding career opportunities for women,
the new singles generation primarily comprises people in the 20-34 age group. Many
within this group feel no immediate need to get married and desire, for the time being, to
concentrate on their careers (Allvine, 1987:124).
30
The growing importance of this segment is reflected by the fact that the traditional
household (husband, wife , children) is no longer the dominant household pattern in the
United States. People are now choosing not to many, marrying later, or marrying without
having children (Kotler, 1994 - 157). Airline marketers have to consider this growing
segment when designing traditional airline products such as spouse fares, family packages,
and so forth.
2.2.2.2.4 Changing sexual attitudes
Since the sexual revolution in the 1960's and 1970's, individuals' attitudes towards
morality, sex, and divorce, have been changing. Divorce is now an acceptable method of
ending an unpleasant marriage, while pre and extra marital sex are more acceptable than
before (Allvine, 1987:122). This change in attitude is very evident in the marketing
environment. Some organisations are even using previous sexual "taboos" as modern
market segmentation and positioning tools. TIME magazine (25 September 1995:20)
reports that Miami Beach (Florida, USA), has recently decided to market itself as "the gay
and lesbian destination of the 90's" as research has revealed that gays "typically have far
more disposable income than do straights" and that gays "clearly spend disproportionately
more on travel than any other group". Certain American airlines, for similar reasons,
already provide packages to gay and lesbian couples (TIME, 25 September 1995:20),
while a Cape Town-based travel agency (Gay esCape), caters for gay and lesbian clientele,
offering tours, advice, and a list of "gay-friendly" places and businesses to overseas gay
visitors.
31
2.2.2.2.5 A growing interest in health consciousness
People in the Western world are increasingly becoming more health conscious, which has
led to a worldwide growth in health products and healthier lifestyles. The South African
society has experienced similar trends in health consciousness. The Health and Racquet
Club (a chain of upper class gyms), was listed on the Johannesburg Stock Exchange in
April 1994. In 1995 the organisation's turnover increased by 34 percent to R120 million
(Nel, N. 1995:70).
The growing interest in health has led to South African airlines receiving more requests
for healthy food such as vegetarian meals; Appletiser; mineral water; brown bread; and
so forth. Many airlines across the globe have banned smoking, as nonsmokers are
increasingly concerned about the effect that smoke fumes have on their health. Smoking
on all domestic SAA, Comair, and Sunair flights, is banned. SAA plans to extend this
policy in the near future to all Boeing 737 flights in Africa, domestic sectors of
international flights, and two of the eleven weekly international flights to London (Natal
Witness, 22 January, 1996).
2.2.3 The physical environment
Across the globe, people are increasingly concerned about the deteriorating physical
environment, and environmentalism has grown from a grass-roots movement into a
political and business force to be reckoned with. Kotler defines environmentalism as "an
organised movement of concerned citizens and governments to protect and enhance
peoples' living environment" (1994:160).
32
Airline marketers should be aware of the threats and opportunities associated with three
trends in the physical environment:
Increased cost of energy. The price of oil created serious problems for the world
economy when it shot up from $2.23 a barrel in 1970 to $34 a barrel in 1982. The
development of alternative energy sources, however, has led to a decline in oil
prices by 1986. Still, oil reserves are finite, and even air transport will have to use
alternative energy sources in the distant future.
Increased levels of pollution. The public's concern with pollution provides
marketing opportunities for organisations. Resourceful organisations will initiate
environment-friendly actions to show their communities that they care about the
well-being of the environment.
The changing role of governments in environmental protection. Governments
vary in their concern for the environment. The German government on the one
hand is vigorous in its pursuit of environmentally conscious policies, while many
poor nations are doing little. The hope is that organisations around the world will
accept more social responsibility and that less expensive devices are found to
control pollution (Kotler, 1994:159).
Environment-related constraints are becoming increasingly common in the air travel
industry (e.g. the banning of stage two aircraft in Europe, restricted airport operational
hours due to noise pollution, etc.). In response to environmental legislation and efforts,
the International Air Transport Association (IATA) provides a "clearing house" for such
information, monitors international environmental debate, and promotes common industry
positions on environmental problems.
33
These include support for a coordinated phase-out of old aircraft types, and noise-
compatible land-use planning. IATA also publishes an "Environmental Review", and is
currently building a data bank containing environmental information (IATA, 1995:8).
2.2.4 The international environment
Due to trade agreements such as the General Agreement on Trade and Tariffs (GATT),
the world is fast becoming one big marketplace. Economic realities seem to have become
more important to countries, while international boundaries have become less significant.
The integration of the European community, the North Atlantic Free Trade Agreement
between the USA, Canada, and Mexico, the collapse of Communism in Eastern Europe,
indicate a trend towards global integration. Closer to home, consensus exists that the
Southern African economies are interrelated and interdependent. Closer integration and
cooperation of the regional economies are therefore advocated (Bennett, 1995:208).
The GATT annex on air transport services came into force for the majority of signatory
countries (including South Africa), on 1 January 1995. Though insufficient time has
elapsed to assess its impact on the air travel industry, a vigorous debate continues whether
in time, GATT will become the primary multilateral instrument to open world air transport
markets. At present, only aircraft repair and maintenance services; the selling and
marketing of air transport services; and computer reservation systems fall within the scope
of the accord. The GATT agreement excludes traffic rights and makes an explicit
commitment that a member's obligations under current bilateral or multilateral agreements
will not in any way be reduced.
34
However, proponents of GATT point out that the agreement calls for "progressive
liberalisation", and some countries (Australia, New Zealand, Singapore, Malaysia, and the
Nordic countries) have already asked for a working party to look at broadening GATT's
coverage of other aviation issues. The eventual effect of GATT and other trade
agreements on air travel could be summarised by quoting a World Trade Organisation
councillor (Marconini): "Aviation cannot escape broad-based economic disciplines
forever, it is no longer the unique, glamorous sector it used to be" (Airline Business,
September 1995:81-82).
Traffic rights and GATT aside, the air travel industry has already been strongly influenced
in recent decades by other international trends. The rise of mega-carriers is one such
example. Airline mergers, takeovers, and alliances, are increasing, and it is predicted that
by early in the next century, five as opposed to the current eight major West European
airlines will exist, four major US trunk carriers (presently 7); and seven other major
airlines (currently 8). The resulting 16 mega-carriers will have an estimated 75 percent
share of world traffic (IATA, September 1995).
2.2.5 The institutional environment
An airline's institutional environment includes components ranging from laws governing
its operations and government agencies enforcing those laws, to the political climate of
the country. Although laws affecting air transport and government agencies dealing with
airlines are the most visible component of an airline's institutional environment, the
influence exerted on an airline by a country's political climate should not be
underestimated, and is often very powerful and prescriptive.
35
This section firstly deals with direct government involvement in the air travel industry
(worldwide, but also in South Africa). The impact of South Africa's political climate on
its air travel industry is then discussed .
One of the main purposes of government regulation in the air travel industry is (or should
be), to protect passengers and society from unfair business practices. The institutional
environment is therefore probably the most restrictive of the "megatrends". Most of an
airline's marketing mix components (e.g. product - aircraft, promotion - advertising, price
etc.), is affected in some way or another by government regulation (Belch and Belch,
1990:57). However, government involvement in the air travel industry has in the past
often exceeded the mere protection of passengers. This is particularly the case in Africa,
where the World Bank and the African Regional Airline Association (AFRAA) have
criticized governments for operating airlines as extensions of their various foreign affairs
departments. They allege that African governments are reluctant to let go of airlines as
they are sources of national pride and often provide free VIP flights. This lack of political
will to reorganize airlines into business units, renders them unattractive to other alliance-
seeking airlines (Finance Week, 26 August 1993). Africa, however, is not the only
continent still struggling with the issue of state involvement in the air travel industry. The
1994 round of state aid approvals in Brussels has given the French, Greek, and Portuguese
governments, authority to support their struggling flag carriers with government aid. Air
France was awarded the biggest aid package ever to an airline - 3.7 billion US Dollars,
one of the conditions being that the French government should not interfere again with
the management of the airline (Airline Business, September 1994:29).
36
The situation in South Africa is fortunately different. In 1987 the White Paper on
Privatisation and Deregulation advocated that the air travel industry be deregulated (based
on the American experience which initiated a worldwide trend). The thinking was that
competition will lead to more efficient airlines, resulting in lower fares, while benefitting
the country's economy in the long term. The recommendation was included in the
Domestic Air Transport Policy, published by the Department of Transport in May 1990,
and subsequently embodied in the Air Services Licensing Act, Act 115, 1990. The South
African air travel industry was, as a result, deregulated on the first of July 1991. SAA,
no longer the official national carrier, now had to operate as a business unit. In response
to deregulation, two airlines initially, Flitestar and Comair, took to the air to exploit the
new opportunity of "open skies". On 29 April 1992, Welgemoed, then Minister of
Transport, announced that the Cabinet had approved a new liberal international air travel
policy for South Africa, which has since become the International Air Services Act of
1993. The new act allowed for more than one designated South African carrier on
international and regional routes (Department of Civil Aviation, January 1996). Comair
has since been designated as the second South African carrier on both the Johannesburg
to Harare, Johannesburg to Windhoek, Johannesburg to Victoria Falls, and Cape Town
to Windhoek, routes.
In response to the elections, a new transport policy is currently taking form, and will be
published as a White Paper by the end of 1996. In line with views held by the present
government, many of its objectives come from the RDP .
37
Some of the issues addressed are meeting basic needs; creating wider ownership of the
South African economy; organising private-sector capital; reducing trade debt; and
promoting fair competition (Financial Mail, 26 January 1996).
As mentioned above, laws and regulations are often not the only institutional force with
which an airline has to deal with. The political climate and government of a country can
often have a powerful impact on airline operations, and South Africa particularly has
numerous examples supporting this statement.
One of the most telling examples currently, is the increasing number of tourists visiting the
country. This, and the high increase in airlines operating to and from South Africa, could
at least be partly attributed to South Africa's first ever democratic elections, held in April
1994. As the majority of overseas visitors use air transport to arrive in South Africa,
while also utilising domestic air transport, the benefits to the South African air travel
industry are obvious. However, the increase in tourists visiting the country is not the only
impact which the country's current political climate had on the air travel industry. Black
economic empowerment, for instance, being one of the present government's main
objectives, is another example. Although no law has been passed in South Africa giving
legal impetus to Black economic empowerment, the following examples illustrate the
subtle yet powerful force which a country's political environment can exert on the air
transport:
0
According to Myburgh (SAA), "Black economic empowerment was undoubtedly
one of the more important reasons" why SAA agreed to help bring SA Express
about (Mazwai, T. 1994:12).
38
SAA decided to acquire a 20 percent share in the airline, while Thebe Investment
Corporation - a Black owned investment giant - holds a 51 percent stake. An
umbilical link exists between Thebe Investment Corporation and the Batho-Batho
trust, headed by Nelson Mandela and (previously) Walter Sisulu, but allegations
of Thebe being an investment arm of the ANC have been vehemently denied by
all parties concerned (Sunday Finance, 6 February 1994:3).
Black economic empowerment is one of the main reasons why the government
also supports affirmative action. SAA and other state-owned enterprises afford
the government with the necessary means to achieve this goal. All appointments,
transfers, and promotions of White SAA employees, for example, currently have
to be approved by a "Turn Strategy Council", which sets racial quota goals and
targets to be achieved by certain dates (De Villiers, 1994:1). The objective of
both Transnet and SAA, is a fundamental shift in race and gender profiles by the
year 2000. Other South African airlines are responding to affirmative action in
various ways. Both SA Express and Sunair have a relatively high non-White staff
component (Sunair, +- 50 percent), and are either partly or wholly owned by the
government. At Comair, the only large, privately-owned airline in South Africa,
most of the junior, middle, and top management positions, apart from a Black
board member, are still filled by Whites (January 1996) - the majority of the non-
White staff employed by the airline in the past two years have filled positions in
the organisation's front-line departments. Although the government has thus far
refrained from forcing private organisations to endorse racial quotas, Comair's
aim is to increase its number of non-White employees.
39
Figure 2.5 reflects the racial composition of the country, SAA, and Comair, at the
end of 1994.
FIGURE 2.5: RACIAL COMPOSITION OF SOUTH AFRICA, SAA, AND COMAIR
1W
79
❑ Bleck
0 White
0 Coloured
0 Asian
76
70
1 6° 0 ce 0.
40
23
13 13
2
COMAIR
SOUTH AFRICA
SAA
SOURCE: Adapted from SAA News. De Villiers, A.(1994). New turn for turn strategy. August p1. South African Advertising Research Foundation.(1994). All Media
and Products Survey. Johannesburg. Comair.(1995). Personnel. Johannesburg.
One of the most publicised issues concerning Black economic empowerment in the air
travel industry, is the privatisation of state assets.
40
The government and unions, unfortunately, have conflicting views on the role of
privatisation with regard to Black economic empowerment. The government is in favour
of partial (e.g. SAA) and total privatisation (e.g. Sunair) of state assets, due to the belief
that privatisation will increase the efficiency and expertise of state assets; earn money for
the government to pay off debt; and grow the economy in the long run. The unions, on
the other hand, feel obliged to protect their members' jobs, and believe that job losses due
to privatisation are inevitable. The issue is far from being resolved, but the latest
indications given by Maharaj (Financial Mail, 26 January 1996) are that "Sunair can be
privatised (now) and the workers would support it". However, Maharaj is not sure who
to sell it to. With regard to SAA, Maharaj is more vague. He states that SAA is not for
sale yet, but that he intends explaining to the unions that privatisation might lead to long-
term growth in employment opportunities (SAA now employs more people than when it
was "rightsized" by Myburgh two years ago). Maharaj is more definitive on the issue of
Black economic empowerment, indicating that both Sunair and SAA (if partially
privatised), will be sold to owners that are fully committed to Black economic
empowerment (Financial Mail, 26 January 1996).
SAA's acquisition of seven Boeing 777-200's and two Boeing 747-400's is
another example reflecting the extent to which the government's Black economic
empowerment drive affects the air travel industry. SAA had to choose between
three different aircraft manufacturers, one of the criteria being contributions to the
RDP through local contracts, as a result of the order. SAA's choice of Boeing
will lead to offset contracts valued at R2.8 billion being placed in South Africa
(Business Report, 6 November 1995).
41
Airlines will continue to be influenced by the political climate of a country, as long as air
transport is perceived to be a high-profile industry. The pressure on an airline to behave
politically correctly might differ from one country to another, and in some cases will even
be exerted by the airline's passengers rather than a country's government. A case in point
is the recent charges of racism which has been levelled at British Airways (BA). In
November 1995, a British-born Black probation officer accused BA of racism, after his
passport was photocopied without his consent - BA eventually apologised. In the latest
race row, BA payed 2 000 pounds in compensation to a 16-year-old schoolgirl who
believed that check-in staff tried to stop her from taking a flight because she was Black.
Whether the accusations are true is difficult to determine, but it does indicate the
sensitivity required from airlines in being "politically correct" (Business Day, 12 February
1996).
2.2.6 The technological environment
Underlying the economic environment is its technological base - the technical skills and
equipment that affect the way an economy's resources are converted to output. New
technologies have created important industries that did not exist even a few years ago (in
1981 Microsoft was a tiny software organisation, now the largest software organisation
in the world, it is worth more than General Motors). Air transport is a technologically
intensive industry, and technological developments affect airline marketing in two basic
ways; firstly with new products; and secondly with new processes or ways of doing things
(McCarthy and Perreault, 1993:123).
42
The air travel industry is constantly offering new products such as bigger, better, and more
efficient aircraft, more technologically advanced airports, new air traffic control systems,
and so forth, while new systems and processes such as ticketless travel and sophisticated
yield management programmes are continuously developed. Other non-aviation related
technological breakthroughs such as video-conferencing (creating an alternative to be
physically present at a meeting or conference) also impact to a greater or lesser degree on
air transport.
The first technological contact that passengers usually have with air transport is by using
a central reservation system (CRS), most often through a travel agent, which provides all
parties involved with easy, convenient, and computerised booking facilities. An airline
with no CRS today, is significantly disadvantaged. In addition to airline reservations,
major CRSs can also offer booking facilities involving hotels, car rentals, and
entertainment. For this reason, and the fact that huge systems such as SABRE and Galileo
span the globe, major CRSs are often referred to as global distribution systems, or GDSs
(Bennett, 1995:208).
The majority of South African travel operators (e.g. Sun International, Southern Sun
Hotels, SAA, Comair, Sunair, Protea Hotel Corporation, Budget, and Avis amongst
others) are subscribers to the Galileo reservation system which is one of the world's
largest CRSs. In 1994, this system served 100 000 terminals worldwide, offered bookings
on 450 airlines, 27 500 hotels and +- 12 000 car rental organisations (Du Plessis,
1994:14).
43
CRSs are constantly developing, allowing for more features, more efficiency, and more
convenience, and it is anticipated that new technology will soon enable travellers to access
these systems from home (Ceronie, 1994).
Most air travellers' second area of interfacing with air transport technology is the airport.
An airport has to make use of a wide range of technology. Apart from the navigational
side (which in the case of South Africa forms a separate state-owned commercialised
organisation (ATNS), security, check-in, and luggage facilities, also have to be provided.
Many airports offer non-aeronautical activities such as restaurants, cinemas, bookshops,
saunas, and duty-free sections, as well. Johannesburg International Airport currently
derives +-20 percent of its income from such non-aeronautical activities, while Heathrow
funds 70 percent of its budget from such ventures. The Airports Company plans to
expand non-aeronautical activities in the near future at the nine state airports which it
controls, in order to boost revenue (Loots, 1994). With the increase in internatignAl and
domestic passengers, other airport services also need to be upgraded. Projects are
currently planned and underway at the Cape Town, Durban, and Johannesburg
International Airports. Recent changes at Johannesburg International Airport include the
installation of 842 metres of travelators, the phasing in of a computer-generated permit
system that will improve control, security, and administrative procedures, as well as
redesigning the traffic flow system to and around the airport (Airports Company,
September 1994:6).
For the passenger, probably the most prominent area of technological interface with air
transport is the aircraft itself
44
Aircraft used today, is a long way from those that undertook the first flight between Cape
Town and London in 1920. The flight took 45 days to complete (Bureau for Information,
1990:17). Wide-bodied planes were only introduced to world air transport in the 1950's,
but aircraft have since become progressively safer, more convenient, more fuel-efficient,
and able to undertake longer journeys. The main aircraft manufacturers today are Boeing,
McDonnell Douglas, respectively the largest and tenth largest US organisation based on
volume of export sales (Boone and Kurtz, 1992:85), and the European consortium Airbus
Industrie. Boeing accounts for approximately 50 percent of all aircraft orders worldwide,
while the remainder is split almost evenly between Mcdonnell Douglas and Airbus
Industrie (IATA, September 1995). Boeing was chosen by SAA, after considering all
three aircraft manufacturers' proposals, to supply the airline with seven of the latest
Boeing 777's, the first aircraft to be fully computer designed (also manufactured with fold-
up wings to beat expected future airport congestions). SAA intends to use these new
aircraft on its European, Far and Middle Eastern routes. In addition, two Boeing 747-400
aircraft were ordered, which will complete the R3,5 billion purchase (Business Report, 6
November 1995; Finance Week, 26 August 1993).
The industry's continuous development of bigger, better, and more efficient aircraft, has
improved the safety of air transport. During 1983-1992, 3.2 accidents per annum (in the
worldwide commercial fleet), were caused by aircraft defects, compared to 3.9 per annum
in the period 1959-1992. Maintenance, weather, and flightcrew, have simultaneously
decreased as primary cause factors for accidents, as shown in figure 2.6. This is quite an
achievement, considering the growth of air transport in recent years (Butler, J. 1993:17).
Primary Factor.
Flight Crew
Airplane
Maintenance
Weather
Airport / ATC
Miscellaneous/other
64.2
56.7
16.0
12.9
al
1959 - 1992
II Last 10 years (1983 - 1992'
4.5
2.7
5.2
I7.6
7.2
15.6
0
10 20 30 40
50 60 70
Percentage of total accidents with known causes
45
FIGURE 2.6: PRIMARY CAUSE FACTORS OF ACCIDENTS
SOURCE: Adapted from Review. Butler, J. (1993). Human factors in air travel. March, p17.
However, despite these reassuring statistics, certain governments are trying to improve
the safety standard of air transport even more. The USA for instance, is presently
conducting a worldwide survey of airlines and have barred nine countries' airlines (Ghana,
Gambia, Zaire, Paraguay, Uruguay, Belize, Honduras, Nicaragua, and the Dominican
Republic) from flying to or from the USA, as these countries' safety measures are
considered to fall short of acceptable standards (Business Day, 5 September 1994:5).
Africa particularly, has a bad safety record.
46
The number of crashes involving African airlines (based on rate per million sectors) is the
highest in the world (Financial Mail, September 1995). South Africans however, need not
fear. SAA's technical facilities (SAA is also responsible for the maintenance of Comair's
Boeing fleet), have been approved by the Aviation Authorities of Hong Kong, Singapore,
the EEC, and the Federation of Aviation Authorities (Business Day, 26 September
1994:6).
The American government's concern with airline safety standards, despite current good
safety records, is warranted. Potential threats loom on the horizon. Notwithstanding
stringent standards worldwide, the dangers of counterfeit and faulty spares are becoming
a serious problem in the air travel industry. Aircraft spares are very expensive and this has
given rise to worldwide trafficking in bogus and fake parts. For example, the locking pins
for a Convair 580 would cost $148 if made to proper standards, a fake could be cut from
a 50c steel bolt - the difference lies in the quality of the metal used. European and
American aviation groups are alarmed at the "growing scope" of the problem and a report
in Washington by the Flight Safety Foundation cites six fatal accidents and scores of other
incidents as involving illicit parts. The problem is exacerbated by the fact that a Boeing
747 contains parts provided by 1 500 suppliers worldwide, which makes it difficult to
control (Jackson, J. 1994:49). Several cases involving bogus parts, such as a Florida
broker selling $1 bedspring coils as a $18 component for a jet-engine starter have been
reported in the USA. A 1992 random sampling of spares at the US Federal Aviation
Authority's own logistics centre in Oklahoma indicated that more than a third of the 500
spares tested did not meet the agency's own approval.
47
The situation is becoming worse as Norwegian aviation experts concluded after three
years, that a 1989 crash in which a Convair 580 disintegrated killing all 50 passengers on
board, was caused by bolts that were made of inferior quality metal. The bolts held
together the tail section of the aircraft and were too weak to withstand the buffeting
forces of flight (Jackson, J. 1994:48).
The air travel industry is progressively becoming more technologically intensive. Airline
products that are now offered to passengers are far superior to those that were available
even as recently as 10 years ago. The rapid pace of aviation technology opens up new
opportunities to airlines, but it also creates problems. Implementation and replacement
costs of new technology are often high, and the increasing specialisation and cost of
manufacturing airline parts lead to a growing threat of a trade in counterfeits. The
technological environment of the air travel industry, however, is bound to become even
more dynamic and volatile in the future, and the success of an airline will progressively
hinge on its ability to bring new ideas and technology to the market.
2.3 THE MARKET ENVIRONMENT
An airline's market environment comprises all the potential customers that might be
willing, and able, to engage in exchange to satisfy their particular needs or wants,
according to Kotler (1994:11). Marx and van der Walt (1993:44), are more specific.
They define an airline's market environment as consisting of travellers with a certain
amount of buying power and certain behavioural characteristics; other airlines that want
to hold on or improve their position with regard to travellers; and distributors of the
airline product.
48
An airline rarely has control over these three components comprising its market
environment, but is often able to influence them through employing specific marketing
strategies. In order to provide a clearer understanding and a broad background to the
market environment of South African airlines, this section firstly analyses the South
African air travel industry; then discusses Comair as a medium-sized South African airline;
and lastly, identifies and describes Comair's competitors. The other components of a
medium-sized South African airline's market environment, air travellers and distributors
of the airline product (i.e. travel agents), are analysed in detail in chapters three and five
respectively.
2.3.! The South African air travel industry
The next section views the South African air travel industry from a world, regional, and
domestic, perspective.
2.3.11.! The South African air travel industry in a world context
The world air travel market constituted 992 571 000 passengers in 1991. The market
shares of the world's different regions regarding these travellers are presented in figure
2.7. The North American, Asian, and European, air transport markets, comprise 90.4
percent of all air travellers. Africa has the world's smallest share of air travel, with South
Africa's air travel market roughly 1 percent the size of the USA market (United Nations,
1992). Notwithstanding their size, North America, Asia, and Europe, have also been the
world's fastest growing air travel markets. During the period 1980 - 1991, these regions
recorded growth of 46 percent, 93 percent, and 56 percent respectively.
50% North America (491 883 000)
2% Africa (24 742 000)
3% Oceania (28 451 000)
20% Euro (201 114 000)
4% South America (41 433 000)
21% Asia (204 948 000)
( ) = No. of trips
49
Africa's air travel market increased by 16 percent during this time, and South Africa's by
17 percent (United Nations, 1992). Although world air transport grew by an immense 53
percent from 1980-1991, it is still in a growth curve - IATA forecasts a 6.6 percent annual
increase in world air traffic between 1994 and 1998 (IATA, 1994:1).
FIGURE 2.7: WORLD SHARES OF AIR TRAVEL (1992)
SOURCE: Adapted from United Nations.(1992). Civil Aviation statistics. New York.
The fact that North America, Asia, and Europe - besides having such large air travel
industries - also include the world's richest and highest GNP per capita countries, reflects
the interrelationship between a country's economy, and the number of air travel trips
undertaken by the country's citizens.
001 0
o New Zealand Canada°
o USA
Saudi Arabia
Greae°
0.5
rn a ii 1— w Mexico o Tunisia° oSouth Africa ce Taiwan ° w _
D
oBraZil co 2 0 1 z o
Philippine
0 05 o Indonesia
o Pakistan
PR China
India
Australia o pUK
Malaysia 0
oKorea o Portuga I
Tojrke Czechoslovakia
pain France° Netherlandk, Germany°
°Italy Japan o
10000 15000
GNP per capita
5000 20000 25000
50
To compare South Africa's air travel industry with other countries of different income
levels, figure 2.8 illustrates the so-called air travel maturity per capita for individual
countries. The unit used on the Y-axis is trips undertaken, and on the X-axis, GNP per
capita. The graph illustrates that the higher a nation's GNP, the more trips are undertaken,
until a point of saturation is usually reached in the region of 7 500 US dollars (1990). One
can assume, based on the graph, that a small growth in the South African GNP per capita,
would lead to a disproportionate high increase in air travel trips undertaken - similar to
other developing countries where air travel growth curves are steep. The air travel
markets of Industrialised and First World nations, on the other hand, appear to be
saturated, and a steep rise in GNP would probably result in a disproportionate small
increase in trips undertaken (Finance Week, 26 August 1993:22).
FIGURE 2.8: AIR TRAVEL MATURITY PER TRIP
SOURCE: Adapted from Finance Week. (1993, August 26). Airline supplement. 7.
10 003 003
8 491 000
8 003 000
8 000 000 — ce w
IZ
Z LL 4 819 000
Z
4 000 033
3 385 000
2 602 00
2 MO 000
1 884 000
1 430 000 1 201 000 930 000
RSA Algeria Egypt Libya Morocco Tunisia Nigeria Rest of Africa
51
2.3.1.2 Trine South African air travel industry in a regional context
In a regional context, the South African air travel industry is the largest African air travel
market. Other significant African air travel markets are Algeria, Egypt, Libya, Morocco,
Tunisia, and Nigeria, as shown in figure 2.9.
FIGURE 2.9: THE AFRICAN AIR TRAVEL MARKET
SOURCE: Adapted from United Nations.(1992). Civil Aviation statistics. New York.
The size of South Africa's air travel industry is even more striking when compared to
countries in the Southern African region. Reflecting the country's economic status in the
area, the size (based on trips undertaken in 1991) of South Africa's domestic air travel
market is almost double that of other South African Development Community countries
(SADC) combined (United Nations, 1992).
52
South Africa's air travel industry is projected to grow even further in the near future, due
to an increase in tourists visiting the country, deregulation which allows for more
competition, and hopefully, economic growth.
Two other aspects further strengthen South Africa's dominance of the regional air travel
market:
South Africa, and more specifically SAA, has more capacity and aircraft available
than the whole SADC 2 fleet combined, while Comair (the country's second largest
operator), is Africa's largest privately owned airline (World Airnews, August
1994:53-77).
Johannesburg International Airport, partly due to the upliftment of sanctions, has
become a regional hub linking international and regional destinations. As recently
as 1992, only 20 airlines operated into South Africa (Johannesburg), but this
number has now increased to 50, while still more airlines are interested in adding
South Africa to their route network (Department of Civil Aviation, January 1996).
There are currently 192 international flights into South Africa per week (excluding
those of SAA), which, to give a rough idea of the frequency, can be translated into
27 flights per day, or 1.1 per hour (Department of Civil Aviatiori, January 1996).
2.3.1.3 The domestic South African air travel market
Industry sources estimate the size of the domestic South African market as anywhere
between 6 and 6.5 million annual single trips (Business Report, 17 January 1996).
2) SADC includes South Africa, Angola, Botswana, Lesotho, Mozambique, Malawi, Namibia, Swaziland, Tanzania, Zambia, Zimbabwe.
SAA 57%
Comair 12%
Other 3%
Airlink 6%
Sunair 11%
SA Express 11%
53
These industry projections are supported by the domestic capacity provided. Based on
January 1996 statistics (753 558 seats), approximately nine million domestic seats will
be provided during 1996. Figure 2.10 reflects how this capacity was spread amongst the
respective South African airlines. Each airline's capacity could be used as a very rough
indication of its market share (passenger figures for South African airlines are
unfortunately not widely available). SAA, as expected, has the biggest share of domestic
air transport capacity - 56.4 percent, followed by SA Express - 12.4 percent; Sunair - 12.3
percent; and Comair - 11.4 percent. SA Airlink provides 5.7 percent of domestic
capacity, and other airlines (Nationwide, Metavia, etc.), 1.8 percent (Comair, January
1996).
FIGURE 2.10: SHARE OF CAPACITY - DOMESTIC AIRLINES JANUARY 1996
SOURCE: Adapted from Comair.(1996). SAAFARI reservations system. Kempton Park.
PRIMARY ROUTES SECONDARY ROUTES JNB= Johannesburg CPT = Cape Town DUR= Durban PLZ = Pal Elizabeth ELS = East Landon BFN = Bloemfontein
172 800
51 400 — 42 300
25 500 2r 000 23 000 21 400
KIM = Kimberley RCB = Richards Bay SZK= Skukuza GRJ = George PZB = Pietermaritzburg NLP = Nelspntit
11 200 8 800 8 600 8 000 7 300 7 200
I I n—]
236 540
JNB-CPT JNB-PLZ CPT-PLZ JNB-ELS JNB-GRJ JNB-SZK JNB-NLP
JNB-DUR CPT-DUR PLZ-DUR JNB-BFN JNB-RCB JNB-KIM JNB-PZB
No
. S
oo
ts O
ffo
rod:
250 000
200 000
150 000
100 000
50 000
54
To add a geographical dimension, domestic air transport capacity can also be divided on
a route basis. Comair uses an arbitrary system of classifying domestic routes into three
groups: Primary (more than 20 000 monthly route seats provided), secondary (8 000 to
19 999 monthly route seats provided) and tertiary routes (less than 7 999 monthly route
seats provided). Using this system, figure 2.11 displays all the primary domestic routes,
as well as the secondary routes Comair operates on domestic air transport routes.
FIGURE 2.11: DOMESTIC AIR ROUTES - JANUARY 1996
SOURCE: Adapted from Comair.(1996). SAAFARI reservations system. Kempton Park.
55
2.3.2 Comair - a medium-sized South African airline
Three domestic carriers, Sunair, SA Express, and Comair, can be classified as medium-
sized South African airlines. However, for the purposes of this study, a medium-sized
South African airline is represented by Comair, although most of the information
contained in this study is also applicable to other medium-sized airlines. The reasons for
Comair being chosen as the focal point of this study are:
0
At the time of the commencement of this study, Sunair was still a very small player
in the domestic market, and could not be classified as a medium-sized South
African airline.
0
SA Express being a predominantly feeder carrier operating turboprop equipment
on mostly secondary routes, Comair was thought to be a more appropriate
example of a medium-sized South African airline.
0
More information relating to the Comair product and operation was available in
an industry where information is tightly guarded.
0
Both Sunair and SA Express are either fully, or partly owned, by the South
African government. Comair is the only privately owned airline in South Africa
that is also a major player in the domestic air travel industry.
Before discussing the present Comair operation, it is necessary to look at the airline's
roots. Comair is South Africa's second oldest airline, after SAA, and has been operating
for 50 years in 1996. The Comair concept was conceived in Egypt (during World War
II) around October 1942, by two South African Air Force pilots discussing their futures.
Martin and Joubert were joined by a third Air Force member, Zimmerman, and the
organisation was registered in 1943 after their return from the war .
56
The organisation's first official flight was a charter on July 14, 1946, from Germiston to
Durban. Scheduled services were started in 1947, and several years of erratic financial
performance followed. The period 1955 to 1960 saw consolidation of the airline and a
gradual return to regular, if not spectacular, profits. In 1976, Comair purchased its first
aircraft that still forms part of the fleet (although being phased out) - a Fokker F27.
However, the biggest change came with the deregulation of the South African air travel
industry in 1991. Comair started operating two daily return flights between Johannesburg
and Cape Town during August 1992, and had since grown to such an extent, that by
February 1996, seven daily return services are provided between Johannesburg and Cape
Town, four daily return services between Johannesburg and Durban, and one daily return
service between Cape Town and Durban (excluding weekends). Other new routes that
have been initiated since deregulation include Johannesburg - Windhoek, and
Johannesburg - Harare. The airline intends to fly (from Johannesburg) to Port Elizabeth,
Nairobi, and Victoria Falls, and between Cape Town and Windhoek in the near future.
As South Africa's second largest and second oldest airline, Comair sees the next fifty years
as "dynamic in terms of the opportunities available" (World Airnews, January 1996:37).
Comair's current fleet consists of six Boeing 737-200's, two ATR 42-320's, and four
Fokker F27's that are being phased out - a far cry from the first fleet of 10 (1943 war-
surplus) Fairchild UC-78's. However, the near future will probably see the carrier's fleet
change even more, as the organisation plans to consider the Airbus A320; Boeing 737-
400; and MD-83 aircraft; during the next two years as early option twin-jet airliners that
could possibly replace its present fleet.
Cape Town
Durban
Skukuza
Richards Bay
Cape Town- Durban
Gaborone
Windhoek
Harare
Mansini
2
r r i i
10 20 30 40 50
BO
PERCENTAGE
57
Upgrading the fleet will form part of two major near-term developments - the other being
the development of domestic and regional networks (World Aimews, January:1996).
Comair has, until now, successfully managed to weather the storms that accompanied the
South African air travel industry, including the industry upheaval caused by deregulation.
In fact, Comair has not only managed to survive, but has been highly profitable in the
wake of deregulation - especially during 1994 and 1995.
The following is a short synopsis of the Comair product. Figure 2.12 reflects the
percentage business (based on passengers carried) that each Comair route generates, while
figure 2.13 depicts the status of competitors on each of Comair's routes (with the
exception of the Johannesburg-Windhoek, Johannesburg-Harare, and Johannesburg-
Mansini routes, due to the unavailability of statistics).
FIGURE 2.12: PERCENTAGE BUSINESS GENERATED BY COMAIR'S ROUTES
SOURCE: Adapted from Comair.(1996). In-house statistics. Kempton Park.
19
11
1
16 17
13 51
55
100
59 70 57
48
37
CPT-DUR-CPT
JNE3-CPT-JNB
JNB-DUR-JNB
JNB-GBE-JNB
JNB-SKZ-JNB
JNB-RCB-JNB (Feb 1998)
SAA Comair Sunair Nationwide 0 Air Botswana 0 SA Exprei
100
80
PE
RC
EN
TA
GE
MA
RK
ET
SN
AR
ES
60
40
20
58
FIGURE 2.13: COMAIR ROUTES AND MARKET SHARES
SOURCE: Adapted from Comair.(1996). In-house statistics. Kempton Park.
2.3.3 Domestic and •egionall competitors off COMSAT
Airline marketers usually face three types of competition. The most direct form is
between airlines offering similar products or services, for example Comair vs SAA,
Phoenix, Sunair, and so forth. The second type of competition involves products or
services that can be substituted for one another. An example would be the competition
between road and air transport on the Johannesburg-Gaborone route. The final type of
competition occurs when different organisations compete for consumers' purchasing
power.
59
The argument is that all organisations are competing for a limited amount of discretionary
buying power. Competition in this sense would mean that a consumer will have to choose
between a vacation in Cape Town using air transport, fitting the bathroom with new tiles,
or saving money for an expensive sound system (Boone and Kurtz, 1992:43).
The next section concentrates on direct airline competition experienced by Comair on all
of its scheduled routes (barring Skukuza), and discusses each of Comair's competitors
briefly (each airline's IATA code is given next to its name).
2.3.3.11 Air Botswana (BP)
The past few years have seen several changes within Air Botswana, including a
management reshuffle and the closing of the Southern Link charter subsidiary (an effort
initiated by Air Botswana with the purpose of fostering regional cooperation). The airline
provides scheduled services from its base in Gaborone to Francis town, Selibe Pikwe,
Maun, Ghanzi, and Kasane in Botswana, and regionally to Johannesburg, Windhoek,
Harare, Lusaka, Nairobi, and Victoria Falls (World Airnews, August 1994:53-77). The
carrier is running at a +-R4 million loss (Galeforolwe, January 1996). Air Botswana
competes with Comair on the Johannesburg-Gaborone route.
Fleet: One BAe.146-100.
Two ATR.42s.
60
2.3.3.2 Air Namibia (SW)
Air Namibia started regional and international services in 1990. The first overseas flight
undertaken was to Frankfurt, Germany, but in July 1992, additional flights to London
were introduced. Air Namibia has approximately 400 staff members, and operates -
mainly from Windhoek - regional flights to Johannesburg, Cape Town, Harare,
Livingstone, Lusaka, Victoria Falls, Maun, and Luanda (World Airnews, August 1994:53-
77). Air Namibia competes with Comair on the Johannesburg-Windhoek route.
Fleet: One Boeing 747SP (leased from SAA).
One Boeing 737.
Three Beech 1900s.
2.3.3.3 Air Zimbabwe (UM)
Air Zimbabwe employs +-1 800 people (April 1996) and is the state-owned airline of
Zimbabwe. Internationally it serves mainly London and Frankfurt. The regional network
consists of Johannesburg, Durban, Cape Town, Lusaka, Mansini, Lilongwe, Dar-Es-
Salaam, Nairobi, Mauritius, and Maputo. Domestic destinations served are Bulawayo,
Victoria Falls, and Kariba, from its hub in Harare (World Airnews, August 1994:53-77).
Despite making a R72 million profit in 1995 (according to the General Manager), the
airline owes the Zimbabwean government R180 million in debt (Star, 5 January 1996).
Air Zimbabwe competes with Comair on the Harare route.
61
Fleet: Two B767-200ERs .
Two B707-300s .
Three B737-200s .
One BAe 146-200 .
2.3.3.4 Nationwide (CE)
Nationwide, the latest entrant to the domestic air transport market, started its operations
in December 1995, and competes with Comair on the Johannesburg-Cape Town route.
The airline defines its target market as holiday-makers and tourists, and according to press
reports does not intend to woo SAA corporate passengers, or undercut other airlines.
The airline's immediate aim is to win the trust and confidence of passengers after the
failure of Flitestar and Phoenix. No expansion is planned in the near future (Star, 8
February 1996).
Fleet: 3 BAC 111 aircraft.
2.3.3.5 Royal Swazi National Airways (ZC)
The national airline of Swaziland, Royal Swazi, started operating in 1978. It presently
serves Johannesburg, Lusaka, Harare, Dar-Es-Salaam, Maputo, and Nairobi, from
Mansini (World Airnews, August 1994:53-77). Efforts are currently (April 1996)
underway to restructure the airline which is running at a huge financial loss, and the Swazi
government has contracted a British aviation consultancy to assist them in the process
(Swazi Observer, November 1995). The airline competes with Comair on the
Johannesburg-Mansini route.
62
Fleet: One Fokker F.28-3000 .
One Fokker 100 .
2.3.3.6 SA Express (SAX)
This commuter airline was born amidst controversy at the end of 1993 and is partly owned
by Thebe Investment Corporation (51 percent), SAA (20 percent), and a Canadian
consortium led by Lardell holdings (Mazwai, T. 1994:12). The airline is operationally
independent of SAA, but uses SAA's booking and check-in facilities, while fully
participating in SAA's Voyager Programme. SAA ceded 10 percent of its domestic routes
to SAX with the idea that the airline should provide a feeder service from airports where
traffic is too lean to operate jets. SAX carries on average 45 000 passengers monthly
between 12 different destinations (connecting Bloemfontein, Kimberley, George,
Upington, East London, amongst others, with main cities). According to SAA, SAX is
profitable and on budget, but will not make a major contribution to SAA's income in the
near future (Financial Mail, September 1995). SAX competes with Comair on the
Johannesburg-Richards Bay route. SAX's current CEO, who was appointed in February
1996, is the first Black airline head in South Africa (Business Day, 8 February 1996).
Fleet: Ten de Havilland Dash-8-300s.
2.3.3.7 South African Airways (SA)
South African Airways as it is known today, was founded on 26 August 1929 as Union
Airways, with a fleet consisting of five Gypsy Moths .
63
Due to financial and other problems, control of the airline was handed over to the
government on 1 February 1934, and it was changed into the new South African Airways.
SAA is today the world's 35th largest airline, with 10 200 employees worldwide, and a
fleet worth an estimated R4 billion (Financial Mail, September 1995:11). The airline
serves 34 destinations in 27 countries, as well as the following eight domestic destinations:
Bloemfontein; Durban; East London; George; Johannesburg; Cape Town; Kimberley; and
Port Elizabeth.
Being a government-owned airline, SAA is profoundly affected by the country's present
political climate. The carrier is, as a result, very committed to Black empowerment (every
SAA department has set affirmative action targets for the next five years). Apart from
affirmative action programmes, SAA also tries to create Black entrepreneurs as business
partners, buys products from Black-owned businesses, and has invested in the partly
Black-owned SAX. Because of the political connotations, the airline will soon change its
well-known orange colour and Springbok logo (Black-owned ad agency Herdbuoys has
been awarded the contract), while its pending privatisation has become a political issue
(Financial Mail, September 1995:22).
SAA, although government owned, operates as a business unit, and recorded its first
profit in four years during the 1994-1995 financial year - R2I7 million, almost wiping out
the cumulative loss of 8254 experienced from 1990 to 1994. SAA's return to profitability
is widely attributed to a 17 percent staff cut-down programme; a 15 percent reduced fleet;
the shedding of unprofitable routes; and sophisticated yield control systems.
64
Staff are directly involved in the airline's financial performance by sharing profits that
exceed set targets. Staff members received their first pay out of these profits in early 1995
(Financial Mail, September 1995:7).
As Comair's major competitor, SAA's standard of service and its marketing efforts are of
particular importance. Regarding service, SAA is a force to reckon with: Readers of two
London-based travel magazines, "Executive Travel" and "Travel Weekly", have voted
SAA the "Best Airline to Africa" for five consecutive years, and readers of the London
"Evening Standard" have awarded it the same accolade for the past two years. In another
international survey which compared the onboard services and ground facilities of 70
airlines, SAA was rated third in sincerity and friendliness, and both the food and wine it
served aloft were rated amongst the top five. SAA's lounges for first and business class
passengers were rated fifth in the world (Financial Mail, September 1995:8). The high
rating given by overseas travellers have not caused the airline to sit back and relax.
Responses to questions asked by opinion metres (typically involving 1 200 - 1 500
passengers per week) are processed on a weekly basis, to measure customer satisfaction
in each aspect of interaction with the airline. Results are produced as soon as possible for
a quick reaction by the carrier. One of the first responses to complaints has been the
introduction of self check-in systems for business passengers with hand luggage only
(Business Day, 5 January 1996).
From a marketing point of view, SAA is working on a two-year global advertising
campaign (the emphasis being on a consistent message) .
65
One marketing initiative of SAA that deserves special mention, is the Boeing 747 flight
over Ellis Park just before the final Rugby World Cup game. The flight resulted in a
public relations coup for SAA, generating goodwill probably immeasurable in monetary
terms (Financial Mail, September 1995:37). This has been followed by another fly-over
before the CAF Cup of Nations Soccer Final in 1996.
SAA competes with Comair on the Johannesburg-Cape Town, Johannesburg-Durban, and
Cape Town-Durban routes
Fleet: Four Boeing 747-400s.
Three Boeing 747-300 SUDs.
Five Boeing 747 Super Bs.
Four Boeing 747 SPs.
Eleven Boeing 737-200s.
One Boeing 767.
Seven Airbus A300s.
Seven Airbus A320s.
One Junkers JU 52 (promotions and charters).
Two Douglas DC-3 (charters).
Two Douglas DC-4 (charters).
One Harvard (Air shows).
Seven Boeing 777-200's (on order, delivery as from 1997).
Two Boeing 747-400's (on order, delivery as from 1997).
One Boeing 747-200 (freighter).
66
Two Boeing 737's (freighters).
One Airbus A300 - freighter (South African Airways, January 1996).
2.3.3.8 Sunair (BY)
Sunair, previously known as Bopair, was started in the late 1970's by the Bophutatswana
government and soaked up R120 million of taxpayers' money in an operation that never
made a profit. After the fall of the Mangope government in March 1994, and
Bophuthatswana's subsequent reincorporation into South Africa, Sunair went it alone, and
is, according to Borstlap, finally making a profit of around R2 million a year. This figure
cannot be verified as the airline has not yet publicised any financial statements (Sunday
Tribune, 10 December 1995).
The new identity adopted by Sunair in April 1994, started with a change in strategic
planning, a subsequent reduction in fleet, and two daily flights to Cape Town (from
Johannesburg). Sunair presently (April 1996) provides six daily return flights between
Johannesburg and Cape Town, five between Johannesburg and Durban, and two daily
return flights between Cape Town and Durban. Sunair has become one of Comair's major
competitors, and has with its transformation and restructuring managed to procure the
affinity and loyalty of its passengers, while steadily increasing its awareness in the
marketplace. Privatisation of the airline (seen as a non-strategic state-asset) seems
imminent in the near future - the government has indicated that Black economic
empowerment and the promotion of competition would be main criteria in its sell-off
(Volksblad, 8 December 1995).
67
Fleet: Four Mcdonnell Douglas DC-9-30s.
One Mcdonnell Douglas on order.
2 B727s (leased from SAFAIR).
One HS 748.2B.
1 Cessna Citation.
2.3.3.9 Zimbabwe Express (Z7)
Zimbabwe Express is a privately-owned airline that started operating in June 1995, in
response to the deregulation of the Zimbabwean air travel industry. The airline serves the
Johannesburg-Harare, Johannesburg-Victoria Falls, Harare-Kariba, and Victoria Falls-
Kariba routes, operating two leased aircraft. No information regarding the profitability
of the airline is available. The airline currently competes with Comair on the
Johannesburg-Harare route (and will in future on the Johannesburg-Victoria Falls route).
Fleet: 1 B727 (leased).
1 HS7 .
2.4. SUMMARY
An airline (as any other business), is surrounded by an external environment that can be
described as the sumtotal of the factors or variables, that influences the airline's long-term
profitability. The external environment of an airline is usually divided into two separate
entities: the macro-environment; and the market-environment.
68
Each of these sub-environments is of equal importance to an airline due to an interplay of
forces, though the effects of and changes in the market environment are often more
sudden, immediate, and noticeable. However, the continuous interactive processes
between the two sub-environments should not only lead to both being seen in conjunction
with each other, but also to a recognition of the inherent unstable nature of the external
environment. This inherent instability requires an airline to be able to adapt and act pro-
actively, if it wishes to ensure its long-term survival.
The macro-environment of an airline comprises six interrelated, uncontrollable,
megatrends or "environments". Some, such as the technological environment, are
changing faster than others, while others such as the socio-cultural environment have a
more subtle effect on the air travel industry. Each of these environments is a powerful
force, and has a potential dramatic impact on an airline:
O
The economic environment. The economic environment consists of all the
economic variables that affect travellers' purchasing power, and the costs involved
in producing the airline product. These include the economic growth of a country;
the rate of inflation; the exchange rate; international capital flows; and the
government's economic policies. Because of the economic impact of tourism on
the country, and especially air travel, a separate section has been devoted to
highlight this industry.
The socio-cultural environment. The South African society is not only ethnically
and culturally diverse, but marked differences exist between each community's
average level of income, education, standard of living, and so forth.
69
Within this broad framework, each community is also subject to worldwide social
trends, such as the growing economic power of women, more liberal sexual
values; the rise of singles, and so forth. As people comprise airline markets, it is
important for a customer-focused airline marketer to know the socio-cultural
background of airline customers.
The physical environment. Barring obvious operational implications, the physical
environment constrains any business operation in the sense that most natural
resources are finite. Therefore all natural resources, and not only those used in the
production of the airline product, have to be used with a sense of responsibility.
In the past decade, attention has shifted to man's impact on the environment. This
growing "green" consciousness, has resulted in laws and policies that in many
cases forced airlines to operate in a more environmentally friendly manner.
The international environment. The world is fast becoming one big marketplace,
and trade agreements such as GATTS are bound to affect the future air travel
industry, although it is still too early to determine to what extent. While countries
worldwide and regionally are cooperating more on economic issues, the air travel
industry itself is consolidating. The current rise of mega-carriers and mega travel
agency groupings will probably change the structure of world air travel
permanently.
The institutional environment. Being a high-profile industry, air travel has always
been affected by political issues. The South African air travel industry has a
plethora of examples supporting this statement.
70
SAA's aggressive affirmative action programme, SAX's role in Black
empowerment, and the government unions stand-off, relating to SAA's proposed
privatisation, are but a few air travel issues subject to political agendas.
0 The technological environment. Probably the most dynamic of the megatrends,
air travel technology is continuously and rapidly changing. Bigger, better, safer,
and more fuel-efficient aircraft are constantly being developed and built, while
future airports and navigational systems might bear but a faint resemblance to the
ones we know today. More advanced reservations and yield management systems
improve the efficiency of airlines, while ticketless travel promises more time
efficiency to business travellers.
The market environment of an airline includes the actual travellers, other competitors; and
distributors (i.e. travel agents) of the airline product. However, it is important to view the
South African air travel industry in a world, regional, and domestic context, to gain an
objective perspective. Africa is the world's smallest air transport market, and South
Africa's industry, though the biggest in Africa, represents a mere 1 percent of the US
market. Domestically, South Africa is one of the very few deregulated air transport
markets on the continent, allowing several competitors to compete with SAA. SAA is a
large airline according to world standards, and most of the new entrants to the South
African air transport market can at best be classified as medium-sized South African
airlines. This study uses Comair (for reasons mentioned) as an example of a medium-sized
South African airline. Comair is presently a highly profitable domestic and regional
airline, and has survived the South African air travel industry for 50 years.
71
This is no small feat, considering that Comair as a private enterprise, has to compete with
six fully state-owned and one partly state-owned airline (as well as two privately-owned
airlines), on the nine routes that it serves. A short summary of the Comair product, and
each of its competitors is given in this chapter.
72
MARKET SEGMENTA MARKET TARGETING,
MARKET POSIITIIONliNG, AND THE DEVELOPMENT OF
A MRSSIION STATEMENT
3.1 [INTRODUCTION
An airline that operates in a broad market usually recognises that it cannot serve all air
travellers, as they are too numerous, dispersed, and varied, in their travel requirements.
Some airlines are usually in a better position to serve particular travel segments of a market,
than others. Instead of competing everywhere, an airline thus needs to identify the most
lucrative market segments that it can serve effectively, and develop airline products and
marketing programmes tailored to the needs of these travellers. Such an approach is the
foundation of modern strategic marketing (also referred to as STP marketing), as displayed
in figure 3.1:
Dividing an air travel market into segments.
Targeting one or more of those segments.
0 Positioning the airline in the marketplace according to the target segment\s (Kotler,
1994:264)
Although STP marketing is well known to modern marketers, many organisations (and
airlines) base the development of their marketing strategies on different viewpoints:
0 Mass marketing. This approach constitutes the mass production, distribution, and
promotion, of one product for all travellers.
73
Mass marketing was an appropriate strategy whilst the South African air travel
market was still regulated, and only one carrier was allowed to operate on major
domestic, and all international routes. The main advantage associated with this
method is the economies of scale that is achieved.
Product-variety marketing. Where several airline products with different features,
styles, and qualities are produced. Current South African travellers can choose from
a variety of airline products ranging from competitively priced economy and business
class seats to more upmarket varieties of the same (Kotler, 1994:264).
FIGURE 3.1: STEPS IN MARKET SEGMENTATION, TARGETING, AND POSITIONING
Market Segmentation
Market Targeting
Market Positioning
Identify segmentation variables and segment the market
Evaluate the attractiveness of each segment
Identiify possible positioning concepts for each targetsegment
Develop profiles of resulting segments
Select the target segments(s)
Select, develop and communicate the chose positioningconcept
SOURCE: Adapted from Kotler, P. (1994). Marketing management: Analysis, planning, implementation, and control. Englewood Cliff's, N.J.: Prentice Hall.
74
It is difficult to determine to what extent domestic airlines are employing the STP approach,
but indications are that this concept has not yet fully taken root in the South African air travel
industry, Comair being a case in point. This chapter firstly examines the issue of market
segmentation, including both a theoretical background and a practical application (where
possible), followed by a discussion of market targeting, and an analysis of market positioning.
The last section of the chapter concentrates on the role and importance of a mission
statement as an internal support of the STP approach.
3.2 MARKET SEGMENTATION
Middleton (1993:65) defines market segmentation as a process whereby airlines organise
their knowledge of traveller groups and select for particular attention, those whose needs and
wants they are best able to supply with their airline product\s. Market segmentation is the
practical expression of consumer orientation theory. It is the first step in the marketing
process of developing more acceptable airline products that meet travellers' needs, the first
stage in the process of setting precise marketing objectives and targets, and the basis for
effective planning, budgeting, and control, of airline marketing activities. Stanton, Etzel and
Walker (1991:84) view market segmentation as the process of dividing a heterogeneous air
travel market into several segments, each of which tend to be homogenous in significant
aspects, whereafter the airline's management selects one or more of these segments as a
target market. A separate marketing mix is then developed for each chosen segment or
group of segments. Boone and Kurtz (1992:261) describe market segmentation as: "the
process of dividing the total market into several relatively homogenous groups with similar
product interests based on such factors as demographic or psychographic characteristics,
geographic location, or perceived product benefits".
75
It follows from the above that market segmentation:
O
Begins with the needs and characteristics of travellers.
O
Divides an air travel market into different homogenous segments based on these
needs and characteristics.
Is the appropriate basis for any marketing planning and activities.
O
Frequently leads to the adjustment of an airline's marketing mix according to the
needs and wants of travellers
3.2.1 Advantages and disadvantages of market segmentation
Due to the implications involved, an airline should carefully consider the advantages and
disadvantages related to market segmentation, before embarking on such a process.
The following advantages are usually associated with effective market segmentation:
Increased market size. Market segmentation often leads to an expansion of an air travel
market, as various new services can be introduced to attract dissatisfied travellers.
Innovative products, for example, can be offered to female travellers, cost conscious
budget travellers, frequent flyers, and so forth.
Increased profitability. Market segmentation frequently results in more profits, despite
the expenses involved in adjusting airline products to target travellers' needs. The more
closely adjusted an airline product is to the needs of a target segment, the stronger the
demand would be - resulting in increased profitability.
Competitive benefits. Market segmentation assists airlines in reducing possible market
gaps through which new entrants can gain a foothold in an air travel market.
76
Once a new airline gains entry, it can expand and broaden its product range, eventually
becoming a direct competitor with established airlines (Allvine 1987:154).
The following disadvantages are often associated with market segmentation:
Market segmentation could lead to increased expenditure due to the development of new
airline products. It is less expensive to produce mass quantities of an airline product,
and have one marketing programme directed at all air travellers, than targeting two or
more travel segments with different needs and requiring separate communication
strategies.
Market segmentation can only provide limited coverage of a specific air travel market,
due to selective targeting.
Too much differentiation can lead to "cannibalization", where one product of an airline,
for example a special lower fare class, decreases the market share of another product
such as normal economy class (Marx and van der Walt, 1993:124).
An airline should assess the possible implications of market segmentation within the context
of the overall market structure, and evaluate to what extent the disadvantages can be limited
and the advantages enhanced.
3.2.2 Criteria for effective market segmentation
To ensure the effectiveness of market segmentation, certain criteria should be employed
during the process. These conditions are listed below:
Discrete. Selected segments must be separately identifiable using certain dimensions
such as purpose of trip, income, benefits sought, and so forth.
77
Measurable. Dimensions which distinguish different segments should be measurable
using available research data, or data obtainable within acceptable budgets. Segments
that cannot be adequately and regularly measured, cannot be properly targeted, making
it thus difficult or impossible to evaluate the effectiveness of marketing activities.
Viable. The long term projected revenue to be gained from a specific target market
should exceed the full cost of adjusting the marketing mix to achieve it (Middleton,
1993 :68).
Accessible. Market segments should be accessible through existing marketing tools such
as advertising media, airline sales force, and so forth (Stanton, et al 1991:86).
The number of target segments chosen should match the airline's marketing capabilities
(Boone and Kurtz, 1992:260).
3.2.3 Segmentation of the domestic South African air travel market
No single method of segmenting an air travel market exists. Airline marketers have to
examine different segmentation variables, alone, and in combination, to find the best angle
when viewing a specific air travel market (Kotler, 1994:219). However, regardless of the
method chosen, it should ideally be based on some form of market analysis, as a commitment
to market segmentation usually implies a commitment to market research. In the travel
industry, one, or a combination of six popular techniques, are often employed in segmenting
markets. These methods are:
Segmentation based on purpose of trip.
Segmentation based on demographic, geographic, and economic characteristics.
Segmentation based on airline user status.
Segmentation based on customer needs and benefits sought.
78
Segmentation based on psychographic characteristics and lifestyle.
Segmentation based on price variables (Middleton, 1993:70).
This chapter includes an application of each of the above techniques to the domestic South
African air travel market, using existing information sources relating to South African
consumers. However, despite the derived demand nature of air transport and a high degree
of emotional involvement from passengers, such an exercise is further complicated by a lack
of required detailed and sophisticated data. The absence of the said information leads the
author to conclude that a thorough segmentation of the domestic South African is not yet
possible. The current deregulated air travel environment, however, requires any airline intent
on positioning itself successfully, to undertake the research necessary in establishing target
segments.
3.2.3.1 Market segmentation sources for the domestic South African air travel market
The following two prominent information sources relating to South African consumers, were
helpful in segmenting the domestic air travel market:
The All Media and Product Survey (AMPS), of the South African Advertising Research
Foundation (SAARF, 1994a).
Sociomonitor of Market Research Africa (MRA, 1992).
The AMPS statistics are collected through in-home interviews with adults 16 years and older,
of all races, in all metropolitan areas of the country. The data is then weighted according to
population numbers in respect of race, area, gender, community size, language, and other
variables. AMPS 1994 figures have been utilised in this study.
79
Sociomonitor is a study dividing both the White and Black consumer markets (separately)
into several psychographic units (no such studies examining the Coloured and Asian markets
exist). The first non-racial and combined study was issued in 1995. For the purposes of this
study, however, only the White Sociomonitor (MRA, 1992) was used, the motivation being
that Blacks comprise 7.6 percent of all South African flyers (AMPS 1994). Although this
percentage is bound to increase, a comparison between the AMPS 1992 and 1994 statistics,
revealed no significant increase in Black air travellers, reflecting the long-term nature of such
a change.
Two other information sources, the South African Business Research Evaluation (SABRE)
and Traveltrak, were evaluated, but found not to be suitable for the purposes of this study.
SABRE only pertains to the top end of the business market and excludes the majority of
South African air travellers, whilst Traveltrak focuses predominantly on variables irrelevant
to this study (e.g. holiday purposes, accommodation, etc.).
3.2.3.2 Segmentation based on purpose of trip
For the majority of airline marketers, segmenting an air travel market based on purpose of
trip is a given. Passengers are generally classified as either business or leisure travellers, and
it is generally accepted that these two groups exhibit different characteristics and needs.
Conventional air travel wisdom perceives business travellers as less price sensitive, having
shorter booking profiles, highly concerned with an airline's punctuality and scheduling, and
requiring a high standard of service.
80
Leisure passengers are perceived to be more price sensitive, less concerned with scheduling,
and willing to forgo some measure of comfort in return for a cheaper air ticket. According
to AMPS 1994, 72 percent of all domestic air travel trips are undertaken for business
reasons, and 28 percent for leisure purposes. A study done by the University of Pretoria at
Jan Smuts (1992:6) confirms this statistic. The study recorded 76.3 percent of Cape Town,
and 80.4 percent of Durban passengers, as undertaking business trips. The slight discrepancy
between the latter and AMPS 1994 statistics, could be an indication of additional price-
sensitive leisure traffic generated by lowcost carriers entering the domestic air travel market
after 1992.
Despite its importance in air travel, segmentation based on purpose of trip is outdated as a
market segmentation tool. Some leisure passengers (though admittedly a minority), prefer
to travel in business and even first class, whilst the AMPS 1994 statistics indicate that the
majority of domestic economy class passengers are travelling for business reasons. The
question is then raised as to what benefits an airline derives from segmenting an air travel
market solely based on purpose of trip. Other segmentation techniques (e.g. segmentation
based on traveller needs and benefits sought), automatically includes the purpose of a
passenger's trip as a determinant of his or her needs. In addition, leisure and business
travellers seeking the same benefits from air travel should ideally be grouped together
regardless of their reasons for travel.
3.2.3.3 Segmentation based on demographic, geographic, and economic characteristics
Segmentation based on demographic, geographic, and economic variables, is a popular
method amongst marketers of all products and services.
81
It is easy to understand and analyse, and it provides clearly defined segments of the market,
compared to techniques such as segmentation based on needs and benefits sought, and user
status, that could be ambiguous and complicated both in application and results produced.
Demographic, geographic, and economic variables, however, are seldom alone an adequate
basis for market segmentation, and should rather be used in conjunction with other methods.
The next section divides the domestic South African air travel market employing these
variables, whilst discussing the limitations inherent to such an approach.
3.2.3.3.11 Demographic segmentation
Demographic segmentation involves the division of an air travel market according to race,
home language, gender, and age, amongst others, and is important because:
Demographics are meaningful variables in determining the size of an airline's target
market.
Traveller needs, wants, and frequency of flying, are often related to demographic
variables.
Demographics are important elements in an airline's communication and media strategy
(Kotler and Armstrong, 1991:221).
As mentioned, demographics are most efficiently used in combination with other
segmentation techniques. A 25-year-old male traveller, for instance, could have similar
requirements from an airline as a 45-year-old female passenger. Demographic information
in this instance could be useful, but would not assist an airline in focusing on the needs of
these travellers.
82
To use another example: market segmentation based purely on demographics, without
considering the frequency with which individual travellers fly, would place the same emphasis
on a passenger flying once a year as someone flying every month. These two travellers are
of obvious different value to an airline, the latter generating more revenue and being the more
important. The following table, table 3.1, displays the demographic division of the domestic
air travel market, followed by a brief discussion of each variable, without taking into account
the travel frequency of individuals (the relevant AMPS statistics was unfortunately for the
purposes of this study not available). However, due to the small percentage frequent
business travellers generating a disproportionate high number of domestic trips, as discussed
in section 3.2.3.4, such a frequency-based profile would to a certain extent resemble the
demographic profile of frequent domestic business travellers as displayed in table 6.4.
TABLE 3.1: DEMOGRAPHIC DATA OF DOMESTIC SOUTH AFRICAN FLYERS
, Lib ,, 30F:4,11411.D i 1 : ,
„lpfl ,, . i 'I NN !
rt rmom !hi 111 , -mr --
!,N1'.:„',"'
4 ,
...„
,T t• 11
1,1"
Pri,ft u;:r (.r.Jpipi.-4"., . ,,,
RI go t i.1111;,,, ; t".IIM ;::.igiupd:::.,fieilmT
Ethnic group
White 85
African g
Coloured 4
Indian 3
Total Iliii
Gender
Male 55
Female 45
Total 100
83
Age group
15 - 24 20
25 - 34 21
35 - 49 34
50+ 25
Total 100
Marital status
Single 27
Married\living together 61
Divorced 6
Widowed 6
Total 1100
Home language
English\other European 60
Afrikaans 32
Black language 8
Tot :.1 li 1 i ,
SOURCE: Adapted from South African Advertising Research Foundation(a). (1994). All Media and Product Survey. Johannesburg.
(i) Ethnic group:
The ethnic division of South African air travellers, reflects the race-based inequalities that
exist in the South African society. Members of the White community fill most senior
managerial and supervisory positions in the country, and are thus more likely to be sent on
business trips. Whites, in addition, earn on average three to six times more than members
from another ethnic community, and are thus more likely to be able to afford air travel for
leisure purposes (Bennett, 1995:199).
84
Gender:
The above statistics display a roughly equal division between the number of male and female
travellers. However, if the frequency with which individual passengers travel was taken into
account, the percentage trips generated by males would be substantially higher, due to their
predominance in corporate managerial positions (which necessitates frequent business travel).
Despite the new constitution's focus on equality, any change in the gender (and ethnic)
profile of South African flyers is likely to be gradual and long-term.
Age:
The majority (60 percent) of South African air travellers fall within the 35 to 49, and 50+ age
brackets. Members of these age groups are more likely to be in corporate positions requiring
business travel, and have a higher probability of being financially stronger and able to afford
air travel for leisure purposes.
Marital status
Closely related to the above statistics, the majority (73.5 percent) of domestic South African
air travellers are married, have been married, or live together.
Home language:
Considering the ethnic division of domestic flyers, it follows that the most frequently spoken
home languages of these travellers would be those used by White South Africans: English (or
another European language) and Afrikaans. These two languages are also used by the
majority of Coloureds and Indians at home. A small minority (7.7 percent) of domestic air
travellers speak a Black home language.
85
3.2.3.3.2 Geographic segmentation_
An air travel market can be segmented according to geographical variables such as countries,
provinces or regions, or cities. Geographical segmentation acknowledges the economic and
sociological differences that exist between regions. People in different areas could have
different perceptions towards airline products, different lifestyles, and use different types of
media, whilst regional economic differences affect the number of air trips that are generated
(Kotler, 1994:270). The following section divides domestic air travellers according to
provinces and cities, using AMPS 1994 statistics.
(1) Provincial distribution of the domestic South African flyer
The majority (76.7 percent) of domestic air travellers reside in the Gauteng, Kwazulu-Natal,
and Western Cape provinces - as illustrated in figure 3.2, which reflects the level of economic
activity in each region:
39 percent of all South African flyers reside in Gauteng, South Africa's wealthiest
province and biggest contributor to the GDP.
19.5 percent originate in Kwazulu-Natal. Despite being the country's third most
wealthy province, the shorter distance and consequent lower fare results in more
affordable air travel between Johannesburg and Durban, than between Johannesburg
and Cape Town, thus increasing the number of air travellers on this route.
18.2 percent of all domestic flyers live in the Western Cape, the country's second
most wealthy province.
Gauteng 39%
KwaZulu-Natal 19.5 Mpumalanga 1% Northern Cape 2.1%
North West 2.3%
Northern Province 2.3%
Free State 4.1%
Western Cape 182% Eastern Cape 11.5%
86
FIGURE 3.2: PROVINCIAL DISTRIBUTION OF DOMESTIC SOUTH AFRICAN FLYERS
SOURCE: Adapted from South African Advertising Research Foundation(a).(1994). All Media and Product Survey. Johannesburg.
(ii) City distribution of the domestic South African flyer
Employing AMPS 1994 statistics, a more detailed analysis of the geographical distribution
of domestic flyers, than the above provincial breakdown, is possible.
5 10 PERCENTAGE
15 20
Greater Johannesburg
PieterrnEaiggr-g
Cape metropolitan
(excl. Johannesburg)
Pretoria
East London / Port Elizabeth
Bloemfontein
15.8
14.2
13.7
12.2
11
2.4
1.2
87
Based on these figures, 83.9 percent of all domestic air travellers reside in urban areas, whilst
66.9 percent (included in the above percentage) live in three areas alone: the Gauteng
metropolitan area (39 percent), the Cape Peninsula metropolitan area (13.7 percent), and the
Durban and Pietermaritzburg area (14.2 percent). Figure 3.3 further illustrates the high
degree of concentration amongst domestic air travellers.
FIGURE 3.3: CITY DISTRB3UITION OF THE DOMESTIC SOUTH AFRICAN FLYER
SOURCE: Adapted from South African Advertising Research Foundation(a).(1994). All Media and Product Survey. Johannesburg.
88
3.2.3.3.3 Economic segmentation
The next section examines the economic characteristics of South African flyers, and its
impact on air travel.
(i) income:
The usefulness of segmenting an air travel market based on the income levels of individual
travellers alone, is debatable. As discussed in section 3.2.3.2, the majority (72 percent) of
domestic air travel trips are undertaken for business reasons and is usually paid for by the
organisation.
Even with regard to leisure travel (comprising 28 percent of all trips and usually paid for by
the traveller), market segmentation based on income levels alone, would fail to consider
lifestyle patterns and other powerful determinants in a traveller's choice of airline. The most
economical air tickets, for example, are not bought by travellers with a low income, but by
travellers that consider themselves as poor, relative to their needs for a certain level of
clothing, entertainment, and so forth, which they cannot afford if they choose a more
expensive airline (Kotler, 1994:273).
On the other hand, income levels are often strong determinants of lifestyle and behaviour
patterns, and could give airline marketers indications of the needs and wants of air travellers.
The AMPS 1994 breakdown of air travellers per income bracket is presented in figure 3.4
From the figure it is clear that :
Approximately two in five (38.2 percent) air travellers earn more than R8 000 per
month.
50
40
30
20 PE
RC
EN
TA
GE
10
0 t 1 , I
R8 000+ R4 000-R5 999 R1 400-R2 499 R500-R799 R6 000-R7 999 R2 500-R3 999 R800-R1 399 R499-
89
Almost 80 percent of air travellers earn more than R2 500 per month.
FIGURE 3.4: INCOME GROUPING OF DOMESTIC SOUTH AFRICAN FLYER (1994)
SOURCE: Adapted from South African Advertising Research Foundation(a). (1994). All Media and Product Survey. Johannesburg.
Similar to the demographic segmentation of the domestic air travel market, the above figures
do not take frequency of travel into account, and would not reflect the high percentage of
trips undertaken by travellers in corporate managerial positions (or professionals and
consultants), who are consequently in higher income brackets.
90
(ii) Lifestyle Measurement (LSM) of the South African flyer
The LSM measure (SAARF, 1994b) was introduced primarily because of complaints that a
segmentation of the South African consumer market based on demographics is too one-
dimensional. Critics argued that pure demographics ignore market commonalities, and that
measurements based on more than race, language, gender, age, geographics, income, and so
forth, needed to be found.
LSM was introduced as a way to bridge the gaps left by pure demographics. It is an analysis
based on economic characteristics, but also focuses on the lifestyle patterns of consumers and
how they spend their income. LSM divides South African consumers into eight groups
(regardless of age, sex, race, or income), based on 13 variables ranging from whether they
own a car, washing machine, micro wave, and so forth, to whether they are rural dwellers,
and supermarket shoppers.
The advantages of the LSM measure are that it:
provides a way of cutting through traditional racial classifications without ignoring
these important differentiators.
enables targeting according to lifestyle similarities instead of looking at demographic
differences.
reflects the media habits of consumers.
91
Despite these advantages, the usefulness of the LSM measure to air transport is questionable:
O The domestic air travel market is demographically very concentrated (predominantly
White males) and a segmentation tool disregarding these traditional demographic
variables will not offer any distinct advantage.
O The LSM classification system is too broad for airline marketers. The majority (83
percent) of air travellers fall into only two closely related LSM "groups". Air
travellers are sophisticated consumers with diverse needs and wants, and require
more detailed segmentation.
With regard to media habits, other studies such as Sociomonitor (MRA) are more
specific.
It was mentioned earlier that the LSM measure divides the South African consumer market
into eight groups (groups 1 - 8), which are categorised into three Super Groups (groups A -
C). The South African flyer falls mainly (96.4 percent) in the LSM Super Group A
(comprising groups 6, 7, and 8). These LSM groups are defined as follows:
Group 6 (13.4 percent of all flyers), has a higher than average (compared to the
overall South African market) incidence of Coloureds, Asians, Whites, full-time
employment, as well as higher education levels. Members of this group have more
affluent household incomes, and an increased incidence of home ownership
(compared to groups 1-5) exist.
Group 7 (41.1 percent of all flyers) is characterised by the predominance of Whites,
Afrikaans speakers, and the 35+ age group.
92
Education and income levels are significantly higher (compared to groups 1-6), 7 out
of 10 members are married, most are in full-time employment, and two-thirds own
their own dwelling - mainly houses. There is a lower incidence of children in these
households.
O Group 8 (41.9 percent) is the most urbanised of all the groups with 90 percent of its
members being White. It is the most affluent and educated of all the groups with a
high level of employment (56 percent) and home ownership (80 percent). Afrikaans
speakers are in the majority. This group has the highest incidence of married people
and school-going or post school-going children.
3.2.3.4 Segmentation based on airline user status
It is important for an airline to focus on nonusers, potential users, first-time users, ex-users,
and frequent users of its product, when segmenting an air travel market:
Nonusers and ex-users should be analysed to ascertain their reasons for using
competitors. Objections raised by these travellers could assist an airline in identifying
unmet needs, and lead to the design of an improved airline product (Allvine,
1987:167).
The number of potential users indicates the scope of growth existing in an air travel
market for an airline.
First-time users have already been "persuaded" to use the airline product, and have
the potential to become frequent and loyal users.
Frequent users are of prime importance to an airline. Though they may only
represent 10 percent of an airline's individual passengers, they could generate up to
60 percent of an airline's revenue (Middleton, 1993:71).
93
The omission of airline user status variables in the segmentation of air travellers, could result
in the creation of a distorted and unrealistic view of such a market. Section 3.2.3.3.1
discussed the necessity of analysing demographic variables in conjunction with individual
passengers' frequency of travel. Psychographic trends, purpose of trip, and pricing
strategies, as well, often contribute in travellers changing from frequent to nonusers of a
certain airline product, and first-time users of another. This interrelationship between the
user status of travellers, and other segmentation methods, once again supports the
recommendation that a segmentation of the domestic air travel market should ideally
comprise a combination of techniques.
This study is unfortunately, with the sources available, unable to provide a comprehensive
user status profile of South African air travellers. The only statistics available, relate to
individual passengers' frequency of travel. However, these statistics are of sufficient
importance to warrant a brief discussion, and lead to the study's conclusion that the domestic
air travel market should rather be segmented according to trips, as opposed to individual
travellers (in the latter case, passengers are of similar value, regardless of their frequency of
travel).
The following AMPS 1994 statistics, illustrated in figure 3.5, motivate the above suggestion:
3.1 percent of the total South African population annually undertake air travel, and
thus generate 100 percent off all trips.
1.1 percent of the total South African population travel annually on business and
generate 72 percent of all trips (included in the above 100 percent).
94
O 0.2 percent of the total South African population travel frequently (six times or more
annually) on business, and generate 42 percent of all trips (included in the above 100
percent).
FIGURE 3.5: FREQUENCY OF TRAVEL AMONGST DOMESTIC SOUTH AFRICAN FLYERS
SOURCE: Adapted from South African Advertising Research Foundation(a).(1994). All Media and Product Survey. Johannesburg.
It follows then that of the 3.1 percent of South Africans that fly annually, 1.1 percent
generate 72 percent of all domestic air travel trips undertaken, whilst 2 percent generate the
remaining 28 percent.
95
Thus, a small number of South Africans generate a disproportionate number of air travel trips
undertaken (section 4.2.4 discusses airlines' usage of loyalty programmes in targeting these
frequent travellers).
3.2.3.5 Segmentation based on buyer needs and benefits sought
This is a powerful segmentation technique as it is generally accepted in marketing that
customers are seeking specific benefits when they make product choices. This technique
categorises travellers according to the different benefits they seek from an airline product.
Some travellers, for example, might identify value for money as the principal benefit which
they seek, other travellers might demand convenient departure times and punctuality, while
still other travellers might view luxury and personal service of paramount importance. The
range and perceived benefits sought by passenger segments are not necessarily apparent to
airline marketing managers, and can frequently only be discovered through the conduct of
market research amongst identified groups (Middleton, 1993:71).
Despite the extreme importance of traveller needs, no information on the benefits sought by
South African flyers is available. Possible research conducted by individual carriers amongst
their own travellers, would for obvious reasons be unavailable for public consumption.
3.2.3.6 Segmentation based on ipsychographic characteristics
"Psychographics", is the term used to denote measurement of a traveller's mental attitudes
and psychological makeup, as distinguished from demographics, which measures objective
dimensions such as gender, age, and so forth.
96
Psychographics involve sophisticated research techniques aimed to position travellers
according to psychological rather than physical dimensions (although the latter are included
in a psychographic profile). The underlying belief is that segmenting travellers according to
psychological dimensions could assist in identifying common values which influence their
travel patterns. This type of research underlies the modern concept of positioning as
discussed in section 3.4. Psychographic segmentation is based on an understanding of a
traveller's needs, benefits sought, and motivations, and usually involves a significant
expenditure on marketing research (Middleton, 1993:74).
Psychographic segmentation divides travellers into separate groups based on social class,
lifestyle, or personality. These variables have a strong influence on the products and services
people choose to buy, and relate to customers in the sense that people often express
themselves through their buying habits. The following are examples of modern marketers
using the above variables as segmentation criteria:
The Values and Lifestyle programme (VALS) has become one of the most popular
and widely used methods for applying lifestyle segmentation in the American
consumer market, and is used by companies such as Eastman Kodak, Mercedes-
Benz, and so forth. It divides the American market into nine lifestyles and four
categories based on the consumer's self-image, aspirations, and products used (Belch
and Belch 1990:206).
Manufacturers of womens' clothing design clothes for the "plain woman", the
"fashionable woman", and the "manly woman".
Cigarette companies develop brands for the "defiant smoker", the "casual smoker",
and the "careful smoker" (Kotler, 1994:274).
97
In South Africa, the Sociomonitor (MRA), features as the most prominent psychographic
segmentation tool. White South African consumers (section 3.2.3.1 discusses the reasons
for only using the White Sociomonitor) are segmented on three levels: the basis is 39 "trends"
or psychographic characteristics, which is used to divide consumers into nine sociograph
cells, which in turn, divides the market into four main value groups. These four value groups
are natural divisions, and represent distinct elements of attitude and approach to life amongst
members of the White society. The four groups are: the Responsibles, the Innovatives, the
Brandeds, and lastly, the Self-motivateds. A more detailed analysis of these groups with
particular reference to air travel, follows.
3.2.3.6.1 Responsibles
Responsibles comprise 23.1 percent of the White population. They are older, female,
Afrikaans-speaking, and on average more likely to be less educated, retired, housewives, and
unemployed. They have lower than average household incomes, and live mostly in the Cape
and Transvaal urban areas.
(I) Characterising trends:
Responsibles are cautious, conservative, and reject hedonism and risk-taking. Their
enjoyment is found in quieter domestic or creative activities, or spending time with their
families. Responsibles are usually family-centred, and air travel could play a key role in
maintaining contact with distant relatives. They are conscious of behaving morally and
correctly, and are proud of their national heritage and nationality - SAM long history as the
national carrier would probably appeal to them.
98
Responsibles are suspicious consumers, and would need assurance that a new operator is safe
to fly. Tried and trusted brands, especially large corporations and businesses (e.g. SAA), are
preferred. They are usually politically conservative, and do not approve of racial mixing.
However, non-White cabin and check-in staff would probably not offend them as these staff
function in a serving capacity. On the other hand, the usage of Black languages on board and
non-White cockpit crew (especially the latter), might be of definite concern to these
consumers. Responsibles usually avoid novelty and change, and tend to stay loyal to their
habits - they have always flown SAA and would prefer to continue doing so.
Because of their lower than average income, and despite their dislike of novelty and change,
Responsibles might be persuaded to try a new airline if the latter offers lower fares. Chances
are, however, they will do so with critical apprehension.
(ii) Marketing implications:
Responsibles shun products or services marketed in a flashy, fast-lane, sensational way, and
Phoenix Airways's flamboyant marketing campaign probably did not appeal to them. They
require "well-endorsed" value for money - that is, if it is the cheapest airline, Responsibles
would prefer numerous other travellers to use it, before they would muster the courage to
do so themselves. They tend to be brand-loyal, and would prefer to stick to one specific
airline.
3.2.3.6.2 Brandeds
Brandeds comprise 25.7 percent of the White population. They are younger (49 percent
under 35 years), Afrikaans-speaking, and predominantly (54 percent) male.
99
The majority of Brandeds live in Transvaal cities, towns, or villages, with slightly less than
the average residing in metropolitan areas.
(i) Characterising trends
Brandeds are characterised by a concern for externals. These consumers are often inwardly
insecure, and try to project a positive image of themselves by wearing certain clothes, driving
certain cars, or drinking certain beers (also flying business class if they could). Status,
materialism, and the need to be liked are underlying motivational forces driving Brandeds'
behaviour. An airline's "image", as a result, would be important to these consumers.
Similar to Responsibles, Brandeds also tend to be politically conservative, and they dislike
racial mixing and equalisation. Brandeds would probably distrust Black cockpit crew -
especially females. These consumers live for today and are frequent users of stimulants - they
would expect an airline to offer free drinks.
However, due to the expenses involved in air travel, Brandeds are often aspirational and
economy-minded, and would often use cheaper airlines for leisure purposes. Sunair's
business class would be of particular interest to them, as it would satisfy their need for status
and admiration, at a cheaper price.
(iii) Marketing implications
Marketing strategies aimed at Brandeds should consider the importance these travellers
attach to an airline's image. These consumers are often more concerned with the image that
a product (or airline) projects, than with the actual quality.
100
This materialism and status-consciousness provide marketers with more scope than the other
value-groups do .
Airline advertisements targeting these consumers should focus on external appearances,
which are all-important to Brandeds, and pertain to the "now", as Brandeds dislike
"responsible" messages (e.g. planning, thinking of the future, etc.). Advertisements should
also avoid conventional authority figures, mixed race scenarios, and blurred gender roles.
3.2.3.6.3 Innovatives
Innovatives comprise 25.6 percent of the White population. They are predominantly male
(65 percent), and divided almost evenly between English (52 percent) and Afrikaans (48
percent) speakers. The majority (66 percent) reside in metropolitan areas and 42 percent
have completed, or are involved in, tertiary education. Household and personal incomes are
above average (for White consumers).
(i) Characterising trends:
Innovatives are modern and active. They enjoy the outdoors, and reject conventional wisdom
whilst choosing their own attitudes towards issues. These consumers select products that
are trendy, and an airline with such a modern image, even if it is new, would probably appeal
to them. Mostly younger males, and living in the "fast lane", they have little time for relating
emotionally to others, and would therefore probably be less likely to have an emotional
commitment towards a specific airline brand. In fact, Innovatives seek and enjoy change, and
will probably not remain loyal to one specific carrier.
101
New airline technology (i.e. ticketless travel) would appeal to these consumers as they relate
comfortably to technological progress. Innovatives are frequently suspicious of large
corporations and businesses (e.g. SAA) and unlike Responsibles, do not view bigger as
necessarily better.
(ii) Marketing implications:
Innovatives are attracted to new, improved, and different products or services - also
applicable to airlines. Advertising themes appealing to Innovatives should have a modern
"with it" milieu, as opposed to themes with a family and homely style. The usage of authority
or church aspects in marketing would be a definite turnoff.
3.2.3.6.4 Sef-motivateds
Self-motivateds comprise 25.7 percent of the White population. The majority of Self-
motivateds are female (60 percent), English (60 percent), under 50, and live in metropolitan
areas.
They are well-educated, and a large proportion are employed in executive or professional
positions. The above average personal and household incomes (A and B category) reflect
their education and employment. This is the value group containing the most working
women.
(i) Characterising trends:
Self-motivateds are generally suspicious consumers, critical of service quality, and will
generally not do or buy things (e.g. business class) to obtain status or admiration from others,
as they have sufficient confidence in themselves.
102
They enjoy novelty and change (e.g. a new airline) as long as there is a potential of quality
and value for money.
They make up their own minds about issues, and are not attracted to popular brands or
products just because "everyone else is". In fact, these consumers are inclined to shun
products that are mass-consumed, and dislike big corporations or businesses (e.g. SAA).
Racial harmony is a very strong concern for Self-motivateds, and they would not be offended
by non-White cabin crew. They are emotionally empathic towards others, and accept a
blurring of sexual roles instead of the usual stereotyping (due to the high incidence of
working women). This value group has a less developed sense of national identity and
patriotism, and would not necessarily be attracted to SAA because of its ex-national carrier
status.
(ii) Marketing implications:
Intrinsics, rather than extrinsics, or a combination of both with quality emphasised, would
appeal to Self-motivateds. Marketing messages can be subtle and cleverly conveyed for a
more positive effect, but promises of quality should be kept. Self-motivateds usually have
a scepticism towards products that appeal to "everyone", and the ideal marketing message
would be one that portrays a specific airline as "exclusive" and not "for the masses". Self-
motivateds enjoy feeling different to others and will therefore be selective in their buying.
Advertisements should ideally create scenarios of modern people who do not subscribe to
society's more traditional values, but enjoy being independent.
103
Self-motivateds relate to racial mixing, peoples' feelings, and independence of thought.
Portrayals of patriotism, and promoting an airline purely on price, should be avoided when
communicating with these consumers.
3.2.3.6.5 Segmenting the domestic air travel market according to the 1992 White
Sociomonitor
Figure 3.6 presents the value group composition of the domestic air travel market, employing
White Sociomonitor (MRA, 1992) statistics weighted according to a 72 percent business and
28 percent leisure component - refer to section 3.2.3.2.
FIGURE 3.6: PSYCHOGRAPHIC SEGMENTATION OF THE DOMESTIC SOUTH AFRICAN MARKET (1992)
SOURCE: Adapted from Market Research Africa.(1992). White Sociomonitor. Johannesburg.
104
The figure indicates that the majority (70 percent) of domestic air travellers fall within the
Innovative and Self-motivated groups. These statistics correspond with the above sections
describing Responsibles as older, females, and with a below average income; and Brandeds
being younger, and the majority not residing in metropolitan areas - refer to section 3.2.3.3,
city distribution of the domestic South African flyer. Members of both these groups are
therefore less likely to occupy corporate managerial or other positions requiring air travel,
and often have a lower than average income, making air travel for leisure purposes less
affordable.
3.2.3.7 Segmentation based on price variables
For any given purpose of air travel there are typically travel segments at the high priced,
luxury end of the market (e.g. business and first class), and others at the low priced, economy
end. These travellers exhibit varying degrees of price-elasticity. Airline marketers should
make a fundamental strategic choice as to the position on the prevailing price spectrum they
should aim their marketing efforts at. This choice will determine the segments they will be
dealing with, and have a profound impact on the nature of the airline product provided, as
well as its promotion.
Airline fares are more than just the monetary value of air travel. They convey expectations
of quality and value to travellers, and communicate images of airlines which travellers often
relate to their own images of the type of people they are. The pricing strategy - in the
context of chosen target segments - governs all subsequent decisions made with regard to the
marketing mix.
105
For example, if an airline decides to compete in the "luxury" and expensive fare range (e.g.
Swissair), its whole product must be organised to deliver the high quality implied.
Brochures, advertising, all forms of sales promotion, aircraft, and any ancillary services
available, should meet the target market's expectations (Middleton, 1993:70-75).
From a simplistic price point of view, the domestic air travel market provides an interesting
scenario of price segmentation. Flitestar initially targeted the top-end of the business market,
charged the same fares as SAA, but tried to outdo the ex-national carrier in style, class, and
service provided. Phoenix, on the other hand, targeted price sensitive travellers, offered
some of the lowest fares in the market, but provided a less than average service. Both
airlines failed, and had to close down. Numerous other factors were obviously involved in
the demise of these two carriers, just as there are many reasons for Comair (the carrier
constantly offers fares +-30 percent less than SAA), and SAA, consistently being able to
operate successfully. These examples reflect the complexities inherent to using price as a
segmentation tool.
3.3 MARKET TA GETING
Market segmentation is only the first step in developing an effective marketing strategy, and
reveals the market opportunities that exist. Once an air travel market has been divided into
segments, an airline has to evaluate these segments and decide which and how many to target
(Kotler and Armstrong, 1991:231).
106
3.3.1 Evaluating market segments
Certain important considerations which an airline has to take into account when evaluating
and choosing target segments are:
The segment size and growth.
The structural attractiveness of segments.
The airline's objectives and resources (Kotler, 1994:281).
These considerations are discussed in the following sections.
3.3.1.1 Segment size and growth
One of the first questions that an airline should ask, is whether a potential target segment has
the "right" size. "Right" size is an arbitrary concept, and should be based on an assessment
of the airline's resources. A large segment requiring vast resources (financial, marketing,
and others), for example, should be avoided by small airlines with limited resources.
Likewise, a small niche segment should rather be ignored by a large carrier who will find it
more profitable to spend its resources on larger segments.
The growth potential of a segment is of obvious importance. If an airline has long-term
visions of an increased market-share, and the segment that it targets has no or limited scope
of growth, it could soon happen that the airline "outgrows" its target segment. The
segmentation and targeting process will then have to be repeated, if other airlines have not
already succeeded in exploiting the most profitable segment options left (Kotler, 1994:282).
107
3.3.1.2 Segment structural attractiveness
Although a segment might be of sufficient size and have desirable growth potential, several
additional factors need to be considered, as depicted in figure 3.7:
A threat of intense segment rivalry. Strong and aggressive airlines might already be
present in a segment, which, upon a new airlines entry, could result in frequent price
wars, advertising battles, and new-product introductions, making it expensive to
compete.
Threats of new entrants. A segment can be unviable if it is likely to attract other
airlines with substantial resources, desiring to increase their market shares. The
lower the entry barriers to a specific market segment, the greater the risk that the
segment will be targeted by other carriers.
Threats of alternative travel modes. An airline should carefully consider a segment
where popular substitutes for air travel exist.
Prices and profits in such a segment could drop, if technological advancements occur
amongst substitute travel modes (Kotler, 1994:282). The Chunnel (the underground
tunnel linking Britain to mainland Europe) is a case in point. Trains using this
undersea tunnel now compete with airlines for traffic between Britain and France
.3.3.11.3 Airline objectives and resources
An airline's own objectives and resources are of prime importance when selecting target
segments. Certain segments might not correspond with an airline's long term market
objectives, and even if it does, the airline should determine whether it possesses the resources
and skills necessary to exploit a segment.
Potential Entrants
(Threat of mobility)
Substitutes (Threat of substitute
Industry Suppliers__ Competitors — Buyers
(Supplier power) (Segment rivalry (Buyer power)
-----_______--
108
FIGURE 3.7: FIVE FORCES DETERMINING SEGMENT STRUCTURAL ATTRACTIVENESS
SOURCE: Adapted from Kotler, P. (1994). Marketing management: Analysis, planning, implementation, and control. Englewood Cliffs, N.J.: Prentice Hall.
An airline should ideally only enter a market segment where it can offer a product of superior
value (Kotler, 1994:283). Failing to achieve this, an airline might find itself with a "me too"
product that would not appeal sufficiently to travellers.
3.3.2 Selecting market segments
Having evaluated different segments according to the criteria analysed in section 3.3.1, an
airline must now decide which, and how many, segments to serve.
109
This is the process of target market selection. Kotler and Armstrong (1991:232) discuss
three different strategies that can be followed:
Undifferentiated marketing. An airline might decide to ignore segment differences
and pursue the whole air travel market, by focusing on the common needs of
travellers, rather than the differences. The airline product is designed to appeal to the
largest number of air travellers, and mass promotional and communication strategies
are used, resulting in lower costs. The disadvantage of such an approach could be
a gradual erosion of the airline's market share, as new competitors target and design
products for specific segments.
Differentiated marketing. An airline could pursue a few segments instead of the
whole air travel market, designing a product and marketing mix that is more closely
adjusted to the needs of travellers falling within each division. Differentiated
marketing typically generates more business than undifferentiated marketing, but also
increases costs. An airline therefore has to weigh the potential increase in sales
against the increased costs of such a strategy.
Concentrated marketing. This type of strategy is appealing when an airline has
limited resources. Instead of pursuing a small share of a large market, a small airline
can pursue alarge share of one sub-market. Such an approach would permit a small
airline to gain a foothold against a larger, more resourceful airline; and enable the
carrier to acquire thorough knowledge of needs existing in the segment; whilst
realising operating economies through specialised production, distribution, and
promotion, of the product. The disadvantages are that the particular market segment
can decrease, become unprofitable, or larger competitors may decide to enter (Kotler
and Armstrong, 1991:233).
110
Prior to the deregulation of the South African air travel market, and in the absence of other
competitors, it was appropriate for SAA to employ an undifferentiated marketing strategy.
The structure of the domestic air travel market, however, has since changed. The resultant
increase in competitors, renders an undifferentiated marketing strategy unsuitable for
domestic airlines. Considering the current market dynamics, a differentiated or concentrated
marketing approach, would therefore be more appropriate, especially for new entrants
desiring to compete in a market still dominated by SAA.
3.4 MARKET POSffTIONING
Positioning can be defined as the art of fitting an airline product to one or more segments of
the broad air travel market, in such a way as to set it meaningfully apart from competing
airlines. The result is the image that comes to the mind of the traveller, or the attributes
perceived as related to the airline (Belch and Belch, 1990:213). Kotler and Armstrong
(1991:235) elaborate on this statement and define market positioning as follows: It is the
position the airline occupies in a traveller's mind, relative to competing airlines.
Travellers are overloaded with airline information, and cannot reevaluate carriers every time
they have to travel. To simplify their decision-making process, travellers organise airlines
into categories and positions. An airline's position is a complex set of perceptions,
impressions, and feelings, that travellers hold of the airline when comparing it with
competitors. Travellers will inevitably position airlines without the assistance of marketers,
but airline marketers should not leave their airlines' market positioning to chance. They
should plan positions that will give their airline the greatest advantage in selected target
markets, and should design marketing mixes to assist in creating these planned positions.
3.4.1 The importance of market positioning
Positioning plays a pivotal role in a marketing strategy, since it links the segmentation
process, the selection of target markets, and an identification and analysis of competitors,
with the internal resources and abilities of an airline. Based on these activities, a positioning
statement can then be developed that answers the following three core questions:
0
What product and service concept does our airline embody?
0
What concepts do we want it to embody?
0
What actions do we need to reach our objective? (Lovelock, 1991: 1 1 1)
These three questions are not only the basis of any explicit market positioning, but should
also be the motivation behind all airline activities.
Market positioning is of special importance to airlines, as it assists potential passengers in
obtaining a mental "fix" on an otherwise amorphous product. If an airline fails to secure a
desired position in the marketplace, the following outcomes may be the result:
The airline is forced into a position where it has to compete head-on with stronger
competitors.
The airline might be pushed into undesirable market segments.
The airline's positioning could become so vague that no-one really knows what its
distinctive competence is (Lovelock, 1991:112).
112
3.4.2 Development of a positioning strategy
The objective of the STP marketing process is for an airline to provide a "differentiated
product" in the marketplace, and an airline's positioning strategy should emphasize those
unique benefits that it offers. However, not all differences between airline products are
meaningful or worthwhile benefits to promote, and an airline has to carefully select and
promote those of sufficient importance to travellers. In section 4.2.3.2, detail is provided
regarding the number of benefits to promote.
An airline can usually base its positioning strategy on a unique benefit when it is
0
Important. The particular benefit is highly valued by a sufficient number of travellers.
0
Distinctive. The benefit is not offered by other airlines.
0
Superior. The benefit is superior to benefits offered by competitors.
0
Communicable. The benefit can be communicated, and is easily experienced or seen
by travellers.
0
Preemptive. The benefit cannot be easily copied.
0
Affordable. Travellers can afford to pay for the benefit.
0
Profitable. The airline will find it profitable to introduce the benefit (Kotler,
1994:306).
The nature of the unique benefits selected by an airline, to a great extent, determines the type
of positioning strategy the airline can follow. The following are some of the more common
positioning strategies used by airlines:
113
0
Attribute positioning. Airline X can tout itself as the world's largest airline, implying
that it has the largest route network, is professional, and has a high level of customer
service.
0
Benefit positioning. Although certain marketers agree that up to three benefits can
be communicated to a target market, certain advantages exist in promoting an airline
as the best with regard to one important attribute - as discussed in section 4.2.3.2.
Airline X, for example, can promote itself as the most punctual airline - targeting
travellers for whom punctuality is essential.
0
User positioning. Airline X can market itself as an airline for service-oriented,
discerning travellers, defining itself through a traveller category.
0
Quality\price positioning. Airline X can position itself as the airline offering the most
value for money (Kotler, 1994:311).
An airline should be aware of the following four pitfalls that could occur when choosing a
positioning strategy:
Underpositioning. When travellers only have a vague idea of an airline's product, and
do not sense anything special about it.
Overpositioning. When travellers have a narrow image of an airline. They might
think that airline X's fares are always expensive, when in fact, discounted fares might
be available.
Confused positioning. When travellers have a confused image of an airline, either
resulting from too many claims being made by the carrier, or a frequently changing
positioning.
I 14
0
Doubtful positioning. When travellers find an airline's claims hard to believe in view
of the type of aircraft used, ticket prices, or standard of service (Kotler, 1994:309).
Whatever positioning strategy an airline chooses, it should always be subject to change, if
market dynamics and changes in target travellers' needs require such a movement. An
airline's positioning should thus not be viewed as cast in stone, but should be responsive and
sensitive to market fluctuations.
3.4.3 Anticipating competitive response
It is essential that an airline analyses its competitors before embarking on any positioning
exercise. Such an analysis will provide airline marketers with a sense of their strengths and
weaknesses, which in turn may suggest opportunities for differentiation. These insights can
also be used to determine which benefits to provide to what market segments. An analysis
of competitors should ideally include both direct and indirect competition (Lovelock,
1991:113). It is, unfortunately, not always possible to pursue a totally unique market
positioning:
0
Other airlines might have arrived at the same conclusions whilst conducting their own
positioning analyses.
An existing competitor might feel threatened by an airline's positioning strategy, and
take steps to reposition its own product to be able to compete more effectively .
A new entrant might decide to copy an existing airline's positioning strategy, and try
to offer travellers a better deal.
1 I 5
The ideal is that an airline should anticipate possible competitive responses to its positioning
strategy. Potential competitors should he identified, and a hypothetical internal analysis done
for each. This information, coupled with existing market data, should provide management
with a good idea of the possible reaction of competitors (Lovelock, 1991:113).
3.5 DEVELOPIING A MIESSIION STATEM ENT
A mission statement is the internal foundation on which an airline's market positioning rests,
and defines the fundamental, unique purpose, that sets an airline apart from competitors,
whilst identifying the airline in terms of the target markets it serves (Wheelen and Hunger,
1989:171). All airline activities can, and should be evaluated in terms of the mission
statement, thus providing clear guidelines to airline managers and employees alike. A
mission statement makes it possible for an airline to coordinate its activities in an effort to
create the desired market positioning. Without a mission statement, the risk exists that front-
line employees will deliver standards of service and treat customers according to their own
perception of what the airline embodies. The result could be a scenario where management
has decided on a specific market positioning, and front-line employees are delivering
something different. Thus a mission statement can be viewed as the motivation behind the
activities of both management and employees - a binding fibre.
A mission statement is the logical conclusion of the process of segmentation, targeting, and
positioning, since it forms the basis on which all marketing and business strategies are built.
Specifically, a well-conceived mission statement will define:
The reason for the airline's existence, and its responsibility towards shareholders,
employees, society, and other stakeholders.
116
The customer needs that are satisfied by the airline product.
Management's performance expectations of employees .
Other general guidelines for overall business strategy (Cravens, 1991:37).
A truly integrated marketing approach requires a perfect fit between chosen target markets,
an airline's mission statement, and its business strategy. Treating these elements as separate
and mutually exclusive entities or marketing tools, will not enhance competitiveness. Instead,
these entities must be regarded as integrated and related concepts to achieve maximum
benefit. Any mission statement that is developed in a vacuum (i.e. not considering the
dimensions of the target market and positioning variables) does not fully capture the essence
of integrated marketing.
3.6 SUMMARY
Most modern organisations realise they cannot pursue all the customers in their market
environment, and that they need to identify those segments which they can serve most
effectively. This realisation has led to the modern strategic marketing approach called STP:
0
Segmenting.
0
Targeting.
0
Positioning.
This chapter has applied six segmentation techniques, using existing South African consumer
information sources such as AMPS (SAARF, 1994a) and Sociomonitor (MRA, 1992), to
the domestic air travel market. These six techniques, used most effectively in conjunction
with each other, are:
1 1 7
Segmentation based on purpose of trip. The majority (72 percent) of domestic air
travel trips are undertaken for business purposes. Despite its importance, purpose
of trip is not sufficient in providing a detailed segmentation of the domestic air travel
market.
Segmentation based on demographic, geographic, and economic characteristics.
Domestic flyers are predominantly White (85 percent); English (60.3 percent); male
(55 percent); and fall within the 35+ age group. The majority (67 percent) reside in
metropolitan areas, and are high income earners. To avoid providing a distorted,
one-dimensional profile of an air travel market, this segmentation technique needs to
include other factors such as the frequency with which individual passengers travel.
Segmentation based on airline user status. This technique divides the air transport
market into nonusers, ex-users, potential users, frequent users, and so forth, of a
specific airline product. The only information pertaining to airline user status
available to this study, related to the frequency with which individual travellers fly.
According to these statistics (AMPS 1994), a small percentage of the South African
population - 1.1 percent, generate 72 percent of all air travel trips undertaken.
Segmentation based on traveller needs and benefits sought. Despite customer needs
being the central focus of modern marketing, information relating to the needs and
benefits sought by South African flyers is unavailable.
Segmentation based on psychographic characteristics. MRA's Sociomonitor (1992)
divides the White South African consumer market into four main value groups:
Responsibles, Brandeds, Innovatives, and Self-motivateds, based on psychographic
values, attitudes, and lifestyle.
1 1 8
The majority (70 percent) of domestic air travellers fall within the Innovative and
Self-motivated groups, and.are sophisticated, quality conscious consumers, with a
tendency to seek and enjoy change, whilst being suspicious of large corporations and
businesses.
0 Segmentation based on price variables. Airline fares convey expectations of quality
and value to travellers. An airline's position on the price spectrum is therefore a
strategic choice, as all aspects of the airline's operation should be coordinated to
reflect the image created by its fares. Information pertaining to the number and size
of price segments in the domestic air travel market is unfortunately unavailable.
The second step in the STP process is an airline's analysis of target segments. During this
phase, viable market segments are identified based on size and growth potential; their
structural attractiveness is assessed; and the airline's objectives and resources are considered.
Having evaluated the different segments, the airline now has an option of two strategies to
follow: Differentiated marketing - targeting several market segments and designing separate
offers for each; or concentrated marketing - pursuing one niche segment. A third strategy,
undifferentiated marketing - pursuing the whole market with a single offer, which does not
include an analysis of market segments, is impractical in a deregulated environment with
several competitors.
The final step in the STP process is the market positioning of an airline, which can be defined
as the airline product's image in a traveller's mind, relative to competitors, and comprising
a complex set of perceptions, impressions, and feelings.
119
Market positioning is important to airlines as it defines the product and service concepts
which an airline embodies, and should ideally emphasize the unique benefits offered by a
specific airline product. An airline's market positioning, however, should be flexible and
adjusted according to changes in travellers' needs and\or responses of competitors.
A mission statement is the logical conclusion of the STP process, as it provides a framework
within which the activities of the airline can be coordinated to ensure that the desired market
position is created. Without the binding fibre of a mission statement, the risk exists that
airline employees could deliver a product different to what is envisaged by an airline's
management, as it communicates to airline staff the unique purpose that sets an airline apart
from competitors.
The STP process is of vital importance to any airline. Without these steps an airline risks
misinterpreting market needs, targeting wrong market segments, or projecting the wrong
"image" in the marketplace. In a fiercely competitive deregulated environment, no airline can
afford to make these mistakes. STP marketing should therefore not be viewed as an
advanced modern marketing technique, Kit rather as a basic "survival" approach needed for
an airline to remain profitable and viable in a dynamic, changing, market environment.
THE ROLE OF THE MARKETING MIN (PRODUCT AND
DIESTRII IN UTIEON) AS A COMPONENT OF AN
120
INTEGRATED MARKETliNG APP OACH
CI INTRODUCTION
The marketing mix is that element of the micro-environment that is under direct control of
airline marketers, although strongly influenced by external forces. Figure 4.1 reveals different
variables that impact on the marketing mix, and expresses the marketing system in three
concentric rings. The middle ring illustrates the interaction that exists between other internal
organisational components (not controlled by marketers) and the marketing mix. The
operational, finance, and personnel sections of an airline, for example, influence and in turn
are influenced by marketing decisions. The outer ring, as illustrated, comprises external
factors which can normally not be controlled or even influenced by an airline (as discussed in
chapter 2). The combined influence of these external factors provides the broad framework
for market opportunities and threats, within which marketing mix decisions have to be made,
subject to other internal airline resource constraints (Middleton, 1993:62). Due to the
dynamic interplay between the marketing mix and other forces in the airline's internal and
external environment, the components comprising the marketing mix need to be continuously
manipulated in response.
ACRO-ENVIRONMEN
physical
ARKET ENVIRONME T
C RGANISATION RESOURC ES
chnologi ntemation
RKETING MI ersonnel
Image
price • roduct
romotion
travel gents
financial corporate
operations
travelle
econom stitutiona
competitors
Bodo-cultural
environments
121
FIGURE 4.1: THE MARKETING MIX IN CONTEXT OF THE MARKETING SYSTEM
SOURCE: Adapted from Middleton, V.T.C. (1993). Marketing in travel and tourism. Oxford: Butterworth and Heineman.
The marketing mix as displayed in figure 4.1, comprises the controllable marketing-decision
variables that an airline uses over a particular period of time. Commonly referred to as the
four p's, these variables are:
Product. The right airline product needs to be developed for the chosen target
market.
122
Place. Appropriate channels of distribution have to exist to ensure that the airline
product reaches the target market at the right time in the right place.
Price. A price providing good value to the traveller and adequate revenue to the
carrier must be set for the airline product.
Promotion. Information and benefits relating to an airline product need to be
communicated to the target market using advertising, public relations, sales
promotions, and personal selling, in order to facilitate sales (Wells, 1993:292).
Due to many important sub-elements comprising each of the four components of the
marketing mix, it is not surprising that some authors have developed variations of the original
four p's, especially with regard to service products. Closer scrutiny, however, would in many
cases reveal that the proposed additional mix components all include integral elements of the
airline product. It is therefore doubtful whether the understanding of marketing is advanced
by such proposed revisions of the four p's, though it remains a matter of personal judgement
and preference (Middleton, 1993:59). For the purposes of this document, however, the
traditional approach of four p's is used. Chapter 4 analyses the product and place
(distribution) components of the marketing mix, and chapter 5 the price and promotion
components.
123
4.2 THE AIRLINE PRODUCT AS A COMPONENT OF THE MARKETING MIX
The airline product incorporates more than one level, as presented in figure 4.2. The most
basic of these levels is the core product, addressing the question "what is the traveller actually
buying?". The core product represents the centre of the airline product and contains the core
benefits which travellers obtain when they buy air travel. To use an example: Buyers do not
buy quarter-inch drills, but they are really purchasing quarter-inch holes (Kotler and
Armstrong, 1991:252). In the same vein would a traveller buy air transport to be at the right
place at the right time in a convenient and acceptable way. Thus, air travel could be viewed
as a problem-solver, solving the travellers' problems (to be at the right place at the right time),
while achieving the airlines' objective - profitability (De Chernatony and McDonald 1992:4).
These examples are used to illustrate the point that the basis of any marketing approach is to
ultimately design the airline product in terms of customer benefits.
The next level of an airline product is labelled the "actual product", and includes five key
product features influencing the choice of potential travellers:
The cost of the airline product.
Schedule and frequency-based features.
Aspects of comfort and convenience.
The ease of gaining access to the airline product.
The image associated with the airline (Doganis, 1991:260).
UGM ENT ED LEV
in-flight entertainment
ACTUAL LEVEL
cost of airline product
schedules a access to frequencies airline CORE product LEVEL
(be at the right place, at the right time, in an
acceptable and convenient way)
communication facilities etc.
• image airline eof
reading material
aspects of comfort and convenien
124
FIGURE 4.2: THE DIFFERENT LEVELS OF THE AIRLINE PRODUCT
SOURCE: Adapted from Middleton, V.T.C. (1993). Marketing in travel and tourism. Oxford: Butterworth and Heineman.
The most advanced level of the airline product is the "augmented product", which builds
around the core and actual products by offering additional services and benefits such as in-
flight entertainment, in-flight distribution of reading materials (i.e. newspapers\magazines),
different menus, fax and other communications facilities, and so forth.
125
British Airways now offers sleeping facilities for business travellers and is currently
researching onboard bread baking technology (in order to provide fresh bread to passengers).
These are all (costly) augmentations of the original airline product.
Competition based on product augmentation is strong in the air travel industry and involves
many expenses. It is therefore important that airline marketers determine the willingness of
travellers to pay the extra cost resulting from additional benefits provided while keeping in
mind that augmentations soon become expected benefits. As airlines raise the fares of their
augmented products due to rising costs, some competitors usually go back offering a more
basic airline product at lower prices (Kotler and Armstrong, 1991:252).
4.2.11 Char etenistics off the o Milne product
The airline product embodies a combination of services useful to travellers. Safety,
punctuality, convenience, frequency of flights, in-flight cabin services, ground services
(ticketing and baggage handling), aircraft type, and even the airlines' image, all constitute the
airline product that travellers buy (Wells, 1993:294). In marketing the airline product, certain
unique characteristics, however, have to be recognised:
O
Because an air service is a deed or performance, it cannot be inventoried to match
fluctuations in demand. Once a flight has taken off, empty seats can never be utilised
again (Lovelock, 1991:8).
126
Air travel is usually a personalised experience, depending on the technical and
interpersonal skills of the air service providers; their attitudes towards work; and their
interactions with travellers. Two people undertaking the same flight might have two
totally different opinions with regard to the service, based on their individual
experiences. Automation of procedures, ghost flyers, effective staff selection,
training, and supervising of personnel, could assist in providing a more consistent
experience (Allvine, 1987:765).
An unsatisfactory airline experience cannot be replaced, as is the case with other
products consumers are dissatisfied with. Airlines attempt to prevent such
unsatisfactory experiences with adequate staff training.
Delivery of the airline product cannot always be guaranteed, due to possible technical
problems or unpredictable weather conditions.
Air travel can only be produced in batches (i.e. 108, 143, or 367 seats), as opposed
to individual units (Wells, 1994:294).
Due to the intangibility of air travel, it is generally more difficult for travellers to judge
the air transport, than other products. This problem (from a traveller's point of view)
is illustrated by figure 4.3, which places certain products and services on a continuum
based on the characteristics buyers can evaluate prior to purchasing.
Most Most goods services
Easy to evaluate 1 1 4
c̀m 4.k AS 44b 09) C! Ccr.
41,q' k 4 CO* cyt „,0 0 9̀ P e<s* 4") ,e,ct" ,e # c.c ec. k 64.
o'cs .4) 0 0 41'
04. sr"
4: q' I •41' •q.
High in search qualities High in credence qualities High in experience qualities
Difficult to evaluate
127
FIGURE 4.3: CONTINUUM OF EVALUATION FOR DIFFERENT TYPES OF PRODUCTS
SOURCE: Adapted from Kotler, P. (1994). Marketing management: Analysis, planning, implementation, and control. Englewood Cliffs, N.J.: Prentice Hall.
Products such as clothes (placed left on the continuum) are high in "search qualities", and
possess characteristics buyers can easily evaluate prior to purchase. In the middle are goods
and services with "experience qualities" (e.g. haircuts, air travel, vacation, etc.),
characteristics buyers can evaluate after purchase. Services such medical diagnosis, car
repair, and so forth (placed on the right-hand side of the continuum) possess credence
qualities and are hard to judge even after they have been bought.
128
Due to air transport exhibiting experience qualities, travellers often feel at risk in their
purchase.
The intangibility of air transport has the following consequences:
Travellers often rely on word of mouth rather than on advertising to form
expectations of an airline's service.
Travellers rely on price, personnel, and physical cues, to judge the quality of an air
service.
Travellers tend to be highly loyal to an airline when satisfied (Kotler, 1994:469).
4.2.2 Developing a competitive airline product
Due to the unique characteristics of the airline product and the highly competitive
environment surrounding it, the majority of modem airlines intensify their efforts in two areas:
service, improving employees' courtesy and efficiency in dealing with passengers, while
offering product features such as in-flight magazines, entertainment, greater seat-pitch angle,
and so forth; and secondly, enhancing the airline's image through brand building (Wells,
1993:294). These efforts not only need to be communicated to travellers, but should form
part of a more comprehensive approach than usually required for the marketing of products,
due to the host of variables influencing the outcome of air travel. Marketing of a successful
airline product can therefore be divided into three components:
129
External marketing, in this case comprising the marketing mix as discussed in the
introduction.
Internal marketing, consisting of the organisation's efforts in motivating its employees
to deliver a high standard of service.
Interactive marketing, which includes the training and skills needed by staff when
serving travellers (Kotler, 1994:469).
Care should be taken that any airline product developments arise from a general customer and
marketing philosophy, as even the best marketing efforts will be severely restrained by an
airline product not fully satisfying customer needs and expectations. Aircraft scheduling,
aircraft type, in-flight and ground service, check-in procedures, and maintenance, amongst
others, should therefore all be elements of a customer value-delivery system (Kotler,
1994:36). The next section discusses the philosophy of a customer-oriented airline and value
marketing as it relates to the airline product.
4.2.2A The airillne product and customer value
For the purposes of this study, the term "value" is defined as: the sum of all the perceived
benefits (gross value) of an airline product, minus the sum of all the perceived costs relating
to the same (Lovelock, 1991:237).
130
The benefits of an airline product would not only include frequency of services, destinations
served, scheduling, aircraft type, check-in facilities, food provided, and in-flight
entertainment, but also the airline image, efficiency, staff attitude and motivation. Subtract
the traveller's total cost in obtaining the airline product (the fare, time spent checking in and
boarding - a flight delay would increase this cost greatly, and the psychic cost - has the
traveller been treated in a respectful and friendly manner?), and the value delivered to the
passenger is left (Kotler, 1994:38).
When travellers evaluate competing airline products, they are basically comparing values.
The greater the positive difference between perceived benefits and perceived costs of an
airline product, the greater the net value. A traveller's evaluation of the net value of an airline
product may be sharply different post-use compared to pre-use. When a passenger buys a
ticket and finds that it not only costs him more but delivers fewer benefits than expected, he
would angrily speak of "poor value" (Lovelock, 1991:237).
4.2.2.2 The zirfline product and canstomer satisfaction
A passenger usually bases his judgement of an airline on the carrier's performance in relation
to his expectations. The satisfaction level of a passenger is therefore the result of the
difference between perceived performance and expectations. Passengers' expectations are
formed by past booking and flying experiences, statements made by friends and associates,
and advertising information and promises.
131
A high level of satisfaction with an airline's service creates an emotional affinity with the
airline brand, not just a rational preference, and cultivates passenger loyalty. As such, it is
important that an airline culture that strives to delight the passenger, is developed (Kotler,
1994:39,40).
Various studies have shown that service companies with high levels of customer satisfaction
share a number of common practices:
A strategic concept. Top service companies are obsessed with the customer. They
have a clearly defined strategy to satisfy the needs of target customers.
A history of top-management commitment to quality. Management evaluates service
performance as often as financial performance.
The setting of high service standards. Swissair, for example, aims to have 96 percent
of its passengers rate the service as good or superior, otherwise action is taken.
Systems for monitoring service performance. Top service companies audit their own
and competitors' service performance on a regular basis.
Systems for satisfying customers with complaints. Efficient service companies react
rapidly and generously to customer complaints.
Satisfying employees as well as customers. The motivation levels of staff influence
customer relations. Top service companies as a result attach importance to internal
marketing, and aim to create an environment of employee support by giving rewards
and incentives for good service performance (Kotler, 1994:477).
132
The importance of passenger satisfaction for an airline is evident, considering that it costs on
. average five times more to recruit a new passenger, than it costs to keep an existing one
(Kotler, 1994:42). A customer service department is therefore an essential component of the
airline product. Most passengers will continue to use an airline provided their complaints are
handled in a satisfactory, expeditious way. Apart from reacting rapidly to customer
complaints, a customer service department can provide management with detailed information
on passenger complaint and compliment trends, and forward useful suggestions received from
travellers.
4.2.2.3 The airline product and quality
The American Society for Quality Control uses the following definition of quality: "Quality
is the totality of features and characteristics of a product or service that bear on its ability to
satisfy stated or implied needs" (Kotler, 1994:57). Quality does not necessarily mean a more
expensive airline product. If a low cost airline meets the needs of its target market most of
the time, it can be considered a quality airline. The quality of an airline product has an
obvious impact on passenger satisfaction (and ultimately airline profitability), and should be
a constant consideration in the daily running of an airline (Kotler, 1994:57).
According to researchers Parasuraman et al, the quality of a service is determined by five
variables:
0 Reliability. The ability to perform promised service dependably and efficiently.
133
Responsiveness. The willingness to help customers and provide prompt service.
Assurance. The expertise and courtesy of employees and their ability to evince trust
and confidence.
Empathy. The provision of caring, individualised attention to customers.
Tangibles. The appearance of physical facilities, equipment, personnel, and
communication materials (Lovelock, 1991:367).
The focus point of airline quality is ultimately the needs of target travellers, and the extent to
which an airline is able to offer the above variables, depends on its knowledge about the same.
Such knowledge, if it exists, should be used as the basis for designing airline products, and
clear quality standards set by top management should thereafter ensure that the actual airline
experience satisfies expectations sold by the market communication function (Lovelock,
1991:370). Providing a quality airline product usually requires considerable efforts due to the
complexities inherent to passengers' perception of "quality". The following premises in
addition to above variables, should consequently be recognized:
0 Quality must be perceived by travellers. Quality begins with satisfying passengers'
needs and ends with their perceptions. It is important to communicate a message of
quality to the market, especially if the airline product's quality has been improved
from a position where it did not fully satisfy traveller needs and created negative
perceptions.
134
Quality must be reflected in every airline activity. If passengers require frequency,
punctuality, and reliability, from an airline, these attributes would constitute quality
in their eyes, and should then be addressed throughout the design of the entire airline
product including support services such as check-in, reservations, cabin services,
catering, and so forth.
Quality requires total employee commitment. Successful airlines are those where
barriers have been removed between departments, and employees work as a team in
order to facilitate core business processes and desired outcomes. Quality implies that
employees satisfy both internal and external customers.
Quality requires high-quality partners. Quality can only be delivered by airlines whose
value chain partners (see next section) are also quality-conscious.
Quality demands continuous improvement. This can be achieved, for example, by
benchmarking an airline's performance against the "best of class" competitor, and
strive to emulate or even overtake them.
Quality improvement occasionally requires quantum leaps. Although small
improvements are often obtainable through increased efforts, large quality
improvements usually call for fresh solutions.
Quality does not always require increased expenditure, and is often a natural result of
things done correctly the first time around. Quality should therefore be "designed"
into an airline product (Kotler, 1994:57).
135
Airline product quality is dynamic, and quality standards have to be periodically reviewed and
assessed in accordance with the fluctuation and evolution of target travellers' needs.
4.2.3 The afraine •oduct and branding
The success of Singapore Airline's "Singapore Girl" advertising campaigns (especially during
the 1980's), illustrates the importance and competitive role of "branding" in the air travel
industry. The "Singapore Girl" advertisements created the image of helpful, smiling, and
attentive cabin staff; and an airline that cared about its passengers. This image was a key
factor in helping Singapore Airlines maintain unusually high load factors throughout the
advertising period and thereafter (Doganis, 1991:279).
British Airways (BA) is another telling example of an airline using the power of "branding".
In 1988, BA set up brand teams to develop and launch two distinct products: Club Europe,
and Club World. The brand teams tasks were to create two distinct products, each with a
unique image, thus differentiating these products from other airline products. BA claims that
this policy was highly successful. Passenger numbers in Club World increased by 27 percent
within the first two years after introduction, while Club World load factors on certain North
Atlantic routes regularly exceeded 80 percent, requiring BA to increase capacity in response
to demand. In some markets BA was even able to charge a premium over the normal
business-class fare for its distinctive product (Doganis, 1991:279).
136
When an airline product is a "commodity" rather than a "brand", it is typically characterized
by the lack of perceived differentiation compared to other competing offers. "Commodities"
are bought on the basis of price and\or availability, and not because of the "brand". Airline
products that are considered "commodities" are therefore easily substituted, as opposed to
a "brand" which represents more than the sum of its component parts. A brand is perceived
to embody additional attributes or added values, which, although often emotional, intangible,
and difficult to articulate, helps an airline to develop a distinctive positioning in the traveller's
mental map of the market. The more distinctive the branding of an airline, the less likely a
traveller is to accept substitute products (subject to certain price and other parameters). An
airline "brand" can therefore be defined as: "an airline product, augmented in such a way that
the traveller or passenger perceives relevant, unique, added values, which match their needs
most closely. Furthermore, its success results from the airline being able to sustain these
added values in the face of competition" (De Chernatony and McDonald, 1992:18).
4.2.3.11 rands as part off the hooking process
Potential passengers evaluate airlines on a variety of attributes, with price often not being the
most important variable influencing the purchase decision. To explain this statement the
brand value equation needs to be analysed:
Rational + Price
rand value =
Emotional
137
During the booking process travellers evaluate the rational elements of an airline product.
These elements might include scheduling, frequency, route network, size or type of aircraft,
and so forth. Equally important is the price differential existing between airlines. If both
airlines offer the same in terms of route network, scheduling, and other important variables,
chances are that the passenger will consider the cheaper option. Emotional aspects, however,
often influence a traveller's evaluation of airline attributes and price differentials. These
aspects relate to a passenger's affinity with an airline, an emotional bond that might exist, and
the possible enhancement of a traveller's status by choosing a certain carrier. Depending on
the relationship, emotional aspects often have the power to distort values travellers assign to
rational and price variables of an airline. This is referred to as the "halo" effect. For example,
a traveller might perceive a preferred carrier as safer, employing superior pilots and cabin
crew, provide more space and better food, whilst facts indicate a competitor to compare
favourably with the preferred airline. Certain travellers might even deliberately overlook
price differentials due to their emotional affinity with an airline (De Chernatony and
McDonald, 1992:232-234).
Branding is the process of building an emotional bond and creating affinity between an airline
and target travellers, through focusing on their needs and preferences. Branding is becoming
an increasingly important survival tool in a competitive industry where product innovations
are easily copied.
138
4.2.3.2 The usage off differentiators in (brand-building
Differentiation can be defined as: "the act of designing a set of meaningful differences to
distinguish the organisation's offer from competitors" (Kotler, 1994:306). Successful
differentiation requires an airline product to offer unique benefits to passengers. Despite
airline product innovations easily being copied, airlines wishing to remain competitive really
have no choice but to develop a unique market positioning, preferably based on both product
and emotional aspects. An undifferentiated airline product leaves itself open to the following
risks as discussed in section 3.4.2: Underpositioning, overpositioning, confused positioning,
and doubtful positioning.
Although marketers disagree on the number of differentiation variables an organisation should
communicate to customers (ranging from one to three), most agree that an organisation
should choose a unique attribute or attributes (often referred to as a unique selling
proposition - USP), based on the criteria reviewed in section 3.4.2, as the basis for a brand
image, and then promote itself as number one in this field. Buyers tend to remember "number
one" messages better. The best "number one" positions to promote usually are: best quality;
best service; lowest price; best value; and most advanced technology (Kotler, 1994:306).
139
4.2.4 Loyalty programmes as a component of the airline product
The majority of modern frequent flyer programmes (FFPs), are examples of an incentive that
has developed into an airline product augmentation, which has since become a benefit
expected by frequent travellers. Airlines employ frequent flyer programmes in an attempt to
induce passengers in flying with themselves, rather than competitors, by rewarding these
travellers for each trip undertaken. The importance of an airline cultivating loyalty amongst
its frequent passengers can be illustrated by the following: Members of United Airline's
"Premier Mileage Plus" constitute 4 percent of the carrier's total customer base, but account
for 20 percent of the airline's passengers - and 25 percent of its revenue (United Airlines,
1995:2).
The first major frequent flyer scheme was initiated by American airlines in 1981, with the
popularity of such programmes since reaching dramatic proportions worldwide. At the end
of 1994, more than 80 million members of FFPs existed in the USA alone, with American
Airline's FFP on its own comprising 15 million travellers (Airline Business, December
1994:20). In South Africa, SAA's Voyager programme included 175 000 members in April
1995 (Bromley, April 1995), whilst +-3 500 travellers belonged to Comair's Corporate Club.
In one form or another, FFPs will probably still be used by airlines in the near future, and the
reasons are threefold:
140
New offers and benefits are continually launched, thus extending the life cycle of
FFPs.
Barriers to exit. Loss of high-yielding traffic due to the withdrawal of such a scheme
could be significant, and it is unlikely that other carriers will follow suit.
FFPs provide information on member behaviour and demographics, which are
progressively used by airlines to direct marketing planning (Airline Business,
December 1994:20).
4.2.5 Future airline product trends
The airline product is continuously evolving due to technological advancements. Whilst ten
years ago individual TV sets, onboard faxes, and seat-back telephones were just a marketer's
dream, most major airlines today offer these facilities. Considering the accelerating pace of
change in the air travel industry, Japan Airlines (JAL) established a 21st century Future
Technology Committee in 1989, to study ways in which JAL can prepare itself to meet future
air travel changes. The result of two years' deliberations was the "Romantech" concept, so
dubbed because of the Utopian or "Romantic technology" envisioned (IATA, September
1995).
141
Although many of its predictions are somewhat "tongue in the cheek", JAL sees a future in
which technology will transform long-haul flying, from today's cramped and regimented
grind, into a fast, comfortable, and pleasant experience. The report covers a broad spectrum
of ideas, ranging from mega-hub airports, to "smart cards" (carried by passengers)
functioning as boarding passes and providing access to information sources using a computer
terminal in the passenger seat. The JAL group has also devised a "Romantech aircraft" to
replace the cramped, three class airliners of today with a spacious, three deck aircraft,
carrying 200 passengers in unprecedented comfort whilst providing lounges, bars, conference
rooms, work stations and restaurants. JAL says that the aircraft will include "...sweeping
improvements in fuel efficiency, through high-performance engines, better aerodynamic
performance thanks to laminar flow control, and advanced flight controls". JAL, however,
gives no indication of the kind of ticket premiums necessary to make such an aircraft
profitable. On board the Romantech aircraft (resembling a 747-400), passengers would be
free to wander around the cabin as they please, taking advantage of different amenities. The
top deck of the aircraft would include a "sky salon" with conference rooms; the main deck
would contain three passenger cabins, restaurants and bars; while the lower deck would be
a "multi purpose space, which could be used for a childrens' room, aerobic exercise space,
or casino". The airline then carries on describing in detail the type of seats, and in-flight
entertainment offered (IATA, September 1995).
142
The overall Romantech concept may ultimately be discarded, but is nonetheless useful for
indicating what technological advancements might be possible just a few years down the road.
It also demonstrates the importance of airlines having a customer centred approach when
designing future products.
4.3 I1MST UTI[ON AS A COMPONENT OF THE MARKETING MIX
The concept of distribution channels is not limited to the distribution of physical goods only.
Airlines also face the problem of making their output available and accessible to target
markets. Creating and manipulating access for travellers is one of the principal ways to
manage demand for the highly perishable airline product. A service-product distribution
channel can be defined as "... any organised and serviced system, created or utilised to provide
convenient points of sale and\or access to consumers, away from the location of production
and consumption" (Middleton, 1993:186). The essence of the definition is that airline product
distribution channels should not in any way be left to chance, but should be carefully planned
by airlines and serviced regularly with sales visits, literature, computer-links, and other
methods. The airline product distribution channel usually includes intermediaries such as
travel agents. Intermediaries can be defined as: "... any extra corporate entity between the
producer of a service and prospective users, that is utilised to make the service available
and\or more convenient" (Middleton, 1993:186).
\\\
AIRLINE
GSA
Travel Agents
Tour Operator
Travel Agents
Other Carriers
Travel Agents
Direct Sales
I IDwn Sale
Shops
1 Reservatio
Travel Agent
TRAVELLERS
143
4.3.1 Distribution channels in the air travel industry
In the air travel industry, five basic types of distribution channels exist, which are presented
in figure 4.4.
FIGURE 4.4: THE FIVE DISTRIBUTION CHANNELS OF THE AIRLINE PRODUCT
SOURCE: Adapted from IATA. (1995). Marketing Workshop notes, 4 - 15 September. Geneva.
144
An airline's own sales and centralised reservation office. The main function of an
airline's reservations office is to determine the load status of all future flights, through
the booking of passengers and manipulating demand using yield management.
Other carriers' sales offices. Tickets sold through this source are referred to as
interline sales and millions of Rands are cleared through IATA's clearing house each
year. Travel agencies often assist with interline sales (Wells, 1993:298).
Travel and tour organisers. Airlines can use travel organisers as wholesalers of their
product. Two principal types of organisers can be distinguished. The first specialises
in air travel by buying large blocks of capacity from an airline and then re-selling it
again to individual members of the public. The second gives an expanded role to the
organiser, in the sense that he does not only buy air travel capacity, but also organises
accommodation and other aspects to make an inclusive tour available.
General sales agents. In an area or region where an airline does not operate, people
or companies involved in the travel trade can be employed to act as sales agents. The
airline's distribution responsibilities in that area or region are thus contracted out to
someone else (IATA, September 1995).
Travel agencies. Travel agencies are by far the most important component of the
airline product distribution channel, due to the majority of airline ticket sales being
bought through them. In order to provide a more comprehensive analysis, travel
agencies are discussed separately under the next heading.
146
Airlines have tried to achieve both these objectives through:
Commission payments. One effect of deregulation and increased competition was that
airlines had to increase their commission payments to travel agents, to promote
selling of their tickets. Commission payments are a particular feature of the domestic
US air travel market. In 1978, before deregulation became effective, most of the
domestic trunk carriers were paying 4-5 percent of their revenue as commission. By
1988, the average figure was 8-10 percent, with one or two carriers such as Pan Am
paying even more. In 1990, airlines in certain US regions, particularly smaller airlines
and foreign carriers with a limited US marketing base such as Thai Airways and
Malaysian airlines, were paying 20 percent or more of the ticket price to travel agents.
Outside the US, attempts by IATA and individual airlines to hold commission rates
at low and fixed levels were unsuccessful. Higher commission rates result from
airlines offering incentives to travel agents to book passengers on their flights rather
than on competitors. A popular incentive often offered to travel agents is override
commission. This enables an agency to claim a higher commission rate than normal,
when it gives an airline an increased share of its ticket sales or surpasses certain
agreed sales targets. By using override commissions, airlines try to persuade agents
into selling primarily or exclusively their tickets (Doganis, 1991:272-273).
Commission paid to travel agencies is Comair's fourth largest expense, after labour,
fuel, and maintenance.
145
4.3.2 The role of travel agencies in the airline distribution channel
The major benefit of travel agents is that they are numerous and widely scattered, giving
airlines a much wider distribution network at a relatively lower cost than they could have
achieved themselves. The following is a good example illustrating the importance of travel
agencies: In 1990, 70 percent of BA's UK sales were generated through 8 700 travel agencies
spread across the United Kingdom; 25 percent of its UK sales were generated through 40 of
its own travel shops and sales outlets; and 5 percent through other airlines' offices.
Worldwide, nearly 80 percent of British Airways's sales revenue is generated through travel
agents or wholesale tour operators. In the United States, according to the US Department
of Transportation, 80 percent of ticket sales for all airlines are generated by travel agencies
(Southwest is an exception with only 60 percent of the airline's tickets sold through travel
agencies). There can be no doubt that the role of travel agents in airline distribution is critical
(Doganis, 1991:272-273). When American travel agents for instance, heard rumours of
Eastern Airline's financial troubles, they shifted millions of dollars in business to other carriers
in order to protect themselves and their customers. This served to hasten the demise of the
carrier (Wells, 1993:298).
Despite the fact that airline marketers have no control over travel agencies or their staff, they
need to attempt and ensure two things: firstly, that agency staff provide an efficient, speedy,
and reliable service to travellers; and secondly, that, where alternative airline products are
available, travel agent staff will give preference to their own particular airline.
147
0 Central reservation systems (CRSs). Airlines that own CRSs offer to install their own
computer reservations systems (discussed in the next section), in travel agency outlets
and shops. Airlines use this approach due to a strong association that exists between
an agent's CRS affiliation and the ratio of bookings on the airline owning the system
(proven by numerous studies). There are several reasons for this "halo" effect.
Travel agents often have more confidence in the accuracy of information on the airline
owning the CRS, than in information relating to other airlines shown in the same
system. Some agents also claim that reservations and ticketing functions for flights
of the CRS vendor airline are completed more rapidly than for other airlines. The
ongoing business relationship between the agent and the vendor airline, in addition,
itself creates loyalty. Since most agents are reluctant to use more than one computer
system, the airline which installs its CRS first, clearly enjoys a privileged position.
Further evidence of the "halo" effect of a CRS is that between 1980 and 1986, the
domestic passenger load factors on both American Airlines and United, which own
the two largest US CRS systems, were consistently above the US air travel industry
average. This could not only have been due to just superior marketing and service
(Doganis, 1991:274).
The next section highlights the functions of a CRS and its importance in the airline
distribution channel.
148
4.3.3 The role of central reservation systems (CRSs) in the airline distribution channel
Airline inventory management, using computer managed databases, has made enormous
strides since 1988 through CRS systems developed by international airlines, some of which
already span the globe and are known as global distribution systems (GDSs). This is such a
dynamic function and developments are occurring so rapidly, that information is likely to be
out of date soon or even before it is published. As a record at least of the state of play at the
end of 1992, table 4.1provides brief information on the four main systems in North America
and Europe, noting the Worldspan link with Abacus, connecting airlines in the Far East.
TABLE 4.1: THE TOP FOUR INTERNATIONAL COMPUTER RESERVATIONS SYTEMS (CRSs) IN NORTH AMERICA AND EUROPE IN 1992
rilO If.,!„ 6 ' ik,,,,P ,.,,4, Al ....i
^ ', ;- cwr lb , Te rimix, q,1:- "N411414' i ,, Sfrli 711 4 11'4' 7 '5174p :Mall.. 11 i_ L CM :!-' L" vItil't , ., „,,„, N. ' '';, L,!..'1:,,,,,
AMADEUS Approximately 40 000 terminals in France, Germany, Spain and Sweden. Claims around 60 percent of European CRS business.
APOLLO Claims 30 percent of USA CRS market
GALILEO Claims 80 percent of UK, and 40 percent of European market
SABRE Mainly USA outlets but growing UK presence at around 500 outlets. Claims 45 percent of USA CRS market.
WORLDSPAN Approximately 38 000 USA terminals; plus 500 in the UK, and another 5 000 worldwide. Claims 15 percent of USA CRS market.
SOURCE: Adapted from Middleton, V.T.C. (1994). Marketing travel and tourism. Oxford: Butterworth.
149
The following are characteristics of CRS systems:
A CRS can be linked to other software programmes such as automatic ticketing,
invoicing, and other office management systems including word-processing, as well
as traveller databases. Due to the necessary heavy investment in equipment and staff
training, it is projected that up to one third of current UK travel agencies, will in
future be too small to afford these expenses.
A CRS provides speedy connection to databases through terminals that deal with vast
volumes of information. The SABRE system for example, manages more than one
million daily bookings.
CRSs originally focused on business travel, but are increasingly linked to leisure
products. Major tour operators such as American Express, Thompson, and Thomas
Cook, have already linked their own systems to major CRSs.
A CRS has the potential to produce high quality visual material, which could
eventually help reduce the existing costly wastage of printed brochures and other
promotional materials.
A CRS provides leading edge competitive advantages to CRS vendors and other
major principals. In 1992 in the USA and Europe, competition policy regulations
were under consideration to prevent possible abuse and unfair competition resulting
from these advantages.
150
O
A CRS exploits global information technology developments, which are predicted to
have increasing influence over all aspects of life in the 21st century (Middleton,
1994:210).
At present, CRS systems work on the behalf of airlines directly and through travel agents.
Travel agents are the logical pipeline and natural partner due to their roles in handling much
of business travel, inclusive tours, and car rentals. There is, however, no reason why CRSs
have to be limited to travel agents only. Provided the potential flow of business is large
enough to warrant necessary investment in essential hard and software, CRSs can easily cope
with additional pipelines. If Minitel-style home shopping is introduced in South Africa,
despite being a viewdata system, it could generate enough business to gain access to CRSs.
In another scenario, ABSA, Standard Bank, or Nedbank (amongst others), could decide to
expand into air travel, and no overwhelming obstacles exist to prevent them from doing so.
In fact, major banks' credit card customer databases already give them powerful leverage as
potential marketing partners for CRSs. An even more exciting future marketing opportunity
exists, interfacing customer databases maintained by large operators with CRS traveller
information (Middleton, 1994:211).
However, the huge marketing power of "mega" CRSs, undue sales benefits they appear to
have bestowed on vendors through the "halo" effect, high profits and the potential risk of
biased schedule displays, have led to mounting calls for airlines to disinvest.
151
In the UK, for instance, the House of Commons Select Committee on Transport, published
a report in 1988 claiming that airline ownership of CRSs was against public interest and open
to abuse. It recommended that the long-term solution of airline divestiture should be
explored, that ownership of individual CRSs in the mean time be spread between different
airlines, and that CRSs be restructured as separate companies with shares available for sale.
Since 1988, CRS systems such as Amadeus, Galileo, and Abacus, were created as joint
ventures by multiple airlines, mainly because of high investment costs. Systems such as
Worldspan, Galileo, and Amadeus, have also adopted "no host" technology, preventing
vendor airlines from receiving preferential treatment. As a result, agents using these systems
could be assured of the same level of reliability and accuracy for all participating carriers,
since no specific airline is favoured. Other CRS systems are likely to follow suit. In another
development, CRSs are increasingly becoming more independent, operating as individual
business units. In 1990, General Motors bought 50 percent of System One (belonging to
Texas Air), the first major non-airline involvement in a CRS. High rates of return and
excellent long-term prospects will inevitably attract more external investors (Doganis,
1991:277).
CRSs play a multifaceted role in air travel, and are not only worldwide distribution channels
giving travel agents and potential passengers access to flight information, instant reservations,
and ticketing, but also enable airlines to monitor and control sales, resulting in improved
passenger and freight yields.
15 2
They provide subscribers with information and booking facilities for hotels, car hire, theatres,
restaurants, and other entertainments; and for international travellers different countries'
passport, visa, and health requirements. In addition, CRSs supply airline partners with
invaluable passenger information - when and where tickets were bought, fares paid, areas of
residence, credit card numbers, smoking habits, seat preferences, travel patterns, and so forth.
This data, broken down, and analysed according to market segments and routes, could
provide crucial input for an airline's marketing and product planning. Barring small niche
carriers, most international and domestic airlines today cannot afford the absence of a CRS
connection. The future role of CRSs in air travel will increase even more, not only in
providing access to airline products, but also as information sources airlines can use to
maximise revenues and improve marketing. Airlines that fail to recognise this trend in the
years ahead, will find themselves losing the competitive battle (Doganis, 1991:277,278).
CRSs have converted the inability of transferring and storing the airline product, once
considered a disadvantage, into a powerful industry asset. Global access to the airline
product for months in advance, is provided at the touch of a button. The sophisticated
information technology employed by CRSs, grants enormous flexibility to airlines, the full
extent of which has yet to be exploited (Middleton, 1994:211).
I 53
4.3.4 New trends in the airline distribution channel
Due to the technological intensive nature of the airline distribution channel, new
developments occur rapidly, with often profound effects on the availability of airline products.
The underlying trend is to make the airline product progressively more accessible to average
travellers, and new technology could soon allow such access from home. The next section
discusses some of the latest airline distribution trends.
4.3.4.1 Electronic ticketing and self-service ticketing machines
"Ticketless travel", "paperless travel", "electronic ticketing", these are all words describing
one of the most recent airline distribution channel trends. Electronic ticketing was introduced
in the US in 1993 by Valujet, a low cost, low-fare airline flying from Atlanta, and Morris Air,
a Salt Lake City-based airline, purchased by Southwest later that year. With the Valujet
ticketless system, passengers received a confirmation number when booking, which they then
had to present at the airport gate (photo-identification often required). Southwest airlines,
the US air travel industry's cost leader, began examining the Morris Air ticketless system
soon after purchasing the carrier. While both Valujet and Morris Air pioneered electronic
ticketing in the US, Lufthansa and SAS experimented with self-service ticketing machines in
Europe. The Lufthansa machine issues a combination ticket\boarding pass for prepaid, full-
fare travel, checks in passengers and assigns seats.
I54
The SAS equipment, apart from doing the same, also awards frequent flyer points (Airline
Business, January 1995 18-19)
Currently, major US airlines such as Southwest, United, Delta, USAir, and American
(amongst others), are experimenting with electronic ticketing on selected domestic routes.
Results have been so positive that projections are that within five years, electronic ticketing
could be used to book the majority of intra-United States short haul travel on return trips
(representing between 60 and 70 percent of all US domestic flights). Non-US carriers on the
other hand, have so far concentrated on developing efficient airport ticketing and check-in
machines, though most plan to study electronic ticketing as well. Carriers such as British
Airways, Swissair, Lufthansa, SAS, Austrian Airlines, and Singapore Airlines, are in various
stages of implementing automated ticketing and boarding pass printers (Airline Business,
January 1995:18-19). In South Africa, SAA introduced ticketless travel on the 16th of
January 1996. The new innovative flight reservation and check-in procedure enables
passengers to make bookings by credit card and then, without collecting an air ticket, report
directly to electronic check-in counters at the airport. Boarding passes are issued when flight
number and identification are provided (Citizen, 17 January 1996).
Electronic ticketing could affect the air travel industry in the following ways:
Cut airline distribution costs. Most US carriers are candid about the use of electronic
ticketing to cut distribution costs.
155
If fewer passengers book through travel agents, carriers will use this as a valid reason
to cut commissions and override payments. Commission costs currently amount to
+-10 percent of a US airline's operating costs, although including CRS fees, gate and
counter operations, this total could rise to +-20 percent. Estimates are that this cost
component could be reduced to +-14 percent if electronic booking were adopted
throughout the US air travel industry.
Change the function of travel agencies. To remain viable, if predictions come true,
travel agencies of all sizes could eventually be forced to offer fee-based, value-added
services for their clients. Mega-agencies such as American Express and IVI Travel,
already have fee-based operations. Smaller agencies would probably be forced to
function in a similar way.
Bypass CRSs. At least two systems, Worldspan and Apollo One, say that electronic
ticketing will not affect CRS fees charged to airlines. Future electronic bookings will
be created in a CRS with an itinerary and invoice, and the CRS will be able to manage
refunds, exchanges, processing, and settlements, in the same manner as used for paper
tickets. Although this would be an acceptable arrangement for airlines such as United
who owns a slice of a major CRS system, carriers such as Southwest would prefer to
decrease their reliance on CRSs owned by competitors. Current Southwest Airlines
passengers can book either by contacting Southwest directly, or through travel agents,
who then contact the airline with the booking information, thus bypassing major CRSs
(Airline Business, January 1995:18,20).
I 56
Significant obstacles, however, still have to be overcome before paperless travel can evolve
globally. Without a ticket, airlines currently have no means of applying the Warsaw
convention treaty rules spelling out a carrier's liability for lost luggage, death, or personal
injury, during an accident. Customs and immigration officials in many countries also require
proof of return travel as a condition of entry. Furthermore, many developing countries'
airlines lack the sophisticated technology and computer capabilities needed to process
electronic bookings.
Electronic ticketing is expected to be utilised most by frequent business travellers preferring
the convenience of not having to fret about losing or exchanging a ticket, or queuing to check
in at the airport. But, in the short term at least, traveller preference could work against
ticketless travel. Certain passengers, particularly leisure travellers, might prefer the security
of a paper ticket. Some business executives have also indicated that they would prefer
automated ticket and boarding pass printers (ATBs) that would "read" their tickets, rather
than facing chaos at the boarding gate with everybody trying to obtain their confirmation
numbers ten minutes before departure (Airline Business, January 1995:20,21).
Whatever the global system eventually used, this latest revolution in airline distribution is set
to shake the South African air travel industry and decrease airlines' ticket sales costs, while
increasing efficiency. It is only a matter of time before self-ticketing will become a reality in
South Africa.
157
4.3.4.2 The changing role of travel agencies
Early indications are that the travel agent industry is consolidating. Small agencies are rapidly
disappearing while larger ones are increasing their market share. In the UK, 25 percent of the
travel market is serviced by only two major travel agency groups (Louw, 1994:37). Should
such a consolidation accelerate, airlines may in the future align with major travel agent
groupings - a new twist to the alliance building trend currently in vogue between airlines.
Travel agent owned distribution technologies, in addition, are being developed, making it
possible for travel agencies to offer future one-stop shopping and travel management services
for individuals and corporations. The travel management concept, for example, would imply
large travel agencies buying tickets in bulk from airlines (probably at discounted rates), then
selling it to their customers. These travel agencies would probably enter into corporate
agreements with organisations, managing their corporate travel budgets for a fee. Individual
travellers could join travel agency loyalty programmes, that are even now drawing repeat
customers, and provide travel agencies with key marketing information. In this way, airlines
could lose control of the distribution pipeline by not being able to access the increasing
amount of customer specific information available (Airline Business, August 1995:28).
4.3.4.3 The changing role of CRSs
On the other side of the spectrum is the possibility of major airlines controlling the distribution
of their own products via a global distribution channel.
158
Carriers will create and offer products directly to the public, employing reservations options
that capitalise on the technology of personal computers, personal digital assistants, self-
service kiosks, interactive television, and voice recognition. Yield management could then
evolve to a stage of one-on-one marketing, where customised fares based on loyalty, yield
potential, and other aspects, are offered to travellers. As carriers gain more personal
knowledge of their passengers - the result of powerful databases interconnecting throughout
the airline - they could wrestle control of the passenger from travel agents. Such a scenario
could result in many travel agents only servicing niche markets, possibly leaving them with
only 20 percent of total booking activity. Early indications are that airlines are attempting to
develop these closer relationships with passengers, as evidenced by the range of new booking
products such as point to point yield management systems, and potential linkups with on-line
services such as CompuServe and America On-line (Airline Business, August 1995:28).
4.3.4.4 The changing role of passengers
The fourth possible future trend in the airline distribution channel, is one where the passenger
takes more control. In this case the customer will "pull" travel information directly from the
online universe, controlling all elements of distribution - time, place, and potentially price. It
is conceivable that passengers will eventually not only make their own reservations, but would
also expect more control over the airline product as technological understanding grows.
Instead of depending on airlines or travel agents, travellers will "own" the information
forming the basis of their travel decisions.
1 59
A possible early indication of this trend is the prevalence of personal computers, personal
digital assistants, interactive television, and the advent of the "electronic" personal travel
agent - software programmes that comb through on-line travel listings. Recently, Official
Airlines Guides and telecommunications giant ATT, formed a joint venture to make flight
listings and changes available to everyone with a computer and a modem - a significant event
in the empowerment of the traveller. The implications of such a scenario could be daunting.
With all the airline distribution changes, airlines will not only be forced to open their
information systems to various technologies, they will also be forced to develop sophisticated
sales messages and marketing initiatives with the ability to penetrate inherent electronic
barriers, existing when travellers control information received. Airlines unsuccessful at
understanding and offering in a simple format what the traveller wants, could fall behind or
become unprofitable (Airline Business, August 1995:29).
It is inevitable that the power structure and leverage within the current airline distribution
pipeline will change with technological advancement, growth of the global economy, traveller
demands, and varying degrees of government deregulation. Customer information
management will in the future become an increasingly valuable competitive tool in the airline
distribution channel, and the battle between airlines and travel agents will be won by the side
that "knows" its customers best (Airline Business, August 1995:29).
160
4.3.5 Direct marketing and the airline distribution channel
Bearing the above in mind, one way of limiting the power of travel agencies through the
development of a passenger database, is the use of direct marketing. Many airlines rely
primarily on advertising, sales promotion, and personal selling, to promote their products,
without realizing the potential value of direct marketing. Direct marketing can be defined as:
"an interactive system of marketing which uses one or more advertising media to affect a
measurable response and\or transaction at any location" (Kotler, 1994:654-655). Direct
marketing is increasingly being used by service companies (and airlines) in reaction to the
"demassification" of markets - the development of an ever increasing number of niches with
highly individualised needs and preferences. Buyers in these markets can be accessed through
sophisticated and specific mailing lists (Kotler, 1994:654-655).
4.3.5.1 Major tools of direct marketing
The following direct marketing tools are available to an airline :
Direct-mail marketing. Direct mail is becoming increasingly popular as it permits high
target-market selectivity, it can be personalised, is flexible, and allows for early testing
and measuring of results. Although the cost per thousand people reached is higher
than with mass media, buyers reached are better qualified prospects. Names can be
obtained from organisation lists or purchased from mailing list brokers.
161
0
Telemarketing. Potential travellers can be called personally, or automatic-dialling and
recorded-message players with voice-activated advertising messages can be used.
0 Electronic shopping. Potential travellers can use electronic services such as Internet,
to make bookings or "look" at airline products. SAA is already advertising on
Internet, although it is not yet possible to make direct bookings.
0
Kiosk-shopping. Some organisations have devised "customer-order-placing"
machines (in contrast to vending machines), and placed them in stores, airports, and
other locations (Kotler, 1994:657,658). SAA has now introduced electronic ticket
issue services at domestic airports, for passengers with confirmed reservations, and
indications are that these services will soon expand (Business Report, 17 January
1996).
4.3.5.2 Advantages of direct marketing
Direct marketing provides a number of advantages to an airline:
It allows for a greater degree of selectivity, as mailing lists containing the names of
any group, from left-handed people to millionaires, can be obtained.
Messages can be personalised and customised
The direct marketer can build a continuous relationship with each traveller.
Direct marketing can be planned more precisely to reach potential passengers at an
opportune moment.
162
0
Direct marketing commercials enjoy a higher readership than other mediums, since it
reaches more interested prospects.
0
Competitors will find it difficult to track or follow a direct marketing strategy.
Based on the response measurement, successful results are easily identifiable (Kotler,
1994:658).
4.3.5.3 The development of integrated direct marketing
A more powerful approach than sending a single mail shot to potential travellers, is to utilise
a multiple vehicle, multiple stage campaign, in other words - integrated direct marketing. This
technique is needed as successive mailings are often necessary to trigger a purchase (or to
persuade a traveller to join a frequent flyer programme). An integrated direct marketing
campaign could comprise a direct mailshot, telemarketing, and further follow-up
communications. Combining the different direct marketing techniques, increases the impact
and awareness of the message, thus generating a greater response than when a single
technique is used (Kotler, 1994:658-659).
4.3.5.4 Developing a database marketing system
Database marketing is a more refined method of direct marketing.
163
An airline marketing database can be defined as "an organised collection of comprehensive
data about individual passengers, and prospects, that is current, accessible, and actionable for
marketing purposes such as ticket sales and the maintenance of customer relationships"
(Kotler, 1994:660). A marketing database would record pertinent facts about the individual
passenger, such as: purchase volume, needs, buying criteria, hobbies, food preferences,
birthdays, and so forth. Building a marketing database is time-consuming and could be costly,
but when operated efficiently an airline will achieve much higher marketing productivity. The
General Electric (GE) database for instance, includes each customers' geodemographics,
psychographics, mediagraphics, appliance purchase history, amongst other variables. GE
direct marketers, as a result, can determine which past customers might be ready to replace
their washing machines purchased six years ago, and which customers would be interested
in a new GE video recorder, based on their history of buying other GE electronic products.
They can identify the most frequent past GE purchasers, and send them a voucher to apply
against their next purchase of a GE appliance. An efficient database marketing system would
allow an airline to anticipate passenger needs, locate good prospects, and reward loyal
passengers (Kotler, 1994:660-662).
164
4.3.5.5 Major decisions in direct marketing
When developing a direct marketing campaign, airline marketers must decide on their
objectives, target travellers, offer strategy, and how to measure the success of the campaign.
These decisions are highlighted:
Objectives. Given the variety of direct-marketing objectives (i.e. to create product
awareness, strengthen brand image and airline preference, stimulate sales by offering
discounts, etc.) the direct marketer needs to carefully define the campaign objectives.
However, if the objective is to create sales (by offering incentives), a response rate of
2 percent is considered good. The other 98 percent is presumable not wasted but
would have an effect on awareness and intention to buy at a later stage.
Target travellers. Direct marketers need to determine the characteristics of travellers
and prospects most likely, willing, and ready, to travel. The best prospects usually are
frequent travellers. Demographic variables such as sex, age, income, and education,
psychographic or other segmentation criteria, can be used to define a target market.
The direct marketer then needs to obtain names of travellers falling within the
specified group.
Offer strategy. Direct marketers need to design an effective offer strategy (i.e. free
tickets, competition, bonus frequent flyer credits, etc.) that would meet the target
market's needs. An offer strategy consists of four elements: the airline product,
medium used, the distribution method, and the creative strategy.
165
O Measuring the campaign's success. By adding planned campaign expenses, direct
marketers can calculate in advance the required break-even response rate. Analysing
past campaigns often assist in improving the performance of a planned campaign
(Kotler, 1994:662-664).
4.4 SUMMARY
The marketing mix is a component of an airline's internal environment, and is directly
controlled by airline marketers, although strongly influenced by changes in an airline's
external environment. The marketing mix constitutes four components, often referred to as
the four p's:
Product.
Place (or distribution).
Price.
Promotion.
Only the product and distribution components are analysed in this chapter, price and
promotion are discussed in chapter 5.
An airline product exists on three main levels:
The core product (to be at the right place at the right time).
166
O
The actual product (including an airline's route network, scheduled-based features,
image etc.)
O
The augmented product (adding in-flight entertainment, fax and other business
services, sleeping facilities now offered, etc.).
Being a service and intangible, the airline product has certain unique characteristics making
it difficult for travellers to judge quality prior to purchase, with the result that travellers rely
heavily on word of mouth to assist them in choice of airline. Once travellers have found an
airline's service satisfactory, they tend to remain loyal, which is then further encouraged by
airlines through offering rewards and incentives to frequent travellers (loyalty programmes).
In order to cultivate traveller loyalty, it is of paramount importance that the design of airline
products be guided by customer value, satisfaction, and quality. These three variables should
be the vantage points from where an airline focuses on unique differences that set it apart
from competitors, enabling a carrier to become truly competitive. If an airline does succeed
in establishing and promoting such differences, it has progressed a long way in building a
brand, which can be described as an airline product augmented in such a way, that travellers
relate relevant, unique, and added benefits matching their needs closely, to it. A brand plays
a decisive role in motivating an air traveller to use a particular airline.
167
The airline product, similar to any other product or service, needs points of access. Five
distribution channels exist in the air travel market:
0
An airline's own sales office.
0
Other carrier's sales offices.
0
Travel and tour organisers.
0
General sales agents.
0
Travel agencies.
Travel agencies account for almost 80 percent of airline ticket sales worldwide, and are
consequently one of the most important components constituting the airline distribution
channel. The overwhelming majority of travel agents use central reservation systems to book
travellers on flights. These computer managed databases provide worldwide and speedy
access to airlines' flights through linkages with one another. However, both the role of travel
agencies, CRSs (which are usually owned by airlines), and passengers, as elements in the
airline distribution channel, are changing:
Airlines using ticketless travel, for instance, would bypass travel agencies, as no
tickets need to be issued - electronic transactions occur directly between travellers and
the airline.
The recent consolidation of travel agencies worldwide, however, could increase travel
agencies' current power in the airline distribution channel.
168
Travellers, on the other hand, want greater power in the booking process, and airlines
are responding by developing technology soon enabling direct access to airline
products from home.
These three trends are indicative of the pending conflict and pressures about to change the
nature of the airline distribution channel.
169
THE ROLE OP THE MARKETING MIIX (PRICE AND
PROMOTION) AS A COMPONENT OF AN
INTEGRATED MARKETING APPROACH
5.11 INTRODUCTION
The marketing mix has been discussed and defined in chapter 4, section 4.1. It consists
of the following four components:
Product.
Distribution.
Price.
Promotion.
The product and distribution components of the marketing mix have already been
discussed in chapter 4, and this chapter will continue to analyse the remaining two
components: price, and promotion.
5.2 PRICE AS A COMPONENT OF T
E MARKETING MIX 111
The price a passenger pays for a ticket, represents the exchange value of an airline
product, and is only element in the marketing mix that produces revenue, whilst also being
the most flexible (Boone and Kurtz, 1992:628). An airline's pricing strategy should have
three main considerations, commonly referred to as the "pricing tripod".
Costs Competition
Traveller's perceived value of airline
product
170
These three legs are: costs; competition; and a passenger's perceived value of the airline
product. The costs an airline needs to recover, set a floor to the fare charged; the
traveller's perceived value of the airline product sets a ceiling; and competitors' fares may
determine where, within the ceiling to floor range, the actual fare level should be, as
illustrated in figure 5.1. An airline's fare structure should be revised often enough to
capitalise on market changes, and should form an intrinsic element of the market
positioning strategy.
FIGURE 5.1: THE PRICING TRIPOD
SOURCE: Adapted from Lovelock, C. (1991). Services marketing. Englewood Cliffs, N.J.: Prentice Hall.
171
5.2.1 Airline fare structures
Airline fare structures usually consist of:
Normal fares such as first, business, and economy class. These fares apply to all
passengers at all times without restrictions, and form the basis for other special
fares.
Common fares are unusual applications of the above. An example would be
where a passenger travelling from Johannesburg to East London, via Port
Elizabeth, would pay the same price as a passenger flying directly to Port
Elizabeth.
Joint fares are single fares applied to route networks of two or more airlines. An
example would be where a passenger pays one fare for travelling from London to
Gaborone, but uses two airlines (BA - London-Johannesburg; Comair -
Johannesburg-Gaborone) in the process. Joint fares are becoming increasingly
popular between major, national, and regional airlines.
Promotional fares are discounted fares such as Comair's M and L class. These
fares supplement the normal fare structure and are usually offered with restrictions
such as a seven-day advance booking required, minimum length of stay, and so
forth. Restrictions serve to minimise the risk of full-paying traffic diverting to
promotional fares, while maximising the generative benefit associated with
discounted fares (Wells, 1993:330).
172
5.2.2 Air travel pricing and demand
One of the major issues concerning airline management is the matching of supply and
demand, and travellers' willingness to buy an airline product is often affected by the extent
to which an airline increases or decreases its fares. The concept of elasticity describes the
sensitivity of airline demand in response to price changes. When a small change in fare
has a big impact on ticket sales, demand is said to be price elastic, but when a change in
fare has little effect on ticket sales, demand is said to be price inelastic. Airlines are
usually particularly adept at varying prices for the same service, in response to the price
elasticity of different market segments at different times of the day, week, or season
(Lovelock, 1991:240).
It is important for airline marketers to determine the price elasticity of target travellers.
For example, if an airline raises its fares by 2 percent, and demand falls by 10 percent, the
price elasticity of its target market would be 0.2. However, if an airline increases its fares
by 10 percent, and demand falls by 2 percent (price elasticity of 5), fewer tickets would
be sold, but total revenue gained would be more (Kotler, 1994:495).
The following variables affect the price elasticity of air travellers:
0 Competition. The more airlines, substitute, and alternative transport modes
available, the more price elastic passengers will usually be. If there are four
carriers operating flights within 15 minutes of one another to a particular city, and
one offers a lower fare, passengers are often likely to fly with that airline, all other
things being equal.
173
0 Distance. Passengers on long-haul flights tend to be more price elastic than those
on short-haul flights, due to the relative cost involved. A 10 percent discount on
a R1500 and R500 fare, for example, would amount to R150 and R50
respectively.
0
Business versus leisure travel. Business travellers tend to be less price elastic than
leisure travellers, as the organisation pays. Business flyers are also less willing to
be inconvenienced (i.e. midnight flights) to take advantage of discounts (Doganis,
1991:224).
0
Time. If travellers have flexible schedules allowing them to choose between
different flights based on fares offered, they tend to be more price elastic (Wells,
1993:327 - 328).
Due to the inherent complexities of air travel, price sensitivity of travellers is also
influenced by an array of other factors than those mentioned above, the synergy of which
often distorts a simplified inverse price and demand relationship. Travellers frequently
tend to be less price sensitive when:
An airline offers a unique product.
They are not aware of substitute airlines or modes of transport.
They cannot easily compare the quality of airlines.
The expense (of flying) is lower in relation to their income.
The airline is assumed to have more quality, prestige, or exclusiveness.
They do not immediately notice the higher fare.
They are slow in changing their buying habits and look for lower fares.
174
They think (or are led to think) that fare increases are justified by quality
improvements, normal inflation, and so forth. (Kotler, 1994:495).
5.2.3 Airline costs and pricing
Airline costs set the minimum level that an airline should charge for a ticket. Most airlines
divide their expenses between operating and non-operating costs. Operating costs are
those expenses that increase or decrease with the number of flights undertaken, and
passengers carried, by the airline:
0
Flight operations. Costs associated with the operation of a flight, such as flight
crew expenses, fuel and oil, airport and route charges, and so forth.
0
Maintenance costs.
0
Depreciation and overhaul of aircraft.
Non-operating costs are those expenses that do not immediately vary with the number of
flights undertaken or passengers carried:
Station and ground expenses. Costs incurred in providing an airline's airport
services, excluding landing fees and other airport charges.
Passenger service costs. Cabin (basic salary) and ground staff related expenses,
including the costs of facilities needed to prepare meals, and so forth.
Reservations, sales, and promotion costs, as well as the office and accommodation
expenses arising from these activities.
General and administrative costs.
175
Other non-operating costs such as interest paid on loans, profits or losses from
affiliated companies, and so forth (Wells 1993:337-342).
5.2.4 Airline productivity and pricing
Improving productivity is an important tool in lowering airline costs. The airline with the
lowest costs has the option of becoming the low price leader, or using its higher margins
to spend more on advertising, sales, customer service, promotional activities, service
extras, more commission for travel agents, or develop new service innovations. In service
industries, productivity measures the amount of service produced by an organisation
relative to the amount of inputs required, which is frequently complicated by the
intangibility of service outputs. Classical techniques of productivity measurement
frequently focus on outputs rather than on outcomes, and stress efficiency but neglect
effectiveness. The need to emphasise effectiveness and outcomes suggests that
productivity cannot be divorced from quality (Lovelock, 1991:366-369). In that vein,
airline management should be careful not to be too cost-conscious when trying to increase
productivity. Cutbacks in front line staff could often result in remaining employees having
to work harder, or in insufficient personnel to serve customers promptly at busy times.
Overworked employees will eventually become exhausted, make mistakes, and treat
customers in a cursory manner, especially if they are discontented, frustrated, and
demotivated. The economisation of equipment and materials could contribute to the
above symptoms, eventually lowering the service quality (Lovelock, 1991:374).
A single composite measurement of an airline's productivity therefore may mask strong
or weak performances in particular airline activities.
176
This creates the need to use a wide range of disaggregate indicators, which would enable
an airline to measure performance in discreet operational areas. The Department of Air
Transport, Cranfield University, UK, proposes the usage of the following ten indicators,
to provide an insight into five important aspects of airline performance:
Airline characteristics: average sector distance, average aircraft size, and degree
of involvement in freight.
0 Labour productivity: available tonne kilometres (ATK) per employee, revenue
passenger kilometres per cabin attendant, and flying hours per pilot.
0
Marketing efficiency: passenger load factors, yield measured by revenue per tonne
kilometre.
Cost control: operating cost per available tonne kilometre.
Profitability: revenue expenditure (revex) ratio (Airline Business, November
1994:23).
5.2.5 The pricing process
An airline's pricing process is usually influenced by a profusion of variables that need to
be considered before price objectives can be set and strategies selected.
5.2.5.1 l[nnuences on the pricing of airline products
Whilst pricing is a vital decision in the marketing of all types of goods and services, the
characteristics of the airline product explain the air travel industry's preoccupation with
price:
High price elasticity in the leisure and vacation travel segments.
No possibility of stockholding air-services.
177
0
High probability of unpredictable but major short-term market fluctuations.
0
Near certainty of tactical price cutting by major competing airlines when supply
exceeds demand.
0
A high possibility of provoking price wars during which short-term profitability
may disappear.
Necessity for seasonal pricing to cope with short-term fixed capacity.
0
A high level of customer psychological involvement, in which price may be a
symbol of status as well as value.
0
High fixed costs, which justify and encourage short-term price cuts to generate
demand (Middleton, 1993:87).
The inherent characteristics of the airline product therefore exert pressure on airline
management to use price excessively as a marketing tool, in attempts to counter falling
demand levels. However, short-term gains such achieved, might not necessarily translate
into long-term benefits for the airline. To achieve maximum efficiency, the price
component needs to be placed within the context and framework of an overall marketing
mix strategy. Such a strategy would place certain constraints on the usage of price as a
marketing tool, as the following important variables need to be considered:
Airline positioning and strategy. Strategic business decisions relating to airline
image and product positioning, strategies for growth, market share, and return on
investment, should usually be the first and dominant influence on pricing.
0 Marketing objectives. Price is a highly influential component of the marketing mix
and can be adjusted to meet particular short-term objectives when necessary.
178
0 Market segments. Pricing decisions should relate to the expectations and
perceptions of chosen market segments, and their capacity and willingness to pay.
Market managers should know what price level each segment can bear, and to
what extent price signifies value for money and service quality (Middleton,
1993 :90).
5.2.5.2 Pricing objectives
Few airlines have a single overriding objective in their pricing policy, though the
attainment of profitability looms large, especially for privately owned airlines. However,
this profit objective might have different implications for different airlines. Some airlines
may be concerned with current profitability, others might be more interested in long-term
profits, while issues such as new equipment, new routes, and expanding into new markets
often impinge on the pricing policy as well (Doganis, 1991:281). Many airlines want their
pricing policy to achieve a number of objectives (apart from profitability). The broader
airline strategy usually determines these other objectives, which could range from survival
pricing for cash; fighting for market shares; pricing at a premium to complement superior
service quality; and so forth. The fact that airlines charge various prices for the same
service at different times, or separate fares for similar routes, complicates the issue further,
often leading to conflict and contradictions in airline pricing policies (Wells, 1993:332).
5.2.5.3 Pricing strategies
The following are some of the more popular pricing strategies pursued by airlines:
179
A single-product, single fare strategy. This approach usually involves a low fare,
and requires high load factors to break even. The ill-fated People Express (and
Phoenix) pursued this strategy (Doganis, 1991:295).
Perceived-value strategy. Certain airlines base their fares on the perceived value
of their service. They consider travellers' perceptions of value, not the airline's
cost, as the key to pricing. Non-price variables in the marketing mix (e.g. type of
aircraft, service quality, brand image), are used to create perceived value in the
traveller's mind (Kotler, 1994:501). Both Swissair and SAS use this type of
strategy. By targeting the top-end of the market, these airlines aim for high-yield
traffic, accepting that their load factors might be lower (Doganis, 1991:295).
SAA could be classified as pursuing a perceived value pricing strategy.
Value strategy. In recent years, several airlines have adopted value pricing, by
which they charge a low price for a high-quality offering. Where perceived-value
pricing is really a "more for more" philosophy, value pricing represents an
"extraordinary bargain" to the traveller. One example of value pricing is
Southwest Airlines, who charges almost one third less than competitors, but
provides a very comfortable flight and extremely friendly service (though without
any frills). Southwest is one of the few US airlines that posts profits.
Going rate strategy. When pursuing going-rate pricing, the airline bases its fares
mostly on those of competitors', with less attention paid to its own cost or
demand. In an industry where the market is dominated by one airline (e.g. South
Africa - SAA), smaller airlines tend to "follow the leader". Fares are adjusted
when the market leader's fares change, and the price differential is usually
preserved (Kotler, 1994:498-505).
180
After deregulation, many US carriers followed this type of pricing strategy. In an
attempt to increase the number of passengers, an airline would cut fares on a
heavily traded route, competitors however, would usually match the lower fares
immediately. As a result, no significant shift in market shares would occur, but
prices would settle at a lower level, with the profits of all airlines decreasing
(Stanton, et al 1991:260). Comair and Sunair can both be classified as having a
combination of value and going rate pricing.
5.2.6 Air travel pricing and yield management
Yield management can be defined as "a process which is used to maximise revenue by
optimising the fare mix" or "a system enabling an airline to identify and take advantage
of market opportunities for every flight" (IATA, September 1995). The main objective
of yield management is to sell as many seats as possible at the highest possible fare. Yield
management is based on the simple economic concept of utility as expressed through the
demand curve. An airline should sell each seat at the maximum each passenger is
prepared to pay for it (Doganis, 1991:302). Yield management is usually a tricky
balancing act which requires the availability of cheap seats well in advance, to
accommodate price sensitive travellers, while retaining high yielding, less price sensitive
travellers, at higher fares. Additionally, it is necessary to overbook flights by a certain
percentage to compensate for the number of passengers expected not to show up for the
flight. Ultimately, yield managers are required to:
Minimise the unnecessary loss of lower-fare revenue resulting from too few
discounted seats allocated.
181
0 Minimise the unnecessary loss of higher-fare business revenue resulting from too
few high-fare seats allocated.
0
Minimise the cost of spoiled seats. When demand is sufficient to fill the aircraft
but the number of "no-show" passengers has been underestimated, and the flight
leaves with empty seats.
0
Minimise the cost of denied boardings. When a passenger is denied boarding
because the "no-show" rate has been overestimated. These passengers usually
have to be accommodated on other airlines at higher fares (Wells, 1993:337).
Due to the complexity involved in this process, yield managers are usually assisted by
sophisticated computer programmes analysing demand trends. These programmes can be
bought from large international airlines that usually design their own programmes, or
alternatively, from IATA. Yield management methodology would typically include
computer analyses of historical flight data; the application of forecasting algorithms; and
procedures downloading the information from the CRS to the yield management system
(IATA, September 1995).
5.3 Promotion as a component of the marketing mix
Promotion can be defined as: "the function of informing, persuading, and influencing the
consumer's purchase decision" (Boone and Kurtz, 1992:526). Promotion is the
communication process used by airlines to influence attitudes and behaviour of potential
travellers, and other important distribution channel components. An airline should focus
the contents of its communication on target travellers' needs and attitudes.
182
How the message is communicated depends on what blend of the various promotional
methods is chosen (McCarthy and Perreault, 1993:418). These methods (also referred
to as the promotion mix) are: advertising; personal selling; sales promotion; and public
relations.
5.3.11 Advertising
Advertising can be defined as any paid form of non-personal communication about an
organisation, product, service, or idea, by an identified sponsor (Belch and Belch, 1990:7).
Some marketers have expanded the above definition and added that advertising also "hope
to inform or persuade members of a particular audience" (Boone and Kurtz, 1992:556).
Advertising is important because travellers in a deregulated environment usually have the
option to substitute one airline product with another. Advertising, sends a message to
travellers, trying to persuade them to buy a specific airline product and no other, using
different motivations (McCarthy and Perreault, 1993:470). Advertising has the following
characteristics:
Public presentation. Advertising is a highly public mode of communication, and
this characteristic confers a type of legitimacy on an airline. Advertising also
suggests a standardised offering.
Pervasiveness. Advertising permits an airline to repeat a message several times.
Amplified expressiveness. Advertising provides opportunities for dramatising the
airline product (e.g. SAA's well-known "baby ad" which features a mother giving
birth during an SAA flight).
183
Impersonality. With advertising a traveller does not feel obligated to pay attention
or respond - advertising is not as compelling as a sales representative (Kotler,
1994:615).
When developing an advertising strategy, airline marketers should start by identifying the
target market and traveller motives, which is then followed by five major decisions. These
steps are discussed in the following sections (Kotler, 1994:627).
5.3.1.1 Setting advertising objectives
The first step in developing an advertising strategy is to set objectives. These objectives
should flow from prior target market, market positioning, and marketing mix decisions
(Kotler and Armstrong, 1991:447). Based on these decisions, many specific
communications and sales objectives can then be assigned to advertising. The "Defining
Advertising Goals for Measured Advertising Results" method (DAGMAR), is often used
to convert advertising objectives into specific measurable goals. A fictitious example of
the DAGMAR method would be "to increase Comair's market share of the two million
domestic business travellers from 20 percent to 35 percent by convincing and persuading
these travellers that Comair is a value for money airline, and a better and more sensible
option compared to SAA and other carriers" (Kotler, 1994:629; Middleton,
1993:156,157).
Most advertising objectives can be grouped into three categories: to inform, to persuade,
or to remind target market travellers.
184
The aim of informative advertising is usually to build primary demand in the pioneering
stage of an airline. Persuasive advertising normally becomes important in the competitive
stage when the airline's objective often is to build selective demand for a specific brand.
Reminder advertising is typically important for mature airline products, and seek to assure
passengers that they have made the right choice (Kotler and Armstrong, 1991:447).
Whatever the advertising goals and objectives may be, advertising plays a key role in
creating an image or position of the airline product in travellers' minds, and cultivating a
bond between a carrier and its target travellers. However, all advertising objectives
should (ideally) eventually elicit actions and responses from the target market (Middleton,
1993:156).
5.3.1.2 'Deciding on the advertising budget
Advertising can be described as an investment that builds up intangible value called
goodwill (or brand equity) for an airline product. The efficiency of advertising in building
up this "brand equity" is still poorly understood. Preliminary studies have concluded that
the impact of advertising is grossly underestimated when only a one-year perspective is
employed, as advertising-produced sales gains appear in many cases to last up to two or
three years. A long-term perspective should therefore be used by an airline when deciding
on an advertising budget.
Airlines usually utilise one of the following four methods when determining an advertising
budget:
185
Affordable method. When the budget is determined according to what
management decides the airline can afford.
0
Percentage of sales method. When a percentage of an airline's sales or revenue
is used as a set standard for advertising expenditure.
0
Competitive-parity method. When the budget is determined based on share of
voice parity with competitors.
0
Objective and task method. This method requires airline marketers to develop a
budget based on defined objectives, determining the tasks needed to achieve these
objectives, and estimate the costs involved.
For the purposes of this study, and in an effort to avoid a lengthy discussion addressing
the advantages and disadvantages of each, the objective and task method is suggested as
the most appropriate when determining an advertising budget. This method has the major
advantage of requiring management to define important assumptions regarding the
relationship between Rands spent, exposure levels, and advertising objectives (Kotler,
1994:630,631). When employing the objective and task method, the following variables
have to be considered:
Stage in the product life cycle. New airline products (e.g. Sunair) typically need
awareness to be built, while mature airline products (e.g. SAA) need to remind
travellers of their importance.
Market share. To build the market share of a lesser known airline frequently
requires more advertising expenditure, than necessary for a carrier with a high
market share.
186
0
Competition and cluster. Concentrated advertising is needed in a market with a
large number of airlines and high advertising spending.
0 Advertising frequency. The number of repetitions needed to convey an airline's
message to travellers (relative to the advertising "clutter" present), impacts on the
advertising budget.
Airline product substitutability. It is important for advertising to offer and
communicate unique airline benefits or features where a carrier can be substituted
by several others (Kotler and Armstrong, 1991:447,448).
5.3.1.3 Deciding on the advertising message
Creativity is critical in determining the effectiveness of an airline advertising campaign,
and is often more important than the actual Rands spent. MacDonalds, for example, spent
more than $185.9 million on advertising, but buyers preferred Burger King's
advertisements (running at the same time), who spent far less. Advertisers usually go
through three steps to develop a creative strategy: message generation; message
evaluation and selection; and message execution (Kotler, 1994:632).
5.3.1.3.1 Message generation
Creative messages using memorable pictures and words, can only be developed once the
vital process of identifying the airline's target market has been completed. Once an airline
has identified its target audience, the effectiveness of an advertising message can be
determined based on the recall achieved amongst the target travellers (Middleton,
1993:157). The "AIDA" concept is often used to design an effective message.
187
This concept stresses the importance of getting attention; retaining interest; arousing
desire; and obtaining action:
It is irrelevant how many people are exposed to an ad, if it does not draw any
attention. A striking headline, newsworthy or shocking statements, attractive
models, special effects, or anything different and eye-catching can be used to draw
the attention of an audience.
The retention of interest might be more difficult to achieve. The target market's
behavioural characteristics become important here, and the tone and language of
the advertisement should correspond with reference groups used by travellers.
Advertisers often tend to develop ads that relate to specific emotions, hoping that
the good feeling of the advertisement will last, even if specific details are
forgotten. The layout, print illustrations, and copy, should be arranged in an
appealing way, leading travellers' eyes through the ad, finally ending on the brand
name.
An advertisement should persuade travellers that a specific airline product can
meet their needs. Some experts argue that an advertisement should focus on a
unique selling proposition (USP), aiming at an important unsatisfied need. Using
a USP could be particularly important when travellers view many competing
airlines as similar. In such a case, airlines should ideally concentrate on developing
a unique emotional proposition (UEP) - by attempting to establish an emotional
bond with travellers based on the airline's unique benefits.
Obtaining action from the potential traveller is the final requirement, and not easy
to achieve in practice. Ads might emphasise that the airline product will meet
strongly felt unsatisfied needs (based on research).
Forces of communication stage
U
1 stage 2
N A
I mpact A Specificness A R
E N
Forgetfulness E S
compn3hensic
S S S
C O N V
C
T
oI
N
Relevance N A C
O N Hostility Apathy n
stage 3
C 0
stage 4 stage 5
R Credibility
O N
Barriers to communication
188
Ads should also reassure travellers about the correctness of their decision, and
while about it, urge them to tell others (McCarthy and Perreault, 1993:487).
Figure 5.2 depicts some of the forces and barriers to communication that impacts on the
attention, interest, desire, and action, that is generated amongst target travellers.
FIGURE 5.2: FORCES OF AND BARRIERS TO COMMUNICATION
SOURCE: Adapted from McDonald, M.H.B. (1989). Marketing plans: How to prepare them, how to use them. Oxford: Heineman.
189
5.3.11.3.2 Message evaluation and selection
An advertisement should communicate an interesting message to the target market, and
convey an exclusive or distinctive benefit that does not apply to other brands in the airline
product category (a USP). The message should also be believable and provable, and
pretested to assess the target market appeal (Kotler, 1994:633).
5.3.11.3.3 Message execution
The impact of an advertisement does not only depend on the actual message, but also on
the way the message is conveyed - rational or emotional. Whichever approach is chosen,
the execution of the advertisement message is crucial for airline products that are highly
similar. Messages can be presented in different execution styles: showing travellers using
the carrier; creating a believable fantasy around the airline product; emphasising how the
airline suits a specific lifestyle; building an evocative mood or image around the airline
product; showing the airline's expertise and experience; presenting scientific evidence
that the airline is preferred or outperforms other carriers; or featuring a highly credible,
likable, or expert source, endorsing the airline product (Kotler and Armstrong, 1991:450).
Size, colour, illustration, picture, and headline, are important elements in the execution
of an advertisement, and should be designed to attract travellers' attention and motivate
them to read the copy. Statistics show that an outstanding advertisement will be typically
noted by less than 50 percent of the exposed audience, 30 percent might recall the
advertisement's main point, 25 percent might remember the airline's name, and only 10
percent are likely to have read most of the body copy. Ordinary advertisements, do not
even achieve these above results (Kotler, 1994:634-638).
190
5.3.1.4 Deciding on media
The basic process of choosing a type of media, revolves around finding the most cost-
effective medium to suit the desired number of target market exposures. The steps
included in this basic decision are: deciding on desired reach, frequency, and impact;
choosing amongst media types; selecting specific media vehicles; deciding on media
timing; and deciding on geographical allocation. Each of these steps is examined in the
following sections.
5.3.L4.11 Deciding on reach, frequency, and impact
Choosing the best advertising medium would depend on an airline's promotional
objectives; target markets; the advertising budget; and characteristics of the media such
as reach, frequency, impact, and the costs involved (McCarthy and Perreault, 1993:158).
Reach, frequency, and impact, can be described as follows:
0
Reach is the number of different persons or households exposed to a particular
media schedule at least once during a specified time period.
0
Frequency is the number of times within the specified time period that an average
person or household is exposed to the message
0
Impact is the qualitative value of an exposure through a given medium (Kotler and
Armstrong, 1991:452).
The higher the reach, frequency, and exposure, the more audience awareness will be
created. Reach is usually critical when launching new airline products (to create
awareness), whilst frequency is more important where there is strong competition.
191
Research indicates that three exposures to an advertisement are usually a good standard
to use (Kotler, 1994:640).
5.3.1.4.2 Choosing amongst media types
The airline media planner has to be familiar with the capacity of major media types to
deliver reach, frequency, and impact, and the specific advantages and disadvantages
associated with each media type, are tabulated in table 5.1. Important variables that need
to be considered during this selection process are:
0
The airline target market. The target market which the advertising message is
aimed at, should be precisely identified in terms of number of people, key socio-
economic variables, and psychographic aspects.
0
Profiles of media users. All media owners should be able to identify their readers,
viewers, or listeners, with precision. This information should then be evaluated
against the airline's target market (Middleton, 1993:158).
TABLE 5.1: ADVERTISING MEDIA ALTERNATIVES
!Sit‘ ' vAPtif.tga — , ,. ' ..151,41Y,rat.— .
..roadcast media
* Television Great impact Temporary nature of message
Mass coverage High cost
Repetition High mortality rate for commercials
Flexibility Distrust
Prestige Lack of selectivity
192
* Radio Immediacy Fragmentation
Low cost Temporary nature of message
Flexibility Little research information
Practical audience selection
Mobility
Print media
* Newspapers Flexibility Short life span
Community prestige Hasty reading
Intensive coverage Relatively poor reproduction
Reader control of exposure
Coordination with national
advertising
Merchandising service
Special techniques
* Direct mail Selectivity High per-person cost
Intense coverage Dependancy on quality of
mailing list
Speed Consumer resistance
Flexibility of format
Complete information
Personalisation
a Magazines Selectivity Lack of flexibility
Quality reproduction
Long life
Prestige associated with certain magazines
Extra services offered by certain magazines
193
* Outdoor advertising
Communication of quick and simple ideas
Brevity of message
Repetition Public concern over aesthetics
Ability to promote products available for sale locally
SOURCE: Adapted from Boone, L.E., and Kurtz, D.L. (1992). Contemporary marketing. Orlando: Dryden Press.
5.3.1.4.3 Selecting specific media vehicles
The airline marketer, after choosing the type of media, should search for the most cost-
effective media vehicle. Media planners usually rely on media-measurement services that
provide estimates of audience size, composition, and media cost. Audience size can be
measured by:
0
The number of physical units carrying advertising (circulation, channels or
stations).
0
The number of people that are exposed to the vehicle (audience).
0
The number of target travellers exposed to the media vehicle (effective audience).
0
The number of target travellers that actually saw, or heard, the advertisement - the
effective advertisement-exposed audience (Kotler, 1994:642,643).
Media planners often use a cost per thousand criterion when selecting media vehicles,
which measures aspects such as audience quality, audience attention probability, prestige,
and believability of the vehicle (Kotler and Armstrong, 1991:456).
194
5.3.11.4.4 Deciding on media timing
A macro and micro scheduling problem frequently exists with airline advertising:
O Macro scheduling. Advertisements should be scheduled in relation to seasonal and
business-cycle travel trends. Advertising expenditures can follow the seasonal
pattern, oppose it, or be constant throughout. A model developed by Kuehn,
examining advertising and timing patterns, showed that an appropriate media
timing pattern depends on the rate at which the effect of advertising expenditure
wears out, and the brand loyalty that occurs amongst travellers, independent of
advertising expenditure.
Micro scheduling. This problem relates to the allocation of advertising
expenditures within a short period of time. If it has been decided to advertise in
September, a concentrated, continuous, or intermittent pattern can be used. The
pattern decision should be based on the rate of new travellers entering the market,
the frequency with which target travellers fly, and the rate at which passengers
forget the brand (Kotler, 1994:644).
5.3.11.4.5 Deciding on geographical media allocation
Regional advertising usually involves greater production costs and a larger number of
creative executions to match local situations. National advertising offers efficiency, but
could fail to address local conditions where differences exist (Kotler, 1994:646). An
airline should consider regional advertising where perceptions and needs of target
travellers differ substantially.
195
5.3.11.5 Evaluating advertising effectiveness
It is seldom possible to isolate the effect of advertising expenditure with precision. Even
so, it is necessary for airline marketers to assess the effectiveness of their spending, and
the following ways are used in practice:
Accurate targeting. Good advertising requires precision in defining target market
numbers and profiles, clarity in deciding what messages should be communicated,
and precision in assessing media audience profiles.
Pretesting of communication effect. Creative advertising can be tested on samples
of the target audience, in order to assess their response, helping advertisers to
maximise positive responses and remove images and messages with negative
connotations.
Market research measures of communication impact. Target travellers can be
interviewed before and after a campaign to assess the levels of recall and any
change in attitude.
Response-effect measurement. If an advertisement is designed to create a request
for information, or provide a phone number for bookings, it is possible to quantify
the response against the cost of each media used with precision (Middleton,
1993:159,160).
Sales-effect research. The effect of advertising with regard to actual selling is
hard to measure. What percentage sales, for example, are generated by a
campaign that increases brand awareness by 20 percent and brand preference by
10 percent?
196
Methods do exist, although factors such as word of mouth, service efficiency, and
so forth, should always be taken into account - especially in the air travel industry
(Kotler, 1994:648).
5.3.2 lPublic relations (PR)
Public relations can be defined as "the management function which evaluates public
attitudes, identifies the policies and procedures of an organisation with the public interest,
and executes a programme of action to earn public understanding and acceptance" (Belch
and Belch, 1990:12). Public relations can also be described as "the deliberate, planned
and sustained effort to establish and maintain mutual understanding between an
organisation (airline) and the public" (Middleton, 1993:156).
Traditionally, public relations has been assigned a more supportive role, rather than being
considered a primary element of the marketing and promotional process. However, a
recent trend is to make public relations an integral part of marketing and promotional
strategies (Belch and Belch, 1990:12). Middleton (1994:174) claims that public relations
is often a more useful promotional tool for travel and tourism than for other categories
of consumer products, since so much of the subject matter is intrinsically interesting. The
processes of public relations involve a series of tasks which are discussed next.
5.3.2.11 Advantages and disadvantages of P
ID
In order to utilise the public relations tool to its full effect, it is important to contemplate
the advantages and disadvantages associated with it.
197
Some of the advantages of public relations are:
Credibility. Public relation communications are perceived by the public in a
different light as advertising, and are often considered more truthful and reliable.
Cost. When considering the possible positive effects of public relation
communications, the relative cost is extremely low.
0 Avoidance of clutter. Public relations communications are often perceived as a
news item, and messages are not subjected to the clutter of advertisements.
Lead generation. Information provided with regard to innovations, new
technology, low fares, and so forth, frequently results in enquiries, providing the
airline with potential passengers.
0 Image building. Effective public relations will usually lead to the development of
a positive image for the airline (Belch and Belch, 1990:558).
One of the main disadvantages relating to public relations could be a lack of coordination
within the marketing department, leading to a "misfiring" of messages, or sending
conflicting messages to the market. The advertising campaign, for instance, might strive
to build a brand associated with style and class, while the public relations are promoting
cheap fares, or sponsor events that do not match the brand-building campaign (Belch and
Belch, 1990:588).
5.3.2.2 Developing a PR plan
An optimal public relations programme requires formalised policies and procedures for
dealing with problems and opportunities.
198
However, this is rarely the case and the public relations function in many airlines is
relegated to little more than press releases, press kits at trade shows, and new route
announcements. A PR plan would firstly involve an assessment of the public attitude
towards the airline; secondly, define relevant target audiences; thirdly, set PR objectives;
fourthly, communicate stories or happenings newsworthy to the target audience which at
the same time support marketing objectives; and lastly, placing these stories in media
corresponding with the target market. The success of the last step is affected to a great
extent by the PR person's personal relationships with various media editors (Belch and
Belch, 1990:580).
The following questions can be used to assist in developing a PR plan:
Does the plan reflect a thorough understanding of the airline's business situation?
Does the programme employ quality research and background sources?
Does the plan analyse recent editorial coverage?
Does the PR person or department understand the airline product's strengths and
weaknesses?
Are the programme objectives specific and measurable?
Does the programme clearly describe the planned PR activities and their potential
benefits to the airline?
Does the programme discuss how results will be measured?
Does the PR programme correspond with the marketing objectives of other
promotion tools (Belch and Belch, 1990:580).
199
5.3.2.3 Implementing a PR programme
The following tools could be used to implement a PR strategy:
0 Special events such as news conferences, press tours, grand openings, and so
forth, can reach and interest the target audience.
0 Written materials such as annual reports, brochures, articles, and organisation
newsletters and magazines, can influence the target market .
0 Audio-visual materials such as films, slides, video and audio cassettes, are
increasingly used as communications tools.
Corporate identity such as logos, stationary, brochures, signs, business cards,
uniforms, and so forth, can help create a corporate identity immediately
recognised by the public.
Public goodwill can be generated by contributing time and money to public service
activities.
Speeches by top management could be used to create airline publicity (Kotler and
Armstrong, 1991:467).
5.3.2.4 Measuring the effectiveness of PR
It is often difficult to measure public relation's contribution to a promotional programme,
as PR is usually used in conjunction with other marketing tools. However, measuring the
number of exposures which the target audience has been exposed to over time, and the
percentage positive versus negative articles, could assist in such an evaluation. A superior
measure, if possible, would be to determine to what extent these exposures changed
peoples' awareness and attitudes towards the airline (Kotler, 1994:681).
200
5.3.3 Sales promotion
Sales promotions are those marketing activities that provide extra value or incentives for
purchasing air travel, and stimulate immediate sales from travellers. Sales gains resulting
from promotions, however, are often temporary, and cease when the promotional period
has expired (Belch and Belch, 1990:13).
Sales promotion can be defined as a component of the marketing communication function
other than advertising, PR, personal selling, and sales literature, with the main objective
of stimulating short-term air travel purchasing, through temporary incentives (Middleton,
1993:165). According to Middletons' definition, sales promotions are short-term,
irregular, and incentive-based by nature, as the following example illustrates: In 1979,
United Airlines lost substantial traffic volume due to a labour strike. Once loyal passengers
were now booked on other carriers weeks and months in advance, and it was estimated
that seven months would be required for sales to recover. The marketing department, as
a result, decided to offer travellers a fifty percent discount on a round trip to any United
destination. Television time was purchased from three networks, space bought in 250
newspapers, and three million coupons printed and distributed. Public response was
highly favourable, with trafic volumes returning to previous levels within eleven days.
Within a month, daily records were set for the number of passengers carried (Allvine,
1987:573).
5.3.3.11 The purpose of sales promotion
Sales promotions are highly popular with the air travel industry, the reasons being:
201
0
Airline profitability is very sensitive to capacity volume and utilisation, and airlines
often attempt to reduce a wide gap by offering incentives.
0
New product activities, such as new routes, new classes of service, new hubs, and
so forth, are often intense, and promotions are necessary to induce trials of these
new services whilst increasing demand.
0
Many travellers make flight decisions based on schedules and price, with brand
loyalty being a secondary consideration.
0
Certain air travellers are highly price sensitive and willing to search extensively to
locate the lowest available fare.
0
Temporary promotions can stimulate interest in discretionary trips which
otherwise could easily have been postponed.
0
Competitive market shares are often close and volatile on a limited number of
major routes that represent the "bread and butter" of the air travel industry
(Lovelock, 1991:254).
The main purpose of sales promotions is to create a more stable relationship between
demand and capacity, in other words demand management, which lends itself particularly
well to the air travel industry. Sales promotions could play an important role in an
airlines' marketing programme, provided that every sales promotion activity supports the
overall objectives of the marketing plan (McDonald, 1989:153).
5.3.3.2 Sales promotion techniques used in air travel
The most popular sales promotion techniques used by airlines can be summarised as
follows:
202
0 Fare cuts, representing a lower than normal charge for a specific air service.
0 Disguised fare cuts that offer added value, such as a spouse fare.
0
Additional services such as free or discounted car hire.
0
Free gifts such as travel bags, toys for children, and so forth.
0
Competitions, such as SAA's "Flights of fun" in 1994.
0
Incentives to regular travellers (Middleton, 1993:170).
The primary danger of sales promotions is that the prolonged usage of an incentives could
result in target travellers perceiving this benefit as a standard element of the airline
product. A sales promotions then loses its power to secure vital additional sales and
erode the airline's profitability (Middleton, 1993:170).
5.3.3.3 If evefloping a sales promotion programme
When planning a sales promotion programme, airline marketers should determine the
objectives; select the tools; develop a programme; and lastly, implement and evaluate the
activities (Kotler, 1994:668).
lEstablishing sales promotion objectives
Sales promotion objectives are derived from broader promotion objectives, which in turn
are obtained from more basic marketing goals. Within this framework, specific objectives
set for sales promotions will vary with the type of target market.
Airline sales promotions can be considered as having three target markets:
203
Travellers. Sales promotions are designed to encourage ticket sales which the
airline believes would not occur without specific action. Sales promotions are
usually restricted to specific target segments to avoid dilution of total sales
revenue.
0
Distribution network. The active participation of travel agents, through which the
majority of tickets are sold, is necessary for incentives to succeed. Travel agents
are typically bombarded by different airlines wanting to be promoted, and any
special effort required from them usually has to be accompanied by incentives.
0 Sales force. Being human, any additional effort expected from an airline's in-
house sales force, over and above routine sales, frequently requires additional
forms of incentives or rewards (Middleton, 1993:166).
5.3.3.3.2 Selecting sales promotion tools
When selecting sales promotions, airlines should use the following criteria to assess which
technique is the most appropriate:
Overall marketing objectives.
Characteristics of target travellers.
Attitudes of travel agents.
Activities of competitors.
Cost effectiveness.
Integration with other marketing elements.
Requirements for effective implementation.
Measurement issues.
Legal and ethical considerations (Lovelock, 1991:255).
If
and.
Consumer Segments Distribution Networtui Sales Force
price cuts/sale offers
discount vouchers! coupons
disguised price cuts
extra products
additional services
• extra commission over-rides
• prize draws
• competitions
• free gifts
parties/receptions
bonuses and othe money incentives
. gift incentives
travel incentives
prize draws
free gifts
competitions
'passport schemes' for regular customers
prize draws
Sales Promotion Techniques '
204
The air travel industry specifically, often uses price reductions as the first tactic for
obtaining more business, when other more profitable choices exist. Marketers are divided
as to whether the popular promotional price discounting (pricing down) route, or adding
short-term value to airline products (packaging up) route, is the best way to achieve
targeted sales volume. There is no doubt that pricing down is easier to implement as it
works faster and is popular with passengers. The disadvantage, however, is that price
cuts are easily matched and often degenerate into price wars, to the detriment of all
airlines. A commitment to product enhancement, and knowledge of traveller segments,
offers the only long-term route out of price cutting wars in which price becomes the
primary reason for traveller choice (Middleton, 1993:170,171). Figure 5.3 displays the
sales promotion techniques used most often in the travel industry.
FIGURE 5.3: SALES PROMOTION TECHNIQUES USED IN AIR TRAVEL
SOURCE: Adapted from Middleton, V.T.C. (1993). Marketing in travel and tourism. Oxford: Butterworth and Heineman.
205
5.3.3.3.3 Planning a sales promotion programme
To avoid wasting money, time, and effort, airline marketers should carefully consider each
of the following guidelines when planning promotions:
Plan a sales promotion strategy on an annual basis rather than launching
promotions indiscriminately as a tactical response to competitive actions.
Keep expected results from a sales promotion strategy realistic.
Set clear time limits for specific sales promotions.
Consider joint sales promotion eforts with other organisations such as hotels, car
rental agencies, and so forth.
Consider promotion overlays. To break through possible promotion clutter
existing in the marketplace, it is often necessary to employ several promotion
techniques to create a blockbuster event.
Motivate the entire market system. The most effective promotion programmes are
those motivating all parties involved in the selling process, such as travellers,
travel agents, and the in-house sales force.
Balance creativity with simplicity. It should be easy for travellers to understand
the promotion and not be excessively difficult to qualify (Lovelock, 1991:258).
The usage of a single theme. Additional benefits could be created by linking an
airline's individual sales promotions to a single theme. MacDonald restaurants,
for example, often use the character Ronald McDonald in their promotions. Such
a theme should be relevant to the airline and used strategically over time, to create
a sense of continuity in travellers' minds (Middleton, 1993:170).
206
Apart from the broad considerations listed above, other aspects demanding attention when
designing a specific sales promotion are:
Promotion objectives. The objective of the promotion could be to defend market
share; attract new travellers; "hook" passengers; or to pre-empt competition.
Product scope. Which routes (or services) will be promoted?
Market scope. Will the promotion be available to all travellers, or only to selected
markets?
Identification of beneficiaries. Promotions are designed to influence or reinforce
traveller behaviour, and it is therefore very important to target the right market
segments.
Value of the promotion. Airline marketers should consider traveller preferences,
costs, and promotion objectives, when deciding on the form and level of value to
be offered.
Timing. The date and duration of the promotion should be planned.
Competition proofing. The final consideration is to design promotions providing
distinctive and continuing competitive advantages, making it difficult for
competitors to copy (Lovelock, 1991:255-257).
5.3.3.3.4 If mpllementing and controlling the sales promotion programme
The final step in developing a sales promotion programme is to implement and control
each activity, which should include a "lead time" - the time necessary to prepare the
promotion prior to launching it.
207
5.3.3.4 Evaluating sales promotions
Three methods can be used to measure sales-promotion effectiveness:
0
Examining sales data before, during, and after the promotion - in other words the
number of air tickets that have been sold.
0
Consumer-panel data would reveal the kind of person that responded to the
promotion.
0
Passenger surveys can determine how many travellers remember the promotion
(Kotler, 1994:675-676).
Sales promotions are valuable tools with the ability to strengthen an airline's position in
the marketplace, however, several factors need to be considered before embarking on such
a programme. The careful consideration of each of the above variables, will ensure that
this instrument is utilised with maximum efficiency.
5.3.4 Personal selling
Personal selling can be defined as a form of person to person communication in which a
seller attempts to assist or persuade prospective buyers to purchase an organisation's
service, or to act on an idea (Belch and Belch, 1990:10).
A sales force could be an effective marketing tool for an airline in generating and retaining
passengers, although the cost implications are high. Airline marketers must determine to
what extent the sales force is achieving the marketing objectives in a cost-effective
manner. The unspoken question is: "if we did not have a sales force, would we have
invented one?".
208
The answer often is to recognise the following important facts of economic life:
0
A sales force is an expensive marketing tool that must be directed selectively
towards very specific objectives, markets and travellers.
0
Salespeople must produce profitable and not just voluminous, results, to justify the
financial investment (Baker, 1987:271) .
5.3.4.1 Advantages and disadvantages of personal selling
The nature of personal selling offers some distinct advantages:
0
An airline sales representative can immediately determine the impact of his\her
message based on the feedback that is received.
0
The likelihood of distractions is minimised during personal contact.
0
The sales representative could become part of the buying decision-making
process, for example with corporate agreements (Belch and Belch, 1990:567).
The disadvantages of using sales representatives are:
The high cost involved.
A small reach.
The possibility of uncoordinated and conflicting sales force and management
objectives.
Inconsistent messages (Belch and Belch, 1990:567).
Due to the cost implications, several, mainly American airlines, are reducing their sales
forces. Telemarketing is used as an alternative to maintain contact with travel agents.
209
These airlines are of the opinion, that the cost involved in maintaining personal contact
with travel agents outweigh the benefits received (IATA, September 1995).
5.3.4.2 Sales force objectives
It is important that sales force objectives focus on both an airline's desired positioning in
the marketplace, as well as target market characteristics. Only when these fundamentals
are in place, can sales representatives concentrate on increasing passenger numbers;
decide how to allocate scarce resources amongst different travel agents and corporate
clients; gather market intelligence; skilfully communicate relevant airline information; and
render required services to clients (Kotler, 1994:686).
5.3.4.3 Sales force size
The size of a sales force is crucial in transforming sales representatives into a productive
airline asset. When an airline has established the number of travel agents and corporate
clients it wants to reach, it can use a "workload approach" to establish the sales force size.
This method consists of the following steps:
0 Travel agents are grouped into size classes according to their annual sales volume
(corporate clients according to potential travel volume).
The desirable call frequencies (number of sales calls per year) are established for
each class.
The number of travel agents in each size class is multiplied by the corresponding
desired call frequency, to arrive at the total workload for the country in sales calls
per year.
The average number of annual calls per sales representative is determined.
O
210
The number of sales representatives needed is calculated by dividing total annual
calls required, by the average annual calls of a sales representative (Kotler,
1994:691).
The workload approach will result in realistic goals being set for sales representatives, and
ensure that the airline's funds are used productively.
5.3.4.4 Managing the sales force
Once the sales force objectives, structure, size, and compensation, have been established,
the airline has to shift its focus to recruiting, selecting, training, directing, motivating, and
evaluating, sales representatives (Kotler, 1994:693).
5.3.4.4.1 Recruiting and selecting sales representatives
Recruiting is the process of inviting people with proper backgrounds to apply for sales
positions. An initial step in the recruiting process is to identify basic characteristics of
successful salespeople. The next step in recruiting is to prepare a job description that is
complete, accurate, and interesting. The third step is to publicise the position (Allvine,
1987:600).
Although it is difficult to know what traits an airline should look for in sales
representatives, several methods can be used to overcome this problem. It is important,
however, to know what type of person travel agents and corporate clients want to deal
with. Another approach is to look for traits that are common to successful salespeople.
211
Garfield, for example, concluded in his study that excellent sales performers take risks,
have a powerful sense of mission, enjoy solving problems, and care for the customer.
Mayer and Greenberg, on the other hand, are of the opinion that an effective sales person
exhibits two basic qualities: the ability to feel as the customer does; and a strong personal
need to make the sale (Kotler, 1994:693).
5.3.4.4.2 Training sales representatives
There is a widespread belief that "good salespersons are born, not made" and that the
primary task of an airline is to recruit and select people with appropriate backgrounds and
natural skills. This attitude is however changing, especially due to the increased
sophistication of travel agents, and a more complicated airline distribution channel
(Allvine, 1987:601).
Travel agents expect salespeople to have an intimate airline product knowledge and to
be efficient and reliable. This requires a substantial investment in training. The median
training period for sales representatives employed by service organisations is usually 12
weeks. Whatever the length of the training programme, the outcome should be that sales
representatives should:
Identify with the airline, and understand its product.
Know the products of competing airlines.
Know and understand the travel agent operation.
Have effective sales presentation skills.
212
New methods of training sales representatives such as role playing, sensitivity training,
cassette types, videotapes, programmed learning, and films, are continually emerging, and
airlines should invest in these methods to be able to develop an efficient sales force
(Kotler, 1994:694).
5.3.4.4.3 Directing sales representatives
The first step required in directing sales efforts is to assign sales representatives to
territories that are reasonably balanced in terms of potential and workload. Once this step
has been completed, selling activities should be scheduled, to enable a cost-efficient
development of market potential (Allvine, 1987:602). The sales manager should
determine the number of calls necessary per travel agent in a particular area (based on
sales volumes), whilst sales representatives could use tools such as call schedules and
time-and-duty analyses to manage their time effectively (Kotler, 1994:695).
Table 5.2 reflects four of the most important difficulties that a sales manager face. The
effectiveness and efficiency of an airline's sales team could be jeopardised if these
difficulties are not overcome.
213
TABLE 5.2: FOUR DIFFICULTIES FACING SALES MANAGERS
fl.L IT
:$ tti, , 1 t,S. i 1 l' ,G; t e4ri 4 Vy 'I. “ ' SA
* Sales force geographically spread Communicating
Motivating
Controlling
a Selling - a developed social skill Keeping high standards of skill
a Customers - often refuse a sales person's proposition
Loss of morale
Erosion of selling technique
* Sales force unsupervised for over 90 percent of the time
Providing frequent leadership to repair morale
Training to develop selling skills
SOURCE: Adapted from Baker, M.J. (1987). The marketing book. London: Heineman.
otivating sales representatives
Personal selling is often a frustrating job, as sales representatives usually work alone and
frequently encounter aggressive competitors and difficult travel agents. As a result, sales
representatives often need special encouragement to perform at their optimum level.
Management can boost sales force morale through:
Creating an organisational climate that provides sales representatives with
opportunities, value, and rewards for good performance, as well as considerate
treatment from immediate superiors.
0
Setting standards and sales quotas stating the number of sales calls that should be
made.
214
Employing incentives such as cash awards, honours, and profit sharing plans
(Kotler and Armstrong, 1991:490).
5.3.4.5 Evaluating sales representatives
The evaluation of sales representatives is increasingly based on objective, rather than
intuitive-type judgements. Sales managers have access to a vast amount of data
permitting them to analyse contributions from individual sales representatives (Allvine,
1987:606). The most important information sources are usually sales reports, personal
observation, compliments and complaints received from travel agents, travel agent
surveys, and conversations with other members of the sales team.
An appraisal of sales representatives, however, should include one of the following
techniques:
Formal evaluation of performance. Such an approach leads to three benefits: (i)
management has to communicate their standards for judging sales performance;
(ii) management needs to gather comprehensive information on each sales
representative; and (iii) sales representatives know they have to discuss their
performance with management at some stage.
Salesperson-to-salesperson comparisons. Relative sales performance is
meaningful only when no variations in workload, competition, airline promotional
effort, area sizes, and potential, exist.
Current-to-past sales comparisons. Comparing a specific sales representative's
current and past performance.
215
Satisfaction levels of travel agents. The travel agent's opinion relating to the sales
representative, airline product, and service, can be measured by mailing
questionnaires or making telephone calls.
Qualitative evaluation of sales representatives. Evaluations can assess the
salesperson's knowledge of the airline, passengers, competitors, and
responsibilities. These criteria need to be communicated to sales representatives
to enable them to improve their knowledge (Kotler, 1994:700-702).
5.4 SUMMA V
The marketing mix constitutes four variables:
Product.
Distribution.
Price.
Promotion.
Chapter 4 reviewed the product and distribution components of the marketing mix, whilst
this chapter examined the remaining two elements: price and promotion.
The pricing strategy of an airline should have three main considerations:
The costs in producing the airline product, which is usually divided between
operating expenses such as maintenance, overhaul, catering, fuel, and so forth; and
non-operating costs such overheads, administration, and insurance, amongst
others. The cost structure of an airline provides the floor or minimum level for
determining fares.
216
Apart from the obvious advantage of higher profits, the airline with the lowest
cost structure has a higher margin to spend on advertising, customer service, and
promotions. However, although airlines should try and increase productivity in
an effort to lower costs, excessively reduced staff numbers resulting in
overworked employees or insufficient personnel to serve passengers promptly
during peak times, should be avoided.
The perceived value of an airline product. The perception passengers have of an
airline is based on its marketplace image, or brand value. These aspects have been
analysed under the product component in chapter 4. The perceived value of an
airline product gives the ceiling, or maximum level, at which an airline should
determine fares.
Fares charged by competing airlines. An airline's fares are influenced by those of
its competitors, especially when competing products are similar and can be used
as substitutes. The nature of market demand is another important variable. A
slight increase in fares could lead to a disproportionate high number of travellers
not flying or switching to competitors (a high elasticity of price), or alternatively,
could result in no substantial decrease in traffic volume (a low elasticity of price).
It follows then that the fares of competitors coupled with the elasticity of price
that exists, should determine where an airline positions its fares between the floor
to ceiling range.
Due to the characteristics of the airline product, airlines are often pre-occupied with using
price as a promotion tool, with fluctuating short-term price policies frequently being the
result.
217
Most airlines, however, settle for one of the following long-term price strategies:
A single product, single fare policy.
A perceived value strategy.
A value strategy.
A going-rate strategy.
These strategies, as mentioned, are long-term policies, and represent a broad and general
framework within which airline fare structures can be developed. Airline pricing,
however, has become so advanced, that most modern airlines implement pricing strategies
for individual flights. This process, referred to as yield management, is accomplished
through sophisticated computer programmes examining a flight's history, potential
passengers, overbooking profile, and so forth.
Promotion as an element of the marketing mix, in turn, comprises four variables:
Advertising. Advertising is the process of ultimately influencing a target traveller,
through communication, to choose one particular airline over another. To gain
the maximum benefit, advertising should be well-planned and thought through by
airline marketers. Such a planning process would consist of determining the
advertising objectives; deciding on the advertising budget (this study suggests the
objective and task method as the most appropriate); followed by deciding what
type of message and medium to use. This process is completed by evaluating the
effectiveness of advertising - the results possibly assisting future advertising
planning.
218
Public relations. A high-profile industry by nature, public relations could be a very
useful airline marketing tool. Many airlines, unfortunately, have relegated this
promotion tool to little more than press releases, new route announcements, and
press kits for trade shows. To exploit the full potential of public relations, a
strategy which includes the following steps should be developed: an assessment
of public attitudes towards the airline; defining relevant target audiences; setting
PR objectives; and finally, communicating newsworthy stories or happenings to
target audiences. Similar to all the promotion components, public relations efforts
should be evaluated to appraise their impact.
Sales promotions. Sales promotions are by nature usually short-term, irregular,
and incentive-based, and are frequently employed by airlines to stimulate demand.
Sales promotion techniques commonly used by airlines range from fare cuts,
discount offers, free gifts and competitions, to frequent flyer programmes. A sales
promotion programme should include a clear definition of the objectives, before
it could be implemented and controlled. These steps should be followed by an
evaluation of the impact the sales promotion had on the airline's traffic volumes.
Personal selling. A current trend existing in the American air travel industry is to
reduce the usage of sales representatives due to the expenses involved. A sales
force, however, could become an effective airline marketing tool, if sales
representatives are trained properly and motivated by management, whilst
selectively directed towards specific objectives and required to produce profitable
as opposed to voluminous results. Frequent evaluation of sales representatives are
also required, to maintain acceptable levels of efficiency and productivity.
219
PRESENTATION OF FIINDUNGS
OF EMPIIRRCAL RESEARCH
6.1 BACKGROUND
The domestic air transport market was deregulated in 1991. Several competitors such as
Flitestar, Comair, and later Phoenix and Sunair, subsequently entered the market. Both
Flitestar and Phoenix eventually had to withdraw from the market, as they were unable to
provide financially viable services. Comair on the other hand, managed to increase its
frequencies from one daily return service to Cape Town in 1992, to seven in early 1996.
During the same period, services to destinations such as Durban, Windhoek, Harare, and
between Cape Town and Durban, were introduced.
Comair's management, however, realised that in a deregulated environment, the airline's
success will not remain unchallenged. Comair's initial market strategy was to avoid head-on
confrontation with SAA, and to target price-sensitive travellers instead, by providing a
product that was +- 30 percent less expensive than SAA economy class. Although Comair's
strategy succeeded, it resulted in the airline having a predominant leisure profile, with the
following disadvantages:
Leisure travellers tend to be more price-sensitive, and less loyal to a particular airline. A
very real threat existed of new entrants copying Comair's market strategy, undercutting
the airline's fares, and thus engaging Comair in repeated price wars.
In addition, indications were that the market niche exploited by Comair, was of insufficient
size to sustain long-term growth.
220
The result of these deliberations was that Comair's management decided to shift the airline's
focus to business travellers.
6.2 RESEARCH GOAL
The industry ratio of business versus leisure travel is 72 versus 28 percent respectively
(SAARF, 1994a), compared to Comair's estimated 30 to 40 percent business component at
the time of the research. Considering the developments discussed above in section 6.1,
Comair's management decided that it would be imperative for the airline's long-term survival
to increase the business travel component. The underlying motivations were:
0 Business travellers tend to be less price-sensitive than leisure travellers.
Business travellers generally are more loyal to a specific airline (when satisfied with the
service).
Given the constraints of the Comair product (only economy class seats offered), it was
decided to specifically target SAA economy class business travellers as potential Comair
passengers, as Sunair was only a small operator at the time of the research, and Phoenix was
known to have an even higher leisure travel component than Comair.
The overall goal of the research therefore was to determine in which manner SAA economy
class business travellers could be persuaded to switch to Comair. The research was expected
to determine these travellers' needs, expectations, preferences, and perceptions of the different
airlines. The results of the research could then be employed to assist Comair in changing the
airline's image, adjust its service, or add any product features deemed necessary, in reaching
the airline's objective.
221
6.3 RESEARCH METHODOLOGY
In order to achieve the goal of the research, it was decided that both qualitative and
quantitative research had to be undertaken. As a result, the research exercise was divided into
two sections, starting with the qualitative research, in order to establish the broad parameters
of the larger quantitative study.
Qualitative research was undertaken, consisting of five group discussions, at the (M1VIR)
offices in Rosebank, between the 22nd and 26th of May 1995. The groups were divided as
follows:
Group 1 - Travel agents
Group 2 - SOHO (small office\home office) - up to 20 employees
Group 3 - Small: 21-100 employees
Group 4 - Medium: 101-300 employees
Group 5 - Large\corporate: 300+ employees.
The discussions were led by a trained and experienced moderator using a specific guideline
and agenda. All the group discussions were conducted in English, and recorded to ensure a
free flow of conversation. Tape recordings were afterwards transcribed verbatim, to assist in
developing a stage two (quantitative) questionnaire.
The qualitative research was followed by the quantitative study. It was decided that personal
interviews using a structured questionnaire based on the results of the qualitative study, were
the method most suitable to achieve the goals of the research.
222
In total, two hundred personal interviews were conducted by experienced research field
workers at respondents' homes in Johannesburg, Cape Town, and Durban. Tables 6.1 to 6.3
divide the research participants according to organisation size; region; and airlines used in the
previous 12 months.
TABLE 6.1: PARTICIPANTS ACCORDING TO ORGANISATION SIZE
, +. ■■■ ' ' 11 ■,,,. ., ,,u11,h,. :;4'..0i....,41,,,u, V,'6,1,
" '.•%)'• ° •, ■■ ••, ..,4•410'134. , if 1 V r, ,, 5,'..g,,V
.4114 ,
,,,f,mo ■
I — 100 employees 80 40
101 - 999 employees 80 40
1 000+ employees 40 20
l'ot 11 t ii 11i1,n+
TABLE 6.2: PARTICIPANTS ACCORDING TO REGION OF ORIGIN
40, ; ' 4P' '''Ill I:' ''' 1- "' "i:'ett'l,''Fil!' IA
,
•1 , '
my pe• : avMetl IF Air ,
Johannesburg 1120 60
Cape Town 50 25
Durban 30 115
I'cii 11' " • • •
TABLE 6.3: PARTICIPANTS ACCORDING TO AIRLINE USED DURING PREVIOUS 12 MONTHS
A ,. ; •'•i-,,,, -•,,' ',•• .s '..•"i
04P'' t 6 . ) V-W:frO 1VOLiitits'0,1,-fi. AP
—
tervitwN ; ih
-- _
Comair 1142 711
Non-Comair 58 29
. Tottd i s ■
223
The results of the research were afterwards weighted according to the respective airlines'
average market shares on domestic jet routes between January and June 1995. These
market shares are reflected in figure 6.1 below.
FIGURE 6.1: AVERAGE MARKET SHARES ON DOMESTIC JET ROUTES (1\1995 - 6\1995)
SOURCE: Adapted from Comair.(1995). In-house statistics. Kempton Park.
Both the qualitative and quantitative research was coordinated and\or conducted by
Marketing and Media Research (MMR), in conjunction with the author.
224
6.4 QUALITATOVE RESEA CH
The next sections discuss the objectives, universe, and findings of the qualitative research.
6.4.1 Qualitative research objectives
The primary goal of the qualitative research was to identify those factors that would
encourage economy-class business travellers to travel with Comair rather than a competitor.
More specifically, the research aimed to:
Establish who the decision makers and influencers are in choice of airline.
Determine the importance of airline attributes.
Determine the perceptions of, and attitudes towards, the different airlines in operation.
Establish attitudes to, and perceptions of, frequent flyer programmes - and in particular
the Comair Corporate Club.
6.4.2 Defining the qualitative research universe
The research universe was defined as all business travellers, English or Afrikaans speaking,
male or female, regardless of age, who have undertaken more than five domestic flights for
business reasons in economy class during the 12 months preceding the study.
In order to cover a broad spectrum of businesses, four different sizes of organisations were
specifically isolated:
SOHO (small office\home office) - up to 20 employees.
Small organisations - 21-100 employees.
225
Medium sized organisations - 101-300 employees.
Large\corporate organisations - 300+ employees.
Considering the influence of travel agents in choice of airline, a separate focus group session
with travel agents from small, medium, and large agencies, was also held. To qualify for the
focus group approximately 50 percent or more of their business had to consist of domestic
business travel, and they had to have made economy class bookings during the previous three
months.
6.4.3 Qualitative research findings
The purpose of qualitative research is to reveal new ideas or hidden feelings of research
participants, through unstructured interviews in which participants can talk freely without too
much guidance from the interviewer. This can be achieved through depth interviews, focus
group sessions, and projective methods (Martins, Loubser, and van Wyk, 1996:134). The
empirical research, as mentioned, employed focus group sessions, and the next sections
provide an overview of the findings of the qualitative study.
6.4.3.11 Decision makers and influencers in choice of airline
The group discussions pointed to four main areas of influence or control in the airline decision
making process:
Organisation policy or attitude.
Employee (or in-house travel agency) in control of bookings.
The business traveller himself .
The travel agent .
226
In the majority of cases, either a secretary or the traveller himself would contact a travel
agent. They would state their desired date and time of travel, and would mention preferences
or limitations, should any exist. The travel agent would then examine the flight schedules and
availability, and will either report the available options and wait for feedback, or make a
booking and dispatch the tickets.
Rarely does the secretary have any say as to which airline to use, and if the organisation
receives a special rate from an airline or have a frequent flyer membership, they may prefer
their personnel to fly this airline. Some organisations may have a policy of preferring the
cheapest fare. However, these are merely preferences in most cases, and business travellers
are often allowed to use other airlines should their schedules be more suitable, or in the event
of seats on the preferred carrier being unavailable. Travel agents appear to have a substantial
amount of control as to which airline is booked, as they are often in a position to choose
between a variety, or could only offer certain options, thus promoting a specific airline should
they wish to do so. The traveller, however, has the final decision and usually the opportunity
to veto the choice. Organisations occasionally have someone dedicated to travel
arrangements, use a specific travel agency, or have an in-house travel agency. In these
instances a business traveller has less influence in the choice of airline.
6.4.3.2 Importance of airline attributes
Participants clearly indicated that the primary determinant of airline choice is whether a flight
is available at the time demanded by the business traveller. Business travellers indicate that
they are in most cases unable to book long in advance, and are thus forced to accept what
flights are available at short notice.
227
However, their time is valuable and it is rare that anyone is prepared to "waste time", by
waiting for a later flight or departing on an earlier flight than needed, merely to stick to a
particular airline. Thus, in general, despite all preferences, they will select the airline with
flights closest to their preferred time of departure.
Most of the participants felt that choice of airline is subject to scheduling and availability of
seats, despite an organisation's preference of airlines offering cheap fares. According to the
participants, SAA has always offered the best schedules in terms of frequency, flights at
desirable times, and availability of seats even at short notice. The result is that organisations
have become accustomed to sending their personnel on SAA and paying for the more
expensive SAA fares. A cheaper fare, has consequently become a bonus, rather than a
necessity. Due to Phoenix Airways's cheap fares resulting in limited availability of seats at
short notice, the airline is not regarded as a real or regular option by the majority of business
travellers. They suggested that airlines such as Comair and Sunair could offer benefits
business travellers perceive to be worthwhile, by combining cheaper fares with "good"
schedules and the availability of seats at short notice. Frequent flyer membership might also
assist in determining airline preference - especially if benefits are accrued by business travellers
personally, although it is once again dependent on availability of flights.
In many cases participants mentioned they were habitual SAA flyers, and had never
considered other options - possibly due to competitors' advertising not reaching them. Other
factors which also emerged were:
Reliability and punctuality. Participants reported that an airline's punctuality is of prime
importance since they frequently have demanding business schedules.
228
Safety and reliability. Participants mentioned they would avoid an airline which safety
they doubted. Of particular concern was Phoenix Airways, although Comair's perceived
older aircraft and turboprop equipment were also regarded with suspicion.
Food, real crockery and cutlery, and service. Participants admitted that these factors do
influence their choice of airline to a certain extent, all other variables being equal.
Participants who had flown both Comair and Sunair, indicated they prefer the latter,
because the airline offers excellent food, and have better onboard service (at similar fares).
They remarked that Comair could improve the food offered, and should provide free
drinks, even if this resulted in a slight fare increase. They commented that SAA had set
the basic standards (with regard to in-flight service) and that other airlines need to offer
more, in order to compete.
Legroom. Participants perceived additional space as the major benefit offered in business
class, although the majority said they did not mind travelling economy class, provided they
have sufficient legroom and are not squeezed up against the next person. Comair's B737s
(only offering economy class seats) were generally perceived as more cramped than
S AA' s economy class, whilst Sunair was seen as having "excellent" legroom, even in
economy class.
Time wasted at the airport. All the participants complained about the time wasted at the
airport before boarding and after landing, and felt that business travellers in particular,
needed to be processed as quick as possible. They therefore suggested that airlines
implement a separate check-in for business travellers, and a faster baggage handling
system. Participants also felt that airlines should allow them extra hand luggage, as they
often need to work during a flight.
229
6.4.3.3 Positioning of domestic airlines
Participants perceived SAA as a natural choice for business travellers, due to being the best
airline with regard to important attributes such as frequent flights, convenient departure times,
and short-term availability of seats. SAA was also perceived to be the most safe, punctual,
and reliable airline, although the most expensive. Words associated with the carrier were: old
and established; leader; monopoly; big; many flights; and convenient. SAA was personified
as typically male; in the 40+ age group; well dressed in a conservative suit; in middle or upper
management; and driving a BMW or Mercedes. Overall, SAA was regarded as the tried,
trusted, and most convenient operator.
Phoenix was regarded as a cheap airline for holiday makers, and not a viable option for
business travellers, due to "poor" flight schedules and advanced bookings required. Words
associated with Phoenix were: discount; cheap; not for businessmen. The airline's aircraft
were perceived to be old and possibly unsafe. Phoenix was personified as a student in flip-
flops and baggies, driving a VW beetle, or as a casual holiday maker.
Sunair was perceived to be the airline offering the best food, service, and all round enjoyment
of the flight, which combined with cheap fares, delivered value for money. Those participants
that have travelled Sunair, viewed the airline as the most punctual, and providing the most
space and legroom in economy class. The impression was created in the focus groups that
Sunair managed to cultivate a fair amount of loyalty amongst its passengers. Words
associated with the airline were: good service; quality; cheaper fares; and holiday.
230
Sunair was personified (similar to Comair) as in the 30+ age group; a yuppy, dressed in a linen
suit; in middle management or owning a business; having a casual attitude; and driving a 3-
series BMW.
Comair was regarded as the airline with the second best schedules (after SAA), and providing
the cheapest fares for business travel (Phoenix was not considered to be an option).
Maintenance was perceived to be good, but there was some concern about the age of certain
Comair aircraft, and the safety of the turboprop equipment. Words associated with the airline
were: second choice; aged; small airline. Comair was personified as between 30 and 40 years
of age; a yuppy with a casual dressing style possessing a cell-phone and laptop; driving a 3-
series BMW (or Toyota); a sales representative on a budget; or being the entrepreneurial or
artistic "type".
The participants' perception and image of the airlines seemed to indicate that Sunair's
economy class may be close to offering what they as business travellers want from an airline,
although without the critical factor of "good" schedules.
6.4.3.4 Frequent flyer packages
Many participants felt that frequent flyer packages are not worthwhile, as they could actually
increase travel expenses in the long term. Discounted fares cannot be used to accumulate
credits, thus limiting business travellers to full economy class fares and one airline only.
Participants also felt that they, and not the organisation, should receive benefits offered by
such packages.
23 I
At the time of the research, both SAA's Voyager programme and Comair's Corporate Club
were in existence. The participants viewed Voyager as complicated, with too many domestic
flights needed to accumulate credits for a free ticket.
Few of the participants were aware of the Comair Corporate Club, and the majority felt that
the package should have been marketed better. They also suggested the following:
That the name be shortened to become more memorable and easy to identify with (e.g.
Voyager member).
That the number of flights needed to earn a free ticket be more clearly described.
That incentives other than free flights, and smaller prizes at more regular intervals (e.g.
cell phones, vouchers for meals, movies, a weekend away, etc.) be considered.
That Comair's Corporate Club should consider offering a special parking area to
members, since parking is so time-consuming.
That Comair should consider linking up with an international airline, thus improving the
competitiveness of the Comair Corporate Club.
Despite the possible benefits offered by a frequent flyer package, it was apparent that business
travellers are primarily concerned with the convenience and availability of flights, as
summarised by one participant: "It doesn't matter what they offer me ..I still have to be there
at 8 a m ".
6.4.3.5 Travel agents: Suggestions for improved service from airlines
Participants belonging to travel agencies were of the opinion that monthly visits from sales
representatives is a minimum requirement in promoting an airline's top of mind awareness.
232
They also considered it important to be informed and updated with regard to new
developments, special promotions, and so forth .
These participants remarked that they would prefer more telephone lines and operators at
airlines, as they often have to wait for assistance, which, once received, is not considered as
very helpful. Their main complaint, however, related to special deals offered directly by
airlines to the public, which they felt although it is wrong, they should at least be informed
about.
Participants from travel agencies believed that they have a powerful influence on business
travellers through deciding which airline products to offer first, and which carriers to promote.
Although a travel agency may have a policy of promoting a specific airline, the influence of
individual consultants and their personal preferences should not be underestimated. The
participants agreed that they would be highly appreciative of benefits or incentives directed
at them, either individually, or in addition to travel agency incentives. All stated that they
would appreciate incentives in the form of cash or vouchers.
6.5 QUANTITATIVE RESEARCH
The five focus group sessions held at the MIVIR offices in Rosebank, defined the parameters
of the quantitative research. A questionnaire - see appendix A, was subsequently drawn up,
and 200 personal in-home interviews held in Johannesburg, Cape Town, and Durban. The
next sections discuss the objectives, universe and findings of the quantitative research.
23;
6.5.1 Quantitative research objectives
The overall goal of the quantitative research was to identify factors that would encourage
economy-class business travellers to travel Comair, rather than competitors. The following
objectives were pursued to achieve the stated goal:
To establish the importance of airline attributes in relation to each other.
To establish the expectations of business travellers, and to what extent the individual
airlines meet these.
To assess the perceptions and attitudes towards airlines
To determine the role of important motivators, such as price, in encouraging business
travellers to switch from one airline to another.
To assess the importance of frequent flyer packages and benefits offered.
6.5.2 Defining the quantitative research universe
The universe for the quantitative research was defined to include all domestic air travellers,
who travelled six or more times on business, in economy class, during the previous 12 months.
Section 6.3 contains a comprehensive overview of the research methodology, and it would
therefore not be repeated.
6.5.3 Quantitative research findings
Quantitative research methods differ from qualitative techniques in the extent to which results
of the former can be projected to represent a wider population. A focus group, for example,
could identify the feelings and motivations of health product consumers, whilst a quantitative
study will be able to determine the population size of health product consumers, the reasons
why certain individuals are heavy users, and so forth.
234
Qualitative techniques involve analysing the responses of a small number of individuals, whilst
quantitative methods usually comprise larger numbers, to represent a wider population
(Dillon, Madden, and Firtle, 1993:134). The following sections provide an overview of the
findings of the quantitative study.
6.5.3.1 Profille of participants
The demographic profile of the quantitative research participants is presented in table 6.4, and
reflects the demographic composition of managerial or professional positions in the country.
The profile is, as a result, skewed towards Whites, males, 30 to 49 year olds, English
speakers, and married or cohabiting.
TABLE 6.4: DEMOGRAPHIC DATA OF QUANTITATIVE RESEARCH PARTICIPANTS
235
Age group
20-29 years 211 20
30-39 years 36 33
40-49 years 29 29
50-59 years 11 16
60+ years 3 2
11"otall 11 +11 114 111
Marital status
Single 2 211
Married\living together 71 73
Divorced 7 6
Total 111411 11 1111
Home language
English 68 71
Afrikaans 27 26
Black ,
5 3 .
411
Occupation
Professional\managerial 70 611
Middle white collar 22 35
Skilled artisan 7 3
Semi-skilled artisan - 1
Unskilled 1 -
o (1411 t 1)
Within the sample group, Comair travellers were generally less frequent flyers - as displayed
in table 6.5, and mostly worked for smaller Gauteng organisations - as reflected in table 6.6.
6-15 trips 81 67
16-25 trips 16 18
26-30 trips 3
31+ trips 4
'N'tunhor of business tif undertaken during the previous 12-months
... _ - Area of residence
Gauteng 53 63
Durban 20 25
Town ry
~Cape 27 112
li li
Organisation size
Small\SOHO 311 46
Large 43 38
Corporate 26 116
a of residonce and o anisatipli size
236
TABLE 6.5: FREQUENCY OF TRAVEL, ALL PARTICIPANTS VERSUS COMAIR TRAVELLERS
TABLE 6.6: AREA OF RESIDENCE AND ORGANISATION SIZE, ALL PARTICIPANTS VERSUS COMAIR TRAVELLERS
237
6.5.3.2 importance of airline attributes
From a marketing perspective, it is imperative to establish which attributes travellers consider
to be important when they select an airline. Participants were consequently requested to
complete the following exercise, in order to determine the significance of airline attributes:
Participants were each given a number of chips which they could distribute between individual
airline attributes, grouped together in a cluster (e.g. price-related attributes were grouped
together under price, and all in-flight service attributes under in-flight service). The more
important an attribute was considered to be, the more chips a participant could assign to it,
leaving fewer chips to be distributed amongst the remaining attributes in the cluster. A
tradeoff between attributes within a cluster thus occurred. The same process was then
repeated between the different clusters (e.g. price versus in-flight service, etc.). A computer
analysis was subsequently employed - using the results obtained - to establish the relative
importance of each individual attribute in relation to all others (regardless of cluster). The
average "importance" that could be assigned to an individual attribute - should all be
considered of equal significance, was 29.4 points out of 100. A score higher than 29.4 (i.e.
82, 76, or 68), therefore indicates the importance assigned to a specific attribute, at the
"expense" of another. The following airline attributes were all considered to be of above
average importance, as indicated in table 6.7:
Best or reasonable prices.
Convenient flight times.
Good value for money
Punctuality.
238
Good safety records.
Good special offers or discounts .
Frequent flights .
Comfortable or relaxed flights.
Well-maintained aircraft .
Good food on flights .
Enough legroom between seats.
Friendly and helpful cabin crew.
TABLE 6.7: IMPORTANCE OF AIRLINE ATTRIBUTES
Alai'kr 1,, 1 r 4% . , x ''' , :,- 4 '
'I' L' ..';h,.01.141;'"f OU'!!l'On ,NIOPII .R1 - '
, .44,...,,J„.L.P.fi.6,•:•144041,4.41440:::41 . IN .1 m S : 41.- .I' [i.do , c
.;
0 L, L 1,1
litt J a„, 1
Best\reasonable prices 82
Convenient flight times 76
Good value for money 6$
Punctual\arrive in time 66
Good safety records 53
Good special offers\discounts 44
Frequent flights 43
Comfortable\relaxed flights 43
Well-maintained aircraft 40
Good food on flights 34
Enough legroom between seats 33
Friendly\helpful cabin crew 311
Fast and efficient check-in 27
Good incentives for frequent flyers 27
Efficient\reliable handling of baggage 25
239
Modern aircraft 23
Efficient\reliable reservations system 23
Personal service\makes you feel special 22
Free drinks 22
Neat and presentable crew 20
Friendly and helpful ground staff 119
Hot meals 19
Fast check-in system for frequent flyers 17
Informative\knowledgeable crew 17
Priority waiting list for frequent flyers 16
Access to seat upgrade 16
Aircraft with attractive interiors 115
Access to lounge facilities for frequent flyers 114
Cabin crew that acknowledge frequent flyers 14
Separate check-in for frequent flyers 113
Real crockery and cutlery 13
Additional baggage allowance for frequent flyers 11
24-hour reservation system 9
Special gifts for frequent flyers 5
6.5.3.3 Positioning of domestic airlines
Section 4.2.3.1 explains that a traveller's perception of an airline comprises rational, price, and
emotional factors, with the latter (emotional variables) frequently possessing the potential to
distort values assigned to the former. Based on this explanation, this section examines the
market positioning of domestic airlines from different angles.
240
Figure 6.2 and 6.3 both reflect participants' more rational evaluation of carriers, whilst figure
6.4 includes emotional aspects.
The attributes associated with each airline are presented in figure 6.2.
SAA was perceived as having convenient flight times, informative crew which
acknowledged frequent flyers, and offering free drinks as well as hot meals (neither were
provided by Comair nor Phoenix at the time of the research).
Comair was strongly associated with offering travellers good value for money.
Sunair was strongly associated with offering real crockery. Although seemingly
insignificant, certain business travellers possibly could regard the usage of real crockery
as indicative of professionalism and superior service levels.
Phoenix was perceived as having special offers and the best prices.
Figure 6.3 reflects the ideal position of a domestic airline in relation to all airline attributes,
and the weighted importance of each - as presented in table 6.7. The figure indicates that
none of the domestic operators reached this ideal position, although Comair came closest on
a horizontal, and SAA on a vertical level. Based on the performance of these two airlines, it
can be assumed that a carrier offering low fares coupled with service attributes similar to those
of SAA, would be able to fill this important market gap. The danger in allowing such a gap
to exist becomes apparent when considering that Sunair's current market strategy is geared
towards offering such a product.
241
FIGURE 6.2: ATTRIBUTES ASSOCIATED WITH AIRLINES
74
144% 1. Best/reasonable prices 2 Most expensive prices a Good value for money
Good/special offers/discounts Convenient flight times Frequent flights Good safety records/safe Modern aeroplanes VVell rraintained aircraft PunctuaVarrive on time Efficient reliable reservations 24 hours reservation system Fast, efficient check-in system Efficient luggage handling Friendly/helpful ground staff Friendly/helpful cabin crew Personal service/feel special Neat, presentable cabin crew Informative crew Crew acimoMedge FF Cornfortablehetaxed flights Good food on flights Hot meals Free drinks Real crockery and cutlery Legroom between seats Good incentive packages FF Lounge facility access FF Priority waiting list FF Special gifts for FF Access to seat up-grade FF Additional baggage FF Separate check-in FF Rapid check-in FF
(FF = Frequent flyer)
29
2 30
31
24
19
SAA 5
32 1 2
2834 6
27
33
20
23
1
1 10
7
1 16
22:1418
261 11
I 15 1
211 89 -20-
1
1
7
SUNAIR 25
COMAIR
4 PHOENIX
1
SOURCE: Adapted from empirical research.
242
FIGURE 6.3: DOMESTIC AIRLINES IN RELATION TO WEIGHTED AIRLINE ATTRIBUTES
Best/reasonable prices Most expensive prices Good value for money Good/special offers/discounts Convenient flight times Frequent flights Good safety records/safe Modem aeroplanes Well maintained aircraft Punctuatiarrive on time Efficient, reliable reservations 24 hours reservation system Fast, efficient check-in system Efficient luggage handling Friendly/helpful ground staff Friendly/helpful cabin crew Personal service/feel special Neat, presentable cabin crew Informative crew Crew acknowledge FF Comfortable/relaxed flights Good food on flights Hot meals Free drinks Real crockery and cutlery
28. Legroom between seats Good incentive packages FF Lounge facility access FF Priority waiting list FF Special gifts for FF Access to seat up-grade FF Additional baggage FF Separate check-in FF Rapid check-in FF
(FF = Frequent flyer)
2
30
31
29
28
32
12
33
SAA
1 24
9
20
23
27
34
22 21
1413
11
8
1 5 18
9
7
16
5
10
26
7
25
SUNAIR
Ideal Point
COMAIR
3
4
PHOENIX
SOURCE: Adapted from empirical research.
243
Both figure 6.2 and 6.3 reflect participants' rational evaluation of domestic airlines, based on
product attributes. Emotional aspects (e.g. brand loyalty, emotional affinity, etc.), however,
frequently have the potential to influence rational values assigned to these variables. Figure
6.4 includes certain of these emotional components and presents participants' personification
of domestic airlines:
Participants perceived SAA as an upmarket operator used by successful people, a leader
in its field, established and reliable, and a business traveller's type of airline. These
statements reflect an emotional affinity and a positive identification business travellers
have with the carrier, resulting in a strong and successful market positioning.
Comair was perceived as old and tired. In the absence of a strong positioning message,
and possibly due to inconsistent market communication strategies, travellers probably
developed their own positioning of the airline based on tangible characteristics.
Sunair was personified as an airline for yuppies, holiday or leisure travel, which indicated
an underpositioning of the product - as discussed in section 3.4.2, mainly resulting from
low awareness at the time of the research.
Participants perceived Phoenix as an airline for the "down to earth" traveller, implying
that it is not a business travellers' airline, as these passengers welcome special treatment
such as separate check-in, extra baggage allowance, and so forth - as portrayed in table
6.17, due to the repeated travel stress they are subjected to.
. For holiday/leisure travel
. Is too small
. For yuppies
COMAIR
. For business men
. Established and reli#le
PHOENIX
. Old and tired appearance
13.5%
76.1%
Is conservative
For older people . For the down to earth
traveller not needing frills
SUNAIR
. Is upmarket
Used by successful people
For the discerning traveller . My type of airline
Leader in fieldSAA
244
FIGURE 6.4: PERSONIFICATION OF DOMESTIC AIRLINES
SOURCE: Adapted from empirical research.
The emotional elements involved in choice of airline, were further underlined by asking
participants which airlines they would never use. The response to this question is reflected
in table 6.8:
All the participants were willing to use SAA.
3.5 percent mentioned they would never use Comair bcause they had a bad experience
and\or the airline's aircraft were too small.
7 percent of the respondents said they would not use Sunair because it was too new (this
objection is presumed to have become invalid as time progressed).
245
14.5 percent of the participants mentioned they would never use Phoenix, because the
airline had a bad reputation and\ or it was too new.
The reasons stated above for not flying an airline, signifies a certain reluctance from
participants to use new airlines, which probably stems from their satisfaction with SAA, and
being suspicious with regard to the safety and reliability of such carriers. In the case of
Phoenix, it also demonstrates the influence of word of mouth as an advertising medium in the
air travel industry. Four percent of the participants stated that Phoenix had a bad reputation,
and although they presumably have not flown Phoenix themselves, would never use the airline.
The small percentage of participants which had an unpleasant experience flying Comair,
should therefore be viewed in light of their possible impact on the perceptions of other
travellers, and not their low incidence.
TABLE 6.8: AIRLINES PARTICIPANTS WILL NEVER USE, AND REASONS WHY
mons for not using e ari 'atiitte
,
P „
• %' i. , ,,,,tf., oo
i , 0 •
Bad reputation 4 - -
Too new on market 4 3 -
Late\not on schedule 2 - -
Aircraft too small - 2 I.
Had a bad experience - - It
Other 4.5 2 11.5
Total - 114.5 9 305 1
246
6.5.3.4 Awareness and usage of domestic airlines
Table 6.9 presents participants' awareness of domestic airlines, and indicates that although
SAA was top of mind for the majority (67 percent), a surprising number mentioned Comair
first (20 percent). Adding spontaneous second, third or fourth mentions, 86 percent of the
participants knew Comair, and 95 percent SAA. All the participants recognised both Comair
and SAA's names when aided. Sunair had the least awareness of the four airlines serving
major domestic routes.
TABLE 6.9: AWARENESS OF DOMESTIC AIRLINES
1 .. 9 i,,9 11P . , P4'? °:'
i i;4ines- '0" ,,, .r''' r.'1,, .1"..•^•..", e. ,77re9 ,,v!1.
.. Spoiutaueo.uft0,, $ . 4:
first ill-01640: .
tr) , .0r
,...„ • - , littinietfii.K...
ItOit , ,. p . 1 t;,,, ,:
„.., li 1-1 , gun
Li .. a
,. . o ZI ' i
'1,,:
SAA 67 95 100
Comair 20 86 100
Phoenix 4 55 97
Sunair 3 42 83
Other 6 66 66
Tantoli.....„,., . 1,4
Based on the positioning of domestic airlines, as analysed in section 6.5.3.3, as well as their
awareness, it is not surprising that SAA is the predominant airline amongst frequent domestic
business travellers. The overwhelming majority of participants (88 percent), stated that SAA
is their usual airline, whilst only 3 percent made the same comment regarding Comair - as
shown in table 6.10.
247
Four percent of the participants named Sunair as their usual airline - a surprising statistic
considering the airline's lack of frequency and awareness at the time of the research, whilst
only 1 percent used Phoenix on a regular basis. When related to the individual airlines'
market shares on domestic jet routes - as displayed in table 6.10, these statistics give a rough
indication of the leisure versus business profile of an operator's passengers. A low number
in relation to a carrier's market share would reflect a high incidence of leisure travellers, and
vice versa.
TABLE 6.10: USAGE OF AIRLINES
1 1 ' "
ti N U al ; rtille .,' °
, 01' ' of Aiiiitit'S*,
, •av ,, a ,
SAA 88 78
Sunair 4 5
Comair 3 12
Phoenix 1 5
Other (Airlink, charters, etc.)
6 -
None\don't know 2 -
Total . 1 4 " il II
* Market shares only pertaining to domestic jet routes. ** Figures do not add up to 100 percent as certain participants use more than one airline regularly.
248
The research further revealed that a degree of loyalty exists amongst participants towards their
airline of choice. Two in five business travellers (44 percent) only flew their regular carrier
as illustrated in table 6.11, and it is interesting to note that those that did use another operator,
preferred Sunair (11 percent) to Comair (9 percent).
TABLE 6.11: NUMBER OF AIRLINES USED BY PARTICIPANTS
Osage stother Fart icipanfe
Use another airline?
Never use another airline 44
Use another airline 66
Tot li 11
Er yes, which other ainhine\s used?
SA Express (small sample base) 211
Sunair 1111
Airlink 1111
Phoenix 110
Comair 9
SAA 0
Other 6
Tot II 76" : -:
Average number of airlines used in the previous 112 months
11.8
* Figures do not add up to 66 percent as certain participants use two or more airlines, other than the usual carrier.
Cooair trftve
Phoenix 4
SAA
Comair
67
21
SA Express 4
Sunair 4
249
Based on the information contained in tables 6.10 and 6.11, the conclusion can be reached that
Comair did not succeed in penetrating the domestic business air travel market, resulting in a
high incidence of leisure travellers amongst the carrier's passengers. On the other hand, both
SAA and to a lesser extent Sunair, have been successful, whilst business travellers did not
even regard Phoenix as an option. Assumptions can be made as to what role Comair's
communication strategy and product played in creating this situation. Although the carrier's
communication strategy succeeded in creating awareness of the airline - as shown in table 6.9,
it possibly failed to project a suitable image to business travellers. Even a successful
communication strategy, however, cannot sell a product which the market finds unappealing,
and indications are that the Comair experience is not popular with business travellers. Table
6.12 supports this statement, and illustrates that of those business travellers that did eventually
use Comair (frequently as a second choice), few were converted by the experience. The
majority (79 percent) still considered another airline as their "usual" airline.
TABLE 6.12: USUAL AIRLINE OF COIVIAIR TRAVELLERS
250
6.5.3.5 The role of price
Price proved to be a difficult airline attribute to research, due to the complexities inherent to
its role in air travel. Despite the research participants identifying price as the most important
airline attribute, as shown in table 6.7, with good value for money and good special
offers\discounts respectively the third and sixth most important variables, they contradicted
themselves on occasion:
Only about two in five participants (44 percent) claimed to know what the fare between
Johannesburg and Cape Town was, as indicated in table 6.13. Comair passengers were
generally more aware of the said ticket price, indicating a higher degree of price-
sensitivity.
The majority of those who claimed to know what the price was, quoted an inaccurate fare,
as shown in table 6.14.
As business travellers usually do not pay for their own tickets, the importance assigned by
them to airline price attributes was even more surprising.
TABLE 6.13: AWARENESS OF PRICE ACCORDING TO AIRLINE FLOWN (COMAIR VERSUS NON-COMAIR TRAVELLERS)
f rice l icirrasts, travellers-
mair Wavelets°
Aware of price 44 71 40
Not aware of price 56 29 60
Total 100 100 1 •
251
TABLE 6.14: AWARENESS OF JOHANNESBURG-CAPE TOWN RETURN FARE
Pa 10 ' , q' nceordng to fucto, bt residence gild: tit ual airline .
1: , . g
Cape 04'61 return re
All participants 1 226.90
Area of residence
Gauteng 11 254.30
Cape Town 11 212.00
Usual airline
Comair 11 226.00
SAA 1 242.00
Actual return fare
Comair 8980.00
SAA 81368.00
The following conclusions, attempting to explain the contradictory research results obtained
relating to the role of price in the airline experience, were eventually formulated:
Based on the brand value equation - as discussed in section 4.2.3.1, travellers judge airline
products employing price, rational, and emotional criteria. A high level of interaction
exists between these three components, and each has the ability to influence the perceived
value of the other. The importance of the respective airline attributes, reflected in table
6.7, were determined by participants using rational and price criteria only, thus possibly
presenting an incomplete picture of the role of price in air travel.
252
0 A set of basic or minimum attributes, such as reliability, efficiency, safety, and an
acceptable level of service, exists in the airline experience. These are hygienic factors,
variables that are only noticed when they are perceived not to be present. Business
travellers, for example, would not be motivated to fly an airline, just because it is
perceived to be safe, they expect it to be. They would, however, avoid an airline if it is
perceived to be unsafe, or similarly lack minimum levels of reliability, efficiency, and
service standards. Price, on the other hand, is an important motivating factor. Motivating
factors are variables that have the potential of influencing a traveller to switch from one
airline to another, once hygienic factors are perceived to exist. The significance of price
is thus likely to decrease to the extent that hygienic factors are perceived not to be
present. It is possible that business travellers' could perceive Comair (old and tired
appearance), Sunair (being new), and Phoenix (being new and having a bad reputation),
to lack certain of the mentioned hygienic factors, thus reducing the significance of cheaper
fares offered by these carriers.
6.5.3.6 Frequent flyer packages
The research specifically investigated frequent flyer programmes, to assess the role of such
packages in persuading business travellers to switch to Comair. The following were the
research findings:
SAA's Voyager programme does indeed promote some loyalty amongst members - as
displayed in table 6.15. The overwhelming majority (97 percent) of Voyager members
named SAA as their usual airline, compared to 88 percent of all participants. The
programme, however, does not discourage members to travel other airlines - the
remaining 3 percent of Voyager menthers indicated that Comair was their iictial
253
TABLE 6.15: LOYALTY CREATED BY SAA'S VOYAGER PROGRAMME
K 4.11
.t .,,:'11.1...r,:e. 'Iri" "1 ..
,, ---.= , , 'O 'f'
, ,. ■fff ,, f -„ ,
1 i
*I .1
..? 'art .4' irr k ., +? f ,%
j. bsiotg:.. , ;‘ , ."•
1r --thr.4 ook -- .1 " ."0 f. VOYag$INP: !,
.614itib . .
— „ ...,.... ,. 0
. _ SAA 88 97
Comair 3 3
Other airlines 13 -
Total :, . . 104a k 4 4
* Figures do not add up to 100 percent as certain participants use more than one airline regularly.
Voyager has not only been successful in cultivating loyalty amongst members, but have
a high awareness amongst all participants (81 percent), compared to Comair's Corporate
Club (10 percent) - as indicated in table 6.16. In fact, Comair travellers were more aware
of SAA's Voyager programme (77 percent), than the Comair Corporate Club (55 percent)
itself. In addition, all Comair Corporate Club members also belonged to Voyager, as
reflected in figure 6.5.
TABLE 6.16: AWARENESS OF FREQUENT FLYER PROGRAMMES
f i'Vrequent flyer ' prograattna '
AR participario
Cowell, : travellt rg
...
trovent&
SAA Voyager Club 81 79 83
Comair Corporate Club 10 55 9
Sunair Frequent Flyer 11 110 -
Not aware of any frequent flyer programme
20 13 119
254
0 However, Voyager's success amongst business travellers should not deter another
airline from developing a frequent flyer programme aimed at these passengers. Figure
6.5 indicates that 40 percent of participants did not join any frequent flyer programme,
thus leaving a comfortable gap in the market for a package competing with Voyager.
FIGURE 6.5: MEIVIBERSIBP OF FREQUENT FLYER PROGRAMMES (ALL PARTICIPANTS)
SOURCE: Adapted from empirical research.
255
A package aimed at the remaining 44 percent of frequent business travellers, not linked
with any frequent flyer programme, should consider the importance of frequent flyer
incentives, as rated by participants and displayed in table 6.17 (the lower the rating, the
more important the incentive). A priority waiting list, followed by a separate check-in and
seat upgrade, were considered to be the most important incentives. Access to lounge
facilities, additional baggage allowance, special parking area, and an upgrade on rental
then followed. A city to airport shuttle and special gifts were considered to be the least
important incentives.
TABLE 6.17: IMPORTANCE OF FREQUENT FLYER INCENTIVES
mb
1 vc que>Pflyer incentives ' (004Wei. the raring; the 1
orci,111PortaM) * I
All
Mai)*
v
ontafir'' tTak;e 1 krat rawei‘111
o ..
Priority waiting list 3.3 2.9 3.3
Separate check-in 3.4 4.4 3.3
Seat upgrade 4.0 3.6 3.9
Access to lounge facilities 4.4 4.9 4.11
Additional baggage allowance 5.2 4.7 5.11
Special parking area 5.2 4.8 5.6
Upgrade on car-rental 6.1 5.8 6.11
Airport-city shuttle 6.5 6.3 6.8
Special gifts 7 7.5 6.9
6.6 SUMMARY
The domestic air travel market was deregulated in 1991. Several airlines entered the market,
of which Comair was one of the few that managed to survive.
256
Due to Comair's initial market strategy, the majority (+-60 percent) of Comair passengers are
estimated to be leisure travellers, compared to an industry average of 30 percent. Comair's
management realised that the airline's high incidence of leisure travellers could endanger the
carrier's long-term survival, as leisure travellers are usually price sensitive, and the possibility
existed that Comair could repeatedly be drawn into price wars by new entrants attempting to
penetrate the market with lower fares. It was subsequently decided that Comair should shift
its market focus to business travellers, as new entrants would find it more difficult to penetrate
this market, whilst these travellers are generally more profitable customers (because of
frequent travel and being less price-sensitive). A change in focus, however, would probably
require changing aspects of the Comair operation, for market penetration to succeed.
Comair's management consequently decided to conduct research amongst frequent domestic
business travellers (travelling in economy class), to determine how they could be persuaded
to switch to Comair. The research was divided into a qualitative and quantitative phase.
The findings of the qualitative research (consisting of five focus group sessions) were the
following:
Decision making. Four main areas of influence or control exist when participants choose
an airline: organisation policy; an employee responsible for making bookings or an in-
house travel agency; the business traveller him or herself; and the travel agent.
Importance of airline attributes. Scheduling is a primary determinant in choice of airline,
and SAA was perceived to have the best schedules. Reliability, punctuality, and safety,
were also considered to be important attributes, followed by food, service, and legroom.
257
Participants complained about the time wasted at airports, and suggested that airlines
implement changes to facilitate a speedier check-in, and baggage collection process.
Perception of airlines. SAA was perceived to be the best airline with regard to the
important attributes mentioned above; Sunair was perceived to offer the best food and
service, as well as all-round enjoyment of the flight; Comair was perceived to be second
to SAA on schedule attributes; and Phoenix was viewed as an airline for holiday-makers.
Frequent flyer packages. Comair's Corporate Club had a very low awareness compared
to Voyager. However, participants felt that it took too long to build up Voyager credits
on domestic flights. The majority of participants mentioned that they were more likely to
choose an airline if they, and not the organisation, benefitted from incentives.
Due to their importance in the airline distribution channel, one focus group session
comprised only travel agents. These participants believed that they have a significant
influence on a business traveller's choice of airline, and as such deserve better treatment
from the airlines. More specifically, it was suggested that airline representatives visit
travel agencies at least once a month, that airlines install more telephone lines, and that
airlines should not offer special deals directly to passengers, without making the same
offers available to travel agents - or at least inform them.
The findings of the quantitative research (consisting of 200 personal in-home interviews in
Johannesburg, Cape Town, and Durban) were the following:
258
Profile of participants. Participants were predominantly White (91 percent); male (82
percent); between 30 and 49 (65 percent); married or living together (71 percent); English
(68 percent); and in professional or managerial positions (70 percent). Participants that
used Comair were usually less frequent flyers, and worked for smaller organisations
mostly situated in Gauteng.
Importance of airline attributes. On a rational level, participants viewed best\reasonable
prices; convenient flight times; good value for money; punctuality; good safety records;
good special offers or discounts; frequent flights; comfortable and relaxed flights; well-
maintained aircraft; good food on flights; enough legroom between seats; and friendly and
helpful cabin crew; as the most important airline attributes (in that order).
Positioning of airlines. SAA was associated with convenient flight times, informative crew
that acknowledge frequent flyers, free drinks and hot meals, and was seen as a business
traveller's airline. Sunair was associated with real crockery, and perceived as an airline
for yuppies or holiday-makers. Comair was associated with good value for money, but
had, according to participants, and old and tired appearance. Phoenix was associated with
the best prices, but was seen as an airline for down to earth travellers. Based on the
weighted importance of airline attributes, none of the domestic airlines managed to reach
the "ideal" positioning in relation to these variables. Despite the existence of this market
gap, SAA was perceived to be the business man's type of airline, reflecting an emotional
affinity participants have with the carrier. The strength of this emotional affinity is
underlined by the fact that SAA was the only airline that no participant considered never
using.
259
Reasons for not flying other airlines ranged from a "bad" reputation (Phoenix) and being too
new (both Sunair and Phoenix), to having had a bad experience and flying small aircraft
(Comair).
0 Awareness and usage of airlines. SAA achieved a high top of mind awareness amongst
participants (67 percent), and was considered by the majority (88 percent) as their "usual
airline". Only three percent of the participants viewed Comair as their usual airline, and
disturbingly, 4 percent Sunair. The term "usual airline" reflected a certain amount of
loyalty as 40 percent of participants never used another airline. Comair's unsuccessful
penetration of the business travel market was further underlined by the fact that 79 percent
of frequent business travellers flying Comair used the airline as a second option only.
The importance of price. Although participants indicated that price was one of the most
important airline attributes, the majority were not aware of price differentials then existing
between domestic airlines. This and other discrepancies relating to price were explained
by the existence of strong emotional perceptions with regard to hygienic and motivational
factors in the airline experience. These emotional perceptions resulted in the significance
of price variables decreasing to the extent that hygienic factors were perceived not to be
present in an airline product.
Frequent flyer packages. Although SAA's Voyager programme is successful in cultivating
loyalty amongst members, it does not prevent them from flying other airlines on occasion.
A high awareness of Voyager exists (81 percent) as opposed to Comair's Corporate Club
(10 percent). Despite Voyager's success, 44 percent of participants did not belong to any
frequent flyer programme, leaving a comfortable gap for an airline wishing to promote an
innovative loyalty programme.
260
Participants considered a priority waiting list; separate check-in; seat upgrades; access to
lounge facilities; and additional baggage allowance (in order of importance) as important
incentives that such a package should provide.
261
SUMMARY, CONCLUSIIONS, AND
RECOMMENDATRONS
7.1 INTRODUCTION
This chapter provides an overview of the preceding chapters, followed by an analysis
of the internal and external strengths and weaknesses, opportunities and threats, of
the Comair product. Conclusions and recommendations are then based on both the
SWOT analysis and the results of the empirical research.
7.2 OVE VIEW OF STUDY
The following sections contain a brief overview of the main aspects discussed in each
chapter .
7.2.1 The airline product does not exist in isolation, but is surrounded by a powerful,
continuously changing external environment, resulting in an airline constantly being
faced with opportunities it can exploit; threats it has to avert; or neutral trends it does
not have to act upon. A carrier which is out of tune with these external changes risks
its long-term survival in this dynamic environment - one decade's success formula
could spell an airline's doom in the next. Unfortunately, it frequently happens that
airline managers' reluctance to let go of preconceived ideas, is the reason behind
airlines failing to respond pro-actively and correctly to external stimuli.
262
The external environment of an airline consists of two "sub-environments": the macro
and the market environment. The macro-environment, in turn, comprises six
"megatrends": the economic; socio-cultural; physical; international; institutional; and
lastly, the technological environment. Although all these "megatrends" are powerful
forces which an airline has little and often no control over, a few currently features
more prominently in the macro-environment of a medium-sized South African airline
than others:
As an expensive product with a derived demand nature, air travel is sensitive
to economic conditions in a country. In the South African situation,
indications are that a slight increase in GNP per capita will lead to a
disproportionate increase in air travel. The South African government's
present economic policies (April 1996), exhibit both positive and negative
trends, which will affect future economic growth in the country. The dramatic
increase in overseas visitors to South Africa, in the mean time, has proved to
have had a positive impact on the traffic volumes of domestic carriers
positively.
Air travel is a high-profile industry, and has consequently been affected by the
South African government's support for Black economic empowerment.
263
SAA's "Turn strategy", the airline's 20 percent share in SA Express; the mere
existence of the latter; the contentious privatisation issue surrounding Sunair
and SAA; to name but a few examples, are happenings directly related to the
government's drive in promoting Black economic involvement. The
government's subtle yet strong influence on the domestic air travel industry
is likely to remain a future powerful mega-trend to domestic airlines.
0
The technological environment is probably one of the most powerful and
dynamic forces in an airline's macro-environment, due to the technological
intensive nature of air transport. The life-cycles of aviation technologies are
steadily decreasing, and an airline's success in the marketplace will
progressively hinge on its ability to implement technological innovations.
However, due to the spiralling costs of especially aircraft spare parts, there is
a need for airlines to be aware of the growing danger of counterfeit products.
The second component of an airline's external environment, the market environment,
comprises competing airlines, air travellers (discussed under segmentation of the
domestic air travel market), and travel agents (discussed under distribution of the
airline product).
264
For reasons discussed, Comair has been chosen as the focal point of this study. Apart
from being the second largest (12 percent domestic market share - January 1996 ) and
second oldest domestic operator (50 years of successful operation), Comair is fully
privately owned, and is in fact the largest independent African airline. Regionally and
domestically, Comair competes against six fully government-owned airlines; one
partially government-owned carrier; and two privately-owned operators. Considering
the uneven playing field and the demise of two new airlines (both privately-owned),
Comair's achievements up to date can be considered remarkable. The uneven playing
field that Comair operates in, however, increases the necessity of the airline
developing an integrated marketing approach, to ensure survival in a volatile and
dynamic environment. The importance of such an integrated marketing approach
becomes even more apparent when contemplating the characteristics of Comair's
main competitor:
SAA is the world's 35th largest airline (56 percent domestic market share - January
1996) with a fleet worth R4 billion, owned by the South African government, and
achieved a record profit in the financial year ending March 1995. The airline has won
several service awards in the past, and is sure to remain a formidable opponent to
Comair.
7.2.2 Few airlines can serve all air travellers in an air transport market, and certain
airlines are usually in a better position to serve particular travel segments than others .
265
Such a selective approach to a consumer market (particularly appropriate for airlines
with limited resources), is the foundation of modern strategic marketing, which
comprises three steps - also referred to as the STP approach:
Segmentation. Six segmentation techniques are commonly used in
segmenting travel markets: (i) segmentation based on purpose of trip; (ii)
demographic, economic, and geographic segmentation; (iii) segmentation
based on airline user status; (iv) psychographic segmentation; (v)
segmentation based on traveller needs and benefits sought; and (vi)
segmentation based on price variables. Utilising official sources relating to
South African consumers, only the first four techniques can be applied with
any success to the domestic air travel market. This is unfortunate, as
segmentation based on travellers' needs and benefits sought, and segmentation
based on price variables, can be considered two of the more important
segmentation techniques: Travellers' needs and benefits sought should be the
focal point of any marketing activity, whilst price is an important variable
influencing choice of airline - even for organisations. However, whatever
approach an airline chooses in segmenting the domestic air travel market, a
combination of techniques should ideally be used. Despite market
segmentation being the foundation of a successful market positioning in a
deregulated environment, it is doubtful if any domestic airline has conducted
such an exercise.
266
This could possibly allow a carrier undertaking such research to gain a
competitive advantage in positioning its product.
Targeting. The second step in the STP approach is for an airline to select
target segments, based on the growth potential and segment structural
attractiveness (i.e. to what extent competitors are already active in the
segment) of market segments, as well as the airline's objectives and resources.
Having completed this process, it will be possible for a carrier to identify
those segments most profitable to target.
Positioning. The final step in the STP approach; positioning can be defined
as the process through which an airline product is adjusted to "fit" target
segments. The idea is that an airline should be able to offer unique benefits
to its target segments, which, if communicated correctly, can result in a
favourable "image" or "position" the airline then occupies in the minds of
target travellers. Without a clearly defined competitive "positioning", an
airline risks its target travellers having a vague, confused, or rigid image of the
airline. An airline's positioning, however, should be responsive to market
dynamics, and is not cast in stone, as competitors might reposition their
products, new entrants might attempt to copy a successful positioning, or
certain airlines might do individual market analyses and arrive at similar
conclusions.
267
An airline's positioning constitutes the image it projects to its target market,
based on unique benefits offered to target travellers. Being a service product,
these benefits should be communicated to airline employees, who are
ultimately responsible for delivering and maintaining an airline's positioning.
A mission statement could play an important role in this communication
process. A well-conceived mission statement does not only define an airline
in terms of its target market, but should also state the carrier's reason for
existence, specific customer needs satisfied by the airline, management's
performance expectations of employees, and other general guidelines for
overall business strategy. Without the clear and defined guidelines contained
in a mission statement, an airline risks its employees and management working
in opposite directions. Thus, the STP approach should be completed by
adding a mission statement as a supportive internal component.
7.2.3 The marketing mix is that section of an airline's internal environment that can
be directly influenced by airline marketers. It comprises four variables that can be
manipulated according to prevailing market conditions and actions of competitors:
Product.
Distribution.
.0 Price.
268
Promotion.
7.2.3.1 The airline product is the core component of the airline marketing mix, and
exists on more than one level. At the most basic level (the core product), it provides
a solution to a traveller's problem of being at the right place at the right time in an
acceptable and convenient way. The next level of the airline product (the actual
product), comprises fares, schedule-based features, aspects of comfort, ease of access,
and the airline image; followed by the last level (the augmented product), which
includes elements such as in-flight entertainment, fax and other communication
equipment, sleeping facilities now offered, loyalty programmes, and so forth. Despite
the majority of airline products comprising these three levels (certain lowcost carriers
offer very little on the augmented level), they are not all equally competitive in the
eyes of travellers. The most successful airlines (from a traveller's point of view), are
invariably those who view customer value, satisfaction, and quality, as prime
considerations when designing their products. Such airlines, being customer focused,
usually also succeed in establishing successful brands. An airline "brand" is an airline
product that has been successful in establishing an emotional affinity with target
travellers, over and above the rational and price aspects of the airline product. A
brand provides an airline with a distinct advantage in the booking process, and is
usually developed by consistently employing a customer centred approach.
269
7.2.3.2 The function of the airline distribution channel is to create and manipulate
access for travellers to air transport, thus providing a principal way of managing
demand for the highly perishable airline product. The airline distribution channel has
the following characteristics:
0
It includes several intermediaries, of which travel agents are by far the most
important (worldwide, approximately 80 percent of airline bookings are made
through travel agents).
0
It is technologically highly advanced using computerised databases as central
reservations systems.
Due to its technological advanced and intensive nature, the airline distribution channel
is a dynamic and volatile component of the airline marketing mix. Current trends
indicate that major changes affecting airline distribution will occur in the near future:
The changing role of central reservation systems - electronic ticketing and
other technological innovations could change the composition of the airline
distribution channel and minimise the importance of travel agencies.
0 The changing role of travel agencies - the rise of mega travel agency
groupings through a consolidation of the travel agent market, could increase
the power of travel agencies in distributing the airline product.
270
The changing role of passengers - modern travellers want more control over
the booking process, and in many cases would prefer using systems providing
immediate access to the airline product. Airlines are responding by
developing systems that could eventually provide "customised" offers to
individual passengers, thus bypassing travel agents.
These three trends are complemented by a growing incidence of airlines using direct
marketing to build relationships with passengers, often developing comprehensive
passenger databases in the process, which could assist carriers in developing future
alternative distribution channels .
7.2.3.3 The price component of the airline marketing mix consists of three legs,
frequently referred to as the "pricing tripod":
The first leg represents the costs in producing the airline product, and sets the
floor level at which fares can be charged.
The second leg represents the perceived value of the airline product to the
traveller, and determines the ceiling level at which fares can be charged.
The third leg represents competitors' fares, and determines where between the
floor and ceiling range and airline should position its fares.
271
This seemingly simple approach in determining airline fares, however, does not always
reflect the reality of air travel pricing. Due to the nature of the airline product (e.g.
cannot be replaced, is expensive, etc.), airlines are frequently preoccupied with
pricing, and lower than cost fares are often used to "buy market share", penetrate new
markets, or stimulate route demand. The result is that few airlines have a single long-
term price strategy which they strictly adhere to. In fact, yield management
technology has advanced to such an extent, that it is today possible for airlines to
develop pricing strategies for individual flights.
7.2.3.4 Promotion as a component of the marketing mix, itself comprises four
variables:
Advertising. Advertising is the process of communicating with the target
market through the execution of certain suitable messages using selected
media, with the ultimate objective of influencing target travellers to choose a
specific airline. Advertising is subject to internal constraints such as the
advertising budget, which, as suggested, should ideally be determined by the
objective and task method.
Public relations. The public relations function in many airlines has been
relegated to little more than writing press releases, announcing new routes,
and organising press kits at trade shows. However, air travel being a high-
profile industry, public relations could become an invaluable tool for carriers
recognising its potential in influencing public attitudes.
Certain airlines consequently develop public relations into an integral element
of their marketing and promotional strategies, although this approach has not
yet been embraced by the majority of South African airlines.
Sales promotions. Sales promotions are by nature usually short-term,
irregular, and incentive based. They are popular tools in the air travel
industry, and are often used to stimulate demand for new routes, or to lure
passengers away from competitors. The type of sales promotions used by
airlines range from fare cuts and discounted fares, to competitions, amongst
others. An airline should have clear objectives when developing a sales
promotion programme, followed by an evaluation of its success.
Personal selling. Due to the costs involved, certain US airlines prefer
telemarketing to personal selling, reasoning that the expenses involved in the
latter outweigh the benefits of personal contact. Before a South African
airline embarks on such a strategy, however, possible differences existing
between the South African and American air travel markets need to be
considered. Building an effective sales team requires sales managers to
concentrate on intensive training, provide the sales team with clear objectives
directing them towards specific markets and target travellers, and motivate
sales representatives due to the emotional demands of the job.
273
In order to create maximum synergy among the four promotion variables, an airline
needs to set definite objectives, develop programmes of execution, and evaluate the
effectiveness of each component. These strategies should then be contained and
coordinated in a well-thought through marketing plan, with the ultimate objective of
influencing target travellers to fly a specific airline rather than competitors.
7.2.4 The empirical research of the study was divided into a qualitative and
quantitative phase. The qualitative section consisted of five focus group sessions and
was completed first, in order to use the information obtained as a precursor and broad
parameter for the quantitative research that followed. The quantitative phase
comprised 200 personal in-home interviews held in Johannesburg, Cape Town, and
Durban. The overall goal of the research was to determine how SAA economy class
business travellers could be persuaded to switch to Comair.
The empirical research established that Comair has not yet succeeded in penetrating
the planned target market, mainly consisting of White (91 percent) English-speaking
(68 percent) males (82 percent), between 30 and 49 (65 percent), and employed in
professional and managerial positions (70 percent). In fact, indications at the time of
the research were that Sunair (at that stage a new entrant), had penetrated this market
at least to the same extent, and possibly even further, than Comair .
274
Research participants that did fly Comair were usually less frequent flyers and worked
for smaller companies in Gauteng.
Not surprisingly, the majority of participants indicated that SAA was their preferred
carrier. The reasons mentioned for not using other airlines ranged from an "old and
tired" appearance attributed to Comair, to Phoenix having a bad reputation, and
Sunair being new (this objection presumably became obsolete as time progressed).
However, despite the negative perception regarding Comair's aircraft and equipment,
the airline was given a high rating on the attribute participants assigned the most
importance to - best\reasonable prices. This high rating nonetheless did not seem to
persuade participants to switch to Comair from SAA. The discrepancy between the
stated importance of the price attribute and the reluctance of participants to fly
Comair on a frequent basis, was eventually explained by the existence of hygienic and
motivational factors in the airline experience. Hygienic factors are mostly
unconscious criteria only noticed when they are perceived not to be present. The old
and tired appearance of Comair, in this case, probably affected Comair's perceived
ability to provide reliable, efficient, and possibly safe air transport. Price on the
contrary, is a prime motivational factor with the ability of influencing a traveller to
switch to another airline, once hygienic factors appear to be in place.
276
TABLE 7.1: AN INTERNAL AND EXTERNAL SWOT ANALYSIS OF COMAIR
(FROM A MARKETING PERSPECTIVE)
Internal strengths Internal weaknesses * Management expertise. * Lack of communication between top
* Organisation profitable. management and front-line employees.
* Established and stable organisation. * Low staff motivation.
* Sophisticated market intelligence * Profit instead of customer driven.
information system. * Customer service neglected.
* No marketing audit or evaluation.
* Lack of general and marketing direction
and coordination.
External strengths External weaknesses * Value for money perception. * Undifferentiated image.
* Acceptable frequency and route * Old and tired appearance. network. * Lack of loyalty .
* Second choice to other airlines.
Internal opportunities Internal threats * Pro-active, cost-efficient, integrated,
accurate, and coordinated, marketing
* Uncoordinated, ineffective marketing
planning. responses to market changes and * Deteriorating staff motivational levels
perceptions. (affecting customer service levels).
* Providing a unique, differentiated * Designing\producing a product that
product with distinctly unique features. generates less than optimum customer
satisfaction.
External opportunities External threats * Create a unique positioning and brand * Remains a second choice airline.
based on strengths not shared by * Increased competition from other
competitors. carriers.
* Successful in persuading SAA travellers * Comair's main differentiator being price.
to switch to Comair. * A passenger profile characterised by a
* Create a loyal base of frequent business
travellers.
high incidence of price sensitive travellers,
leaving Comair vulnerable to new entrants
* Create a strong positioning for Comair undercutting its fares.
as a defence mechanism against aggressive newcomers.
* Decreased profitability.
275
Comair's old and tired appearance thus unconsciously undermined the rational
importance assigned by business travellers to the airline's low fares, as participants
doubted Comair's ability in providing reliable, efficient, and to a lesser extent, safe
transport.
The empirical research further probed the importance and impact of another
motivational factor - frequent flyer programmes. The research established that SAA's
Voyager programme has been successful in cultivating loyalty amongst members, but
that Comair's Corporate Club has been unable to do the same. However, 40 percent
of the participants did not belong to any frequent flyer programme, thus allowing an
airline other than SAA designing an innovative loyalty programme, ample space for
growth.
7.3 A SWOT ANALYSIS OF COMAIR
The following analysis combines an internal assessment of Comair with certain of the
external perceptions as established by the empirical research.
277
7.4 CONCLUSIONS AND RECOMMENDATIONS
The research findings, coupled with the conclusions contained in the internal and
external analysis of the Comair product, lead to the following three recommendations:
0
The development of a customer-oriented approach in the organisation.
0
The development of a differentiated Comair product.
0
The development of a coordinated market and communications strategy.
The next section discusses each of these recommendations separately, but two
important aspects need to be emphasized before commencement:
0
The importance of process in change. Even if the attitude changes
recommended is eventually attained - in itself a gradual progression, it should
not stop there as marketing is a continuous process of placing the customer
first. The headings of each of the recommendations thus include the word
"development", reflecting the said process approach.
Inputs from other Comair departments. These recommendations are based on
marketing objectives, and should be complemented by inputs from other
Comair departments to ensure effective implementation.
7.4.1 The development of a customer-oriented approach
The next section examines the role of three components in the development of a
customer-oriented approach for Comair:
278
O
Comair management.
O
Comair staff
O
Target travellers.
7.4.1.1 The role of Comair management
Management determines to a great extent the culture of any organisation, and without
the cooperation of Comair's management, any efforts in cultivating a customer-
oriented approach in the airline, will ultimately be futile. The main role and objective
of Comair management should thus be to create an organisational climate which
facilitates the development of such an approach.
A customer-oriented marketing approach positions marketing as an interface between
target travellers and an organisation. The need for Comair (and any other airline) to
adopt such an integrated marketing approach has been advocated comprehensively
throughout this study, and the motivations need not be repeated in this section again.
However, in order to highlight this point even further, the difference between
Comair's current strategy, and the desired approach is illustrated in figure 7.1
279
FIGURE 7.1: THE CURRENT AND PROPOSED ROLE OF MARKETING IN COMAIR
SOURCE: Adapted from IATA.(1995). Marketing Workshop notes, 4-15 September. Geneva.
280
Marketing is presently an important function in Comair, although the organisation's
main focus is on financial performance. An integrated marketing approach does not
negate the importance of financial performance - profitability being the basis of any
successful organisation, but in fact enhances it by steering an airline into a direction
where it can reap long-term financial benefits by concentrating on traveller needs.
Developing such an integrated marketing approach for Comair would be a gradual
process where decisions are increasingly focused on customer needs, and the first step
required of the airline is the design of a mission statement, the contents of which
should be communicated to the staff
7.4.1.2 The role of Comair staff
A customer-oriented approach, if adopted by Comair, should result in changing the
current role of staff, to a committed work force striving to deliver service excellence.
The study recommends the following in order to facilitate such a change:
that staff be viewed as an additional "target market" which the Comair
product has to be marketed to. Being a service product it is important for
employees to believe in the airline and feel motivated, before they can provide
service excellence.
28 I
Incentives (e.g. monthly competitions and raffles) and training programmes
(e.g. BA's "Putting People First" and "Winning for Customers" programmes),
should thus be included in the airline's marketing plan.
that staff, especially front-line staff, be involved in decisions affecting
passengers. They represent the visible "face" of Comair to travellers, and as
such, can provide valuable information pertaining to traveller needs, through
the implementation of a bottom-up information system. The formation of
"quality circles" could be invaluable in creating such a system, but is only
feasible in an environment where employees are highly motivated.
that the possibility of profit-sharing be examined. Profit sharing teaches staff
the relationship between performance and revenue, and whilst gaining their
cooperation in the process, contributes to employee motivation.
that employees be encouraged to be innovative and take responsibility for
traveller satisfaction. Staff should respond immediately when problems arise,
for example, and not wait for complaint letters or phone calls. The existence
of a mission statement is critical in this step, as it provides the framework
within which staff can be allowed to be innovative. Awards or prizes can be
given to staff that "walked the extra mile" and be published in the MN-Netma
(internal Comair publication), thus giving visible recognition to such an
approach.
282
7.4.1.3 Increased awareness of traveller needs
In the development of a customer-oriented approach, it is imperative for Comair to
become an organisation that exceeds in listening to its customers. The following two
steps can assist in achieving such an objective:
O the creation of a marketplace performance unit. Based on the British Airways
example (Prokesch, S. 1995:110), such a unit should be independent from
other marketing functions, and act as a surrogate for customers in assessing
the Comair product, by evaluating the airline according to criteria travellers
employ when judging carriers (e.g. punctuality, service standards, efficiency,
etc.). A monthly report can be issued by such a unit and submitted to
Comair's top management. Besides reporting on key performance indicators,
such a report can also focus on a particular issue such as check-in efficiency,
or it might evaluate the effectiveness of an advertising campaign. Where
possible, Comair performance statistics can be compared with those of
competitors. A marketplace performance unit would provide Comair with a
"reality check" regarding its service, and also reflect any positive or negative
trends.
the creation of a customer relations department in Comair. For an expensive
service product with roughly 700 000 annual customers, such a department
is essential.
283
Apart from having a dedicated person or persons investigating and answering
customer complaints promptly and efficiently, such a department can provide
Comair with invaluable information regarding its product and service. British
Airways's Care Line, and its efficient complaint handling system, is a good
example which can be copied by Comair. Such a Comair customer relations
department should liaise with the marketplace performance unit, which can
research consistent complaints received .
7.4.2 The development of a differentiated Comair product
A differentiated airline product is the basis for a strong market positioning, and the
following recommendations could contribute in changing Comair's current "old and
tired" appearance, whilst developing a unique airline product :
Comair's aircraft appear to be the major contributor in creating an old and
tired appearance of the airline, and the options of acquiring new aircraft or
upgrading the interior of the present fleet, need to be investigated.
Considering the tremendous cost involved in the purchase of new aircraft, and
the fact that Sunair's even older aircraft did not project the same image, the
latter is probably a more practical solution. Other factors that need to be
considered in redesigning the aircraft interior are the colour scheme (certain
colours project a more business, stylish, and professional image) and leg space
(space on Comair aircraft should compare favourably with those of
competitors).
284
Comair's planned business class should be subject to the same considerations.
that new technologies such as ticketless travel, Internet bookings, and so
forth, be investigated by Comair. These innovations have come to stay and
the sooner implemented by Comair, the better.
that the performance of especially front-line staff be reassessed, and a training
programme be employed to raise efficiency. Comair's small training
department (its current focus mainly being to teach airport staff basic
performance skills), need to be developed into a unit that cultivates service
attitudes, and should thus include customer service programmes for managers.
that a more rigorous process of selecting especially front-line employees be
instituted. The ideal would be to include psychological testing and group
exercises in the current selection process.
that as an audit "moments of truth" be identified in the Comair experience,
evaluating both the service and technological components of these. Moments
of truth are individual interaction events which a traveller progresses through
when flying Comair, and would range from the booking "moment", check-in
"moment", to the baggage collection and customer service "moments". The
marketplace performance unit can be employed to measure these moments
against traveller expectations.
285
7.4.3 The development of a coordinated market and communications strategy
In order to facilitate a coordinated market and communications strategy for the
airline, which will communicate Comair's market positioning effectively and
consequently succeed in building a brand, the following suggestions are offered:
O
that Comair's marketing department need to be restructured to include a
marketplace performance unit (independent of other marketing functions), a
customer service department, as well as a brand management responsibility.
that marketing plans are developed to coordinate and evaluate all marketing
activities.
that the objective and task method is employed in determining marketing
budgets. If it is decided that Comair needs to increase its top of mind
awareness in the marketplace, for example, a goal should be established (e.g.
30 percent top of mind awareness) and the costs in achieving this objective
calculated. The advertising budget should then be based on these calculations.
that the communication strategy be less price-centred and shift its focus to
communicate the unique benefits (which could include price, but not as a sole
differentiator) of the Comair product (based on previous suggestions).
that the possibility of separate branding for Comair's turboprop operation be
examined.
286
Many business travellers view the safety of these aircraft with suspicion, and
confuse Comair's smaller domestic and regional routes where they are used
(being the most suitable aircraft), with the airline's jet routes. Thus, separate
branding could combat any negative perceptions that could arise from
Comair's mixed fleet.
O
that a loyalty programme for travel agents be developed. Individual travel
agents should be able to accumulate credits, based on Comair bookings, which
could be exchanged for rewards.
By implementing the above recommendations and following the integrated marketing
approach described in this study, Comair will be in a position to capitalise on the
opportunities offered by a deregulated market environment .
LIST OF REFERENCES
Airline Business. (1994). News analysis: Brussels state aid fall-out. September:29.
Airline Business. (1994). Who is lean and mean? November:22.
Airline Business. (1994). The loyal family. December:20.
Airline Business. (1995). Paperless journey. January:18.
Airline Business. (1995). Airline Odyssey. August:26.
Airline Business. (1995). Regulation - the great GATS. September:81-82.
Airports Company. (1994). Airport News. September:4.
Allvine, F.C. (1987). Marketing: Principles and practices. New York: Harcourt Brace
Jovanovich.
Baker, M.J. (1987). The marketing book. London: Heineman.
Belch, G.E., and Belch, M.A. (1990). Introduction to advertising and promotion
management. Homewood, Ill.: Irwin.
Bennett, J.A. (1995). Managing tourism services. Pretoria: J.L. van Schaik.
Boone, L.E., and Kurtz, D.L. (1992). Contemporary marketing. Orlando: Dryden Press.
Bromley, I. (1995). Loyalty through product relevance. Unpublished document, April.
Bureau for Information. (1990). This is South Africa. Pretoria.
Bureau for Information. (1995). South African profile. Pretoria.
Business Day. (1994, September 5). US bars entry of nine countries after safety probe.
5
Business Day. (1994, September 26). SAA technical approved by overseas authorities.
6.
Business Day. (1996, January 5). SAA to introuce new check-in system soon.
Business Day. (1996, February 8). Skosana joins SA Express.
Business Day. (1996, February 12). British Airways pays out to settle discrimination suit.
Business Report. (1995, November 6). Boeing to back RDP after SAA's jet orders.
Business Report. (1996, January 17). Plan to fly Phoenix and Avia out of the ashes.
Butler, J. (1993). Human factors in air travel. Review. March:17.
Central Statistical Services. (1994). Demographics 1993. Pretoria.
Central Statitistical Services(a). (1995). October 1994 Household Survey. Pretoria.
Central Statistical Services(b). (1995). Statistics in brief Pretoria.
Ceronie, B.A. (1994). Speech: Strategic Airline Technologies. Aviation and Airport
Management Conference, Indaba Hotel, 14 and 15 March.
Citizen. (1996, January 17). No-ticket travel now on SAA.
Coetzer, J. (1994). Passasiers, rederye boet vir HOP. Finansies en Tegniek. 2
September:23.
Comair. (1996, January). In-house statistics. Kempton Park.
Cowell, D. (1988). The marketing of services. London: Heineman.
Cravens, D.W. (1991). Strategic marketing. Homewood, Ill.: Irwin.
De Chernatony, L., and McDonald, M.H.B. (1992). Creating powerful brands. London:
Butterworth and Heineman.
De Wet, G. (1995). Comair presentation - 4 December. Kempton Park.
De Villiers, A. (1994). New turn for Turn strategy. SAA News. August:1.
Department of Civil Aviation. (1996). Civil aviation statistics. Pretoria.
Dillon, W.R., and Madden, T.J., and Firtle, N.H. (1993). Essentials of marketing
research. Homewood, Ill.: Irwin.
Doganis, R. (1991). Flying off course. London: Harper Collins Academic.
Du Plessis, M. (1994). Automated take-off. Finance Week. 24 March:14.
Finance Week. (1993). Airline supplement. 26 August:7, 10, 22.
Financial Mail. (1995). Insert: Swoop to conquer. September:7, 8, 11, 22, 37 .
Financial Mail. (1996). Up for grabs. January.
Galeforolwe, J. (1996). Personal reference - 4 January. Kempton Park.
IATA. (1994). Annual report. Geneva.
IATA. (1995). IATA, what it is. and what it does. Geneva.
IATA. (1995). Marketing Workshop notes. 4-15 September. September, Geneva.
Jackson, J. (1994). Time bombs on the tarmac. TIME. 7 February:49.
Kotler, P. (1994). Marketing management: Analysis_ planning, implementation. and
control. Englewood Cliffs, N.J.: Prentice Hall.
Kotler, P., and Armstrong, G. (1991). Principles of marketing. Englewood Cliffs,
N.J.:Prentice Hall.
Loots, B. (1994). Speech: Strategic planning for airports. Aviation and Airport
Management Conference, Indaba Hotel, 14 and 15 March.
Louw, N.S. (1994). Die bemarking van lugvaart passasiersdienste in Suid Afrika na
deregulering. Unpublished Honours thesis, UNISA.
Lovelock, C. (1991). Services marketing. Englewood Cliffs, N.J.: Prentice Hall.
Market Research Africa. (1992). White Sociomonitor. Johannesburg.
Martins, J.H., and Loubser, M., and van Wyk, H.de J. (1996). Marketing research: A
South African approach. Pretoria: UNISA Press.
Marx, S., and van der Walt, A. (1989). Marketing management. Johannesburg: Juta and
Co.
Marx, S., and van der Walt, A. (1993). Bemarkingsbestuur. Johannesburg: Juta and Co.
Mazwai, T. (1994). SA Express: Cherry on the top. Enterprise. June:12, 13.
McCarthy, E.J., and Perreault, W.D. (1993). Basic marketing. Homewood, Ill.: Irwin.
McDonald, M.H.B. (1989). Marketing plans: How to prepare them, how to use them.
Oxford: Heineman.
Meyer, J.R., and Oster, C.V., and Clippinger, M. (1984). Deregulation and the new
airline entrepreneurs. Cambridge: MIT Press.
Middleton, V.T.C. (1993). Marketing in travel and tourism. Oxford: Butterworth and
Heineman.
Middleton, V.T.C. (1994). Marketing in travel and tourism. Oxford: Butterworth and
Heineman.
Nasionale Tydskrifte. (1993). Traveltrak. Johannesburg.
Natal Witness. (1996, January 22). SAA gets serious about flights for non-smokers.
Nel, N. (1995). Robust results. Megalife. April:70.
Prokesch, S. (1995). Competing on customer service. Harvard Business Review.
November 101 - 112
Rapp, S., and Collins, T. (1990). The great marketing turnaround. Englewood Cliffs,
N.J.: Prentice Hall.
SATOUR. (1993). Annual report. Pretoria.
SATOUR(a). (1994). International travel to South Africa - Summary findings. Pretoria.
SATOUR(b). (1994). Projection of overseas visitors. Pretoria.
SATOUR. (1995). South Africa as an international tourist destination. Pretoria.
Shaw, S. (1990). Airline marketing and management. Southport: Pitman.
South African Airways. (1996). SAA Public Relations information_ January 1996.
Johannesburg.
South African Development Bank. (1990). Economic statistics. Johannesburg.
South African Institute for Race Relations. (1995). Fast Facts. April.
South Africa (Republic). (1987). White paper on privatisation and deregulation. Pretoria.
South African Advertising Research Foundation(a). (1994). All Media and Product
Survey. Johannesburg.
South African Advertising Research Foundation(b). (1994). Living Standard Measure.
Johannesburg .
Stanton, W.J., Etzel, M.J., and Walker, B.J. (1991). Fundamentals of marketing.
London: McGraw-Hill.
Star. (1996, February 8). It's all right when you own the planes.
Star. (1996, January 5). Africa's failing state-owned airlines need to unite.
Stengel, R. (1995). A land singing twin anthems. TIME. 8 May:40.
Sunday Tribune. (1995, December 10). Sunairs' debts to fly away.
Sunday Finance. (1994, February 6). Just how far do ANC-Thebe links go?.
Swazi Observer. (1995, November 12). British consultants to help Royal Swazi.
TIME. (1995). Vamping for new visitors. 25 September:20.
Times Media Limited. (1994). South African Business Research Evaluation (SABRE).
Johannesburg.
United Airlines. (1995). United World. Spring:2.
United Nations. (1992). Civil Aviation statistics. New York.
University of Pretoria. (1992). Comair Market Survey. Pretoria.
Volksblad. (1995, December 8). Mbeki kondig veldtog van privatisering aan.
Wells, A.T. (1994). Air transportation: A management perspective. Belmont:
Wadsworth.
Wheelen, L.T., and Hunger, J.D. (1989). Strategic management and business policy.
New York: Addison Wesley.
World Airnews. (1994). Airline directory. August:53 -77.
World Airnews. (1996). Comair looks ahead as it celebrates its golden anniversary.
January:37.
World Bank. (1996). World Bank Atlas. Washington D.C.
O.No.1 -6 DSI 32/95 AIRLINE SURVEY
CHECKED: (EVENING):
IF YES TO ANY, CLOSE INTERVIEW
0.1 How many local air trips within South Africa have you made for business reasons during the last 12 months?
(NOTE: A DIRECT RETURN. TO AND FROM A DESTINATION IS REGARDED AS ONE AIR TRIP. STOP•OFFS ARE REGARDED AS MULTIPLE AIR TRIPS E.G. JOHANNESBURG TO DURBAN, PE TO CAPE TOWN. CAPE TO JOHANNESBURG EQUALS THREE AIR TRIPS. How,frioa/ piaa.siike fugfri.se fm,f u binre Sukf-Afrika vir besigheidsredes onderneem gedurende die afgelope 12 rnaende?
NAME OF RESPONDENT:
ADDRESS:
DATE:
TIME TAKEN: MINUTES
TELEPHONE No. (DAY"):
3.4CKCHECKED:
QUOTA:
AREA COMPANY SIZE FLOWN COMAIR AT LEAST ONCE IN LAST 12 MONTHS
Gauteng Durban Cape
Town
SOHO/smalyredium
1-100 empl
Large
101+ enrol.
Corporate
10004- empl
Yes No
12-1 2 10.1 2 3 11-1 2 3
INTRODUCTION Good morning/afternoon. My name is from Decision Surveys International. We are conducting a survey on local
business air travel May I please have 20 minutes of your time o answer a few questions?
Goeiernre/-rniddaig_ My naam is van Decision Surveys Interne7bnal. Ors is besio met 'n opname oor plaasli4e luign9ise vir
Ncksigheids.doeleirdes. Mag ek assebfief 20 minute van* u yd in bestag neorn om 'n paar vrae fe. beentwoord?
An? you or any member of your immediate family or any c:os,l, friends, employed in any of the following types of business?
Is u of Re/ lid van u onrric'defilne farrilie of eniqe intierne vnende wericsaarn ty enige van die t-orgende tipos Dosignede?
YES NO
Market research/marknavorsing ■
Aciveilisingi,cerlame
An airiinern Luaredety
Travel
consultancy/rReisa:wn.'skan..'kc,ns ; hint
LS 13-1
6-10 2
11-15 3
16.20 4
21-25 5
26,30 6
Other (specify)
-> CLOSE INTERVIEW
-> CONTINUE, GO TO Q2
0 2 When you travel by air within South Africa for businestr, reason, what class do you usual:y travel? ffe,r, rfeer u vir besigheidsredes binne Suid -A`rika per luc !e s, wa:Ter k;as ro,S gewoon;ik?
Economy
- Eitirornie
14 - i
Business 2
* Bosig.'leil
Other (specify)
- A./der (spesifiseer)
-> CONTINUE, GO TO Q.3a)
-> CLOSE INTERVIEW
W/O:
INTERVIEWER No.: 7-9
Q.3b)
•
AIRLINE SURVEY - 2 -
A 091 32/95
0.3a) Which domestic airlines do you know of or have ever heard or? (RECORD FIRST MENTION THEN OTHER MENTIONS)
Walter binnelandse Iugdienste/lugrederye ken u of van waver het u al ooit gehoor?
SHOW CARD 1: Which of these domestic airlines do you know of or have heard of? (RECORD THOSE NOT MENTIONED IN (3.10)
Walter van hierdie binnetandse lugdiensTe ken u of van wafter het u gehoor?
DOMESTIC AIRLINES
0.3a) SPONTANEOUS
Q.3b) AIDED
FIRST MENTION
OTHER MENTIONS
Comair 15.-1 16-1 17-1
Phoenix Airways 2 2 2
South African Airways (SAA) 3 3 3
SA Express 4 4 4
Sun Air 5 5 5
Charter fligh ✓ 6 6 6
Other (specify) o Ander (speslfiseer)
None/don't know o Geen/weel nhio
9 9 9
0.43) When you travel by air within South Africa for business reasons, which airline do you usually travel with? Wanneer u per lug binne Suid-Afrika reis vit besigheldstedes, met watier lugdiens reis u gewoonllk?
0.4b) Still thinking of your business travel within South Africa, which other airlines have you used clueing the last 12 months? (CHECK QUOTA) o .5,e,scrs gedagrig aan u sakereise binne Suid -Afrika. wafter ander lugdiens-re her u gedurende die afgelope 12 maande gebruik?
RECORD ONE ANSWER 0.4.0 Q.4b)
Comair 16-1 19-1
Phoenix Airways 2 2
South African Airways (SAA) 3 3
SA Express 4 4
Sun Air 5 5
Charter flights 6 6
Other (specify)
o Ander (spesifiseer)
No usual airline
o Geen gebruieike lugdiens vie 9 9
-> CKECX QUOTA
AIRLINE SURVEY - 3 -
A DSI 32/8.5
0.5 To which places in South Africa and neighbouring countries did you travel by air during the last 12 months?
Na w-after plekke in Sold-Aft-4Q en buurstate net u per lug gereis gedurende die afgelope 12 maande?
IFICSDIM HOLIDAY
Bloemfontein 20-1 22-1
Cape Town 2 2
Durban 3 3
East London 4 4
Gtsorge 5 5 0
Johannesburg 6 6
Kimberley 7 7
Manzini 8 8
Port Elizabeth 9 9
Richard's Bay 21-1 23-1
Skukuza 2 2
Windhoek/Namibia 3 3
Harare/Zimbabwe 4 4
Maputo/Mozambique 5 5
Victoria Falls 6 6
Other (specify)
. Ander (spesifiscer)
0.6 Approximately how many people are employed full -time by this company?
• Ongeveer hoeve•e/ mense is wityds in diens by hierelie maatskappyr?
ONE ANSWER
1-100 24-1
101-999 2
1000+ 3
ASK ALL:
If you had to travel by air on a short trip (up to 1 hour). exclusively for business what are all the factors that would make you choose one, specific domestic airline instead of any other? (PROBE THOROUGHLY) Why do you say that? As u vir it korf rit (tat en met 1 uur) uitsluidik vir besigheid per lug moos reis, war is al die faki0re taaitt u Ben, spesifieke binnelandse No:liens sal laa? kies in plaas van enige ander? Waarom se u dir?
25-27 1
And if you had to travel by air on a longer trip (over 1 hour), exclusively for business what are all the factors that would make you choose one specific domestic airline instead of any other? (PROBE THOROUGHLY) Why do you say that? En as u vir 'n fancier nt (!anger as 1 uur) uitsfuitlik vir besigheid per lug moss reis, war is al die faktore wat u eon sposifieke binnelandSe luqdiens sal feat tries in plaas vat 'n ander? Waarom se u Chi
28-30
AIR LINE SURVEY - 4 - A OS1 32/95
SELF-COMPLETION:
0.8a) Here are the names of various domestic airlines. Which of these domestic arlines would you say have/are
(ROTATE ORDER)
STARTNC KANT .71" A T E_.+117-NT c
COM MR p407 N
AZOV'', 'CS
t AA
AIR WA YS
S A
EX PREZ
SUN AM
NONE DONT KNOW
Best/ reasonable prices 31-1 2 3 4 5
Most expensive prices 32-1 2 3 4 7 5 6
• Good value for money 13-1 5 6 7
Good special offers/discounts 34-1 2 3 4 5 6
Convenient flight times 35-1 2 3 4 5 6
Frequent flights 36-1 3 4
Goon safety records/sale 37.1 2 ..
Modern aeroplane.; 38-1 2 3 4 5 6 7
Well-maintained aircraft 39-1
Punctual/arrive on time 40-1 2 3 4 5 6 7
Efficient and reliable reservation system 41-1 2 3 4 5 5 7
24 hoer reservation sivntero 42-1 2 3
Fast and efficient check-in system 4
Efficient and reliable handling of lucgaoe 44-1 2 3 4 5 6
Friendly/he:pi:WI ground staff 45-1
Friendly/helpful cabin crew 48-1
Personal service/make you feel special 47-1 2 3 4 5 5 7
Neat and presentable cabin c ,ew 48.1 2 3 4
Informative; knowledgeable crew 4-1 2 3 4 5
Cabin crew that acknowledge trequent travellers 50-1 2 3 4 5 ..,
Comfortable/relaxed filohts 51.1 2 3 4
Good food on flichts 52-1 2 3 4 5 6 7
Hot OISSOS S3-1 2 3 a 5 6 7
Free drinks 54-1 2 3
Real crockery and cutlery ---.
55-1 2 3 4 e
5 6 7
Planes with attractive interiors 56-1 2 3 4 S
6 7
Enough legroom between seats 57-1 2 3 4 5 6 7
Good incentive packages for frequent flyers 58-1 2 3 4 5 6 7
Access to lounge facilities for frequent flyer's —...
51-1 2 3 4 5 6 7
_...., f?rio■ily w aitin g ovstem for frequent flyers 5:5-1 2 3 4 5 6 7
Special gifts for frequent flyers 61.1 2 3 4
--.
5 6 7
Acom;s to seat upgrade for frequent flyers 62-1 2 3 4 5 6 7
Additional baggage allowance for frequent flyers 63-1 2 3 4 5 6 7
Separate check in for frequent fl,, , ers.:. 54-1 2 3 4 5 5 7 .■•■■•••■••••.
Rapid check-in process for frequent flyers
CI.
65-1 2 3 4
--.0
5
■
5 7
AIRLINE SURVEY A OSI 32/95
SELF-COMPLETION:
0.8;1) (ROTATE ORDER)
• Hier is die name ‘14 rs Ir ie oinneianc's ;ugdienste. Walter van hierdie binnelandse lugdienste sou u s6 het/is 7
ST A Pl'IN ,.; P71ST STA IEM ENTS
COAA at 1-14OE.: CC
AIRWA YS
S AA
AmwAYS SA
EN PRESS
51-1N AIR
NONE FONT , N OW
Seve/bii;i;:e pry-se 31-1 2 3 4 5 6 7
Duurste pry 32-1 2 3 4 5 5 7
Goole waarie vir Told .713-1 2 3 4 5 6 7
Goole sposi.afe aanDiadingetatiag rise
GtIfirAlirs, vleyrtyo
34-1
35-1
2
2
3
3
4
4
5
5
6
6
7
7
v4.71/vuicrao v/u3lt-e 36-1 2 3 4 5 5 7
Goole voillqoodsrokort:1;/v9llig
Modeme 4i ie
37.1
33-1
2
2
3
3 ... ,....
4
4
5
5
6
5
7
7
Wiegtuig goer, instand ehou 39.1 2 3 4 5 6 7
Sripro:lkiarrivswar .f."-oryds 40-1 2 3 4 5 6 7
41-1 2 3 4 5 6 7 Doer. nde en bwrcubare bes rektngsteise;
24 uur besprekingstelsel 42-1 2 3 4 5 6 -
7
Vinnige en doeftfvffenee aartrne!Cingstelset 43-1 2 3 4 5 6 7
Doe.tn7!ffenle en Detroubare tiantering van bagasie 44-1 2 3 4
Vrienclelike/hulpvaareige grondper3vnee; 45.1
vriondelike,thulpvaardige k- •uiternarniog 45-1 2 3
Perscdnlike diens/1-3a• jou soesiaal %roe! 47.1 2 3 4 5 5
Ne;iese en festsoon/lAre kajuiT.orranning 48-1
ir 9' • ' - ,lciir:C.4. e p:ernannin 49-1 2
9e•'eeid refs
Warrn otes 53-1 2 3 4 5 6 7
G•at•s drankies 5-1.-1 2 3 4 5 6 7
Ecrtv brEw+irwafr en et? tgerei 55-1 2 • 3 4 5 6 7
VII ie met ean&79;c110-, irnvriours 56-1 2 3 4 5 6 7
Genooc treenspasie ttissen si4olekke 57-1 2 3 4 5 6 7
Goeie aens,00ringspakketee vir mense wat gereeld vlieg 56-1
Toegafig tot .siticamerfasifite:te vir mense wat Conch vlieg 531 2 3 , 4 5 6 7
Priontert wag! ̂telsels vir mense wat meld Oied 641 2 3 4
Sposialo goskerAo vir roens-,? wat gsreeld vlieg 51-1 2 3 4 5 6 7
Toegang tot srUplek opgraderfng vir mense wat geeld vtieg
62-1 2 3 4 5 6 7
Adclisione1e bagaste toegeraar vir monse war aorooki lifie9 63-1 2 3 4 5 6 7
4/5011derlik0 aanrnolding vir menso wa! com.eld vlie9 64-1 2 3 4 5 ..-
6 7
Vinn igft aarorrvid;ngsorses yin trense wit goreold viieg 65-1 2 3 4 5 5 7
AIRLINE SURVEY - 5 - A OSI 32/95
laBb)
SELF-COMPLETION: Could you Indicate which of these airlines portray the following characteristics?
Kan u aandui rearriN• van hierdie tuadinnsre die volgonde eienskappe openbaar?
COMAIR VHOENDC A2AVA Y'S
S AA
ALIM AY
SA E( Fms
',CU?: :4 OS P. 1:0N 7
5.50vi
Established and reliable
Gevestig en Defroubaar 66-1 2 3 4 5 6 7
For businessmen
Vir sakemanne
57-1 2 3 4 5 6 7
Used by successful peop:e Gftbruik deur suk.s.Rsvolle mons.,
66-1 2 3 4 5 6 7
For holiday/leisure travei
Or vakensie/ontspanningsreis
69-1 2 3 4 5 6 7
For older people
Or ouer manse
70-1 2 3 4 5 6 7
For yuppies
Vir 'yuppies °
71-1 2 3 4 5 6 7
For the discerning traveller Vir die simipsinnige reisiger
72-1 2 3 4 5 6 7
For the down-to earth traveller not needing frills or die nugtere/realistiese rein der war nie tier lanrynOies nodig het nie
73.1 2 3 4 5 6 7
My type of airline
My ffpe lugdiens
74-1 2 3 4 5 6 7
A leader in its field 'n Leior op sv gebied
75-1 2 3 4 5 6 7
Old and tired appearani
Ou en rrioe voorfroms 4
76-1 2 3 4 5 6
-..,■.1
7
Is upmarket
Is 'n hoer k!as
77.1 2 3 4 5 6 7
ts conservative Is konserwaOef
78-1 2 3 a 5 6 7
Is too small
is re /dein
79-1 2 3 4 5 6
80 - ®
When travelling economy class for business in South Africa. different people consider different things important in airline travel.
I am going to ask you which factors you consider more important.
14'anneer manse ekonornieklas rein vir besigheid in Surd-Afrika, beskou verskilIonde rnense verskillendo dingo as belangrik in lugreis6.
Ehr gaan vir v vre wetter faktore u as moor belanarik beksou.
CONSIDERING PRICE SHOL CARD 911: (HAND RESPONDENT 9 CHIPS) Please distribute these 9 chips across the following price factors in accordance to the importance of each. The more chips you allocate
to one factor the more important that factor is to you.
(FILL IN THE NUMBER OF CHIPS ALLOCATED TO EACH FACTOR ON THE GRID PROVIDED) Versprei asslabii5e h;ericyje 9 skyises oor die volgeinde prysfaidore na gelang van die belargrikhfici van eikeen. Hoe meer skyges u can 0917
fakfor /oaken, hoe belangniuir is daardie faktor vir u.
CONSIDERING FLIGHT SCHEDULES.L5FIQW CARD 90): (HAND RESPONDENT 7 CHIPS) Please distribute these 5 chips across the following flight factors in accordance to the importance of each. The more chips you allocate to one factor the more important that factor is to you. ■ (FILL IN THE NUMBER OF CHIPS ALLOCATED TO EACH FACTOR ON THE GRID PROVIDED) Versprei assebliof hierthe 5 skyhes oar die volgende viuglaktore na gelang van die belangrikheid van elkeen. HOP moor skyfies u a•n eon
faktor foe ken, hoe beiangriker is daardin faktor vir u.
CONSIDERING 1-1.JEAZAFTSF40tvCARE) :
(HAND RESPONDENT 7 CHIPS) Please distribute these 9 chips across the following aircraft factors in accordance to the importance of each. The more chips you allocate
to one factor the more important that factor is to you.
(FILL IN THE NUMBER OF CHIPS ALLOCATED TO EACH FACTOR ON THE GRID PROVIDED) Versprei assebilial hiendie 9 sky 6es oar die volgende vliegtuig faktore na gelang van the belangrikhoid van .olkeen. Hoe moor skyfies u can eon faktor tneken, noe belangriker is daardle faktor vir u.
1 1 .r.7-1 I
AIRLINE SURVEY - 8 - B DS! 32/95
0.9d)
°
CONSIDERING GROUND SERVICE (SHOW CARD 9c2a: (HAND RESPONDENT 11 CHIPS) Please distribute these 11 chips across the following ground service factors in accordance to the importance of each. The more chips
you allocate to one factor the more important that factor is to you.
(FILL IN THE NUMBER OF CHIPS ALLOCATED TO EACH FACTOR ON THE GRID PROVIDED)
Versprel asseblief hierdie 11 skyfies oor die volgende grondcfiens faktore na gelang van die belangrikheid van elkeen . Hoe moor skyfies
aan eon faktor tooken, hoe belangriker is dawdle Isktor vir u.
CONSIDERING CABIN CREW (SHOW CARD 9e): 0.9e)
(HAND RESPONDENT 11 CHIPS) Please distribute these t 1 chips across the following cabin crew factors in accordance to the importance of each. The more chips you
allocate to one factor the more important that factor is to you.
(FILL IN THE NUMBER OF CHIPS ALLOCATED TO EACH FACTOR ON THE GRID PROVIDED) Versprei asseblief hierdie 11 skyfies oar die volgende kajuitbemanning fafrforn negate/1g van die Deiangrikheid van ellreen. Hoe meerskyfies
u sew eon faktor toeiten, hoe belangriker is daardie faldor vir u.
CONSIDERING IN-FLIGHT SERVICE (SHOW CARD 91): 0.91) (HAND RESPONDENT 11 CHIPS)
Please distribute these 11 chips across the following in-flight service factors in accordance to the importance of each. The more chips
you allocate to one factor the more important that factor is to you.
(FILL IN THE NUMBER OF CHIPS ALLOCATED TO EACH FACTOR ON THE GRID PROVIDED) Versprei asseblief hierdie 11 skyfies oor die volgende diens-in-vlug faktore na gelang van die Delangnkheid van elkeen. Hoe meer skyfies v san een rektor toeken, hoe belangdker is daardie factor vir u.
CO N SIDERING
0.9g) (HAND RESPONDENT 5 CHIPS) Please distribute these 5 chips across the following cabin interior factors in accordance to the importance of each. The more chips you
allocate to one factor the more important that factor is to you. (FILL IN THE NUMBER OF CHIPS ALLOCATED TO EACH FACTOR ON THE GRID PROVIDED) Versprei asseblief hierdie 5 skyfies oor die volgencre kajuitinterieur faktore na gelang van die belangrikheid van elkeen. Hoe meer skyries u aan een faktor tooken, hoe belangriker is daardie fakTor vir u.
CONSIDERING FREQUENT FLYER INCENTIVES (SHOW CARD 9h): 0.9h) (HAND RESPONDENT 17 CHIPS)
Please distribute these 17 chips across the following frequent flyer factors in accordance to the importance of each. The more chips you allocate to one factor the more important that factor is to you.
(FILL IN THE NUMBER OF CHIPS ALLOCATED TO EACH FACTOR ON THE GRID PROVIDED) Verr.,prei asseblief hierdie 17 siryfies oar die valgende mense-waNgereeld-vlieg fektore na gelang van die belangrikheid van oilmen. Hoe meer skyfles u aan een faktor toeken, hoe belangnkor is daardie Mirror vir u.
CONSIDERING ALL THE FACTORS (SHOW CARD 94): 0.9i) (HAND RESPONDENT 17 CHIPS)
Please distribute these 17 chips across the following factors in accordance to the importance of each. The more chips you allocate to one factor the more important that factor is to you. (FILL IN THE NUMBER OF CHIPS ALLOCATED TO EACH FACTOR ON THE GRID PROVIDED) Versprei asseblielhiendie 17 skyfies oor die volgende faktore na gelang van die belangrikheid van elkeen. Hoe meer skyfies u aan een rektor toeken, hoe belangriker is daardie fairtor vir u.
PRICE/PRYS (9 CHIPS)
Best/reasonable prices
o Bogie/B:1,11;e pryse
Most expensive prices
. Duurste pryer
Good value for money
* Goele waarde vir geld
Good special offers/discounts
* Gook* spesiale aanbiedinge/ sfslagpryse
FLIGHTS/VLUG (7 CHIPS)
Convenient flight times
Gerieflike vlugtys
Frequent flights o Vseivtddige vlugle
Punctual/arrive on time
o Stiptefik/arrivaer betydS
14
7
8
9
10
11
12
13
AIRLINE SURVEY - 7 - B DSI 32/S8
Cont/...
AIRLINES LUGREDERYE (7 CHIPS)
Good safety records/safe * Goeie veilieneidsrekords/veibe
Modem aeroplanes o Modeme Wegnile
Well maintained aircraft
Woeful.; good instand gehou
GROUND SERVICE/GRONDDIENS (11 CHIPS)
Efficient and reliable reservation system
6 Occe/rreffende en beoubarra
besprokingstelsel
24 hour reservation system
* 24 uur besprekingstelsel
Fast and efficient check-in system o Vinnigo en dog ttAtffende
aanmerdingsrelsel .
Efficient and reliable handling of luggage
0 Doeltroffende en batroubare hanrefing van bagasie
Friendly/helpful ground staff 0 Vriendelike/hulpvaardige grondpersoneel _
CABIN CREW/KAJUITBEMANNING (11 CHIPS)
Friendly/helpful cabin crew 0 Vriendelike/hulpvaardige ksjuitbemanning
Personal service/make you feel special
o Persoonlike diens/laat jou spesiaat vce/
Neat and presentable cabin crew
o Neffiese en faesoenlike kajultbemanning
Informative/knowledgeable crew
o Ingeligle/kundige bernannina
Cabin crew that acknowledge frequent travellers
0 Xajuirbremanning wet erkenning gee aan manse wet gereeld reis
15
16
17
18-19
20-21
22-23
24-25
26-27
28-29
30-31
32.33
34.35
36-37
IN-FLIGHT SERVICE/IN-VLUG DIENS (11 CHIPS)
Comfortable/relaxed flights
o Gerieflike/ontspanne Aire
Good food on flights . Goele kos op vlugte
Hot meals
0 Warr etes .
Free drinks * Gratis &ankles
Real crockery and cutlery
0 &re brookware en eeterai
CABIN INITERIOR/KAMITINTERIEUR (S CHIPS)
Planes with attractive interiors 0 Weeettile met aantreklike interieurs
Enough legroom between seats
o Genasg asenspasie russen sitplekke
38,39
4041
42-43
44-4.5
46-47
48
49
AIRLINE SURVEY - 8 -
8/C DS! 32/95
Coati—
FREQUENT FLYER MENSE WAT GEREELD VLIEG (17 CHIPS)
Good incentive packages for frequent flyers
o Goe;e aansperingspakket vir mense wat gereeld vlieg
Access to lounge facilities for frequent flyers a Toegang tat sitkamerfasIlltelte vir mense wat gereeld vlieg
Priority waiting list system for frequent flyers o Prforitert waglys-stelsel vir mense wat gereeld vlieg
Special gifts for frequent flyers
* Spesiale geslienke vir mense waf gereeld vileg
Access to seat up-grade for frequent flyers
a Toegang tot sitplek opgradering vir manse wet gereeld vlieg
Additional baggage allowance for frequent flyers
a Addlslonele bagasie tbegelaat vir manse wat gereeld vtieg
Separate check-in for frequent flyers
a Afsonderfike aanmelding vir mense wat gereeld vlieg
Rapid check-in processing for frequent flyers
* VInnige aanmeldingsproses ',It* moose wat gereeld vlieg
52-53
54.55
56-57
5859
60-61
62-63
64-65
ito
ALL FACTORS/ALLE FA/(TORE (17 CHIPS)
Price/special offers 0 prys/spesiale aanbiedinge
Right schedules
- vlugskedules
The aircraft
a Die Wiegtufg
Ground service
a Gronddiens
Cabin crew
a Kajuifix+manning
In-flight service
0 Diens in-vlug
Cabin interior
o Kajuitinfeneur .
Frequent flyer incentives o Aansporings vir mense wet gereeld vlieg
0.10a) Which incentive programmes for frequent flyers do you know of or have you heard of? 0 Wafter aansporingsprogramme ken u vir moose wet gereeld vlieg, of van wetter hot u gehoor?
0.10b) Which, if any, are you a member of?
Van waner, inctien enige, is u 'n lid?
0.10a) 0.10b)
SAA Voyager Club 23.1 24.-1
Comair Corporate Club 2 2
Other (specify) a Ander (spesifiseer)
None
o Germ 9 6
7-8
9-10
11 - 12
13-14
15-16
17-18
19-20
21.22
AIRLINE SURVEY - 9 - C OSI 32/95
SHOW SHUFFLE CARDS 0.11
When people consider incentive programmes for frequent flyers, different things are important to different people. Which of these factors
is the MOST IMPORTANT to you? Can you sort them in order from the most to the least important? (NO EQUAL RANKINGS)
Wannear men se aan soon nosprograrrinte oorweeg vir mense war gereefd vtieg, is verskillende dingle balangrik vir verskillende mense. Wafter
van hierdie faktore is vir u die HEEL BEZANGRKSTE? Kan u hulle rangskik in voIgorde van die heel belangnkste tot die mins belangrikste?
Access to lounge facilities * Tcxegang tot sitkamerfasiliteite
Priority waiting list system * Prionteit waglysstelsel
Access to seat up-arade
* Toagang tot sitplek opgraderfng
Additional baggage allowance
* Addisionele begasie toegeleat
Separate check-in
* Alsonderlike aanmelding
Upgrades on rental cars
* Opgradering op gehuurde motors
Special parking areas with shuttle services
* Spesiale parksterareas met pendeltuigdiens
A bus service to and from airports and main city centres <. 'n Busdiens na en van lughavvens en middestede
Special gifts for frequent flyers Spesiale geskenke vir mense wet gereeld vficag
0.12a) Are you aware of the price of a return ticket between Johannesburg and Cape Town on SAA economy class?
Is u bewus van die prys van 'n rettaarkaartile met SAL se ekonomieklas tussen Johannesburg err Kaapstad?
25
26
27
28
29
30
31 .
32
33
Yes 34-1
* Ja
No 2 ., Nee
-> GO TO 0.12b)
-> SKIP TO 0.13
O.12b) How much is a return ticket on SAA economy class between Johannesburg and Cape Town? Hoeveel is 'n retoerkaaro'ie met SAL ekonornieklas tussen Johannesburg en Kaapsted?
35-37
AIRLINE SURVEY - 10 - C DSI 32/95
0.13
BRAND PRICE TRADE QFF Show respondent bound booklet open at first page - with first set of prices showing
(PLEASE CHECK THAT ALL THE SECTIONS ARE IN THE STARTING POSITION) wys die eerste bladsy van die boekie aan respondent - wys °erste stel pryse
NOW SAY: Thinking again of air travel for business inside South Africa, if you were given these airline choices. at the prices listed below, which airline
would you choose to travel with between Cape Town and Johannesburg relvm? Oink weer aan lugreise vir besigheid binne Suid-Afrika. As u hierdie keuse van lugdiensre gage* is teen die pryse hieronder gelys, wetter lcrgdiens sou u kies vir 'n retoervfug tussen Kaapstad on Johannesburg?
INTERVIEWER: Write 01 in the box of the airline/price chosen on the grid provided.
Now turn over the first section of the airline chosen on the spiral binding.
Leave all the other sections alone. Skryf 01 in die blokkie van die varfrose lugdiens/prys op die taco! voorsien. 8laai no die °erste afdeling om van die varkose lugdiens in die spiraalboakie. Leal al die ander afdelings
SAY: Now at this new price, which of the airlines shown would you fly with between Qape Town and Johannesburg return? Teen hiercrre nuwe prys, met wafter van die aangeduide lugdienste sou u refoer vlieg tussen Kaapstad on Johannesburg?
Write 02 in the box of the airline/price chosen on the grid. Turn over that section only of the spiral binding.
Leave the other sections alone.
Skryf 02 in die blokkie van die verkose fugdiens/prys op die label.
8Iaai slogs daardie afdeling om in die spiraalboekle. Lear al die ander afdelings uit.
Say: And which airline would you fly now? En met warner lugdiens sal u nou vlieg?
Write 03 in the box of the airline/price chosen on the grid.
Turn over that section only on the spiral binding. Leave the other sections alone .
Skryf 03 in die blokkie van die verkose lugdiens/prys op die Label. Blaai siegs dawdle a/doling om in die spinsalboekle. Laat al die ander afdelings uit
REPEAT UNTIL THE FAAICIRAUM PRICE OF ONE AIRLINE HAS BEEN REACHED.
AIRLINE PRICE OPTIONS
SAA BUSINESS CLASS R1,368 R1,539 R1,710 R1.881 82,052
SAA ECONOMY CLASS R1,09.4 81,231 R1.368 R1,505 R1,642
COMAIR R 666 R 882 R 980 R1,078 R1.176
PHOENIX AIRWAYS R 766 R 862 R 958 81,054 R1,150
SUNAIR BUSINESS CLASS RI.CL14 81,231 R1,368 R1,505 R1.642
SUN AIR ECONOMY CLASS P 686 R 882 R 980 R1,078 R1.176
39
40
41
42
43
44
AIRLINE SURVEY
C DSI 32/95
0.14a) Which domestic airlines. if any, would you never consider using? Wafter binnelandse lugdienste, indien enige, sou u noon oorweeg om to gebruik nie?
0.14b) why do you say that? (PROBE THOROUGHLY) Wastorn s?. u die •
0.14a) 0.14b) - REASONS
Cornair
45. 1 46-47 j ]
Phoenix Airways
2 4849 I 1
South African Airways (SAA)
3 50-51 I
SA Express
4 5253 I
Sun Air
5 54-55 I I
Charter flights
6 56-57
Other (specify) • Ander (spesifiseer)
None o Geen
5859
C DSI 32/91 AIRLINE SURVEY - 12 -
DEMOGRAPHICS
I have a few more questions. Your answers will be treated with confidentiality and will be used only to group our interviews into
demographic categories. Ek het nog 'n pear vrae. U anrwoorde sal vertroulik han•eer word e,/ sal s.regs gebruik word om ons ondefioude in demogralCose kateoorfe
to grrepeer.
0.153) RECORD ETHNIC GROUP.
African 60-1
White 2
Coloured 3
Indian 4
0.15b) RECORD GENDER.
Male 61-1
Female 2
0.16 Into which of the following age groups do you fall? In wafter van die volgende ouderdomsgroope vs] u?
20-29 62-1
30-39 2
4049 3
50-59 4
60+ 5
0.17 What is your marital status? Are you Wet is u hux.ellkstaatr? Is u ?
READ OUT
Single, never married
o Enkel, nooit getroud nie 63-1
Married or living together
0 Getroud of woon seam ,:...
2
Divorced
o Geskei 3
Widowed o Wewenearrovz*
4
Separated o V& NM?! m
5
-13- C DSI 32/95 AIRLINE SURVEY
0.18 Please tell me what your home language is. i.e. the language you speak most often at home?
Se asseblief vir try wat u huis-t-aal is. d.i., die teal wet u mees dikv.*4Is tvis prest?
English/other European 64-1
Afrikaans/both 2
Zulu 3
Xhosa 4
North Sotho/Pedi 5
South Sotho 6
Other (specify) . Ander (spesifisear)
0.19a) Which of these statements best describes your working life?
Wetter van hierdie stallings baskryf u werkslewe ten Basta?
Working full-time
o Wet* voltyds
65-1
Working part-time
o Woe( dee/rycrs 2
0.19b) What is your occupation. i.e. what type of work do you do? Wat is u beroep, d.i. wetter ripe week doer, u?
66
0.20 Which one of the following describes the highest level of education you have achieved?
Wafter eon van die volgende baskryf die hoogste vlak van ondetwys wat u beheal het?
READ OUT
Up to primary school completed
* Laerskooi vottooi
67-1
Some high school o n Biefiie hoerskool
2
High school completed/matric
o Hoerskool voltool/rnetriek 3
Some university 4 0 'n Biefiie universiteit
University completed o Universiteit vottooi
5
Post-graduate
o Ne-graads 6
professional 7
* professioneat
Other post rnatric technical 8 o Ander na.skools o tegnies
Secretarial
o sekretaneet 9
other o ander
0
- 14 - C OSI 32/95 AIRLINE SURVEY
0.21a)
•
Does yo-Jr combined monthly household income fall above
R2.500? Fiease include all income from salaries. investments.
pensions. etc. (RECORD ONE ANSWER)
rs u pekonnn:nnntor!. awancInbkso hc.f.'snouenbkm in:corns-to bo
R2,500? Si.. ,:t assnbliot albe inkorrsr4 urt salarisso, tuo!fr-,1g,:ings,
pensininne. or...s in
Yes
No
68.-1
2
GO TO 0.21b)
GO TO 0.21d)
0.215) IF ABOVE R2-50:0 ASK: Yes 69-1 GO TO 0.21c) -/-
Does it fall above Ft6.0007 RECORD ONE ANSWER
• Is di? bo P5,000' No R2.503-R5.999 2 GO TO 0.22_n)
0.21c) IF ABOVE R6.000 ASK:
Does it fa li above R10.000" RECORD ONE ANSWER
Yes R10,000-, 70-1 GO TO 0.22A)
• Is dr! bo R10.000? R6.000-.999 2 GO TO Q.22a)
Q.2Id) IF BELOW R2,500 ASK: Yes Less than R300 71-1 GO TO Q.22a)
Does it tail below R300? RECORD ONE ANWER
• is (lit onCe=w P8007 No R300-R2.499 2 GO TO 0.22a)
Refused/don't know 3 GO TO 0.22a)
0.22a)
•
Does your monthly personal income fall bova R2,5007 Please
include all in=me from salaries, investments. pensions. etc.
RECORD ONE ANSWER Is u gnkornbinfrn/Ve rnaandeIrkse huisho ,,c1t, ;:ko InkornsO3 bo
P.Z500? Suit assnblinf a!In inkor-iste urt salari;se. bnlecainos,
censio,,tne, ens in.
Yes
-
No
.....
72-1
2
-..-
GO TO 0.22b)
GO TO 022d)
0.225)
•
IF ABOVE R2,50:0 ASK:
Does It fail above R6.00? RECORD ONE ANSWER
Is dir Do R6,000?
Yes
No R2,500-RS.099
73-1 -
2
GO TO 0.22c) .
GO TO 0.22 ...c;
0.22c)
•
IF ABOVE R6.000 ASK:
Does it fall above R10.000? RECORD ONE ANSWER
is cfr bo R10,000?
Yes
No
R10.000-•
R6,00D-R9.99.9
_.... 74-1
2
GO TO O.2.3
GO TO 0.23
0.22d)
•
IF BELOW R2.50:0 ASK: Does it fall below RSCCr' RECORD ONE ANSWER
Is dIt or:Opr F?S00?
Yes -
No
Refused
Llt:s t- P. o
476' ,r• - k .7 .•
- 75-1
2
3
GO TO Q.zg
GO TO 0.21
GO TO 0.2:3
0 23 RECORD SUSURB O RESlDENCE.
THANK RESPONDENT FOR HIS/HER TIME AND CLOSE INTERVIEW
80 -
