ROLE OF MARKETING IN AIRASIA GROUP

INTRODUCTION
This paper attempts to understand whether marketing plays material role in supporting
the function of a firm as well as contributing in the formulation of corporate strategy for AirAsia
group, Malaysia (AirAsia). This is guided by the view that the marketing, in general, has
become less influential in a corporates strategic decision making (Klaus, Edvardsson,
Keiningham, et al. 2014). The paper will be structured as follows:

PART A

: Background on AirAsia

PART B

: AirAsias marketing

PART C

: What is meant by marketing?

PART D

: The holistic marketing concept

I.
II.

PART E

Relationship marketing
Integrated marketing

III.

Internal marketing

IV.

Performance marketing

: Conclusion

PART A: BACKGROUND ON AIRASIA

AirAsia is Asias very first budget or low cost carrier (LCC). It is co-founded in
Malaysia by two prominent entrepreneurs, Mr. Tony Fernandes and Mr. Kamaruddin Meranun,
which have spotted business opportunity arising from the inexistence of the much needed
affordable air travel service in Asia. Mr. Fernandes and Mr. Meranun acquired the then lossmaking full carrier AirAsia in 2001 from a government-owned company and transformed it into
a profitable LCC. Current AirAsia imitates the low-cost airline business model first introduced
by Southwest Airlines Co (Southwest), the pioneer of LCC business,.

The LCCs fleet consists of 164 aircrafts as at end of 2013 and has an extensive route
network covering 87 destinations worldwide throughout 22 countries, mainly in the south-east
Asian countries as well as Australia, India, China, Nepal, South Korea, Japan, Saudi Arabia and
Macau (AirAsia Berhad 2012).

AirAsia serves 3 billion customers throughout Asia and its services are provided by its
subsidiaries incorporated worldwide such as AirAsia Berhad, AirAsia X, AirAsia Zest, AirAsia
Indonesia, Thai AirAsia, AirAsia India and AirAsia Japan.

PART B: AIRASIAS MARKETING

AirAsias success in marketing is a befitting example of the broader importance of
marketing in helping society to embrace new product (or service) as highlighted by Kotler &
Keller (2012). Prior to the establishment of AirAsia, access to air travel in Asia is deemed as
exclusive for the higher income customers due to the high airfare. This is despite the increasing
need among the public due to the challenging geography and the rapid economic growth of the
region. Once the right service at the right cost is made possible by AirAsia, the LCC has
launched marketing campaign, undertaken in holistic manner, to attract new passengers.
Promoting the perception of lower fares and extensive network by the LCC has attracted a large
proportion of first time flyers (OConnell & Williams 2005).

The provision of affordable mode of air transportation, of course, is enabled by

AirAsias highly efficient operations (International Airport Transport Association 2013).
AirAsia also operates with the lowest unit cost in the world, beating the established LCCs like
Southwest and Ryanair (Financial Times 2010). These facts has been used extensively by
AirAsia in further marketing its affordable service to its targeted market (AirAsia 2014).

The strategic marketing and operational efficiency has permitted the LCC to expand
beyond the Malaysian market and emerge as a regional player. This is in line with the internal
view of the company to promote its service to all travellers, regardless of the income level.
This internal view is translated into the companys slogan, i.e, Now Everyone Can Fly, which
also facilitates external stakeholders to understand the LCCs strategic vision.

Figure 1: AirAsias main tag line (Source: Companys official website)

PART C: WHAT IS MEANT BY MARKETING?

Bagozzi (1975) suggested the idea of exchange of value to understand the marketing
behaviour. The exchange of values refers to the various combination in the transfer of tangible
values (for example money, products and services benefits) and intangible values (social
recognition) between two or more social actors such as consumer, advertising agency, service
provider and producer. In this perspective, marketing can be described as the exchange of values
between two or more social actors.

Bennett (1995) defines marketing (management) as the act of planning and executing
the conception, pricing, promotion, and distribution of idea, goods and services to create
exchanges that satisfy individual and organisational objectives. This definition is also adopted
by The American Marketing Association.

Meanwhile, exchange is further defined as the act of obtaining a desired product from
someone by offering something in returnWhether exchange actually takes place depends
upon whether the two parties can find terms of exchange that will leave them both better off
than before the exchange (Philip 1994).

Thus, it can be concluded that marketing can be understood as the execution of certain
actions that lead to the exchange of certain values.

In practice, the nature of the exchange is complex due to the existence of various social
actors in marketing activities. Taking AirAsia as example, the LCC leverages on the publicity
of other established global brands to promote its own brand thus injecting a new social actors
in its marketing activities. The LCC has arranged to associate itself with one of the biggest

football club in the English Premier League, Manchester United Football Club (MU), by being
the clubs official LCC.

AirAsia has painted the fuselage and tail of one of its Airbus 320, dubbed as the Red
Devil Airbus, with images of the clubs players and crest, respectively. This has developed the
brand image of the LCC. At the same time, MUFC is able to intensify its brand presence in
Asia. Thus, it can be seen that on top of the exchange of values from airline-customer
interactions, there exists an exchange of agreed and desired value between AirAsia and MUFC,
its marketing partner, arising from the airline - football club partnership.

Figure 2: Red Devil Airbus (Source: http://www.adweek.com/adfreak/hitch-ride-man-u-airplane-19231)

PART D: THE HOLISTIC MARKETING CONCEPT

According to Kotler & Keller (2012), holistic marketing concept revolves around the
marketings development, design and implementation of marketing programs, processes, and
activities with proper acknowledgement on the extensiveness and relationship of these
marketing stages. Generally, holistic marketing is a comprehensive marketing approach and it
is a must for a company to become successful.

Kotler & Keller, (2012) also suggested four broad components in holistic marketing,
namely relationship marketing, internal marketing, integrated marketing and
performance marketing. The scope of holistic marketing in this paper, however, will be
confined only on the first two components.

Relationship marketing
Relationship marketing is perhaps the most apparent components in holistic marketing.
This is because evidences of this component are the easiest to be spotted or identified as it
normally involves external stakeholders. Specifically, it suggests an organisation to develop
and maintain positive relationship with constituents for relationship management to ensure
business success. Kotler & Keller (2012), classified the constituents as customers, employees,
marketing partners (channels, suppliers, distributors, dealers and agencies) and financial
stakeholders (shareholders, investors and analysts).

Gronroos (1990) highlighted that interaction or customer relationship is important in

marketing. This is especially in the case of service provider like AirAsia which activities
beyond merely the management of marketing mix of 4Ps (product, place, promotion and price)
as originally proposed by (McCarthy, Perreault & Quester 1990).

The term relationship marketing may refer to a marketing tactic aiming to attract and
retain customers, but to a majority of researchers, it means a strategic choice. As a strategic
choice, it is described as all marketing activities directed towards establishing, developing, and
maintaining successful relational exchanges (Li & Nicholls 2000).

Zineldin & Philipson (2007) supports the superior of relationship marketing philosophy
over transactional marketing philosophy. However they also highlighted that despite that,
transactional marketing are still relevant for corporates. The relevancy can be measured by
studying the relationship of financial performance and profitability with the relationship
portfolio. This view is also consistent with Gummesson (1995).

It is further highlighted that in practice, there is none of the company that solely use the
relationship marketing approach and that transactional marketing is still dominant. It is also
argued that relationship marketing should be used as support instead of a replacement to
transactional marketing (Zineldin & Philipson, 2007).

In practice, relationship marketing can be achieved through many ways. In analysing

AirAsias way of undertaking relationship marketing, this paper chooses to focus on the usage
of social media platform and customer relationship management (CRM) programme.

Being a relatively young and fast-growing LCC, the maintenance of good relationship
with customer is central to AirAsias marketing strategy. It is reported that AirAsia integrates
social media as part of the companys core values in building relationship and its brand
(AirAsia Berhad 2012).

Mr. Fernandes, the current CEO of AirAsia is known as an active social media user.
Through Twitter and Facebook, he has managed to collect feedbacks from the public as well as
involving himself with the day-to-day functioning of the LCC, reflecting the big role of senior
management in AirAsias relationship marketing.

AirAsia has made several significant business decision based on the comments or
feedbacks gathered from Twitter. It is reported that the LCC has added two previously
unpopular destinations, namely Lombok (Indonesia) and Xian (China) based on the direct
feedback provided by the LCCs followers in Twitter. These destinations has proven to be able
to attract new customers and be immediate hits (AirAsia Berhad 2012). There are also many
free flights given to Twitter followers by Mr. Fernandes. This also boosts the relationship
marketing with customers.

As part of its CRM strategy, AirAsia launched a programme called Ask AirAsia. Under
the programme, AirAsia subscribes to a CRM integrated solution provided by a third party. The
platform provides feedback to customers via live chat and social media platform such as Twitter
and Facebook and disseminates information through the YouTube and Instagram in a very
effective manner. This can be considered as AirAsias means of differentiation which
ultimately helps in its relationship marketing.

AirAsia operates a fully functional e-commerce website, where it offers integrated

online sales facility where 45% of its booking were made via the online platform (Thomas
2003). AirAsia is also an extremely innovative LCC, being the first airline in the world that
offer SMS booking (OConnell & Williams 2005). Furthermore, one research concluded that

AirAsia always put customer as their first priority in every consideration, reflecting the LCCs
fascinating relationship marketing (Abd Razak 2009).

As the business decision as big as introducing a new destination based on feedbacks

received in social media, it is believed that AirAsia also regards feedbacks from such
marketing channel as a credible input to influence the management in corporate strategy
formulation as well.

Internal marketing
Second element in holistic marketing is internal marketing, which Kotler & Keller
(2012) define it as the task of hiring, training and motivating employees to be able to serve
the customers well. Kotler & Keller (2012) also highlighted that this must be embraced by all
employees, especially the senior management. In other words, the LCCs marketing
philosophy and activities, such as branding strategy, must involve all employees and not only
those in the marketing department. One study concluded that AirAsia puts high emphasize on
the understanding of the companys vision, mission and objectives among its employees (Lim,
Mohamed, Ariffin, et al. 2009).

The senior management members in AirAsia plays a pivotal role in exhibiting the
LCCs marketing vision as well as motivating the employees on serving the customer well.
AirAsias top three senior management members have Twitter account which dedicated mostly
in entertaining issues related to the LCC and these accounts are praised by a third party
consultancy company as having the balanced two-way tweets (AirAsia Berhad 2012)

Furthermore, the active role played by senior management members can also be seen
from the extra efforts exerted by Mr. Fernandes in promoting AirAsia brand. He has ventured
into British sports car manufacturer Caterham and soccer club Queens Park Rangers and
inventing marketing collaboration such as sponsorship and commercial partnership. This has
allowed AirAsia brand to enjoy better visibility.

The willingness of the senior management members to exhibit AirAsias brand and
culture to the world, as open as possible, is a strong indicator of AirAsias fascinating internal
marketing philosophy. For example, Mr. Fernandes relentlessly instils a strong brand-based
culture within the organisation. He wears the trademark AirAsia cap in almost all of his official
appearance. The CEOs of the LCCs main subsidiaries also seen with similar style in many
occasions. While all of these are seen as promoting AirAsia to external stakeholders, especially
the customers, it also helps AirAsia to motivate its own employees and further encouraging
these employees to embrace to AirAsias marketing culture.

Figure 3: Mr. Fernandes, AirAsia founder (Source http://edition.cnn.com/2007/WORLD/asiapcf/09/20/talkasia.fernandes/)

Meanwhile, there are also internal marketing programmes that are designed to directly
motivate the employees. Under AllStar initiative, senior management members of AirAsia will
always address their employees as AllStar to instil the sense of belonging and cultivate the

10

strong brand-based culture throughout the organisation. There are also other corporate culture
practices that are introduced to reduce the gap between senior management and AllStar such as
the practice of addressing each other in AllStar and senior management on a first name basis
(Lim, Mohamed, Ariffin, et al. 2009). This will be translated into motivation and hence the
marketing productivity.

Deliberation also being made in AirAsias hiring and training process to ensure that
the hired employee is able to serve customers appropriately. A suitable example is AirAsias
employee development programme called Cadet Pilot. The programme managed to hire,
motivate and develop an employee who was originally hired to carry bags but 18 months later
developed as the First Officer for AirAsia (Lim, Mohamed, Ariffin, et al. 2009).

11

PART E: DISCUSSION AND CONCLUSION

Firstly, based on the analysis undertaken on AirAsias marketing philosophy, it can be
found that AirAsia has done well in marketing its business and brands to support the function
of the LCC. The marketing approach undertaken by AirAsia is positioned between moderate
and aggressive.

Secondly, the concern raised by Verhoef & Leeflang (2009) on the declining influence
of marketing department on the corporates business strategy may not be applicable to AirAsia
for several reasons.
(a)

Despite AirAsia does not have a formally appointed C-level executive to ensure
marketing interest be maintained in the companys strategic direction, its senior
management members consistently take an active role in bringing the marketing
factors as part of inputs in AirAsias corporate strategy formulation;

(b)

It is believed that many of AirAsias expansion strategy is based on the input

from its marketing interaction with customers, especially via social media.
Example on AirAsias addition of new routes based on social media interaction
presented in this paper would support this view; and

(c)

Overall, AirAsias marketing processes and programmes are undertaken in

holistic manner, fulfilling all of the four components of holistic marketing
concept soundly. According to Klaus et al. (2014), a good demonstration of
holistic marketing will allow marketing to be visible and receive support from
stakeholders, including companys management, and ultimately be allowed wide
role corporate strategy formulation.

12

Nevertheless, there are also several aspects that should be improved by AirAsia in
regards to elevating marketing higher to the strategic level.

Firstly, it is found that there are lack of linkages between financial performance and
marketing activities of AirAsia, i.e. loose implementation of performance marketing in holistic
marketing approach. The poor linkage issue is not only faced by AirAsia but airline as a whole.
According to (IBM 2002), many airlines adopt CRM as a competitive catch-up rather than as
means of differentiation. Airlines rushing to adopt CRM just to imitate competitors and many
of them are unable to apply the CRM strategically and translate it into better financial
performance.

In implementation CRM initiative, AirAsia should understand which initiatives can

drive profitability and the risk that may be brought by such initiative. For example there are
much difference in the profit margin contribution between frequent flyers programmes and
online baggage tracing as reflected in the graph on the return on investment from selected CRM
initiative (IBM 2002)
1.8
1.62
1.6
1.4
1.2
1
0.72

0.8
0.6
0.4

0.14

0.2

0.11

0.04

0.001

0
Frequent flyers
programmes

Site
Web-based E-mail campaigns Internet check-in Online baggage
personalisation customer service
tracing
Change in profit margin (%)

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Secondly, AirAsia focuses too much on its customers in its relationship marketing. The
other constituents in relationship marketing, especially the suppliers. In AirAsias case, it refers
to the airport operator. It is known to the aviation community in Malaysia that AirAsia being
very difficult and vocal to Malaysia Airport Holdings Berhad, the national airport operator.
There are several conflicts surfaced between the two companies (Thestar 2014).

On the other note, looking at the issue of marketing in strategic context should also be
viewed and analysed in the reverse direction, i.e. on to what extent the strategic decision be
translated into marketing programmes and processes. A healthy two-way flow is maybe more
important than ensuring that marketing has its place at strategic formulation level.

In AirAsias case, it is found that the traces message from the strategic level can be seen
in its marketing programmes and processes. For example, at strategic level, the LCC decides to
move forward as an efficient LCC that provides the best price to customers at all level of
income. Additionally, AirAsia strives to further differentiate the LCC from the other LCCs by
providing excellent and projecting it as a fun LCC. This strategic direction is translated well
into AirAsias marketing activities and channels.

In conclusion, marketing plays pivotal role in AirAsias operational as well as corporate

strategy. However, there are still room for improvements. In addition, the issues on marketing
and corporate strategy must be looked at in both directions, i.e does marketing influences the
corporate strategy decision and does corporate strategic decision translated into marketing.

14

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