EasyJet Marketing and Management in the Airline Industry Case Study Analysis
EasyJet Marketing and Management in the Airline Industry Case Study Analysis discusses that This is a competitive world, mainly, for business as it has to face competition from its rival in its market industry while giving stiff competition to others. Being competitive means the ability to withstand the market demand, ability to supply and cater to the needs of customers that should be better comparatively to the others. This ability develops positive ratio over the competitors creating a brand for itself in the market. In order to make such happen, it is necessary for the business organizations to have strategic marketing plan to promote their products and services, should be able to meet the expectations of customers and at competitive price. Consumers continuously want improved products at lower prices and innovation plays a key role in providing such services to the customer that can provide competitive advantage to the company over its competitor (Saxena, 2009) often resulting in financial gains. However, financial success depends on marketing ability, as it tricky and “considered as heel of Achilles’ of many prosperous companies” (Kotler, Keller, Koshy and Jha, 2009, p.7). Many prestigious companies considered as leader of their respective markets have reworked on their marketing strategy according to the changing market situation so as to remain in the competition. The present research is aimed at studying the market scenario in airline industry and at the same time identifying the best marketing approach in ever changing marketing environment by providing analysis on Easy Jet Airlines.
1.2 Background to the Research
Marketing is concerned with identifying and meeting social and human wants whereas marketing management is “an art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value” (Kotler, Keller, Koshy and Jha, 2009). Marketing theory is a business orientation focusing on customer satisfaction and at acceptable levels of revenues and costs. Therefore organizations have true marketing orientation focus addressing the needs and wants of one or more targeted segments of the market (Loudon, Stevens and Wrenn, 2004). According to Shaw (2007, p.13) “marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably”. It is further mentioned that anticipating emphasizes the dynamic discipline of marketing where consumer requirements are in a constant state of evolution and change as evident in airline industry and successful airline companies are those who anticipate such changes and make themselves ready with newly reworked, reformulated strategic marketing plan. Air travel assists in promoting important things such as world trade, international investment, economic growth and tourism which are necessary for the growth of national economy (McNeel and Bolos, n.d.). The industry has been further boosted by the expansion of EU and privatization as well deregulation ending the monopolies ending the state owned carriers and exposing them to competition (Mayer, 2003). As air travel continues to remain large and growing industry, competition in this sector has increased simultaneously with various companies entering the market in a bid to provide better and faster service at comparatively low rates.
EasyJet flies over more than top 100 routes in Europe than any other airlines, providing air services to the passengers at different destinations around 29 countries (EasyJet Plc. 2011). It is also called as the ‘budget airline’ and leads the FTSE 250 by 17% to 366p. Further it has been revealed by Carolyn McCall, Chief Executive that the number of corporate passengers has increased by five times boosting revenues by 23% to £935m (Garside, 2011). EasyJet airline facilitates its passenger to their destinations on time with greater connectivity across Europe (EasyJet Plc, 2011). EasyJet’s low cost and intermediate strategy positions the company very well comparatively with other companies as experts suggest predict excellent growth opportunities for low cost sector. It adopts marketing mix strategy addressing the 4Ps with low price, product – ‘no frills’, point to point service, place/distribution – internet booking system and promoting itself effectively by advocating internal marketing (Mayer, 2007). Though the marketing strategy adopted by EasyJet Airlines has been effective and yielding positive results, the airline industry, in general, faces serious challenges in form of ever increasing costs, partial growth in national income, increasingly disappointed customers and environmental vulnerability (McNeel and Bolos, n.d.) which necessitates most of the company to rethink their strategy, hence this study. EasyJet Airlines has been selected, as it is considered as a challenge to reformulate a marketing plan to such a successful company operating on low cost strategy.
1.3 Rationale of the Study
Airline industry is constantly growing and increasing in terms of service, revenue and competitors. As mentioned above, airline industry, though, being a profitable zone, has to face serious challenges. Increasing fuel prices, economic crisis, natural disaster like volcano eruption resulting in ash clouds over most part of the Europe, conforming to environmental law to cut down carbon emissions, customer dissatisfaction, etc, are some of the issues that airline companies have to address in order to achieve their goals and objectives. In view of such challenges, the exigency in the airways may not be met with current marketing strategy which needs to be revised and as such this study is essential which will help in assessing the different marketing strategy and arriving at specific marketing plan for Easy Jet Airlines, which offers low prices on its ticket, is considered apt for this study.
1.4 Aims and Objectives
The study aims to:
- Analyze the market for airline industry, in general, in view of the recent economic crisis
- Analyze and evaluate EasyJet Airlines market share, financial position and marketing strategy so as to compare it with other low price airlines to ascertain the position of EasyJet in the airline industry
- Suggest a marketing plan or strategy for EasyJet in view of various challenges faced by the airline industry
1.5 Structure of the dissertation
The study is structured in following chapters:
Chapter 1 makes a brief introduction to the study, stating the purpose, rationale and objectives of the study. Chapter 2 presents review on various literature pertaining to marketing and its definitions, management of marketing, concepts; marketing in airline industry and best practices in airline industry, This chapter also introduces EasyJet Airline, presenting the company’s corporate profile, its business, marketing strategy and market share. Research methodology is presented in Chapter 3 which reveals the methodology used by the researcher to collect primary and secondary data so as to make necessary analysis regarding the marketing strategy in airline industry which is later analyzed in chapter 4 which is Findings and Data Analysis followed by concluding chapter. This chapter 5 presents recommendation and suggestions for reformulating, reworking the marketing strategy for EasyJet Airlines.
Review of Literature
Marketing does what market needs. Market and marketing are interrelated as both are incomplete without each other. Any industry needs a strong marketing strategy that could attract as many people as possible to enter its domain donning the role of providers, suppliers, distributors and buyers. Market is an interesting place where lot of things happen and marketing makes it happen. Marketing is such an appealing, puzzling and prosperous field that no one has been able to sort out its essential elements and their links on a higher theoretical level which therefore stays put on expressive stage with traces of analysis and conceptualization (Gummesson, 2002, p.325). Educating the customers about the products and services is the primary function of marketing which is carried out by persuading people to make informed purchase decisions. However, the role of marketing is limited to guidance and therefore cannot compel people to buy an item which they do not need or want (Steinberg, 2005, p.2). The vital function of marketing in the enterprise stems from the fact that marketing is the process via which firm creates values for its chosen customers (Silk, 2006, p.3). Value is created by meeting the customers end and satisfying their demands for which an essential strategy needs for formulated. According to the American Marketing Association (AMA) “marketing is an organization function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders” (Steinberg, 2005, p.2). In the above context that marketing is essential for the growth of business by creating products and services that meet customers end, this chapter looks at the importance of marketing in the airline industry and presents review of various authors on marketing, in general as well as on airline industry which will facilitate in understanding the market scenario, consumer preferences and different market strategies available that can be used and developed by EasyJet Airlines.
2.2 Importance of Marketing
According to Philip Kotler “marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with others”. Harry W. Hepner introduces marketing as a subject that “includes every activity that has to do with the movement of goods from the point where they are produced to the point where they are consumed. It includes product planning, pricing, advertising and analysis of market in terms of its present and potential customers” (Jain, 2010, p.2). The process of marketing is undertaken by various groups of people in a specific department which involves establishing long term relationship which can be rewarded in the future course of business when these process benefit all the concerned parties (Lamb, Hair and McDaniel, 2011). Similarly Rao (2011) mentioned that marketing can be understood from two perspectives i.e. management and social perspective. As per management perspective, marketing is an art and science of performing of all the activities mentioned by Lamb, et al (2011) which also includes building, maintaining and enhancing relationships with customers to satisfy them better than their competitors. Dayal, Zachriah and Rajpal (1996) mentioned that marketing is concerned with the way resources are produced and allocated through the exchange process between buyers and sellers in a market. According to Jain (2010), marketing is about facilitating right goods and services to the target people, at right place, time and at the right price with right message and advertising. It is further mentioned that marketing is a broader concept which includes all human activities in relation to the market which includes product planning and growth, buying and assembling, pricing and discounting, supply and selling, branding and packaging, standardization and grading, transportation and warehousing, promotion and advertising, financing and risk bearing, analysis of market in terms of its present and potential customers. Marketing is of vital importance to the business enterprises as stated by Peter F. Drucker “marketing is the distinguished and unique function of business” (Jain, Khanna, Grover and Singla, 2007, p.268). According to Kotler, Bowen and Maken (2008), marketing, in present business environment, is simply a business function which is much more than an ad campaign and primary task is not to fool the customers or endanger the company’s image. It is further mentioned that marketing deals with customers while creating customer value and satisfaction are at the heart of hospitality and travel industry marketing. Shaw (2007, p.2) differentiates marketing into consumer and industrial marketing wherein consumer marketing is targeted at the individual or the family while industrial marketing is about business-to-business or firm-to-firm marketing. Airline marketing illustrates both principles of marketing wherein marketing to the business air traveler, and of freight services illustrate the concept of industrial marketing while leisure air travel marketing, increasingly exhibits the principles of consumer marketing. Successful organizations approach marketing in a professional, systematic manner which has led to the recognition of marketing management as a primary function on a par with finance and production (Dayal, Zachriah and Rajpal, 1996). Basing on these factors, it is mentioned that marketing management is concerned with the direction of these activities which are performed to obtain marketing goals i.e. increasing the customer’s satisfaction and firm’s profits. The management perspective of marketing is necessary to understand in a challenging environment as it is the key to developing marketing strategy.
2.3 Marketing Management
According to Biggadike (1981) there is no unifying pattern for the entire marketing field but there is a model for marketing management which tries to satisfy customers by the meeting the demands within the context of the environment and the firm’s resources and objectives (the uncontrollable factors) by formulating an apt marketing mix (the four Ps – controllable factors). Kotler (1973, p.42) mentioned that “marketing management may be considered as the problem of regulating the level, timing and character of demand from one or more products of an organization that is assumed to form an idea of a desired level of demand based on profit maximization, sales maximization subject to a profit constraint, satisfying the current or desired level of supply”. Marketing management is the practice of assigning the resources of the organization for marketing activities which is responsible for conceptualizing strategies (Principles of Marketing, n.d). Marketing decision making ignores cohorts in the managerial decision process despite various studies having proved the great potential of cohort analysis in marketing strategies and consumer behavior (Motta and Schewe, 2008). These processes are further classified into four basic steps viz; planning i.e. the process of examining and understanding the surroundings within which the organization functions; implementation i.e. the process of putting plans that have been made into action which is the transition from expected reality to existing reality; monitoring i.e. the process of tracking plans and identifying how plans related to changes that take place during program operation when more information in required and correction i.e. the stage in which action is taken to return the plans to desired state based on feedback obtained in the monitoring stage (Principles of Marketing, n.d). According to Webster (n.d.) marketing management needs to evolve and change in view of the changing period while marketing has had periods of growth and retrenchment as its relationships with other management functions keep changing. As stated earlier that marketing creates value, Webster (n.d.) in this context mentions that innovation management, customer relationship management and value or supply chain management should be included. To implement this new point of view and to define a role for marketing management within the organization consistent with today’s challenges, Webster (n.d) in contrast to the follower of 4P’s suggests forgetting the 4ps, quit treating sales as part of marketing, recommends to think of marketing as a management competence based on customer information and its integration into business processes, strengthen market research as the study of customers, develop organizational relationships to link marketing to cross functional business processes and link marketing actions and market resources to cash flow consequences. Webster (n.d) further argues that a new outlook of marketing management in the company must start with the focus on customer value, conceiving marketing management as ‘the process of defining, developing and delivering customer value. It is evident from the review of various literature available on marketing management and related theories that it is essential in an organization in order to provide value to the customers so as to increase the presence of product or service in the market through better management and operations. Considering the importance of marketing in various services oriented and product oriented organizations, the following section discusses the airline industry in general followed by essential marketing strategies in airline industry.
2.4 Airways Industry Market Scenario
The global airline industry provides service to most of the countries in the world and plays an important role in the development of a global economy. It is a major economic force, in terms of both its own operation and its impacts on related industries like aircraft manufacturing and tourism. Global airline industry consists of over 2000 airlines operating more than 23000 commercial aircraft, providing service to over 3700 airports. The world air travel has grown at an average of approximately 5% per year during the past 30 years with substantial annual variations due to changing economic and differences in economic growth in different regions of the world (Belobaba, Odoni and Barnhart, 2009, p.2). Giovanni Bisignani in his speech on State of the Industry elaborated about the constant fears and threats being faced by the airline industry. Terrorism, wars, revolutions, pandemic fears, earthquakes, volcanoes, failing economies and sky rocketing prices of oil and all others have created havoc for airline industry and still 2010 was the best year of the decade with a profit of $18 billion. It is further mentioned that the industry transformed by slashing costs up to 9%, increasing fuel efficiency by 24% and enhancing labor productivity by 67%. Apart from natural and unnatural calamities, the industry has to face a new kind of challenge in keeping its carbon emission minimal to the prescribed standards contributing to the environment (IATA, 2011). According to the industry statistics revealed by IATA (2011), it is revealed that the year 2010 was the best year for the industry after 2004 where there was an positive change in revenue. It is further revealed that the number of passengers has also increased from -2.1% in 2009 to 7.3% in 2010 with subsequent increase in net profit from $-9.9 billion in 2009, which is mainly to due to economic recession, to $18 billion in 2010, a margin of 3.2% (IATA, 2011). The overall outlook of the industry is bleak, in spite of the profit made during 2010, as cash flows are coming under pressure for all the airline companies and asset utilization has started to decline. The hike in oil price fuelled by monetary expansion has resulted in the employee lay-offs to support the cost cutting strategy, increasing the travel cost which has resulting in the fall for demand due the consumers giving second thought and opting for alternatives instead of costly transport. Increase in fuel prices by $40 per barrel along with associated increase in travel costs has been detrimental in the 3-4% fall in the number of passengers travelling on economy seats. However, Asia continues to product largest profits as it remains the hottest destination for FDI facilitating more travelling to countries in Asia mainly India and China, two emerging economies of the decade (IATA, 2011). In this present scenario, airline companies need to manage change effectively through effective marketing strategies, not only to tackle the challenges thrown by natural calamities and disasters but also to face stiff competition from its competitors in the industry segment battling out in the open to gain maximum market share.
2.5 Airline Marketing Strategy
Making decisions on the business related issues mostly on marketing is the main logic of marketing strategy which concentrates mainly on marketing mix and marketing allocations in relation to expected environmental and competitive conditions (Chawla, 2003). According to Belobaba, Odoni and Barnhart (2009) the demand for air travel and shipment of goods drives the air transpiration service. Air travel demand is defined for an origin – destination market and is typically measured in terms of flow per time period in one or both directions in the specified market. The supply side of air transportation is characterized to a large degree by joint production – many markets are simultaneously served by a single flight in an airline network. According to Shaw (2007), 4Ps marketing model is the powerful one and describes much of what an airline industry will require to compete in the ever changing business environment. Marketing Mix strategy i.e. 4Ps comprise of product i.e. variety, quality, features, options, style, brand name, packaging, services, etc; price i.e. actual price, discounts, allowances, payment period, etc.; place i.e. channels, coverage, locations, inventory, transport, distribution, etc. and promotion i.e. advertising, personal selling, sales promotion, public relations, direct marketing, etc (Chawla, 2003). However according to Kim and Singal (1993, p.551), the airline industry presents a exceptional opportunity to test for market power with the help of product prices where each of the route can be identified as a separate market. The airline industry offers several opportunities to the company initially due to deregulation of airline industry which came into effect through Airline Deregulation Act of 1978 which led to the establishment of new carriers and allowing them to enter into profitable routes, followed by various marketing strategy like price cutting and reduced operating margins while losing airline companies filed for bankruptcy or consolidated through mergers; which was a kind of strategy to overcome challenges and meet companies objective through renewed vision. It is further important to mention that airline industry is strong market where there are no easy substitutes. According to Wensveen (2007) the tremendous growth in airline has been achieved due to competitive pricing, market expansion, identifying new markets and adjustment of service to meet consumer demands. Initially, major airlines invested heavily in computerized reservation system (CRS), developed aggressive mechanisms to employ travel agent and evolve rewarding strategy, built brand name loyalty through frequent flier programmes and established affiliations with commuter airlines to provide feeder traffic to their hubs. The cost leadership strategies is another method of marketing which was set up by Southwest Airlines to serve the intra state Texan market in the United States which resulted in profits and since then the airline has remained profitable and competitive. Innovation is yet another strategic turn in airline marketing as many great airlines have the experience of launching a new route amidst great optimism. Product push marketing and customer led marketing approach can be combined in the airline industry to achieve significant share in the market through finding ways to encourage or persuade customers to buy the products or instead chase the customers to find out their needs and wants and deliver those products and services much before the competitor does (Hooley, Piercy and Nicoulaud, 2008). Discounting strategy, most often used by the companies in retail industries, is also profitable as it places more emphasis on increasing net revenue by selling to different customer classes at different prices and further discourages and foils entry to the industry by low cost start up airlines (Mills, 2002). Hening and Hansen (2000) promote the concept of relationship marketing as it relies on a move from function based marketing to cross function marketing which includes all aspects of all customer – company interactions. It represents the combination of increasingly individualized products and services with tailored marketing communication approach. Various marketing strategies have been implemented effectively by the airline companies. However it will be necessary to analyze which marketing strategy will be able to face the challenges of present economic conditions as well future threats from nature, terrorists and world economy.
2.6 Easy Jet –Marketing Strategy
Easy Jet Plc is a leading European low cost airline launched in 1995 by Greek shipping magnate Stelios haji Ioannou which aimed at replicating the US success of similar airlines (Foss and Stone, 2001). The company has grown from two routes to Glasgow and Edinburgh to more than 212 routes serving 64 European airports with an average load factor of 85.2% (Plunkett, 2006). The marketing strategy mainly focuses on very low pricing. EasyJet uses computerize reservation system facilitating its customers with electronic services like smart booking and payment (Foss and Stone, 2002). However, key to expansion of EasyJet was its expansion strategy by merging itself with Go Fly which operates on similar lines i.e. low cost strategy. Another significant part of EasyJet’s corporate strategy is the active implementation of yield management techniques wherein it launched a slogan arguing that it makes air travel as accessible as a pair of jeans, setting its highest fare at less than 50% of its competitors’ full Economy Fare and its lowest available fare at around 20% of the latter. This has enabled EasyJet to achieve high levels of customer satisfaction (Butler and Russell, 2010, p.128). The key to EasyJet strategy is maximizing the income generated from each flight by carrying as many passengers as possible on each journey by offering low prices to the first passengers to book a particular flight (Doole, and Lowe, 2005). This kind of strategy virtually attracts number of customers so as to get the cheapest fare for travel.
Marketing is an important aspect of business organizations as effective strategy can lead to growth of the business otherwise may lead to bankruptcy. In order to formulate an effective marketing strategy, it is necessary to analyze the present market scenario and competitors. It is evident from the review of various literatures that airline industry is faced by various challenges and it is therefore necessary for the airline companies to evolve or revise their strategy in order to avoid future failure. In this context, already existing strategies implemented by the airline companies will be analyzed in coming chapters and brought together to suggest viable marketing strategy for EasyJet airlines.