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CONTENT

PAGES

1.0 INTRODUCTION2
About the product..2
1.1 Company background......7
1.2 Business process and operation...9
1.3 Low cost carrier (lcc) business model.11
1.3.1 Business model...11
1.4 Competitive Advantages ....12
1.5 Historical Performance...13
2.0 ANALYTICAL SWOT ANALYSIS...18
3.0 PRODUCT ANALYSIS.21
3.1 The product Life Cycle (PLC)....21
4.0 STRATEGIS AND TACTICS...24
5.0 SEGMENTATION, TARGETING AND POSITIONING ANALYSIS
5.1 Market Segmentation...26
5.2 Target Market Profile30
5.3 Positioning..32
6.0 MARKETING STRATEGIES AND EVALUATION OF MARKET PROGRAM
ELEMENTS..33
Refferences
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1.0 INTRODUCTION AND HISTORY


a. Introduction of the product

Name of the company: Air Asia Berhad


ABOUT THE PRODUCT
Air Asia is a low cost airline based in Kuala Lumpur, Malaysia. It operates
scheduled domestic and international flights and is Asias largest low fare, no frills
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airlines. Air Asia pioneered low cost travelling in Asia. It is also the first airline in the
region to implement fully ticketless travel and unassigned seats. Its main base is the
Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). Its
affiliate airlines Thai Air Asia and Indonesia Air Asia fly from Suvarnabhumi Airport,
Thailand and Soekarno-Hatta International Airport, Indonesia, respectively.
The airlines established in 1993 and started operations on 18 November 1996. It
was originally founded by a government-owned conglomerate DRB Hicom. On
December 2, 2001 the heavily indebted airlines was purchased by the former Time
Warner executive Tony Fernandess company Tune Air Sdn Bhd for the token sum of
one ringgit. Fernandes proceeded to engineer a remarkable turnaround, turning a profit
in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at
breakneck speed, undercutting former monopoly operator Malaysia Airlines with
promotional fares as low as RM1 (US $ 0.29).
Air Asia operates with the worlds lowest unit cost of US$0.023/ASK and a
passenger breakeven load factor of 52%. It has hedged 100% of its fuel requirements
for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew
productivity level that is triple that of Malaysia Airlines and achieves an average aircraft
utilization rate of 13 hours a day.
Air Asia currently is the main customer of the Airbus A 320. The company has
placed an order of 175 units of the same plane to service its routes and at least 50 of
these A320 will be operational by 2013. The first unit of the plane arrived on 8
December, 2005.

Support
As a pioneered in low cost air transportation in Asia, Air Asia has several
subsidiaries and associate company to support its operation.
Subsidiaries
Thai Air Asia was established as Subsidiaries of Air Asia Berhad on 8 December
2003 as joint venture with Shin Corporation. Flight operation was commenced on 13
January 2004 from its base in Don Mueang International Airport. Since 25 September
2006, the airline is based at the new Suvarnabhumi Airport.
The other subsidiary is Indonesia Air Asia. This airline is based in SoekarnoHatta International Airport. Air Asia acquired the then defunct Awair in 2004 with a 49%
stake in the airline. Awair commenced services on behalf of Air Asia in December 2004;
full rebranding to Indonesia Air Asia was completed on 1 December 2005. The airline is
based in Soekarno-Hatta International Airport.
Associated companies
They also have associate companies such as Air Asia X, Fly AsiaXpress, Tune
Hotels and Tune Money. Air Asia X is a service operated by Air Asia X sdn.Bhd.
(previously known as Fly AsianXpress Sdn.Bhd.) as a franchise of AirAsia. It has started
offering long-haul services from Kuala Lumpur to Australia and China using Airbus
A330. The inaugural flight was on 2 November 2007 to Gold Coast, Australia.
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The first AirAsia no-frills hotel, Tune Hotels, is ready for occupancy in Kuala
Lumpur and Kota Kinabalu and later in Penang, Johor Bahru, KLIA, Miri, Kuching and
Sandakan.
Tune money is Asias first no-frills online financial service owned by Tune Air
Sdn.Bhd. Modelled aftaer Virgin Money, it comprises life, home and motor vehicle
insurance as well as prepaid cards.
Destination
Air Asia operates over 200 flights a day, to over 75 domestic and international
routes covering Malaysia, Thailand, Indonesia, Singapore, Brunei, Myanmar, the
Peoples Republic of China, Vietnam, Laos, Cambodia, Australia and the Philippines.
In 2007, 19 new routes had been introduced over the Air Asia wide network.
These include routes from Kuala Lumpur to Gold Coast (Via Air Asia X), Vientiane and
Banda Aceh and the connection of Southern China (Macau and Shenzhen) with
different Malaysian hubs and Bangkok. In 2008, new routes were introduced which
included destinations in India and China.
Air Asia future plan is seeking to set up a hub in Malacca serving Medan, Pekan
Baru, Palembang, Padang, Penang and Langkawi. Air Asia has gained approval from
India authorities to start flying to destinations in India such as Chennai, Madurai and
Kochi.

Value Added Services


On 15 May 2007, a service named Xpress Boarding was launched, enabling
passengers to get priority boarding for a fee. This product is available in all hubs
including Thai Air Asia and Indonesia Air Asia.
On Air Asia X flights, passengers are given a choice of purchasing extra baggage
weight, meals, comfort kit and seat selection all with nominal fees.
On 26 November 2008, Air Asia has launched its Air Asia X London flights to
London Stanstead Airport.
AirAsia is one of the award winning and largest low fare airlines in the Asia
expanding rapidly since 2001. With a fleet of 72 aircrafts, AirAsia flies to over 61
domestic and international destinations with 108 routes, and operates over 400 flights
daily from hubs located in Malaysia, Thailand, and Indonesia. Today, AirAsia has flown
over 55 million guests across the region and continues to create more extensive route
network through its associate companies. AirAsia believes in the no-frills, hassle-free,
low fare business concept and feels that keeping costs low requires high efficiency in
every part of the business. Through the corporate philosophy of Now Everyone Can
Fly, AirAsia has sparked a revolution in air travel with more and more people around
the region choosing AirAsia as their preferred choice of transport. AirAsia creates values
through the following vision and mission:

1.1 COMPANY BACKGROUND:


In 1993, Air Asia was established and started to operate on November 18, 1996.
The airline industry was originally founded by DRB-Hicom which is a governmentowned conglomerate. Fernandes proceeded to engineer a notable and significant
turnaround, turning an Air Asia a profit in 2002 and establishing new routes from its hub
in Kuala Lumpur International Airport rapidly.
On December 2, 2001, Air Asia was purchased by Tony Fernandes. The industry
is operating scheduled domestic as well as international flight and known as the largest
low-fare in Asia. Air Asia is a pioneer when it comes to low-cost travelling and the first
industry in the region to implement ticketless travel and unassigned seats. Nonetheless,
as of February 5, 2009, Air Asia has implemented allocated seating for their guests
across all their flights which include Thai Air Asia and Indonesia Air Asia. The main base
of Air Asia is the Low Cost Carrier Terminal located at the Kuala Lumpur International
Airport.
The company aims on enabling more people to travel by air by providing them
hassle-free, no frills and low-cost airline services. Accordingly, the advent of aviation

deregulation has been able to provide opportunities to different airline industries and
started low-fares operations in 1990. Because of this, low cost carriers has been
developed in Asia since 2000 and industries like Air Asia has been able to grab this
opportunities. Accordingly, low-cost carrier model is very applicable in the global market,
even though deregulated market are most appropriate for its faster spread. It can be
said that with the deregulation of aviation market in European Union, airlines are also
given the chance to make decisions with regards to market access, fares and capacity.
It is said that before the deregulation, airline industries have always been restricted by
governments which controlled the destinations of the airline industry and also the
product planning and pricing strategy.
AirAsia makes the low fare model possible and create values through the
implementation of the following key strategies:

1.2 BUSINESS PROCESS AND OPERATION


AirAsia has fostered a dependency on Internet technology for its operational and
strategic management, and provides an online ticket booking services to traveler online.
The following shows the home page of AirAsia.com as the company key channel of
marketing and sales.

Exhibit 1 AirAsia.com Home Page


To book a flight with AirAsia, customers can either choose the following channels or
simply visit the
AirAsia.com home page and follow the below 5 steps.
1. Call centre
2. Sales office and airport sales counter
3. Authorized travel agents
4. Mobile booking via mobile.airasia.com or
5. Online (http://www.airasia.com) in 5 easy steps as shown below.
Step 1 - Search
Step 2 - Select
Step 3 - Guest & Contact
Step 4 - Payment
Step 5 - Itinerary

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1.3 LOW COST CARRIER (LCC) BUSINESS MODEL


The low cost airlines like AirAsia have changed the definition of airlines that air travel is
a luxury and it is only for the upper segment of the population. The key objective of low
cost carriers is to increase their reach and provide the services to a large segment.
However, the low cost carriers are now facing some challenges in the market.
1.3.1 BUSINESS MODEL
AirAsia follows the Low-Cost-Carrier (LCC) business model in the airline industry, which
can be characterized as below:

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FIGURE 1: LOW COST CARRIER BUSINESS MODEL


1.4 COMPETITIVE ADVANTAGES
With the Low Cost Carrier business model, AirAsia has the following competitive
advantages over the competitors in the airline industry, which can be summarized in the
following diagram.

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FIGURE 2: AIR ASIA COMPETITIVE ADVANTAGES


1.5 HISTORICAL PERFORMANCE
Air Asia is using Customer Relationship Management (CRM) as their
performance measurement system. This performance measurement system is putting
customer at the heart of the business. It satisfies the customer needs and wants. It is
strategy and process of acquiring, retaining, and partnering with selective customer to
create superior value for company and the customer. This will then increase the
shareholders wealth and company value in the long term. According to the Chairman of
Air Asia, Dato Abdul Aziz, the core of the company is to provide excellent service and all
the staff in the company is trained to put customers as their priority. This has shown the
company concern of customers relationship. Thus, Air Asia has started to implement
CRM as their performance measurement system on March 2009. is strategy and
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process of acquiring, retaining, and partnering with selective customer to CRM in Air
Asia helps the company to target market, increase merchandise and launch various
promotions by analyzing knowledge about customers. Air Asia official website includes
the necessary information such as destination, hospitality, transportation, climate
information as well as recommendation. This could convenient the customers in gather
information for their decision making. Other than that, Air Asia has an effective CRM
system to address the route that has proven to be lucrative and delivered sustained
profit which is Malaysia Singapore route. Therefore, Air Asia has increased the flight
from Malaysia to Singapore on 2009. In the effort of customer retention, CRM helps the
company to identify loyal customers and implement loyalty programs to treat them
better. In addition, CRM recognized and analyzed the buying pattern of the customers.
From here, Air Asia can increase flights, number of seats and at the same time provide
packages, hotels and number of staying days in tourist locations. In addition, customers
will receive information such as travel guide and suggested destination by SMS. These
efforts could help the company to acquire more potential customers in align with CRM.
Hence, Air Asia managed to secure the first cycle of the CRM which has tremendous
effects on the entire chain cycle. Lastly, according to Skytrax Airline Ranking, it was
clearly defined.
i)

Cost reduction:

With the implementation of CRM, it would help to reduce the operational cost in
the company. CRM is the performance measurement system that implement
under cross functional integration of the processes, workers, marketing data and
operation in the company. With the integration of the components in the
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company, it could enhance the efficiency and effective in the daily operation in
the company and therefore, cost of operating can be reduced significantly. Other
than that, CRM detects and alerts to the management the poor operational
processes in the company. With this, management can perform corrective action
and step and thus, it could lower the unnecessary cost incurred in the operation.
ii)

Increase customer satisfaction:

The main objective of CRM is dealing with long term and sustainable customer
relationship by satisfy every customer. CRM provides company the systematic
data regard to customer value and information which are useful to allow company
to execute the steps and attempts in customer relationship. In addition, CRM
supply the complete and crucial information about every customer which help
company to identify the profitable and potential customers. The information and
data can be obtained from CRM are such as personal details of the customers,
buying patterns and demands of the customers. The management in the
company could then launch the comprehensive efforts to satisfy the customers in
accordance with their needs, demands, preferences, and requirements.
Customers are considered satisfied not only they obtain what they want but also
their perceived value of the particular product and service is exceeds their
expected value. Hence, satisfaction of the customers can be increased when the
company is able to constantly provide products and services that above
customers expectation.

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iii)

Growth in number of customers.

CRM upholds two major principles which are customer retention and customer
acquire. Customer retention is dealing with retain the existing customers to avoid
loss of customers while customer acquire is to attract new customers and
therefore increase the portion of the customers. With CRM, company manages to
commence various loyalty programs to reward the identified loyal customers.
This is one of the efforts in performing customer retention. Other than that, the
company could acquire new customers by execute some promotions to attract
potential customers through communication medium such as telephone, emails,
internet and sales visit. When the company is successful in retain and acquire
customers, the numbers of customers is will certainly grow.
iv)

Improved marketing strategies and competitors information:

CRM ensures the company to focus to external components such as customers,


markets and competitors as well. By implementing CRM, the company can
improve their products marketing strategies and plans. With the help of CRM, the
company could measure their marketing efforts such as marketing campaign,
marketing promotion and figure of sales, so that, corrective action can be taken
for improvement. In addition, CRM too facilitates the company in optimizing and
controlling the marketing, sales and processes. Other than that, CRM enables
company to access to competitors information in the sense of using market
intelligence to track competitors information as well as analysis of customers
trend.

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v)

Provide long term profitability and sustainability:

CRM is a tactical approach that enables company to generate long term profit
from the sustainable customer relationship. CRM integrates the marketing
strategies and information technology to create long term profitability that derived
from relationship with customers. Cost reduction from CRM could avoid the
company to operate at low cost. Customer satisfaction and high customer
numbers is the core of company earnings. Lastly, effective marketing strategies
and competitors information allow the company to success. These factors
contribute to company long term profitability. When the profit is high and
maintained so as the shareholders wealth.

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2.0 Analytical Tools (SWOT Analysis)


To figure out the internal factors such as strengths and weaknesses, and external
opportunities and threats to business objectives, a SWOT Analysis of AirAsia can be
conducted and shown below.

Strength
AirAsia serves a very basic need of its passenger, getting from point A to point B,
its business models derives from Southwest Airlines, Ryanair and EasyJet. AirAsias
No Frills module simply means cutting out the unnecessary offering such as in-flight
meals, baggage allowance, lesser leg room and reduced seat pitch. The storage space
for food has been used to add more seats. And by no free snacks means lesser time
spent on the ground and AirAsia spend nothing more than 25 minutes on the ground
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each time it lands. Averagely a full board airline is airborne for 8-9 hours a day while
AirAsia flight is airborne for 12 hours a day. By using the same fleet, AirAsia reduces the
cost of training cabin crews and pilots as it is easier to move them around and the floor
plan and layout remains the same. The official website of AirAsia, allows you to pay
using multiple currency options and with the partnership of Expedia, AirAsia website
serves as the only website a passenger need to book a flight, accommodation and
ground arrangements. AirAsia has won the prestigious award Worlds Best Low Cost
Airlines by Skytrax for the last 3 consecutive years (AirAsia, 2012c), Appendix 7 shows
the award won by AirAsia for the last 3 years and it certainly helps build trust in the
brand.
Weakness
According to a research, 35% of passengers choose airlines based on
punctuality (Emirates247, 2008) by delaying flight AirAsia also loses its air borne time.
Another problem that AirAsia faces is the customer service support and there is only 2
ways for one to get in touch with an AirAsia customer service representative, either by
writing to their customer service e-mail mailbox with a reply response lead time of 4-5
days or a premium customer service line with a charge of RM 1.95 per minute (AirAsia,
2012e). There also have been incidents whereby AirAsia website is down, most of the
time during its promotions and most probably due to heavy traffic and non-redundant
data infrastructure. As cost rises and consumers expects to pay lesser AirAsia routes
its flights to secondary airports as the handling fees and airport charges are lower.
Opportunities

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As the flight to Europe and India has been called off, AirAsia focuses to open
more routes in North Asia. With new fleets AirAsia should open more routes such as
Palawan, Boracay, Makati, Koh Sa Mui and Madurai. MAS has also confirmed that it will
reduce its flight frequency to Sydney and Fireflys routes to Langkawi, Penang and
Singapore post August 2011 agreement to benefit AirAsia (The Star, 2012b)
Threats
Events such as Bali bombing, 9/11 and Bangkok Airport lockdown are
unpredictable potential treats. Aviation rules and government policies also act as a
threat and in this case, AirAsia faces fuel price hike, airport tax, handling charges and
government protection towards national carrier and predominant route restrictions.
Major challenges
Increasing competition because of increasing number of low cost airline competitors,
and aggressive competition against the large or traditional airline companies
Customer decrease because of poor economy
Rising of the fuel prices
Higher labor cost
Inadequate infrastructure
Route and flight utilization
Safety and security issues of aircraft crash or being attacked

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3.0 PRODUCT ANALYSIS


As with living organisms, products have a life cycle. For some, such as the
Boeing 747, the life cycle is measured in decades whilst for others, for example the
merchandising spin offs from popular movies, the life cycle may be measured in mere
weeks.
3.1 The Product Life Cycle (PLC)
A product enters the market in one of three ways. The first may be as an
improvement on an existing product, in which case there will already be a customer
base. The second is as a competitor to an existing product, in which case a customer
base exists, but its loyalties may lie elsewhere. The third way is as a totally new
product, in which case a customer base needs to be built up.
Research has shown that many new products never move out of the launch
stage. In the 1960s it was stated that 96 per cent of all new product launches failed. By
the 1980s this had improved to the extent that only 80 per cent of product launches
failed.
Reasons for failure were given as:
Incorrect segmentation trying to reach the wrong market.
Incorrect pricing either too expensive to provide consumer value ortoo cheap to
sustain the costs of production and market activities.
Incorrect communication mix failure to create the required levels of awareness,
interest and action.
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Incorrect distribution not in the right channels or if in the right channels, not in
enough of them.
The product itself by far the most common reason. The product does not provide any
new benefits or it provides benefits that are not sought or valued by the customer. It has
no beneficial differentiation to existing products already established in the market.
Air Asia, Airlines Company with 58 flight destination is in the growth phase
position of Product Life Cycle (PLC) stage. The growth phase is when loyalty begins to
be built up. Some products or services can be taken up by the customer base very
quickly and achieve rapid growth. Sales of Air Asia Airlines grew tremendously in every
country in which they were available.
It is during the growth phase that the product will begin to recover its
development and launch costs and slowly move through the break even mark to begin
to make a profit for the organization. During the growth stage of a new market or a new
product, competitor will also enter the market with similar products or services and
competition will become increasingly evident.
The characteristics of products or services in the growth phase are Gain market
share instead of create awareness and promote trial as the objective, increasing the
sales, moving from the non-profits into profit, the competition is growing.
As Air Asia gain high market share begins to make a contribution to overall
profitability. Revenue pays off the development costs. It will begin to make rival product
or service into problem. As the market still growing, revenues can be expected to

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increase. This period correspond to the star phase of the Boston Consulting Group
(BCG).
The market mix elements during in the Growth phase are as follows.
Product: Product extension and minor modification.
Price: Penetration Pricing for Market Share.
Advertising: Heavy media even not as heavy as introduction phase, to build
awareness and create brand.
Sales promotion: Reduce as demand increases instead of intensive sales promotions
to encourage trial likes introduction phase.
Distribution: Move from selective distribution to intensive distribution.
4.0 STRATEGIES AND TACTICS
Strategy is used to refer to an overall plan of action. The strategic plan of a
company will indicate where the organization is going and how different functions fit into
the plan. Tactics are the smaller scale actions that are taken to realize the objectives of
the strategy. Gaining 40 percent market share for a product in order to boost profits is a
strategy. Lowering the price of that product for a time in order to stimulate sales is a
tactic.
The Internet plays a vital part in the Air Asia business and has proved to be
critical to the success of the business. As a low cost operation, controlling the cost of
doing business is clearly highly important to the airlines ability to be competitive by

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offering low fares. The Internet provides the most cost effective distribution channel
available.
AirAsias promotions are very well received by the consumer for example its
Free Seat Promotion and Mega Sale Promotion. In order for AirAsia to maintain its
profitability and ensure its stays in line with cost leadership business model, AirAsia has
to offer more routes and products in its portfolio. Association of Asia Pacific Airlines
stated that demand for air travel is projected to grow 5% annually, with the Asia Pacific
region expanding at an even faster pace of 6% per annum over the next twenty years
(AAPA, 2011). More routes and fleets mean more customers and potential ancillary
income, in 2010 ancillary income per guest is RM 44 (AirAsia 2010). Air Asia should
also strongly focus on its offering via web booking as 77% of its revenue derives via
internet. To further proof this, during AirAsias Mind Blowing Fare, 538,000 tickets were
sold in 24 hours and a record setting 36,871ticket per hour. (AirAsia 2010)
Online Marketing
Social media is a very powerful tool, in a recent survey by TNS, Malaysians have
the most number of friends in social networking websites and spends 9 hours a weekly.
(The Star, 2010).
But in total, on average a Malaysian spends 19 hours and 48 minutes online
whereby 54% of them are spent purchasing online, and a 46% trust the source obtained
online. 94% of Malaysian uses social networking sites as shopping guidelines and 45%
of them share their experience on their product, brand or experience. (Nielsen, 2010)
AirAsia should continue to carry its promotions and focus even more on online
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marketing and selling. Social medias are mostly free and AirAsia should leverage on
these platforms to market its product and also use it a medium to collect feedback.
However, AirAsia should also be mindful as negative comments and bad customer
experience will also be posted on the same platform and it is visible to everybody.
AirAsia has to be tactful in handling these situations.
Increase Product Offering
By partnering with Expedia, AirAsia adds value to its services by easing travellers to
book accommodation and ground arrangements. AirAsia should work with more
partners to obtain a better price so that its customer will be able to get better deals.
Agoda, Booking.com, Wotif and Orbitz are a few other options for AirAsia to work with
on accommodation. As for tour packages and ground arrangements, AirAsia should
form collaboration with local partners, for example Reliance and Berjaya Holidays.
These arrangements with local travel agents will also benefit AirAsia as they may set a
quota or have an agreement with the local tour agents to use AirAsias services. AirAsia
should also focus on new routes, for example, domestic flights within Thailand, Australia
and India, respectively 34 %, 49% and 59% of all flight are domestic flights (Forbes,
2010).

5.0 SEGMENTATION, TARGETING AND POSITIONING ANALYSIS


5.1 Market Segmentation

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AirAsia may use segment bases such as demographics, socio-cultural, user-related,


user-situation and benefits-sought segmentation to segment their market, as indicated
in Table 1.
TABLE 1: MARKET SEGMENTATION FOR AIR ASIA
Segment
Segm
ent

Segment 1

Segment 2

Segment 3

Segment 4

Base
Demograph
ics
Income

Sociocultural
Social class
Userrelated

MYR0
MYR40,000
(yearly)

Lower
class

MYR40,00
1
-MYR60,0
00
(yearly)
Middle
class

MYR60,00
1 and over
(yearly)

Upper
class

MYR40,00
1
MYR60,00
0 (yearly)

Middle
class

Low

Moderate

High

High

Leisure

Leisure

Leisure

Business

High

High

Low

High

Usage rate
Usersituation
Time
Benefits
Sought
Value-formoney

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Income
Under demographics, income is one of the variables which AirAsia may use to segment
their market (Schiffman, Bednall, OCass, Paladino & Kanuk, 2008). Income indicates
the capability of the consumer to travel with AirAsia as consumers from different income
groups are attracted to different airlines. For example, low-income [MYR0 MYR40,000
yearly] and middle-income [MYR40,001 - MYR60,000 yearly] earners are more price
sensitive than high-income [MYR60,001 and over] earners, thus they would be more
attracted towards LCCs such as AirAsia. This is because low-income and middleincome earners generally have lesser disposable income than high-income earners,
hence are unlikely to be capable of purchasing airline tickets from FSCs such as MAS
as their tickets are more expensive. For low-income and middle-income earners, their
main need of an airline ticket is simply to travel from one destination to another.
Therefore, the pricing of airline tickets is a vital factor that influences purchasing
behaviours. Statistics have indicated that consumers have increased their expenditure
in air travel due to the availability of more affordable domestic and regional flights from
LCCs (Consumer Lifestyles Malaysia, 2009).
Social Class
AirAsia may have segmented their market into lower, middle and upper social classes
on the basis of this variable because different social classes tend to have different
purchasing behaviours, brand preferences and expectations (Schiffman et al., 2008). A
consumers social class is associated with the income level that the consumer is
earning. For example, if a consumer is categorized as a low-income earner, the

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consumer will fall within the lower social class. Moreover, upper social class consumers
would tend to have a negative perception about the image of LCCs as a provider of less
comfortable services.
Usage Rate
Usage rate is one of the variables under the user-related segmentation which AirAsia
can use to segment their market and is divided into low, moderate and high usage rates
(Schiffman et al., 2008). Depending on the consumers amount of disposable income
and preferences, consumers will have different levels of usage rates. For example,
consumers [Segment 4] who travel frequently for business meetings would have a high
usage rate of air travel as they are required to travel to different destinations frequently.
Consumers with low usage rates are mostly from the low-income category who can only
afford to travel at most twice a year depending on the destination. This is because they
have less disposable income compared to high-income earners. However, if price levels
are affordable, then low-income earners [Segment 1] would be able to travel more often
with LCCs.
Time
As for the user-situation base, AirAsia is able to use time as one of their variables to
divide the market (Schiffman et al., 2008). The time variable is categorized into leisure
and business. Consumers with different purposes of travelling have different priorities.
For example, low-income earners who are planning to go on a leisure holiday would
have the ability to continuously monitor ticket prices to ensure that they can attain the

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cheapest price. Travellers on business trips meanwhile would probably have to pay
higher prices because they may need to purchase airline tickets in advance.
Value-for-money
Value-for-money is one of the benefits sought variables which AirAsia can likely use to
segment their market (Schiffman et al., 2008). The level of importance of value-formoney can be divided into low, moderate and high whereby consumers with lower
income levels tend to place high emphasis on value-for-money products and services.
For example, consumers from Segment 4 place high emphasis on value-for-money
because these consumers are working for corporations that are currently affected by the
economic recession happening, thus they are required to reduce their expenses as
much as possible (AirAsia, 2009d).
5.2 Target Market Profile
Once the market has been segmented, the organisation can analyse, evaluate and
prioritise which segment to pursue (Duncan, 2005). There are three different target
markets which AirAsia are targeted. These segments are categorised as Segment 1,
Segment 2 and Segment 4 as indicated in Table 2.
Table 2: Target Market Profile of AirAsia

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Segment 1
Income

: Low-income level (MYR0


MYR40,000 yearly)

Social class

: Lower social class

Usage rate
Time

: Low
: Leisure

Value-for-money : High
Segment 2
Income

: Middle-income level (MYR40,001 -

MYR60,000 yearly)
Usage rate

: Moderate

Time

: Leisure

Social class

: Middle social class

Value-for-money

: High

Segment 4
Income

: Middle-income level (MYR40,001 -

MYR60,000 yearly)
Usage rate

: High

Time

: Business

Social class

: Middle social class

Value-for-money

: High

Segment 1 is referred to as the lower social class consumers who travel at most twice a
year for leisure and have high importance on value-for-money. Segment 2 is defined as
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middle social class consumers who travel moderately for leisure and place high
emphasis on value-for-money. Segment 4 meanwhile is classified as middle social class
consumers who travel frequently for business purposes but also place high importance
on value-for-money. This is because the current economic climate has caused
consumers to be more price-sensitive and often search for the best value (AirAsia,
2009e). However, this has not dampened but instead increased the frequency of
consumers to travel domestically or internationally on LCCs (Airline Passenger Traffic
Malaysia, 2008; Airline Passenger Traffic Asia Pacific, 2008). Consumers these days
who travel for leisure or business want to pay as little as possible to secure a seat on a
flight (Driver, 2001).
5.3 Positioning

FIGURE 1: AIR ASIAS PERCEPTUAL MAP


31

AirAsia has positioned itself as the leading and largest LCC in Asia with the philosophy
of Now Everyone Can Fly (AirAsia, 2009b). They believe in the no-frills, hassle-free,
low fare business concept and believe that keeping costs low requires high efficiency in
every part of the business (AirAsia, 2009b). Efficiency creates savings which are then
passed on to consumers in order to make affordable air travel a reality. AirAsia has
sparked a revolution in air travel with more and more people around the region choosing
AirAsia as their preferred airline (AirAsia, 2009b). Figure 1 indicates the position in
which AirAsia currently stands against its competitors. The vertical axis illustrates the
price range while the horizontal axis represents the service quality. Despite being Asias
largest and leading LCC, service quality of AirAsia lacks behind other LCC such as
Jetstar. Thus, while AirAsia hopes to maintain its current position as the leading LCC, it
also hopes to moves towards providing better services in the future as seen in Figure 1.
6.0 MARKETING STRATEGIES
PROGRAM ELEMENTS

AND

EVALUATION

OF

MARKET

Table 3: Comparison of Malaysias Top Players in Low Cost Carriers Marketing


Program
Company
Price

Variety of
Destinatio
ns

AirAsia

FireFly

Tiger Airways

Malaysia Airlines (MAS)

Price ranges
from RM30 to
RM 700.

Price ranges
from RM 50
to RM500.

Price ranges
from RM30 to
RM400.

Price ranges from


RM60 to 5000.

9 countries
across
South East
Asia
(40destina
tions)
3 countries
across
South Asia

5
countrie
s across
South
East
Asia (18
destinati
ons)

6 countries
across
South East
Asia (18
destination
s)

9 countries across
South East Asia
(32 destinations)

5 countries across
South Asia

1 country
in East
Asia

(9 destinations)
1 country in Africa

32

(4
destination
s)

(5destinati
ons)
-

1 country
in East
Asia
(6
destination
s)

1 country
in South
Asia
(3
destination
s)
1 country
in Oceania
(12
destination
s)

(1 destination)
-

4 countries across
East Asia
(11 destinations)

4 countries across
the Middle East
(4 destinations)

7 countries across
Europe
(7 destinations)

1 country in North
America
(2 destinations)

2 countries across
Oceania
(6 destinations)

1 country in South
America
(1 destination)

Promotion

Place/
Location

Certain
amounts
of free
airline
tickets
are
offered to
consumer
s.

Various
call
centres
across 7
countries.

41 airport
sales
stations
across
Southeast
Asia, South
Asia, East
Asia.

Zero
fare
promoti
ons
during
shoulder
travellin
g period.

Low fare
promotion
offerings to
different
locations
during
different
travelling
periods.

1 call
centre in
Malaysia
.

8 city
ticket
offices in
4
countrie
s.

Various call
centres
across 7
countries
in
Southeast
Asia and
Oceania.

13
airport

Low fare
promotion
offerings to
different locations
during different
travelling periods.

129 sales offices


located in 52
countries across
the world.

33

27 sales
centres
across 5
countries
in
Southeast
Asia.

Branding

The leading
and largest
low fare
airline in Asia.

Added
facilities

Provide
online
check-in
within 24
hours of
departure
time.
Offers
Snack
Attack, a
buy-on
board
programm
e offering
food and
drinks for
purchase.

Prebooked
light meals
during
flights.

Free
seating
with
Xpress
Boarding

ticket
offices in
2
countrie
s.
-

2
operatio
n
centres
in
Malaysia
.

The
community
airline.

Light
snacks
and
drinks
are
included
on board
for
passeng
ers.
20kg
baggage
check-in
allowanc
e is
given to
passeng
ers.

AsiaPacifics
true low
fare airline.

Offers
light
snacks
and
drinks for
sale on
board (Inflight
service)
Seat
selecting
service
for
purchase
during
online
purchase
of flight
ticket.

Malaysia Airlines
whereby MH stands
for Malaysia
Hospitality.

Provides online
check-in service
within 24 hours
of departure
time.

Business and
First class
passengers are
entitled to use
the facilities in
the Gold
Lounges in
certain airports.

Offers customer
loyalty program
(Enrich)

34

option.
-

Self checkin counters


at all
airports.

Self checkin through


mobile
phones.

E-Gift
vouchers
are
available.

Sources: (AirAsia, 2009b; AirAsia, 2009f; AirAsia, 2009g; AirAsia, 2009h; AirAsia,
2009i; AirAsia, 2009j; Tiger Airways, 2009b; Tiger Airways, 2009c; Tiger Airways,
2009d; FireFly2009a; FireFly, 2009b; FireFly, 2009c; Malaysia Airlines, 2009b;
Malaysia Airlines, 2009c; Malaysia Airlines, 2009d; Malaysia Airlines, 2009e;
Malaysia Airlines, 2009f)

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August16,2009,from
http://www.portal.euromonitor.com.ezproxy.lib.monash.edu.au/passport/ResultsList.aspx
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16,2009,from
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ee.aspx
AirAsia.

(2003).

Vision

&

Strategy.

Retrieved

August

14,

2009,

from

http://www.airasia.com/investor/vision1.shtm

35

AirAsia. (2008a July 14). Press Releases: AirAsia wins Airline Strategy Award: Finance
Category Real 5 Star carrier gets Real 5 Star honour!. Retrieved August 16, 2009, from
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http://www.airasia.com/site/my/en/pressRelease.jsp?id=2926c6af-7f000010-6dd8e100d734ffa9

AirAsia.

(2009a). Awards

&

Recognition.

Retrieved August

18,

2009,

from

http://www.airasia.com/amazing/en/pageWithHeader.php?
menu=one&content=one_awards
AirAsia.

(2009b).

Company

Profile.

Retrieved

August

18,

2009,

from

http://www.airasia.com/site/au/en/page.jsp?name=Company+Profile&id=261a884eac1e00ae-edd9de00-4fe3279d&nav=5-0
Malaysia Airlines. (2009d). Annual Report 2008. Retrieved August 15, 2009, from
http://malaysiaairlines.listedcompany.com/misc/ar2008.pdf
Malaysia

Airlines.

(2009e).

Loyalty.

Retrieved

August

15,

2009

from

August

16,

2009,

from

http://www.malaysiaairlines.com/my/en/loyal/loyalty.aspx
Malaysia

Airlines.

(2009f).

Lounge.

Retrieved

http://www.malaysiaairlines.com/my/en/flymh/lounge/lounge.aspx
36

Saha, G. C. & Theingi (2009). Service quality, satisfaction, and behavioural intentions: A
study of low-cost airline carriers in Thailand. Managing Service Quality, 19(3), 350-372.
Schiffman, L., Bednall, D., OCass, A., Paladino, A., Ward, S. & Kanuk, L. (2008).
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37