Options as a Strategic Investment

Strategic Marketing or Marketing in Aviation
Effective marketing depends upon effective marketing system employed by an industry or separate companies. Marketing as an activity is carried out in a variety of contexts. The most obvious context is of course the sale of goods and services to end-users. Marketing can be described as one of the functional areas of a business, distinct from finance and operations (McDonald, Christopher, 2003). Marketing can also be thought of as one of the activities that, along with product design, manufacturing, and transportation logistics.
In general, aviation industry is one of the profitable industries today which is characterized by of rapid technological and marketing changes. Nevertheless, the present situation requires cooperation between airlines and airports which should help them to market their services effectively to their clients.
Marketing strategies include a wide variety of techniques aimed to deliver customer satisfaction and safety. New product and services development, technological changes mark the main strategic activities in this market segment. Technology, being a universal factor that crosses national and cultural boundaries, plays the crucial role in aviation and aerospace industry. It should be mentioned that technology is truly “stateless”; there are no cultural boundaries limiting its applica¬tion. Once aviation technology is developed, it soon becomes available virtually every¬where in the world.
In regional markets such as Europe, the increasing overlap of advertising across national boundaries and the mobility of consumers have created opportunities for aviation and airlines marketers to pursue pan-European product positioning. For instance, in 1970s the jet airplane revolutionized communication by making it pos¬sible for people to travel around the world in less than 48 hours. Tourism enables people from many countries to see and experience the newest products being sold abroad. One essential characteristic of the effective global aviation business is face-to-face communication among employees and between the company and its customers. Without modern jet travel, such communication would be difficult to accomplish (Bellis, 2001).
New transportation technology significantly reduces the level of prices. The costs associ¬ated with physical distributionboth in terms of money and timehave been greatly reduced as well. The per-unit cost of shipping automobiles from Japan and Korea to the United States by specially designed auto-transport ships is less than the cost of overland shipping from Detroit to either U.S. coast. Another key innovation has been increased utilization of 20- and 40-foot metal containers that can be trans¬ferred from trucks to railroad cars to ships.
Another technological innovation, which helps to improve marketing activities is the Internet and World Wide Web. Airlines and aviation can be called boundaryless or global industries, and for this reason Internet and Intranet services has become a driven force for them.
Today’s information technology allows airline alliance partners to sell seats on each other’s flights, thereby helping travelers get from point to point more easily while boosting revenues for companies such as United Airlines and Lufthansa. Meanwhile, the cost of international telephone calls has fallen dra¬matically over the past several decades. That fact, plus the advent of new communi¬cation technologies such as e-mail, fax, and video teleconferencing, means that man¬agers, executives, and customers can link up electronically from virtually any part of the world without traveling at all.
When a company establishes a site on the Internet, it automatically becomes global, at least in terms of its potential to reach global customers with information. At present, Internet usage is heaviest in the United States. Even as that situation changes, however, many constraints must still be overcome before Internet merchandise purchase transactions can become borderless (Joines, Scherer, Scheufele, 2003).
Marketing departments in aviation and airline industry work closely with R&D departments to ensure that the products which are developed are those which cater for the changing needs of target customers and different needs of varying customer segments. In recent years, high failure rates in the introduction of new products have led departments to be very risk averse, with most ‘new’ products emerging being merely extensions of exist¬ing product lines and not truly new and innovative offerings.
The marketer’s role in aviation and airline new product development is therefore about providing a link between the market and the design department, with customers and R&D technicians both being involved in the process. It also requires involving senior management, as changes in customer demand and purchasing patterns may have serious implications for future busi¬ness objectives and directions.
The main marketing strategy in aerospace and aviation industries is to design a product that consumers did not explicitly request. The challenge of course is to get out in front of consumers; to extrapolate and infer future customer needs. Yet traditional forms of marketing research seldom seem to provide the insight necessary to engage in creative marketing. The basic aerospace initiative include:
“Re-invigorate basic and applied research in aeronautics and aviation.
Develop aviation/aerospace technologies that will significantly lower noise, emissions and fuel consumption.
Address the cost, frequency and reliability of entering space, and increase its economic viability.
Fund revolutionary, not just evolutionary, changes to the air transportation system to obtain greater capacity, safety, traffic flow and automation” (U.S. Aviation and Aerospace Industries, 2003).
It is easy to see the rationale for presenting the marketing department as the linchpin in the new product devel¬opment process. They are the conduit of information between the market, and the firm and the various departments involved in the new product development process. Taking on a pivotal role means broader involvement of various stakeholders which can be further facilitated by project teams which bring members of all groups together at the same time to discuss and attempt to solve mutual problems. “Infrastructure and air traffic management issues will be a new topic to address both on behalf of aerospace manufacturers and service providers and the SBAC airports segment” (UK aircraft and aerospace industry, 2005).
The above apparently suggests that new product development is purely finding out what customers want and then delivering it. It is possible to suggest, however, that cus¬tomers do not always know what they want, or at least cannot articulate it in concrete terms.
David Kiley expresses an interesting idea supposing that Airlines “are not marketing even if they think they are”. He explains that “consumers are, for the most part, choosing based on where their frequent flyer miles are (that they collect through their jobs) and price. The typical leisure traveler these days is checking online via Orbitz, Expedia or one of the other services for prices and schedules. When the selection of options comes up from United, Northwest, Delta, American, Air France, Virgin Atlantic–how many people are choosing based on how they feel about the airline?” (Kiley, n.d.). On the other hand, it is difficult to deny the role of advertising in airline marketing which has a great influence on consumers preferences and choice.
Today, customer service in airlines relies on reputation and trustworthiness and this no less true in the new forms of system-service. In fields such as package delivery and money management, consumers are seeking indications that their risks will be minimised or eliminated. For these kinds of consumer acts, customer service plays an essential role in assuaging the fears of consumers by projecting an image of trustworthiness and expertise (Johnson, Scholes, 1998).
The Choice of Press issues is based on readership. It refers to the total number of people who probably will read the publication. For example trade and technical publications are often read by people other than the purchaser at the purchaser’s place of work. Sunday newspapers and colour supplements are invariably passed around the family for reading. Therefore, readership figures may be several times larger than circulation figures and help to tell us how many people may read the publication. The readership profiles usually indicate the demographic characteristics of the readership, such as age, sex, income and, in particular, socio-economic grading of readers, quintessential to the effective targeting of a company’s advertising. For instance, “Delta has recently kicked off a new campaign, themed “Good Goes Around.” American has been running sentimental TV ads with the slogan, “We Know Why You Fly.” (Kiley).
For maximum penetration it may help to select primary (first choice) media that interlock or cross support each other. If deeper penetration into the same target market, for example, is required, then vertical advertising in the media that reach the same target market will be sought. For example, advertising on commercial television may be linked with advertising in the magazine that provides the program schedules for viewers, or local radio advertising in a particular area may be accompanied by direct mail or press advertising. “The airline industry has literally fought for deregulation that has made each company nothing more than a commodity” (Kiley).
Without new qualitative service airlines companies will not be capable to achieve the overall objectives, that is why the main objective of a company is to maintain the level of service quality and develop strategies to improve its services. Service concepts are based on understanding the unique environment in which a particular firm operates. Usually, airline companies find specific marketing strategies and then translate them into a detailed plan of action which foresee an efficient marketing effort. Implementing a customer oriented strategy is more important than any other techniques. It also means impressing upon the entire staff the importance of customer service because a satisfied customer is the best marketing tool available.
All customers have some expectation of the quality of services which have to be provided. Present day situation is marked by two factors specification, which is to do with the ‘design quality’ of service, and conformity, which is to do with the ‘process’ quality which is achieved are of particular importance to customers. Ultimately they are the two factors which deter¬mine the quality levels provided by a companies to their customers. These two factors however are themselves determined by other factors.
Specification in the airline industry is determined as a result of an organization’s pol¬icy, which in turn resulted from decisions on its market policy, and consideration of the market or customer needs and requirements, and the activ¬ities of competitors. This is the process of designing quality into the service (Ennew, Reed, Binks, 1993). For instance, “Airlines are scrambling to fill seats and make their customers happy, that’s clear. British Airways just this week signed a deal with the Worldwide Travel Exchange (WWTE) hotel-booking arm of Expedia inc company Travelscape, enabling the airline’s passengers to book rooms at more than 40,000 hotel properties” (Cox, 2002).
Proof of customer contact improvement includes measuring customer satisfaction, establishing new performance standards, and thereby gaining greater control over, and routinisation of, professional service work. At the same time, quality improvement through self-directed project teams has evolved into a practice whereby task forces adopt goals and use methods that are centrally determined. In this manner, ‘success’ is evaluated by others through institutionally defined performance improvement measures (Mascarenhas, Kesavan, Bernacchi, 2004).
Today, a wide range of Web services are adopted by airlines and aviation to contact with the customers and to ensure customer satisfaction. It is not a unique and a new form of service but still it is one of the most beneficial areas for attracting a new customers and providing new services for target customers. For instance, “Travelocity provides Internet and wireless reservations information for more than 700 airlines, but it doesn’t have special marketing relationships with all of them. It did sign a similar deal with Continental in January and has deals with British Airways, JetBlue and America West, among other airlines” (Cox, 2002).
For airlines companies, Internet rationalizes the expensive and cumber¬some proposition of large-scale customer service. Second, the system serves to reduce at least the appearance of risk associated with time-space distanciation and the opacity of the expert system.
In only a short time, online finance has become immensely popular around the world. This might have something to do with the fact that in climates of risk, especially those involving investments, many customers prefer a ‘hands-on’ approach. Indeed, online services and trading has several advantages for customers. The main, it is available around the clock. There are, of course, risks for customers associated with online trading (Mascarenhas, et al, 2004).
In aviation this approach includes maintenance of high standards which is a key factor in effective customer contact. The purpose of maintenance is to attempt to maximize the performance of service by ensuring that it performs regularly and efficiently. Service, however complex or simple, however cheap or expensive, is liable to breakdown. The effective operation of any system is dependent on the maintenance of all parts of the system, e.g. buildings, services. Indeed, company welfare or personnel practice is designed partly as a maintenance activity, e.g. training and retraining to maintain the availability of appropriate skills, facilities to maintain human capacity, counselling to maintain interest and motivation (Joines et al, 2003).
The audiences may be geographically dispersed in time, but they share common interests that are perhaps difficult to serve profitably though other international media. The online airlines sites (www.bluejet.net.tc or www.britishairways.com) thrive because they offer their participants the following: a forum for exchange of common interests; a sense of place with codes of behaviour; a meeting place for specialists; the development of stimulating dialogues leading to relationships based on trust; encouragement for active participation by more than an exclusive few.
“Customers can book on-line at www.CanJet.com through CanJet’s Reservations Sales Centre” (Cox, 2002). Service, however complex or simple, however cheap or expensive, is liable to breakdown. Another alternative is to deliver ads via third-party ad-server companies which can serve ad messages simultaneously to multiple Web sites, measure results, produce consolidated reports, report on the success of the entire campaign, and analyze these results immediately, enabling advertisers to quickly assess the ongoing effectiveness of the campaign.
In traditional markets, dual distribution systems are not uncommon; there are numerous examples of companies using more than one channel of distribution to sell to different groups of customers. However, the process of managing multiple distribution systems can be both tricky and risky. While electronic commerce is creating new opportunities for differential pricing, it can also make such pricing strategies more difficult when it is used to provide customers with better information about their choices. Indeed, customer ignorance -about prices, features and relative product performance – has traditionally been a source of profit for companies. The relationship marketing process involves an iterative cycle of knowledge acquisition, customer differentiation and customization of the entire marketing mix. This process is sometimes referred to as a learning relationship (Johnson, Scholes, 1998). A learning relationship between a customer and an airline comapny gets smarter and smarter with each individual interaction, defining in ever more detail the customer’s own individual needs and tastes.
“The leadership position of the U.S. aviation and aerospace industries is being eroded by foreign competitors who benefit from extensive government subsidies” (U.S. Aviation and Aerospace Industries, 2003). In aerospace services is creating new flexibility for consumers and for business, government markets. And innovation is also occurring through experimentation with new approaches to market development in emerging markets There appears to be a mismatch between the technology incorporation cycle and the technology introduction cycle. Just when the customer feels comfortable with a given technology that they have acquired, a new version comes along making the earlier one obsolete.
A problem with aerospace industry is that although there are only a few major companies, these companies have a majority of the control over the market, requiring an extremely unique spin off of this already established product to have a chance at success. There are many innovative products that enter the sector every year. A talented company management could definitely add these product to the list if they are willing to work hard, think outside of the box, and put their heart into their company (UK aircraft and aerospace industry, 2005)
Competitive pressures have prompted many airlines and aerospace companies to involve marketers in design, manufacturing, and other value-related decisions from the start. This approach is known in some circles as boundaryless marketing. Rather than linking marketing sequentially with other activities, the goal is to eliminate the communication barriers between marketing and other functional area’s. Properly implemented, boundaryless marketing ensures that a marketing orientation perme¬ates all value-creating activities in a company (McDonald, Christopher, 2003).
A partnership marketing strategy is the quickest and cheap¬est ways to develop a global strategy in aviation. It allow share control over assigned tasks, a situation that cre¬ates management challenges. Partnership in aviation is attractive because high product development costs in the face of resource constraints may force a company to seek partners and the technology requirements of many contemporary products mean that an individual company may lack the skills, capital, or know-how to go it alone (UK aircraft and aerospace industry, 2005).
It is possible to conclude that aerospace and airline industries mature, fragmentation is overcome and the industry tends to become a consolidated industry dominated by a small number of large companies. Although industries begin by being fragmented, battles for market share and cre¬ative attempts to overcome local or niche market boundaries often result in a few com¬panies’ obtaining increasingly larger market shares. When product standards become established for minimum quality and features, competition shifts to a greater emphasis on cost and service. Slower growth combined with overcapacity and knowledgeable buyers put a premium on a firm’s ability to achieve cost leadership or differentiation along the dimensions most desired by the market.
The increasing opportunities of the Internet offer another area of strength for airlines marketing stretagy. Customers want more help with the Internet, airlines in a better position to give it to them. In the traditional brand relationships, communication flows between the marketer and the consumer. The key to airlines successful relationship marketing program is information. The better information that a company can propose to a particular customer, the more value that firm will potentially be able to provide that customer.
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