The Airline Industry essay
Marketing focuses on matching customers with the products or services that satisfy some of their needs. Essential elements of marketing include analysis of the target market, market segmentation, targeting the chosen customer segments, positioning of products and services, etc. The purpose of this paper is to consider marketing in the context of airline industry: to discuss key external factors influencing airline industry, to identify market segments in airline industry and explain these segments using the marketing concepts of segmentation, targeting and positioning, and comparing the positioning and target markets of two airline companies: JetBlue and Southwest Airlines.
Key external factors affecting airline industry
Airline industry consists of several segments: passenger airline industry, military, cargo carriers, etc (Structure of the airline industry, n.d.). In the context of this paper passenger airline industry will be considered. The groups of external factors affecting airline industry can be classified according to PEST framework: economic factors, political factors, social and technological factors (Doole & Lowe, 2005).
The key economic factors influencing airline industry are changing fuel prices and stage of economic development (recession or revival) which affects the purchasing ability of customers. Political factors include international airline fees and regulations, airline alliances, the regulations for security measures. Key social factors include the growth of demand for business class trips and the increase in leisure travel (Cento, 2008). Greater requirements towards passenger comfort can also be viewed as an external factor influencing airline development. Technological factors include the development of telecommunications, new construction materials and advanced airline designs (Rothman & Jasper, 2011).
Major airline market segments
Segmentation
According to Doole and Lowe (2005), segmentation is defined as the analysis of target customers and identification of customer groups which have similar needs. There exist various segmentation bases in marketing. In the context of airline industry, market segmentation is commonly performed according to the schedule (regular flights, charter flights), geography and purpose of flights (international, federal/national and local flights) and the combination of service and price (economy class, business class, first class). Customer segmentation is performed according to demographic characteristics (age, family status, gender), occupation, purpose of flight.
Targeting
In the context of marketing, targeting is defined as developing the criteria for assessing the attractiveness of market segments and focusing on particular market segments. There exist different approaches to targeting: companies can focus on specific market segments or offer products for all segments; furthermore, companies can deliver segment-specific products/services or offer the same products/services to different market segments. In airline industry, the most frequently used approach is to target different market segments by offering differentiated services (Cento, 2008).
Positioning
Positioning denotes the choice of marketing mix for every market segment selected during the targeting stage. The choice of positioning depends on customer preferences. In airline industry the preferences of customers depend on various factors such as pricing, schedules, flight frequency, destinations, procedure of reservation, ticketing, staff attitude and quality of service, safety measures, various options offered on board, check-in process, brand image, etc. Wen and Yet (2010) classify these factors into such categories as brand image, safety, on-board amenities, price and flights, and ground services. These categories are used for market positioning in airline industry and are matched with customer preferences. For example, for young customers airline companies offer economic flights with transfers, and for business travelers maximum speed and comfort of flight is offered at a premium price.
Comparison of JetBlue and Southwest Airlines
Target market
The focus of Southwest Airlines is on domestic market of the United States, while JetBlue targets international market. At the same time, Southwest Airlines covers the majority of states and offers a convenient flight schedule of local flights. JetBlue focuses both on local flights (covering about half of all states) and international flights (more than 10 international destinations) (Cento, 2008). Southwest Airlines tends to expand its local network by acquisitions, while JetBlue actively participates in international flight alliances.
In terms of financial position, Southwest Airlines is stronger compared to JetBlue as its liquidity is higher, and its turnover ratios are superior as well. JetBlue has higher debts while Southwest Airlines has larger revenues. At the same time, profit margins of JetBlue are higher.
In terms of pricing, JetBlue on average charges higher prices, but this difference is explained by the differences in target geographic locations of these companies. Therefore, target customers of JetBlue are primarily entertainment-loving young and middle-age people willing to travel locally and abroad at a reasonable cost. JetBlue also specifically targets families: the company offers various family-friendly services.
Southwest Airlines targets the customers willing to travel across the United States at the lowest cost. The strategy of Southwest Airlines is centered around on eliminating all extra services and options in order to reduce costs. At the same time, Southwest Airlines pays a lot of attention to cabin staff and to the quality of customer service. Brand image of Southwest Airlines is not so vibrant as that of JetBlue, yet it is frequently chosen by middle-aged customers and older who want to save money; young people who tend to choose economic flights are also target customers of Southwest Airlines.
Positioning
Both JetBlue and Southwest Airlines position themselves as lowcosters. JetBlue company offers high-quality service combined with low fares. The company has new aircraft and offers various entertainment services on board such as Live TV (Cento, 2008). The company has a corporate culture focused around customer interests and safety. JetBlue emphasizes the importance of flight experiences and offers personalized entertainment services. Furthermore, JetBlue offers a variety of extra services such as food, diapers and strollers, and allows to check-in various special items.
Southwest Airlines exists for almost 30 years longer than JetBlue as it was founded in 1971. This company also pays a lot of attention to delivering superior customer service and customer experience. Core advantages of Southwest Airlines are local flights available at low prices and convenient schedules. Southwest Airlines is known as the cheapest provider of local flights, and such cost leadership is the key competitive advantage of the company.
Conclusion
The analysis of airline industry shows that key external factors influencing it are fuel costs, international regulations, safety concerns, technological changes and customer preferences. There are different approaches to market segmentation in airline industry; the most frequently used segmentations are demographic, geography-related, purpose-related and price/quality-related. Airline companies tend to offer differentiated services customized for different market segments.
JetBlue and Southwest Airlines both belong to the category of low-costers, but these companies are quite different from the marketing perspective. JetBlue targets both international and local customer segment, while Southwest Airlines focuses on local flights. Southwest Airlines offers services for price-sensitive customers and positions itself as a convenient provider of local flights at the cheapest cost. JetBlue targets families and young people and positions itself as the provider of modern flight services with many entertainment features and superior customer experience at a reasonable cost.
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