British Airways Marketing Report Essay

Current share price is 225 with a range of between 224 and 289. Marketing is ‘the management process responsible for identifying, anticipating and satisfying customer requirements profitably. ’ BA used to operate in an oligopoly market however throughout the last century this has changed. Previously it was only large national companies that had enough money to provide flights however nowadays the market operates in perfect competition with high barriers to entry. BA can use marketing to promote their product, drive market share, anticipate customer requirements, satisfy customer needs and ultimately make a profit. The Marketing Mix The marketing mix is a combination of 4 P’s (product, price, place and promotion) that should be used in conjunction with each other to ensure a competitive edge over other companies. ‘The marketing mix is designed to produce mutually satisfying exchanges with a target market’. Product BA’s product in essence relates to the flights offered. However, the product can be drilled down into specific areas ranging from the airport lounges around the world, the ‘extras’ that you can buy on board such as model BA aeroplanes or even package holidays. Each of these has been specifically tailored to meet customer expectations (which are highlighted in the section of the report titled ‘target market’). This part of the marketing mix focuses on how BA’s products are managed and in the Guardian case study article titled ‘BA, Iberia and American Airlines tie-up heralds new era of transatlantic travel’ dated 06/10/2010 it shows how BA have made an executive decision to link their websites with other companies to have the possibility to offer a higher number of routes (products) to their potential customers. Price Price is simply ‘the amount of money customers must pay to obtain a product’. BA’s price is generally higher than their competitors although this is because they believe they are offering higher quality. However, in recent times BA appear to be losing the price war against low cost budget competitors such as Ryanair and Easyjet. Following this, BA have undergone marketing strategies to reduce their price and carry out ‘sale discounted’ periods. BA demand immediate payment for their products, do not give credit terms or allowances. Promotion In the early days when BA was a nationalised company and the market was an oligopoly, they didn’t have to promote as much, as competition was minimal. However, with the growth of new players in the market BA have resulted to advertising in the following areas: tube stations (especially the Jubilee Line going towards Canary Wharf to target higher earners), newspapers (such as the Financial Times and Sunday broadsheets), airports (mainly in Heathrow and Gatwick – their primary hubs) and adverts between TV programmes, starting from September 2009 – such as the News, Politics programmes and factual documentaries. BA also use personal advertising techniques with their advert: ‘Come together it’s Christmas’. This uses emotional targeting to encourage people to buy their product to visit loved ones during this period. See Appendix 2. Place Currently BA do not operate from London Stanstead however a marketing decision could be taken to include this to their portfolio. This would give them a higher percentage of UK airport utilisation however a cost benefit analysis could prove this move to be not so advantageous. BA have recently ‘taken on’ Easyjet and are now offering a Gatwick-Marrakech route at discount prices. This gives customers higher choice and allows BA to remain competitive and attempt at satisfying the needs of those who want to pay less. Once BA have exhausted the 4 P’s, a S. W. O. T. Analysis will be completed to determine and examine internal strengths and weaknesses and, external opportunities and threats. S. W. O. T. Analysis Strengths The case study website article on ‘This is Money’ dated 24/01/2011 undoubtedly highlights one of the major strengths carrying BA at present. The merger between BA and Iberia has strengthened its financial position and is a step closer to ‘creating a multinational multi-brand airlines group’. BA take pride in their strong brand, high quality service and offer prestigious first class airport lounges to ensure that their customers are taken care of to the standard they expect for the prices they are paying. This is what has allowed BA to charge higher fares and gives them the image that higher class passengers are willing to pay for. By linking themselves to fellow competitors (American Airlines) and strengthening their position by joining the One World syndicate, BA have encouraged higher revenues from this tactical decision. Following the strong decline throughout the global recession, BA’s strength is ‘bouncing back’ according to the BBC News Article ‘British Airways in first profit for two years’. Although the rise in incomes and ultimately rise in profits was linked to higher cargo fares, BA were able to successfully cut costs and meet their carbon emissions targets also. Weaknesses Despite the above, BA has been renowned for strong continual losses as highlighted in the other BBC News Article ‘British Airways reports ? 164m loss’. The losses were mainly caused by the volcanic ash cloud and staff strikes both resulting in the cancellation of thousands of flights. It’s reported that just ’15 days strikes†¦ had cost the airline ? 142m’. The strikes had also had a negative impact on their declining reputation making some people not wanting to fly with them anymore. BA’s reputation was also hit when they were sued ? 10K by competitor Virgin for accessing their private files and consequently trying to poach business. If this wasn’t bad enough, in 2009 BA were fined a massive ? 110m for price fixing – known as a ‘cartel’ and this is illegal. Although passengers accept that flight travel can be dangerous, BA adds to its weakness with its own incidents. These range from a mid-air collisi on in 1976, a pilot being sucked out of the aircraft when a windscreen exploded and in 2008 a BA plane at Heathrow missed the runway and crash-landed. More recently, BA has been investigating prices of flights to some destinations that were being charged at 10 times the normal price owing to a ‘system error’ online. This is going to make people think twice when booking with the company. Opportunities While the above 2 sections focus internally, opportunities and threats highlight those factors that can influence BA externally. The lifting of the recession in recent months has allowed passengers to review their spending habits and hopefully create higher disposable income in households and allow the ‘loosening of the belt’ for those corporate company credit cards. BA need to carefully position their marketing strategies at the right time in order to capture these people with that bit of extra money to spend and the report will focus on this issue in the following few pages. BA sold its Gatwick hub airport for ? 1. 5bn, although this was reportedly at a loss (as BA originally paid ? 10. 1bn for it 3 years prior), it gave BA the opportunity to invest its interests elsewhere and concentrate on a smaller number of airports. BA also sold its interest in the London Eye – now sponsored by EDF, to focus on other projects. Threats BA has been hit by threats in recent years ranging from terrorism, bad weather, volcanoes and more recently the devastating earthquake and tsunami in Japan and the civil unrest in Libya. Numerous flights have been cancelled to the Libyan capital Tripoli costing BA millions of pounds. Following this, BA has been forced to cancel their entire summer 2011 season of flight programmes. The events in Japan have also affected BA’s programmes with flights to Tokyo disrupted. The case studies provided highlight how BA ‘went into meltdown’ following the heavy snow suffered in the UK during December 2010. The conditions caused hundreds of flights to be cancelled for both cargo and passengers and the title of the article ‘British Airways says bad weather could cost it ? 50m’ sums up the situation perfectly. The terrorist events in the USA in 2001 still continue to make passengers nervous of flying, especially Trans-Atlantic and this is always going to be a sensitive subject that BA would find hard to market against. By doing so, they would not want to seem like they are publicising terrorism but at the same time have concentrated their marketing strategies on the highest standard of comfort and ‘relaxability’. A final threat is shown in an article by the Telegraph where BA is ‘attacked’ by a social media Facebook campaign where Gatwick workers have criticised BA’s Terminal 5 at Heathrow calling it ‘shambolic’ and the page was even designed with videos showing the CEO of BA wrestling with baggage and trolleys. This damages BA’s reputation and makes a mockery of their brand. All of the factors mentioned above in the marketing mix and S. W. O. T. Analysis are important for BA to consider however if the company does not have a target market to aim their products at, the company would not be able to survive. British Airways Target Market and Positioning Strategy In order to ensure BA’s products are directed at the correct audience to maximise revenues and profits, careful market research needs to be invested in to find a target market. ‘The basis of target marketing is market segmentation’; which splits the market into groups of potential customers that have the same characteristics. From the 3 marketing strategies, it’s believed that BA use a ‘differentiated strategy’ as they focus on several specific areas of the market to target. The characteristics below offer ome possibilities that link all of BA’s customers together. Watch the News on television Celebrities Speak a 2nd language Middle/Upper Class Holiday in non-European destinations Read non-fiction In full time employment or retired Have higher disposable incomes By segmenting the customer base to determine a ‘target market’ BA split the market depending on the following variables: * Demographic – age, gender * Geographic – where the target is based * Geo-demographic – size of households, number of cars etc.. depending on location * Psychographic – lifestyle, attitudes Behavioural – the relationship between the target market and the product As the points show in the circle above, BA focus their marketing strategies on those that have higher income and appear in the middle/upper classes of the population, this is evident from the prices of their products and the quality of the service offered. Both genders are targeted equally with the age range (generally) being between 35 to 65. The BA advertising strategies are positioned to target those situations that their customers can relate to and dream about – i. . luxury holidays, comfortable flights and a reliable service. This concentrates on the behavioural variable. Geographically, as BA is a British company, the target market is centralised in the UK however following partnerships with fellow companies such as American Airlines for example, a wider global base is reached. BA have positioned their product away from their low cost budget competitors acknowledging that they offer a more luxurious alternative to cheap travel. Their positioning strategy can lso be seen in the ‘product class membership’ which again, separates BA’s service away from the Easyjets and Ryanairs. By doing this, BA have created their own competitive advantage and have taken an alternative route to satisfy other customers needs that are not centered around saving money. Marketing Recommendations In order for BA to evaluate how successful their target market strategies and their positioning tactics are, the report recommends that the company should see how many levels of ‘Maslow’s Hierarchy of Needs’ are being satisfied from a purchase of a BA flight. This can be seen in Appendix 3. Psychological needs: SATISIFIED: shelter from the cold, provision of food and oxygen * Safety needs: SATISIFIED: provision of a safe environment and reassuring customers * Belongingness and love needs: N/A * Esteem needs: N/A * Self-actualization needs: Possibly relevant to those who are over-coming their fear of flying. Secondly, BA could conduct marketing research to determine ‘why’ customers buy their products in the first place. This could be conducted as a quick questionnaire either in-flight when the customers are all in one place at the same time or as a mandatory set of questions when booking flights. This will help BA to see what criteria are satisfied during the stage of the ‘buyer decision process’. There are 3 possibilities however the report recommends that BA would come across the most popular varible below: * Routine Response Behaviour: Customers who are frequent flyers, possibly members of the Executive Club, they are aware of the low cost competition however have a loyalty towards BA and favour their service. Appendix 4 shows where the report deems BA’s product to currently be in the market. By carrying out the market research above and with the new strong group behind the company, the brand could move backwards in the graph and back and return to the growth stage. This can also be said of Appendix 5, by moving BA from a question mark in the Boston Matrix and positioning it in the ‘star’ category. The report recommends BA to further extend their marketing strategy to concentrate on ‘holidays’ and not just flights. This links closely with an interview carried out by ‘Marketing Week’ and BA’s Head of Marketing, Richard Tams. ‘We are devoting more and more of our reativity in any given campaign to talking about holidays’. BA should extend this further and working with tourist boards of exotic countries to promote cheaper package holidays with the support of the Government in those ‘further to reach’ luxurious locations. Tams states ‘we are looking to move BA. com to much more into the space of a t ravel website rather than a flights website’. The report strongly agrees with this marketing strategy and would fully support BA’s proposals. This widens their product mix and allows a larger more diverse target market to be captured. Conclusion The report has analysed the company British Airways firstly concentrating on the product mix and a S. W. O. T analysis. The report has described the company’s target audience and commented on the current positioning strategy of British Airways. The report has concluded with marketing recommendations that could be put in place to ensure the long time success of the company. Future events that British Airways will have to be aware of include the UK Government adjusting passenger air tax and carbon emission regulations. 2,682 words. Bibliography All referenced throughout. Books Jobber, D. 2001 4th edition ‘Principals and Practices of Marketing’, McGraw Hill International, P 810 * Kotler, P. 2010 9th edition ‘Principals of Marketing’, Pearson * Lamb, C. 2009 6th edition ‘Essentials of Marketing’, Neil Marquardt * The Chartered Institute of Marketing, LSBU lecture notes Websites All accessed between 24/03/2011 and 30/04/2011 * www. bbc. co. uk /news * www. dailymail. co. uk/travel/article-1369100/Libya-action-hits-British-Airways-flights. html * www. guardian. co. uk * www. google. co. uk/finance? q=PINK%3ABAIRY * www. iagshares. com www. letsstartthinking. org/quickreference/maslow-need-hierarchy. asp * www. marketingweek. co. uk/sectors/travel-and-leisure/airlines/qa-with-ba-marketing-head-richard-tams/3019560. article * www. news. airwise. com/story/view/1300492770. html * www. news. cheapflights. co. uk/†¦ /ba-takes-on-easyjet-on-gatwick-marrakech-route * http://phx. corporate-ir. net/External. File? item=UGFyZW50SUQ9ODMyOTJ8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 * www. telegraph. co. uk/travel/3366187/British-Airways-staff-attack-passengers-on-Facebook. html * www. thisislondon. co. k/standard/article-23431527-london-eye-looks-for-new-sponsor-as-ba-pulls-out. do * www. thisismoney. co. uk * http://uk. reuters. com/article/2009/10/21/uk-baa-idUKTRE59K1D820091021 * www. utalkmarketing. com/UTMImages/2/BA_terminal5_2. jp g Appendices 1. ) Group structure of IAG 2. ) BA advert 3. ) Maslow’s Hierarchy of Needs 4. ) Product Life Cycle 5. ) Boston Matrix ——————————————– [ 1 ]. www. iagshares. com [ 2 ]. http://www. google. co. uk/finance? q=PINK%3ABAIRY [ 3 ]. Lamb, C, 2009 ‘Essentials of Marketing’ 6th edition. Neil Marquardt,