Bcm 318

Aviation marketing

By Felicia Naatu (PhD)

 COURSE OUTLINE
• Course description: Aviation marketing is an activity of planning, designing,
anticipating, and operating, to deliver value satisfactorily to customers at a profit in
airline business. This is an introductory course that provides an overview of how the
airports and airlines are managed.
• Course objective: The course has been prepared to help students understand the
basics of aviation marketing. It will be quite useful for students who are keen on
taking up careers in aviation marketing.
6. Pricing and revenue management
1. The fundamentals
7. Distributing the product
2. The market for air transport services
8. Brands management in airline
3. The market environment
marketing
4. Airline business and marketing 9. Relationship marketing
strategies 10. Airline selling, advertising and
5. Product analysis in airline marketing promotional policies.
COURSE OUTLINE …
ASSESSMENT TOOLS
• Examination; 75%
• Continuous Assessment: (an assignment with presentation 8% +
mid-trimester 12% + attendance 5% ) 25%

Mode of Content Delivery

• Lectures,
• Presentations
The fundamentals
 Aviation
– Aviation: The term aviation is used to refer to all the activities
related to flying aircraft. The word was first used by a French pioneer
named Guillaume Joseph Gabriel de La Landelle in 1863. It’s origin is
from the Latin word “avis” that literally means bird.

– As aviation involves all the activities related to flying aircraft, the

management of the workflow of airline, airport, and other
businesses within aviation or aerospace industry is referred to as
aviation management.
 Brief history
• The history of flying objects can be traced first to the original idea of Chinese Hot Air
Balloons which were used to scare away enemies in the 3rd Century BC.

• Another is their kite-flying also. Kites were used to send messages, lift humans, measure
distances, and test winds during the 5th Century to the 7th Century AD in China.

• Then later during the Renaissance period, Leonardo Da Vinci studied the flying principles of
birds and found that the equal amount of resistance is offered by an object to the air, just as
the resistance air offers to the object.

• Then during the 17th century, experts tried to create copper spheres containing vacuum to
lift an airship as at the time they knew that objects lighter than the air can remain up in the
air.
 Brief history …
• During the 18th Century, five flights were successfully conducted using balloon in
France.

• The Polish King Władysław-IV In 1647 invited the Italian inventor, Tito Livio Burattini
to Warsaw to build an aircraft. It was with four fixed glider wings.
• The aircraft could only successfully lift a cat in the air, but upon landing, the cat
sustained minor injuries.

• Experts around the world in the 19th and 20th centuries, continued to experiment
to come up with improved flying machines or aircrafts, which were heavier than air
and based on the principles of aerodynamics.

• The most notable names then were Wright brothers, Orville and Wilbur Wright.
They made the first sustained, controlled, powered and heavier-than-air flight at Kill
Devil Hills in North Carolina in the year 1903.
 Misconception about marketing
• What is marketing?

 The marketing function is often ascribed to advertising and promotion as the

marketers are often called in after production.

It is also misconstrued that marketing is about producing things that people
may not really need and then tricking them into buying through deceitful
advertising.
 Marketing
• It is an essential discipline that involves the collaboration of the marketing function
of an organisation with all disciplines within an organisation for value-creation and
satisfaction of target customers. So,

• “Marketing is the management process responsible for identifying, anticipating and

satisfying customer requirements profitably” (CIM UK 2018).

• Aviation marketing: Accordingly, the management process of identifying,

anticipating and satisfying customer requirements profitably in the airline industry
is known as aviation marketing.
 The “Marketing Mix”
• The marketing function involves activities related to the following “4Ps”

• Product - offering
• Price - charge for offering)
• Promotion - communication channels or methods
• Place - distribution channels

• The “4Ps” concept points to the fact that marketing decisions cannot be made in
isolation.

• Marketing decisions are linked with the ability to make trade-offs between them in
order to optimise the overall result for the firm. This ability is an absolutely crucial
skill.
 the Application of Marketing Principles to Airline
Management
• There are seven stages

1. The customer - knowledge of current and potential customers e.g. market size,
demographics, Customer requirements and attitudes.

2. The marketing environment – the PESTE for analysis

3. Strategy Formulation - The strategic direction identifies the firm’s goals, and objectives, the
markets in which it will participate and the methods it will employ to ensure successful
exploitation of market potential.
Strategic option will result in a requirement for a linked set of Product, Pricing and
4. Distribution decisions.

5. Product Design and Development -

6. Pricing and Revenue Management -
7. Distribution Channel Selection and Control
8. Selling, Advertising and Promotional Policies: selling and marketing are not synonymous
The Market for Air Transport
Services
 What Business are we in?
• A business that defines well what it does, is better placed to correctly
identify their customers.
• It is easy for an airline to say that it is a player in the aviation business, but that,
– will result in a serious underestimation of both the extent and the nature of the competition that
the airline faces.
– Such a definition of market participation is termed as ‘Marketing Myopia.

Aspects of aviation to engage in

1. Transportation: a clear economic, and social need for transport to be
satisfied in an optimum way. Air transport or a surface transport mode
may not matter. E.g., short-haul routes where surface transport provide a
level of service in terms of comfort and door-to-door journey may be
better than airline at times. Depends on the value created.

2. Communication: Airlines have always assisted people to communicate, as

travel allows opportunities for face-to-face meetings, though the
 What Business are we in? …
4. Logistics: It is rarely possible for airlines to sell successfully against surface transport
operators on the basis of price. Surface transport rates are almost always cheaper.
The competition involves other airlines bidding for a share of the available air freight
market.

5. Information: businesses associated with the movement of urgent information

(including news: e.g., news papers) were lucrative until the mid-1980s. Its currently
challenged by the electronic transmission of documents initially through fax machines
and, more recently, E-mail.

6. Selling services: successful airline requires numerous skills to be developed. E.g.,

aircraft engineering, airport ground handling and data processing and management.
Many carriers make important revenues from selling these skills to others who need
them.
 Who is the “Customer”?
• Consumer: are those people who actually travel

• Customers: decision-makers.

• Marketing concerns how purchase decisions are made.

• There are two facets of markets in this regard.

 the consumer market: consumer markets refers to the individuals and or the
family. It is often easy to identify the customer for a particular product.

 the industrial market: Industrial market refers to business-business or firm-

firm marketing. Purchase decisions in industrial markets are often of complex
decision-making processes.
 FOUR KEY CUSTOMER DECISIONS
• Will a trip be made at all? – one might present a case to the boss for a business trip
to be undertaken, only to find that the necessary expenditure is not sanctioned. In
this case the true customer is the boss (e.g. CEO).

 What mode of transport will be selected? – corporate policy formulators may be

the target to enable the air-line traveling or not for a business travel. In terms of
leisure, the family member with most influence in travel decisions.
 For air trips, what class of service will be purchased? –
First class – senior executives (decision makers)
business class – middle rank
economy or coach class – Junior employees.
 Which airline will be selected? - more companies have centralised travel
purchasing in order to gain access to corporate discounts from airlines. This
narrows the choice which the individual traveller could exercise.
 Customer needs
• All firms need to understand the factors that affect customer decision-making regarding
prospective journeys.

• Apparent an True Needs

• To know the true factors influencing customers, customers are often asked.
- But what they say may not be the truth. For instance they may say what they regard as an
acceptable answer.
• The truth too may be a True Need of greed (e.g. benefits bought with employers money)
• Almost all the airlines try to massage the ego of the travellers in the business travel market
e.g.,
• separate reservation phonelines,
• check-in-desk with a red carpet in front of it, and
• separate cabins on board.
• True Needs” are at the heart of successful marketing. E.g. they are constant in their
importance through time even though they reflect the weaknesses of the human personality.
 Industrial Buying Behaviour
• As learnt earlier, contrary to consumer markets where the decision makers are easily
identified, industrial markets are characterised with complex customer buying
decision-making process.

– E.g. different corporate executives interacting in different ways through a

Decision-Making Unit (DMU).

– The participants in industrial purchase decision-making are of five groups.

o Deciders: make the final purchasing decision in the best interest of the firm
that employs them (there may be hidden agenda).

o Gatekeepers: the flow of information into the Decision-Making Unit. E.g.

secretaries (through isolation of people, backlash, discredit in the eyes of
boss, and intimidation.
 INDUSTRIAL BUYING BEHAVIOUR …
• Users: actually use the product or service once it has been purchased. Tend to be
very concerned about the quality and utility of the product, and less worried about
the cost of obtaining it. extravagant service standards, a strong product
reputation, and attractive Frequent Flyer Programme and with a prestigious
brand position.

• Buyers: negotiate the final deal with the different suppliers. Usually the finance
department. wish to protect their job security. They try to demonstrate that their
interventions save the company substantial amounts of money. Sales people try to
reserve the final concession till the last stages of negotiation.

• Influencers: do not use a product, or become involved in detailed negotiations

with suppliers, but who do influence the final outcome of the buying process.
 The “Customer” in the Business Air Travel Market
• Consumer and Customer

• The question of correctly identifying and targeting “Customers” in the business air
travel market is a vital one for airlines, and one that is causing increasing controversy.

• Secretary: airlines have clubs for executive secretaries. This leads to true need of
greed. E.g. they may go in for those that offer incentives.
• Agent: they may seek those that offer commission
• Travel agency clerks: have true needs similar to those noted above. They will also
welcome the offer of incentive
• Corporate Travel Manager: Under such an arrangement, carriers will be
approached to offer substantial discounts in order to be one of the favoured
airlines. So freedom-of-action will be denied to executives who actually fly. They
will be required to choose from one or a small number of airlines.
 The “Customer” in the Leisure Air Travel Market
• Similar to the business travel air market, identifying the “Customer” is just as difficult
and important.
• A large chunk of holiday travel is undertaken in family groups.

• Therefore the question about how travel decisions are made within the family is a
crucial one, which should for example decide the creative content of advertising and
promotional work, and the media buying decisions which are made.
• Children are influencers in travel buying decisions. Though the parents decide,
they choose by taking into account the children preferences (e.g., video games,
etc.). ‘Pester Power’ is often exploited.

• For women or men as decision makers, culture plays a significant role. In UK and
Norway for instance women are key decision makers in holiday travel decisions.
 The “Customer” in the Leisure …
• Tour Operator: value-adders, in the sense that they take airline seats, accommodation,
surface transfers and add-ons such as tours, sports opportunities etc to make up
packaged holidays.
– In targeting the leisure air traveller, airlines must regard the senior managers and
product managers of major Tour Operators as very important customers. By so
doing they are featured in tour operators brochures, and websites.

• Consolidator: is a dealer in discounted air tickets. They are popularly known as “Bucket
Shops”. They provide outlets for airlines to wholesale blocks of seats for a very low cost-
of-sale. The consolidators’ bargaining power often leads to extremely low prices and
yields.

– Reliance on consolidators as a significant channel of distribution, can result in a

straightforward selling task, in that an airline will be able to act purely as a
wholesaler.
 The “Customer” in the Air Freight Market
The significant customers in the air freight industry are: (1) air freight forwarders and their (2)
clerks.
1. Air freight forwarders
• In air freight, marketing intermediaries known as air freight forwarders are extremely
important to most airlines.
• More than 90% of air freight traffic is typically provided by forwarders.

• A considerable proportion of air freight traffic is sent under the ‘Consolidation’ principle
by the forwarder.

There is a big difference between the passenger and freight businesses.

• The forwarder is regarded as a more significant customer compared to travel agents in the
passenger air travel market.
• E.g., they make routeing and carrier selection decisions than is the case with travel agents.
THE “CUSTOMER” IN THE AIR FREIGHT
MARKET
2. Clerks for freight forwarding companies.

• Another set of customers are the clerks for freight forwarding companies.
They are responsible for a considerable proportion of air freight moves which
usually take place at night.

• Many airlines only attempt to market their air freight services through air
freight forwarders. Those that try and do more than this gets a very much
broader base of ‘Customers’.
 Market Segmentation – Air Passenger Market
• A market segment is a group of customers who have sufficient in common that they
form a viable basis for a product/price/promotion combination.
• Market segmentation is the process of dividing a market into distinct subsets of
consumers on the basis of their common needs or characteristics to target with a
market mix.
• Two likely mistakes from market segmentation are:
1. Under-segmentation: a large group with high degree of difference in
requirements of those under the segment. It leads to high costs

2. Over-segmentation: where too many segments are isolated. It could result in

insufficient indicators with regard to policy development.

 Correct segmentation depends on the question of the use the segment will be put to.
 For product planning, almost all airlines are handicapped by the fact that they have only two
or three classes of service on board. As such broad segmentation can be used for product
planning.
 Segmentation Variables in the Air Passenger Market
• There are basically three broad segmentation variables in the air passenger market.
1. The purpose of the passenger’s journey,
2. The length of their journey
3. their country or culture of origin
a. Journey Purpose: is a fundamental segmentation variable in the air passenger market,
with the essential division being between business and leisure travel. Worthwhile sub-
segments are formed from journey purpose in both business and leisure groups.
o Exceptions include pilgrims’ visit to holiest places in South Arabia. E.g.
– In business travel: corporate travellers (with frills) and independent business
travellers (without frills).
– In leisure segment there are two obvious sub-segments (holiday and visiting-
friends-and-relatives VFR).
 Segmentation Variables in the Air Passenger Market
b. Length of Journey: Short-haul traveller and long-haul route are bases for
segmentation.
– On short-haul routes, the airport experience is especially important, while in-flight
aspects like seating, comfort or food is less important.

– On long-haul routes, the in-flight experience is very important indeed in ensuring

customer satisfaction
c. Country/Culture of Origin of the Traveller: global branding and seamless services
based on the large alliances are conflicting with the obvious differences in customer
requirements which occur between different cultures.
• E.g., a business traveller in Europe and North America is typified as a
middle-aged, soberly dressed person carrying a small amount of baggage.
• this is different in third world where business travellers are traders who fly to destinations for
available goods at cheap price to sell at premium back home.
 Customer Requirements – Business Travel Market
The business traveller (independent and corporate) is at the core of airline marketing
efforts. E.g., yields per passenger-kilometre have generally been much higher than
those obtainable from the leisure segment. However, such travellers also account for a
high proportion of airlines’ costs.
Corporate business traveller
1. Frequency and Timings: Frequent flights will ensure that business travellers can fly
out for a meeting shortly before it is due to begin and return to their offices or
homes very soon after the meeting. Airlines which dominates in frequency may
obtain higher share of the market. The timings of the flights are also important.
E.g., well spread throughout the week, and room for day-return (flights
concentrated in the morning to enable a return).

2. Punctuality: obviously, punctuality is of crucial importance to the business

traveller, with flight delays meaning inconvenience, missed appointments and,
perhaps, the loss of customers.
3. Airport Location and Access: with regards to the short-haul routes, accessible local
airport are preferable to distant hubs. It may not even matter if there are no frills if
the airport is easily accessible.

4. Seat Accessibility/Ticket Flexibility: the probability that a passenger will be able to

book a seat on a flight shortly before it is due to depart is known as seat
accessibility. To the business traveller seat accessibility is very important as there
could be sudden need for them to travel at any point in time.
- Also, there could be sudden need to change flights because of some crises, and this
requires a flexible ticket that can be cancelled and for an earlier or later flights. So flights
with high frequency, seat availability and flexible tickets are very appreciated by business
travellers.

- Another key thing is no-show for flight which can be rebooked without paying high
penalty.
5. Frequent Flyer Benefits: beneficial to long-haul travellers. But short-haul
travellers may prefer appropriate timing and, seat accessibility , and punctuality
over frequent flyer benefits (flyer benefits are bonus to them)

6. Airport Service: time spent at airports for short-haul flights are longer than the
flight time. As such, airport service is a significant factor in choice-of-airline
decisions.
– Separate check-in desk are necessary for business travellers as they often check
in very late. This guards against the possibility of checking in late.

– Expedited security and passport checks, and a lounge to relax on prior to a flight
to make calls, send emails etc.
– Premium baggage service which includes not checking in bags.
7. In-Flight Service: On short-haul routes, the fact that flight times are short
means that in-flight service often assumes a lower priority than frequency,
punctuality and airport service in choice-of-airline decisions.

But because almost all competitors are trying match with frequency and
timing, and the airport services are often not controlled by the airlines, the
in-flight experience may be a crucial one for choice-of-airline decisions.

In-flight services include

1. seating comfort (seat pitch and width)
2. Business Class cabin
3. Meals and drinks (breakfast and an evening meal on return)
Difference between independent business traveller and corporate traveller

1. The fundamental needs remain exactly the same in terms of frequency, timings,
safety, punctuality, seat accessibility and ticket flexibility.
2. Price sensitivity: independent business travelling are very sensitive to pricing
than in the Corporate market. (Payments are from the independent
business travellers own pocket compared to the corporate traveller
whose cost are paid by the business).
3. No frills: independent travellers would therefore trade off cheaper ticket prices
against product frills such as standards of seating comfort, free drinks, and in-
flight meals. This makes it very easy for “cost leader” airlines to target them.
4. While frequent fly points (e.g., free flights) are not attractive to the corporate
traveller, it is of significant importance to the individual traveller as it reduces
their expenditure on tickets.