1 Aviation Management College AIRLINE MARKETING Product Analysis In Airline Marketing -CONT-

2 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Lecture 28/01/10 Managing a Product Portfolio – Boston Box

3 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box Background -US Boston Consulting Group 1963 -Using product range & portfolio -Using 2 variables: -a) The size of total market -b) The share of the market or market share

4 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box i)WILDCAT - Characteristics -Product with low market share -The overall market is growing -Invest to increase market share -Using ‘4 Ps’ of Marketing Mix

5 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box i)Wildcat - Using ‘4 Ps’ of Marketing Mix -Product specs equal or better -Competitive pricing -Advertising & promotion activities -Using the right distribution channels

6 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box

7 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box i)Wildcat – in Airline Marketing -Airline route as product; frequencies, connections, package -International market; image & status, withdrawal, an advantage to competitor and difficult to re-enter

8 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box ii)THE STAR - Characteristics -Product has good market share -The market is growing -The best product to the firm -The product produce max profit -Need to spend heavily to defend market

9 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box ii)STAR – product investment -Advertising & promotion -Pricing strategy; competitive -High volume sales -Thin profit margins

10 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box ii)STAR – in Airline Marketing -Aero-engine market powering large jet aircraft -Players: GE, Pratt & Whitney & Rolls -Competition is intense -Spend large sum to defend market

11 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box ii)STAR – in Airline Marketing -Spend large amount on continuous product development & improvement program. -Stiff pricing sometimes sold below cost -Profit from sales of spares & lifetime product support -All with huge sales revenues, often thin margins

12 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box ii)STAR – for Cost Leader Airlines (LCC) -Intra European route & Asian regional routes -Attracts new players -Growing market -Competitive pricing -High sales revenue -Low profit margins

13 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box iii)CASH COW PRODUCT – characteristics -Product have good market share -Market is in maturity stage (not growing) -Market not attractive to new entrants -A major source for profit because no/less spending to protect market share

14 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box iii)CASH COW PRODUCT – in Airline Marketing -Smaller engine market; a monopoly by The Tay of Rolls-Royce -Fokker & Gulfstream jets, stagnant market -Now Fokker has gone bankrupt from 1996

15 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box iv)DOG PRODUCTS – characteristics -Low market share -Market is small & not growing -Ready to discontinue product -No spending, money used for other product -

16 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix A marketing tool created by Igor Ansoff and first published in his article "Strategies for Diversification" in the Harvard Business Review (1957). The matrix allows marketers to consider ways to grow the business via existing and/or new products, in existing and/or new markets

17 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix There are four possible product/market combinations. This matrix helps companies decide what course of action should be taken given current performance. The matrix consists of four strategies:

18 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix

19 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Customer Service-Related Product Features 3. Inflight-service -Wider seats & aisle -Inflight cabin service -Food & bevereges

20 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 1, Market Penetration - Market our existing products to existing customers. - Able to increase sales/revenue - e.g., promoting the product, repositioning the brand, etc. - Product is not altered and we do not seek any new customers.

21 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 1.Market Penetration (existing markets, existing products): -company enters/penetrates a market with current product -by gaining competitors' customers (part of their market share). -other ways include attracting non-users of your product or convincing current clients to use more -with advertising or other promotions. -on is the least risky way for a company to grow.

22 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 2. Market Development - market existing product range in a new market -product remains the same, but promote to a new customers - Exporting the product, or marketing it in a new region

23 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 2. Market development -(new markets, existing products): -established product in the marketplace can be targeted to a different customer segment, -as a strategy to earn more revenue for the firm. -Eg.,, Lucozade was first marketed for sick children and then rebranded to target athletes. -developing a new market for an existing product. -the market need not be new in itself, but the market is new to the company.

24 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 3. Product Development -new product to be marketed to our existing customers. -develop and innovate new product offerings to replace existing ones. -products are then marketed to our existing customers. - often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers.

25 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 3. Product development (existing markets, new products): -developing new products for to the same market -old product but new to the company -Eg., McDonald's within the fast-food industry, but frequently markets new burgers. -when a firm creates new products, it gain new customers for these products. -new product development, a crucial business strategy for firms to stay competitive.

26 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 4. Diversification New products to new customers. Two types of diversification, a)Related diversification - remain in a market which we are familiar. Eg., a soup manufacturer diversifies into cake (food industry). b)Unrelated diversification - we have no previous industry nor market experience. For example a soup manufacturer invests in the rail business.

27 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 4.Diversification - (new markets, new products): -Virgin Cola, Virgin Megastores, Virgin Airlines -Telecommunications are examples of new products created by the Virgin Group of UK, to leverage the Virgin brand. -This resulted in the company entering new markets where it had no presence before

28 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 4. Diversification Federal Express (FedEx): -door 2 door service, -smaller shipments

29 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix Lesson From Ansoff Matrix To achieve the correct balance between risk & opportunity: 1.Firm must have product that fit into each of the four boxes 2.Need establish product &market for short term profit 3.To grow business must create new product & market

30 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Fleet & Schedules-Related Product Features 1.Cabin Configuration & Classes of Service LCC airline (trade-off between comfort and price) – single class, to put as many sits - Safety is not a major concern - Lack of pax comfort

31 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Fleet & Schedules-Related Product Features 2. Network, Frequencies & Timing (compromise between product quality & cost) -Routes are more often regulated -Frequencies are also determined by regulatory factors -Timing eg. Long haul not stop, now more efficient by the introduction of new aircraft B777 and A330

32 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Fleet & Schedules-Related Product Features 3. Puctuality (trade-offs cost vs. punctuality - New aircraft vs old/2 nd hand (replacing policy) - Invest in Auto-Landing-Capability for poor visibility condition - Scheduled maintenance & sufficient spares - Schedules Planning: max aircraft utilization, low cost - Punctual arrivals importance: connections, business meetings, emergencies

33 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Customer Service-Related Product Features 1.Point-of sale service -travel agent - Global distribution system –computer reservation - Internet bookings

34 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Customer Service-Related Product Features 2. Airport Service -Low-fare airlines -Few counters, longer check-ins -No seat numbers -Traditional Airlines-frequent buss traveler -Limousine service -Check-in & transfers services -Preferential baggage service -Departure/arrival lounge -

35 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Customer Service-Related Product Features 3. Inflight-service -Wider seats & aisle -Inflight cabin service -Food & bevereges

36 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING The Air Freight Market 1.Air Freight Capacity -Cabin door size: length and square sizes limitations -Design density: weight capacity & volume metric -Special freighter aircraft

37 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Lesson Learnt

38 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING

39 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING

40 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING