Consumer Behavior Segmentation Targeting and Positioning

Consumer Behavior: Segmentation, Targeting, And Positioning

Consumer Behavior

Key External Factors. The airline industry is susceptible to changes in the environment that stem from natural causes and man-made causes. As with any transportation industry, a fundamental and consistent external factor that influences the airline industry is weather. Many other external factors can be ameliorated to one degree or another by direct action of the airline companies. Weather triggers unavoidable adjustments and accommodations, many of which are the bane of airline customers and airlines alike. Additional external factors that the airline industry cannot influence to any great degree include the cost of fuel and the cost of labor. The Air Transportation Association reports that the primary expense of running an airline is the cost of paying the wages and salaries of pilots, flight attendants, reservations or check-in and ticketing staff, baggage handlers, customer service representatives, dispatchers, marketing and sales, IT staff, and maintenance mechanics. The second largest expense in the airline business is fuel, a variable that shows fluctuation across carriers according to the efficiencies of airplanes and the type of haul that occurs. Short hauls generally are less fuel efficient because of the high levels of fuel consumption during takeoff and landing. Regional disruptions around the globe can have dilatory impact on international carriers. External variables that the airline industry can influence over the long-term include the route structures and the capacity of airports.

Moreover, the costs associated with maintaining and upgrading in the airline business includes facility and fleet costs. Airlines can certainly negotiate contracts to lower the costs of leasing, buying, and maintaining their fleet. Nevertheless, competition is keen and for some travelers, accessing online maintenance data is a variable in choosing an airline for their personal travel.

Targeting Industry Segments. Considering the airline industry overall, there are distinct types of services that are associated with particular market segments. The segments identified by the U.S. Department of Transportation (DOT) include: International, national, regional, and cargo (Rothman & Jasper, 2011). Categorically, international airlines earn annual revenues in excess of $1 billion, national airlines are considered to be those with revenues of $100 million to $1 billion, and regional airlines generally provide short-haul flights that contribute to annual revenues of $100 million.

With high levels of mergers, acquisitions, and consolidations in the airline industry, segmentation has constricted to large enterprise carriers and niche participants (Rothman & Jasper, 2011). The smaller niche segments tend to focus on route, by providing service between two heavily trafficked commuter points or feeder routes, or price, attracting customers through lower overall costs or options that enable travelers to orchestrate the actual cost of their travel according to their budget.

Positioning in the airline industry is driven by factors important to travelers -- factors that influence whether and how a customer differentiates an airline. Travelers can access a considerable amount of information about particular airlines online, and the airlines tend to be heavy purchasers of television media. The comparative strengths and weaknesses of the different airlines fall into several categories that are well-known to customers who fly frequently. These attributes include the following: Ticket cost, customer service, operating efficiency, flight type offerings, service offerings, technological advancements, and -- of necessity -- economic recovery.

Flight Class Target Markets. The flight class options offered by most airlines are another layer of segmentation, which is characterized by optional upgrades that technically blur the lines across the segments. These optional upgrades are a major catalyst for targeted marketing, particularly through the airlines' own credit cards. Generally, though, some differences between the flight class segments are relatively stable. For instance, when an airline creates a customer persona for First Class travelers, one attribute is a lack of price sensitivity. First Class travelers value convenience, special treatment, exclusivity, and traveler status over price. Business Class travelers must often meet corporate requirements for flying and so are forced to be price sensitive; but Business Class travelers are also quite likely to hold annual passes for flight clubs, like Red Carpet rooms. Economy Class travelers do tend to be price sensitive, but they will upgrade to gain additional legroom and a roomier seat, and are often on the lookout for opportunities to avail themselves of perks in Business Class.

Compare and Contrast - JetBlue and Southwest. While American Airlines and U.S. Airways were required by the Justice Department to sell their takeoff and landing rights at Ronald Reagan National Airport in Washington DC as a condition of their merger, Southwest and JetBlue took their place (Mouawad, 2014). Airports, such as Reagan National and La Guardia, have only so many slots for takeoffs and landings each day because of air traffic congestion, so these scarce slots are a valuable competitive edge (Mouawad, 2014). Moreover, January 2014 finds Southwest making plans to fly to the Caribbean and internationally, apparently closing the gap between the national airline company and international carriers, such as JetBlue.