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Aviation Management College AIRLINE MARKETING Product Analysis In Airline Marketing Aviation Management College Product Analysis In Airline Marketing Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING What is the Product of Airline Business? - An intangible one Product Analysis In Airline Marketing Aviation Management College 1. Product Life cycle a) - Introductory stage New product Less promotion 60% to 70% failure Eg., Concord, Boeing 717, Airbus 318 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING 1. Product Life cycle a) Introductory stage - success factors - Relative - advantage – better, value for money than the replacement - Compatibility – gradual change vs. radical change - Complexity – easy to use or to adapt - Divisibility – with smaller steps or trial basis - Communicability – easily understood, and accepted Aviation Management College Product Analysis In Airline Marketing 1. Product Life cycle b Growth Phase - Sales accelerate - Advertising & promotion bare fruits - Benefits from imitation buying AIRLINE MARKETING Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING 1. Product Life cycle b - Growth Phase - challenges Production rates increases to meet demand Competitors are responding with rival product Operating cost increases with sales and production - Balance growth between meeting demand & over production/expansion Product Analysis In Airline Marketing Aviation Management College AIRLINE MARKETING 1. Product Life cycle c) - Maturity stage Sales begin to slow down Most people have got it Market saturated with competition Market changes from growth to replacement Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING 1. Product Life cycle c) Maturity stage – responding to challenges - Developing and introduction cost have been recovered - Still able to make profit at lower prices - Enjoys economies of scales - Production efficiencies - Increase financial flexibility Product Analysis In Airline Marketing Aviation Management College 1. Product Life cycle c) - Maturity stage- challenges Use R&D to produce new product Replace product before abandoning Produce for other AIRLINE MARKETING Product Analysis In Airline Marketing Aviation Management College AIRLINE MARKETING 1. Product Life cycle d) - Decline stage Market stop buying A lot of rivals Stop producing and slowly withdraw from market Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING 1. Product Life cycle d) Decline stage – challenges - R&D during maturity stage – going concern - Replacement available before declining stage - Product introduction at declining stage Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Product Life Cycle in Aviation Industry 1. Boeing 737 - started 1960 737-100 sales was poor - 1972 financial crisis worsen situation - Continue R&D 1970 produced 737-200 - Sold 200 planes in 10 yrs - 1980 maturity stage & competition A320 - Early 1980 introduced -300,-400,-500 - Until 1990 sold 2000 planes Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Product Life Cycle in Aviation Industry 1. Boeing 737 - cont - 1994 threat from A-319,318,321 - Launch 737-600,-700,-800,-900 Product Analysis In Airline Marketing Aviation Management College - AIRLINE MARKETING Product Analysis In Airline Marketing Aviation Management College - AIRLINE MARKETING Product Analysis In Airline Marketing Aviation Management College - AIRLINE MARKETING Aviation Management College Product Analysis In Airline Marketing Product Life Cycle in Aviation Industry PLC of Frequent Flyer Programmes (FFP) -1981 introduction by AA -1990 Growing with millions of members - 2000 Maturity, other Airlines join in - now moving to Decline stage, AIRLINE MARKETING Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Product Life Cycle in Aviation Industry Frequent Flyer Programmes-Declining Signs - irresponsible employee; unnecessary travel - point awarded to corporate x-individual -points converted to corporate discounts -Points can be collected from other airlines - Points can we accrued by other source Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Product Life Cycle in Aviation Industry PLC of Leisure & Vacation Market a) Introductory stage attracts innovators - High disposable income - Well-educated - Adventures, willing to try new purchases - Status conscious - Showy characters Aviation Management College Product Analysis In Airline Marketing Product Life Cycle in Aviation Industry PLC of Leisure & Vacation Market b) Growth stage of Innovators -New destination -Exciting adventure -Interesting events -Good package -Image advertisement -High price AIRLINE MARKETING Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Product Life Cycle in Aviation Industry PLC of Leisure & Vacation Market c) Maturity stage of Innovators -More people are joining the package -Affordable to the mid-low income travelers -Becoming crowded and noisy Aviation Management College Product Analysis In Airline Marketing Product Life Cycle in Aviation Industry PLC of Leisure & Vacation Market d) Decline stage of Innovators -Product become old-fashioned -Lack privacy and exclusivity -Operators concerned with volume -Service and quality declining -Market full of laggards AIRLINE MARKETING Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Product Life Cycle in Aviation Industry PLC of Leisure & Vacation Market e) Introductory stage attracts Laggards - the last to adopt an innovation. - typically tend to be focused on “traditions”, - lowest social status, lowest financial fluidity, oldest of all other adopters, -in contact with only family and close friends, Aviation Management College Product Analysis In Airline Marketing Product Life Cycle in Aviation Industry PLC of Leisure & Vacation Market e) Introductory stage attracts Laggards AIRLINE MARKETING Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box Background - US Boston Consulting Group 1963 - Using product range & portfolio - Using 2 variables: - a) The size of total market - b) The share of the market or market share Product Analysis In Airline Marketing Aviation Management College AIRLINE MARKETING Managing a Product Portfolio – Boston Box i) WILDCAT - Characteristics - Product with low market share The overall market is growing Invest to increase market share Using ‘4 Ps’ of Marketing Mix Product Analysis In Airline Marketing Aviation Management College AIRLINE MARKETING Managing a Product Portfolio – Boston Box i) Wildcat - Using ‘4 Ps’ of Marketing Mix - Product specs equal or better Competitive pricing Advertising & promotion activities Using the right distribution channels Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box Product Analysis In Airline Marketing Aviation Management College AIRLINE MARKETING Managing a Product Portfolio – Boston Box i) Wildcat – in Airline Marketing - Airline route as product; frequencies, connections, package International market; image & status, withdrawal, an advantage to competitor and difficult to re-enter - Product Analysis In Airline Marketing Aviation Management College AIRLINE MARKETING Managing a Product Portfolio – Boston Box ii) THE STAR - Characteristics - Product has good market share The market is growing The best product to the firm The product produce max profit Need to spend heavily to defend market Product Analysis In Airline Marketing Aviation Management College AIRLINE MARKETING Managing a Product Portfolio – Boston Box ii) STAR – product investment - Advertising & promotion Pricing strategy; competitive High volume sales Thin profit margins Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box ii) STAR – in Airline Marketing - Aero-engine market powering large jet aircraft Players: GE, Pratt & Whitney & Rolls Competition is intense Spend large sum to defend market Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box ii) STAR – in Airline Marketing - Spend large amount on continuous product development & improvement program. Stiff pricing sometimes sold below cost Profit from sales of spares & lifetime product support All with huge sales revenues, often thin margins Product Analysis In Airline Marketing Aviation Management College AIRLINE MARKETING Managing a Product Portfolio – Boston Box ii) STAR – for Cost Leader Airlines (LCC) - Intra European route & Asian regional routes Attracts new players Growing market Competitive pricing High sales revenue Low profit margins Product Analysis In Airline Marketing Aviation Management College AIRLINE MARKETING Managing a Product Portfolio – Boston Box iii) CASH COW PRODUCT – characteristics - Product have good market share Market is in maturity stage (not growing) Market not attractive to new entrants A major source for profit because no/less spending to protect market share Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box iii) CASH COW PRODUCT – in Airline Marketing - - Smaller engine market; a monopoly by The Tay of Rolls-Royce Fokker & Gulfstream jets, stagnant market Now Fokker has gone bankrupt from 1996 Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Managing a Product Portfolio – Boston Box iv) DOG PRODUCTS – characteristics - Low market share Market is small & not growing Ready to discontinue product No spending, money used for other product Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix A marketing tool created by Igor Ansoff and first published in his article "Strategies for Diversification" in the Harvard Business Review (1957). The matrix allows marketers to consider ways to grow the business via existing and/or new products, in existing and/or new markets Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix There are four possible product/market combinations. This matrix helps companies decide what course of action should be taken given current performance. The matrix consists of four strategies: Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 1, Market Penetration Here we market our existing products to our existing customers. This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on. However, the product is not altered and we do not seek any new customers. Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 1. Market Penetration (existing markets, existing products): - company enters/penetrates a market with current product - by gaining competitors' customers (part of their market share). - other ways include attracting non-users of your product or convincing current clients to use more - with advertising or other promotions. - on is the least risky way for a company to grow. Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 2. Market Development Here we market our existing product range in a new market. This means that the product remains the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new region, are examples of market development. Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 2. Market development - (new markets, existing products): - established product in the marketplace can be targeted to a different customer segment, - as a strategy to earn more revenue for the firm. - Eg.,, Lucozade was first marketed for sick children and then rebranded to target athletes. - developing a new market for an existing product. - the market need not be new in itself, but the market is new to the company. Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 3. Product Development This is a new product to be marketed to our existing customers. Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers. Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 3. Product development (existing markets, new products): - developing new products for to the same market - old product but new to the company - Eg., McDonald's within the fast-food industry, but frequently markets new burgers. - when a firm creates new products, it gain new customers for these products. - new product development, a crucial business strategy for firms to stay competitive. Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 4. Diversification New products to new customers. Two types of diversification, a) Related diversification - remain in a market which we are familiar. Eg., a soup manufacturer diversifies into cake (food industry). b) Unrelated diversification - we have no previous industry nor market experience. For example a soup manufacturer invests in the rail business. Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 4. Diversification - (new markets, new products): - Virgin Cola, Virgin Megastores, Virgin Airlines, Virgin - Telecommunications are examples of new products created by the Virgin Group of UK, to leverage the Virgin brand. - This resulted in the company entering new markets where it had no presence before Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 4. Diversification Federal Express (FedEx): - door 2 door service, smaller shipments Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix 4. Diversification Market completely new products to new customers. Two types of diversification, a) Related diversification - we remain in a market or industry which we are familiar. For example, a soup manufacturer diversifies into cake manufacture (i.e. the food industry). b) Unrelated diversification - we have no previous industry nor market experience. For example a soup manufacturer invests in the rail business. Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING Balancing Risk & Opportunity – the Ansoff Matrix Aviation Management College Product Analysis In Airline Marketing AIRLINE MARKETING