Status of the Industry Marketing

¶ … Status of the industry

Marketing problems facing carriers

Different strategies

Description of high/low marketing strategy

Why high/low strategy is the best marketing strategy

Examples of high/low marketing strategy

Status of the industry

In the wake of the terrorist attacks of Sept. 11, 2001, the industry hardest hit in American and around the world has been, without a doubt, the airline industry. Faced initially with empty planes and frightened fliers, confidence in security measures and general safety of the skies has taken hold again - perhaps be necessity - but airlines are daunted today by increased security costs along with a strong pilots' and airline workers' union along with stiff competition.

And of course, recent world events have also added to the airlines' woes. Take fuel costs, for instance. The huge hike in fuel costs caused by the second Iraq war have forced every airline to change routes and increase ticket costs. Just recently, for instance, Air France has had to cancel non-stop flights to Vietnam - a major source of revenue over which it had a territorial de facto monopoly - because of monumental fuel costs. Air France now must, like very other airline, offer only one-stop flights to Vietnam. (Gooch, 2005)

As a result, some of the cornerstone airlines in America have either filed for bankruptcy or are on verge of doing so. This list includes such giants as U.S. Airways, United Airlines, American Airlines, Delta Airlines, Midway Airlines and several smaller airlines. These events made very public the struggles of the airline industry. Several airlines, such as U.S. Air, have even asked their employees to forgo wages and work for free for a period of time to help their employer stay afloat.

Marketing problems facing carriers

These industry ailments have forced several new marketing problems and exacerbated the old ones. The critical problem facing the industry, though, is the new revelation - in the post 9/11 era - that price is the overwhelming determining factor in airline choice. If two airlines offer even remotely similar routes, the choice that a business or pleasure traveler will make is rarely based on the number of stops or even on the airport - travelers are more than willing to smaller to a smaller, more distant airport today to save money - and definitely not on the reputation or size of the airline; and certainly not on the frills or amenities offered on board the flight.

For instance, a pleasure traveler is more likely to choose a flight priced at $180 between Baltimore/Washington to Ft. Lauderdale that makes a stop in Atlanta on a smaller carrier such as Airtran than one that costs $231, flies non-stop directly from Washington/National (the airport of choice) to Miami (the destination of choice) on a larger carrier with a stronger reputation and better service and frills such as American Airlines.

The purchaser will often ignore the fact that he will have to spend more money than the saved $51 simply to get to his destination and buy snack foods for the plane. The dawn of the internet generation and the GDSs' has both helped and hurt the airline industry in that it has made it easier than ever for customers to comparison-shop on price, and often quality is ignored to a large extent, and only price is considered.

On the marketing front, this presents a gigantic challenge: How to market to a potential market that cares only about price and is willing to make irrational decisions against their own best interest simply because an initial price is marginally lower on an internet travel site?

Different strategies

Obviously, one of the marketing strategies is to really improve amenities and offer such pristine services - both customer service oriented and with regard to food and other products on planes - that customers begin to ignore price and choose based on quality.

Another strategy is market national carriers as regional carriers in the locations in which they have hubs. For instance, even though Continental and Delta both have non-stops to Atlanta from several different cities, the first and natural choice will be Delta since they have marketed themselves as an Atlanta hubbed airport while Continental is hubbed in Newark.

Description of high/low marketing strategy

The marketing strategy of choice, however, is simply to accentuate low costs by cutting frills and eliminating hub-based systems in favor of short nonstop hops for even the largest national carriers. This is the model followed by such successful low-cost carriers as Jet Blue and Southwest Airlines.

These airlines are able to go up against giants like United and American by slashing fares, marketing their no-frills image and flying short distances and choosing cheaper, slightly out of the way airports.

For instance, Jet Blue flies not to Miami but to Ft. Lauderdale and even though Delta might fly to Miami, Jet Blue will still get the fare because of its lower price and no-frills marketing strategy.

Airlines have to realize that this is a price-sensitive market and only spend marketing dollars on advertising low-cost fares and the fact that fliers are not being charged for peanut bags they believe they simply do not want or need. (Mercer Management Consulting, 2002)

However, they must also market to the few but extremely deep-pocketed fliers who fly in luxury regardless of price. But there, they must not offer mid-level products such as United Airlines over Jet Blue: That difference is minimal and negligible. No, rather, they must offer low-cost flying choices and then a few extremely high level products. The minimal difference between mid-level products and low-cost products in marketing has been proven useless.

Why low/high cost marketing strategy is the best

This strategy of marketing primarily to the lowest cost and highest priced markets is the most successful because it entirely galvanizes the market in a natural pattern. There are those fliers who sacrifice quality and convenience for price, regardless of how small those price differentials are, and these fliers make up the bulk of the market. Then there are those fliers who do not care at all about price and in fact choose the most luxurious options sometimes solely because of their high price.

There simply exists very little market for products that offer some luxuries and a higher price: As a result, commercial aviation marketing staffs must concede that this traditional market after which they've always gone has simply eroded during the internet generation, and simply cease marketing to it. (Adams, 2005)