Airline Marketing and Management
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1 Airline Marketing and Management Seventh Edition STEPHEN SHAW SSA Ltd, Oxfordshire, UK ASHGATE
2 Contents List of Figures and Tables xiii Introduction 1 The Fundamentals What is Marketing? Definition The 'MarketingMix' Stages in the Application of Marketing Principles to Airline Management Benefits of a Marketing-Based Approach 8 Successful Airlines The Market for Air Transport Services What Business Are We In? Transportation Communication f Leisure Logistics Information Selling Services Who is the'customer'? Definitions 'Apparent'and 'True'Needs Industrial Buying Behaviour The 'Customer' in the Business Air Travel Market The 'Customer' in the Leisure Air Travel Market The 'Customer' in the Air Freight Market 24
3 n Airline Marketing and Management 2.3 Market Segmentation: Air Passenger Market The Concept Segmentation Variables in the Air Passenger Market Customer Requirements: Business Travel Market The Business Travel Market: Demographics and Psychographics The Leisure Segment of Demand Segmentation of the Air Freight Market Differences between the A ir Passenger and A ir Freight Markets Segmentation Variables: Air Freight Market 45 Successful Airlines The Marketing Environment The Theoretical Basis: PESTE Analysis PESTE Analysis: Political Factors Terrorism Fears/Political Instability Deregulation and'open Skies' Marketing Policies for a Deregulated Environment Privatisation 'State Aid' Airport Slot Allocation PESTE Analysis: Economic Factors Economic Growth and the Trade Cycle PESTE Analysis: Social Factors The Ageing Population Changing Family Structures Changing Tastes and Fashions in Holidays The Uncertain, Deregulated Labour Market The Female Business Traveller PESTE Analysis: Technological Factors Video-Conferencing The Internet 11
4 Contents vii Surface Transport Investment New Aircraft Developments PESTE Analysis: Environmental Factors Climate Change and Global Warming Shortages of Infrastructure Capacity 'Tourism Saturation' 84 Successful Airlines % Airline Business and Marketing Strategies Porter's 'Five Forces' and their Application to the Airline Industry Rivalry amongst Existing Firms Substitution New Entry Power of Customers Power of Suppliers 'Disintermediation' Strategic Families Cost Leadership, Differentiation and Focus: The Principles Cost Leadership in the A irline Industry: Background 'True Low Cost': Fundamentals of the Business Model 'Hybrid'Low-Cost Carrier Models Cost Leader Airlines: Current Issues Cost Leader Airlines: The Future 'Differentiation' in the A irline Industry A irline A lliances Airline Industry Consolidation: The Latest Developments 'Differentiation'Airlines: The Future The Concept of the'legacy Airline' 'LegacyAirlines': Strategic Options 141
5 viii Airline Marketing and Management 4.4 'Focus' Strategies Types of Focusing in the Airline Industry 'ValueAdded'Focusing: 'IntegratedCarriers' 'Value Added'Focusing: 'All Business-Class'Airlines 'Low Cost'Focusing: Charter Airlines 'Lost-in-the-Middle' Airline Business and Marketing Strategies: Common Mistakes Objectives Diversification vs Specialisation Pace of Expansion Competitive Response 'Control' Over-Optimism/Fall-Back Position 161 Successful Airlines Product Analysis in Airline Marketing What is the'product'? The Theory of Product Analysis and its Application to the Airline Industry The Product Life Cycle Product Life Cycles in the Aviation Industry Managing a Product Portfolio: The 'Boston Box' Balancing Risk and Opportunity: The 'Ansoff Matrix' Fleet and Schedules-Related Product Features Cabin Configuration and Classes of Service Network, Frequencies and Timing Punctuality Customer Service-Related Product Features Point-of-Sale Service Reservations and Overbooking Airport Service In-Flight Service Controlling Product Quality 197
6 Contents ix 5.6 The Air Freight Product A ir Freight Capacity 199 Successful Airlines S Pricing and Revenue Management Building Blocks in Airline Pricing Policy Pricing - A Part of the Marketing Mix Deregulation Revenue Management Systems Willingness-to-Pay'and'Capturingthe Value' A La Carte 'Pricing 'Uniform'and'Differential'Pricing The Principles Differential Pricing: Arguments in Favour Differential Pricing: The Case Against The Management of Discount Fares Pricing Response and Pricing Initiatives The Structure of Air Freight Pricing 230 Successful Airlines Distributing the Product Distribution Channel Strategies Types of Distribution Channel The Concept of 'Super Profits' The Travel Agency Distribution System Advantages and Disadvantages Today's Distribution Channels The Future of Distribution Global Distribution Systems (GDSs) History and Background Current Issues 249
7 x A irline Marketing and Management 1A Distribution Channels in the Air Freight Market 253 Successful Airlines Brands Management in Airline Marketing 'Brands'and'Commodities' What is a'brand'? Why Brands? Brand-Building in the Airline Industry Foundations for Brand-Building Positioning Brands The Brand-Building Process Brand Strategies 268 Successful Airlines Relationship Marketing Fundamentals of Relationship Marketing Some Definitions Building Advocate Relationships Components of a Relationship Marketing Strategy The Management of Quality Customer Relations Marketing Communication Loyalty Schemes Frequent Flyer Programmes History and Current Status FFPs: Programme Member Requirements FFPs: Airline Requirements The Future 285 Successful Airlines
8 Contents xi 10 Airline Selling, Advertising and Promotional Policies The Anatomy of a Sale The AIDA Model and the SPIN Cycle Sales Planning The Sales Budget The'Communications Mix' Marketing Communication Techniques Sponsorship Policy Database Marketing Media Relations The Field Sales Team Airline Advertising The Functions of Advertising Advertising Decisions What are the Features of'good'airline Advertising? Selling in the Air Freight Market The Sales Task in the A ir Freight Market Marketing Communication Methods 322 Successful Airlines The Future of Airline Marketing 323 Glossary ofaviation Terms 327 Glossary of Marketing Terms 343 Index 357
AIRLINE MARKETING AND MANAGEMENT
AIRLINE MARKETING AND MANAGEMENT This page intentionally left blank Airline Marketing and Management Sixth Edition STEPHEN SHAW Stephen Shaw 2007 All rights reserved. No part of this publication may be
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