Comparing the Marketing Strategies of Qantas and Virgin Blue - Essay Example

Running head: QANTAS AND VIRGIN BLUE Qantas and Virgin Blue [Writer’s name] [Institution’s name] Qantas and Virgin Blue Introduction: Marketing is the most powerful weapon available to a business; however, marketing is often confused with sales and advertising. It is noted that business need to understand that marketing is much more than that. Marketing, in fact, has a various roles in a firm or business; firstly, it connects the business with its target market, it provides the major link between the business and its customers. Secondly, as marketing focuses on the needs and wants of customers, it gives a business direction and helps it to manage in a changing environment. Thirdly, it provides the information the business needs in order to change direction or adjust its tactics by providing new products or changing existing products. Fourthly, marketing helps to coordinate how a business can best use its resources to satisfy customers and achieve profit targets, yet the marketing plan can actually be seen as the 'blueprint' for a business's future success. As it is noted in order to carry out the marketing program, a business needs a plan that will help it to achieve its objectives, and there are several stages needed to be taken; which include the situation analysis, establishing market objectives, identifying target markets, developing marketing strategies, preparing marketing plan, and the implementation, monitoring and adjustment of the plan. Situation analysis involves looking at the market in terms of size and growth, needs of the target market and trends in buyer behavior, where the performance of the product(s) in terms of sales, profit margins as well as stage in the product lifecycle are analyzed and chief competitors are highlighted. The next stage in the marketing plan is about establishing marketing objectives; the objectives established in the business plan will be the guide for the marketing objectives. A number of general marketing objectives can be identified, such as, increasing a business's market share, developing new products or services, expanding the existing market, and entering new markets, etc. Moreover, identifying target markets involves breaking down the marker into smaller segments or parts; this process is called as market segmentation. Once the whole market is broken down, a business can then decide which target group of customers it will focus on. After identifying the target market, a business's management department has to develop the marketing strategies that will allow the business to satisfy the wants of the targeted market and achieve its marketing objectives. It is noted that the marketing mix makes up the core of business's marketing strategies, there are totally four elements of the marketing mix included in the marketing mix; the product or service offered for sale, the price structure, the promotional activities, and the distribution network of the business. Marketing Strategy: Qantas Airline. The Queensland and Northern territory aerial service (Qantas) Group has a long history in the Australian airline industry. It began its operations in 1920 as the second oldest airline in the world. Passenger and mail services started in 1920. When the Australian Government bought Qantas in 1947 to operate as the nation's flag carrier, Qantas was restricted to flying only internationally, while the domestic market was heavily regulated. After deregulation of the industry in the early 1990's, Qantas was able to re-enter the domestic market in Australia. Through continual restructuring and reorganization, the Qantas Group is changing to reflect the demands of the market and keep the business profitable by generating revenue from various business areas. As well as operating the core flying business, Qantas operates a number of profitable subsidiaries to support the airline. The core flying business of the Qantas Group includes Qantas, for the business and full service economy traveler, Qantas Link, for the regional flyer, Australian Airlines, for the leisure market in Asia and Jetstar, for the low-budget traveler. Qantas operates carriers to cater for various segments in the market, rather than concentrating on one brand to appeal too many. It has also been announced that Jetstar International will begin operations late 2006, with flights to start in major cities in Asia. This carrier will replace Australian Airlines and will extend the domestic Jetstar network in Australia. Qantas operates within its domestic market and international routes. They have been able to expand to Japan, New Guinea, the Pacific Islands, Hong Kong, South Africa, and North America. Their expansion also included the acquisitions of shares in different airlines in other countries, as well as an increase in the number and type of aircrafts they have for their fleet. The Qantas Group operates a fleet of 219 aircraft, comprising Boeing 747s, 767s, 737s and 717s, Airbus A330s and A320s, Bombardier Dash 8s, Bombardier Q400s and British Aerospace 146s. (http://www.qantas.com.au/infodetail/about/FactFiles.pdf) Competitive advantage is defined as the ability of a company to outperform its rivals, commonly measured by superior performance and the attainment of above-normal profits. The most important elements of competitive advantage are: efficiency, quality, innovation and responsiveness to customers. These factors are interrelated and the extents to which a company can deliver on these factors determine business success. To create value in their product, Qantas have fulfilled these factors successfully. Qantas have gained competitive advantage by building up a strong brand image, an extensive network of domestic and international routes and an impeccable safety record. Qantas's strategies have changed significantly since the 1980's because they have had to compete in the market since 1995 without government financial assistance. When the Australian Government deregulated the air industry, Qantas was already in a strong position. It had the competitive advantage of being Australia's national carrier, operating an international network and controlling all of the previously Government-owned Australian Airlines domestic services. When Virgin Blue entered the market and Ansett Airlines collapsed, Qantas became the only carrier to offer a full domestic service. The arrival of Virgin Blue had an impact on Qantas's market share and profits, and Qantas was forced to match low fares to operate at better capacity. In 2004, Qantas launched Jetstar, essentially a copycat of other low-cost carriers such as Virgin Blue. It competes directly in the budget air travel market and has only the one competitor. Jetstar operates on a lower cost model, where labor, maintenance and "no-frills service" contribute to a lower cost base. Jetstar Asia is a low-cost carrier Singapore-based venture, in which Qantas has a 45 per cent stake. The carrier is intended to be a budget carrier to tap into the highly lucrative market of Asian leisure travel. At this time however, Jetstar Asia is struggling to fill capacity and is likely to be merged with Jetstar International late in 2006. Low-fare carriers are able to access a larger market segment as these customers are convinced that budget travel has more value for money than services provided by premium carriers such as Qantas. E-business and clever marketing strategies have allowed airlines like Jetstar and Virgin Blue to be successful, with customers willing and able to try budget travel. Low fares increase market share and demand, as the lower cost of air travel makes it within reach to more of the population. Jetstar increases market share of the Qantas Group without jeopardizing the Qantas premium brand. Market segmentation is the process of subdividing customer groups based on customer preferences. Qantas has developed a number of carriers to reach more market segments. The Qantas Group operates Jetstar on a focused cost-leadership strategy. This strategy is based on operating in a single segment of the market, where low priced products are offered to one group of customers. The Qantas brand is a focused differentiation strategy, focusing on the segment of the market that wants premium services. As well as establishing a low-cost carrier, Qantas continues to benefit from expanding and seeking efficiencies in its business segments. The airline is looking increasingly at diversifying outside of traditional airline operations to grow revenue domestically as well as internationally. The current leaders of the airline are Geoff Dixon, Chief Executive Officer and Managing Director since 2001, Peter Gregg, Chief Financial Officer and Margaret Jackson, Chairman. There are also a number of Independent Non-Executives including James Packer and General Peter Cosgrove. The Qantas Group is successful and profitable, posting reports of after tax profit for 11 years. In the financial year 2004/2005 generated $1027.2 million before tax, $763.6 million after tax. For the year ended 30 June 2006, Qantas reported a profit before tax of $671 million, a 26.6 per cent decrease on the year to 30 June 2005. Net profit after tax was $480 million, a 30.4 per cent decrease on the previous year. The Directors declared a fully franked final dividend of 11 cents per share. The dividend for the full year was 22 cents, 2 cents higher than the prior year.1 Marketing Strategy: Virgin Blue Virgin Blue, one of the airline companies in Australia, which provides lost cost, low fare domestic airline, offering frequent passenger services on routes between all of the Australia's major cities, is one of the subsidiaries of the Virgin Group that steped into business on the 3rd of August 2000 with just two aircraft but yet it was offering as much as seven return flights a day, which flew between Brisbane and Sydney. And this has been expanded to cover the major cities in Australia. According to Virgin Blue, the objective of launching the company is to develop a Virgin branded, low cost, low fare carrier operating in the Australian domestic aviation market. In fact, Virgin Blue has been become one of the fast growth rate airline company in the world that grew quickly to turn into second domestic airline in Australia. Until 2003, Virgin Blue's overall passenger share of the total domestic market of Australia was more than 28% and available capacity share was 27%. Virgin Blue In September 2003 introduced anew airlines called Pacific Blue, this airline was to offer a similar service the only difference as that was to be cheaper, and its fights flew between New Zealand and Australia. The aim of the Pacific Blue is to compete with the Air New Zealand and Qantas on trans-tasman routes via position itself as a low-cost competitor. Facing the cheaper service competition, Qantas responded to Virgin Blue base by launching a similar carrier, Jetstar in 2004. And in May 2005, Jetstar announced that it would cover the route to New Zealand. Virgin Blue's Marketing Team primarily focused too much on Australian Domestic market. Thus, it is difficult to expand the brand to international flight with original domestic strategies .Virgin Blue’s strategy and objectives are clear: offer an easy-to-understand, low-priced means of transport, using a low-cost business model. Profit margins are high because costs are kept low by using a single-model, young fleet, having a lower cost and more flexible labor force and keeping its staff motivated and involved. Its Marketing objective is to gain a 40% market share in the domestic aviation market, increase brand awareness of the targeted business segment to 65% and increase market share in the business market segment to 50%.Financial growth to increase by a minimum of 10% annually, bringing total revenue to roughly $2 billion by the end of 2009-10. Virgin has historically targeted the well beaten routes of Sydney-Melbourne, Sydney-Brisbane and Melbourne-Adelaide, which have worked as important cash cows for all domestic airlines. Virgin has relied on a user-pay system for any excess privileges such as meals and accessories, which has allowed the company to streamline costs and reduce fares. This system has been ideal for the price conscious customer. This target market is long and far reaching, spanning from families, students, the elderly and economy-class frequent fliers. These markets take up a large portion of the flying community and by dominating them; Virgin saw a stream of exponential growth in a waning industry. The holiday market through Virgin Blue Holidays will be another very good growth market for the airline. Virgin Atlantic has always prided itself on its individuality and innovative approach to issues. However, it will help company work more closely with other carriers on areas of mutual interest at a time when there are more and more regulatory initiatives emerging and ever-increasing government interference in industry. Comparison of market and pricing strategies of Qantas and virgin blue: However, when looking to the future, main competitor Qantas had a distinct advantage over Virgin. The comforts of Business class, Qantas Club and loyalty programs such as frequent flier points. Essentially the business markets who were able to shell out extra if it meant that there was internet access, comfort seats to sleep in and meals, plus the ability to gain rewards for repeated travel. Virgin has now created a Virgin Blue class, which is a business class option, directly taking on Qantas Club by introducing The Blue Room, according to Virgin promotional materials includes. In the Blue Room, you can catch up on some work, or catch up on some rest. Each lounge is equipped with courtesy data access points, photocopier and fax, cinema as well as Sony Play station 2 and consoles. The alternative is yours to pay and get pleasure from a massage, a meal before a latte. For the future, Virgin Blue needs to maintain their dominance of the budget mass market, but also cater for the business class. The complication with this is that to modify aircraft to meet these needs, a large amount of expenditure will occur and Virgin will not longer be seen as a low cost airline. Virgin must consider the fact that families are likely to enjoy facilities to entertain children, something which is not provided by Virgin but is by Qantas. To ascertain the way in which Virgin Blue has tried to position itself within the Australian market, one need look no further than the home page of the their website which encourages the public to "Fly with Virgin Blue, Australia's multi-award winning low fare airline that is big on service and low on price." Through their advertising and communication strategies Virgin Blue has tried to position itself based on excellent customer service. While Virgin Blue may not hold a competitive advantage over main rival Qantas with regards to luxury or business class service, it tries to position itself favorably with regards to in-flight service to the everyday individual. This can be seen through Virgin Blue's series of television advertisements containing the tagline - 'If only you got Virgin Blue service everywhere'. Through their pricing Virgin Blue has positioned themselves to the public as a budget, low-fare airline. Virgin Blue's low-fare rates are facilitated through a low-cost structure, highlighted by a single type aircraft fleet and the elimination of expensive, non-essential service ad-ons. By providing a low-cost service, particularly through eliminating non-essential services, the risk for Virgin Blue is that they may exclude a large section of the market such as business people who want these extra services. Virgin Blue have managed reduce this risk somewhat by providing many extra services but at an additional fee. In international market, Virgin has smaller size of planes with single class of 170 passengers and short-haul flights. The Australian domestic market remainsVirgin Blue’s primary focus, as the airline continues its commitment to offer Australian air travellers consistently affordable fares, combined with an increasing range of benefits and services. Available on a pay-for-use basis. As part of their strategy to attract higher Yielding corporate traveler business, in the past year Virgin Blue has introduced a series of product and IT initiatives designed to appeal to business travellers, major corporations, travel procurement managers and potential partner airlines. These include the Velocity loyalty program; the relaunch of lounges at major airports, Web Check-In, Self Check-In Kiosks at airports, new flexible fares for business and government travellers, completion of new code-share technology and an Application Program Interface facility for corporate accounts. At the same time Virgin Blue continues to protect its traditional leisure market base combining highly competitive air fares with a range of extras on a pay-for-use basis. The airline is also expanding its Blue Holidays division following formation Of a powerful new venture with Asia Pacific’s leading online travel company ZUJI. Blue Holidays now offers an extensive range of affordable holiday packages at quality properties throughout Australia, New Zealand, the South Pacific and selected international destinations. Pacific Blue and Polynesian Blue, our joint venture carriers launched in 2003 and 2005 respectively2, are profitable and delivering results to Virgin Blue as strategic investments as well as valuable tourism and economic benefits to the countries they serve. Virgin Blue will continue to seek innovative ways to further enhance its profitability and competitive position and at the time of going to print we are examining potential USA operations, future fleet requirements and have commenced a program to fit the existing fleet with live2air seatback entertainment. Benefits from revenue and cost initiatives developed in the past year are expected to deliver further value and Virgin Blue is well positioned, however management remain cautious with regard to continued escalation of fuel prices and related Household inflationary pressures which may lead to softening consumer sentiment.3 With compare to the two main domestic airlines as Qantas (include the subsidiaries, Jetstar Airways) and Virgin Blue, Qantas is committed to defending a minimum 65% of the domestic aviation market share against Virgin Blue. For instance, Virgin Blue flew 1.127 million domestic passengers, compared with 1.933 million of Qantas in July 2004. Until the beginning of 2005, Virgin Blue has captured 33 percent of the domestic market in around 5 years with a faster growth rate and is enjoying on-going demand and strong forward booking. These show that the demand of a cheaper airline services is strong4. Making a contrast of the services offered between the two airlines, Virgin and Qantas, there is a wide range of methods one can use to give you an idea about the differences between the services existing and their range of prices, which will be looked at. Above all, the marketing mix’s aspects of price as well as promotion will be the core focus of discussion for this assignment when looking at a variety of attributes, product description, the pricing structure of the two airlines and their product variations. When comparing these two airlines, one must look specifically at their brand image. In order to analyze the brand image in the aspect of these two extremely different airlines makes it simpler to decide why they are poles apart and why their products and services are so different from each other. Both companies have targeted different markets, Virgin targeting a market who are interested in money saving in even if it means compromising on comfort and aesthetics, whereas Qantas target a market who give preference to an aspect of status. Thus the image is that the two airlines target is budget versus quality. A common aspect of both airlines is that Both Virgin and Qantas have corporeal and intangible aspects of the products and services which they tend to provide their customers. The Qantas prices may perhaps be a bit dearer, however they do offer food and drinks at no additional cost, while Virgin sell foodstuffs throughout their flight, although the culinary ability of both companies leaves a great deal to be desired, apparently more so for Qantas. The major intangible aspect for both the airlines is the flight itself which is the main function of the companies. The visual scrappiness of Virgin's planes as well as terminals leave a lot to be desired, and for a lot of people may reflect, if the airline’s flight will be safe or not. Nevertheless, I find the confidence and liveliness of the flight crew and attendants comforting, this also makes trip, a fun one . Qantas take themselves much more seriously although, advertising the verity that they are notoriously, the world's safest airline to travel with . When the actual flight package between Qantas and Virgin is compared , one can find variation in the product being offered to a certain extent . One can easily tell just from the prices that Virgin offers that , it tried exceptionally hard to give the customer a perception of a completely different picture when they came into the airlines market; an airline that is low budget . This is reflected in the excellence of their terminals as well as the older planes that they use. The differences on airline travel that Virgin has implemented are countless, as well as making passengers pay for meals on the plane and the apparently poor interior of the planes they use. One astonishing distinction between the two companies is the class structure. While Qantas still has the same old seating system that is, economy, business and first class seating, Virgin only has economy style seating in their planes. It's this sort of differentiation that makes them so unique for the customers, mainly for their repute of being a low-budget airline. Virgin's angle of differentiation ever since they came into the airline market has been that they are a low budget airline and openly forfeit luxuries to prove it. As well as this, virgin only has domestic flights inside Australia, while Qantas also offers international flights. Qantas, in the same way, have tried to be different from their rival with their quality, at the same time as trying to match Virgin's cheap domestic rates. How long they will be able to do this is extremely debatable, however the reality is, Virgin's differentiation strategy have worked and the airline at the present seems to be in it for the long heave. The pricing structure of these two airlines seems to be the most important thing that people distinguish them for. Virgin is notorious for their low prices in the eyes of the costumers as well as offers good deals on domestic flights. For example, a one-way flight from Adelaide to Melbourne possibly may cost $79 for an adult according to airline’s pricing. Qantas, nevertheless, gives the same flight that is mentioned in the example above for $89, and this also includes a meal. Once in a while, Virgin offers their 'sale destination' for every capital city, this offer is a very bright idea, and is excellent for travelers who are of the business class. The strategy used for marketing is using lower prices, which both companies have considered. There is definitely a competitive advantage there for Qantas for the time being , as they expand a loyal supporter base. However there's the concern of economy versus class, the latter being a lot more business orientated, which is where the majority of Qantas' loyalty will reject. Likewise, there have been many positive affects on the airline industry. People have been able to travel economically, going on holidays inside Australia (boosting internal tourism) as well as allowing people to visit family who live interstate, without having to be concerned regarding mammoth costs that they had before Virgin came into the Australia domestic airline market. As well as having highly increased air travel, the pricing strategies, both airlines have also given people the chance to travel the country in an extremely economical price package , and a great deal faster as well. It seems as though both virgin as well as Qantas is extremely marketing orientated, they both also have focused only and only on the customer, competitor intelligence along with aiming to uphold and craft good customer relationships. One such purpose for Virgin would be to increase the majority market share for the domestic air travel market. By doing this , they may possibly offer a fly-buys scheme with one of the huge food outlets, such as Qantas have done, therefore gaining brand loyalty among day-to-day shoppers. Operationally, the airline may perhaps go to Woolworths, a chief competitor of Coles Myer, which would work well for both the companies as they are in opposition to one another. While both airlines are exceptionally different, they both want to attain a common goal: to help Australians to reach their desires destinations . In spite of pricing strategies, differentiation, a variety of service components and a range of their products, both airlines have achieved their most wanted result. Recommendations: In the creation of Branson's Truly Global Brand, Virgin Blue must go into Pacific- United Stated Flight. However, Qantas as the world's most profitable international airline has entered the market much earlier than Virgin Blue with strong brand awareness. Virgin Blue has a reputation of domestic airline but never experiences of international fly, cooperates with success international airlines will be a smart choose. Virgin has also joined SIA and the Singapore airline's partners, Air New Zealand and Ansett Australia, in The Great Escapade round-the-world ticket promotion. Virgin Blue can use product invention strategy to satisfy to the target market which could be the young graduate people who will become business travelers. Virgin Blue should design new products for international markets like multi-class aircraft. The flights that Virgin Blue used only have one class, no dedicated lounges for business travelers, and does not provide much entertainment, must be successful in short-haul trip because it low cost and customer will be easy to satisfy within 1 or 2 hours when they fly a low price. The creation of first-class and business-class will move Virgin Blue from its low-cost carrier (LCC) beginnings and reinvent itself as a new type of carrier capable of offering the benefits of full-service airlines but with an LCC's lower cost base, and attract more of the well-heeled travelers5. A loyalty program should be build to catch customer loyalty. Such as frequent flyer program and the main reasons why airlines operate these bonus programs are to cultivate brand loyalty and repeat business. The Qantas Frequent Flyer program is the most successful loyalty program in the Pacific and Oceania through offering customer services on the airlines worldwide network together with more than 100 program partners, newly announced benefits were added automatically to Qantas Frequent Flyer members from the effective dates. Members can obtain more information about the changes to the Qantas Frequent Flyer program at the website. The success of Qantas can be a sample for Virgin Blue to create the customer loyalty and achieve a higher goal or remain the original bonus program of Virgin Blue- Called Velocity Program- that can be applied through the Virgin Blue Brand, like Pacific Blue, Holiday Blue, Virgin Blue, and so on. Furthermore, advertising through TV, internet, magazines, and outdoor post can efficiently contribute the company to build brand awareness in new entry market. Passengers want to know they are flying with a reputable company, and advertisements emit sheen of respectability. References Virgin Group rejects bid and increases stake in Virgin Blue, Airline Industry Information. 2006 p 1 Ian Thomas, Luck played a key part in float success', Australian Financial Review, 2006 p 5 http://en.carnoc.com/list/0/101.html retrieved on 30 April 2007 http://www.virginblue.com.au/pdfs/investors/AnnualReport-2006-A4.pdf retrieved on 30 April 2007 http://www.qantas.com.au/infodetail/about/FactFiles.pdf retrieved on 30 April 2007 Read More