Marketing Management Assignment # 3

Airline Case Study

PGDMM-2010-2011

01st August 2010

Agenda
Home

Profitability Implementing Undifferential strategy Need for Differential Strategy

Previous

Next

Differential Pricing Strategy

Calculations Profits, Profitability, Revenue, Cost incurred in both strategies for the full plane for each class & per passenger in class

Help

Benefits of Segmentation
Beneficiaries Segments subsidizing other segments

Why Segment?
Home

Helps differentiate products and services to meet customer needs and desires. Design or redesign new products and services to meet market needs. Find hidden needs and make improvements to existing products. By selecting and focusing on the most responsive segments to the exclusion of others, marketing can be created to more effectively fit consumers. Finding, understanding and focusing on the needs of best customers can make one a market leader. Target the marketing mix for the customers most likely to want products or services Identify behaviors and buying motives for products and services. Identify most and least profitable customers.

Previous

Next

Help

Segmentation Process
Home

Previous

Next

Help

Benefits of Segmentation Airline Stake holders

Home

Allows airlines to focus their resources more effectively, and with a greater chance of success Increasing competition makes it difficult for a mass marketing strategy to succeed When the focus is on segmented markets, the airline's marketing can better match the needs of that group Market segmentation focuses on that subset of prospects that have the greatest potential of becoming customers and generating revenue.

Previous

Next

Help

Airlines who segment their markets match their strengths and offerings to the groups of customers most likely to respond to them.

Airline Profitability Airline Profitability

Home

Profit = Total revenue Operating cost

Previous

Next

If un-differentiated strategy is implemented

Help

The total revenue would be $250 X 240 Seats= $60,000

Profit = 60000-50000= $10,000 (Without variable cost/ passenger)

If variable cost is added which $20/ passenger then the profit would be $10,000 + $4800= $14,8000

Need for Differential Strategy

Home

Previous

Differential Strategy

Next

Help

Marketing management says $250 already begins to loose business for low budget travelers.

Business people can pay more for superior service and comfort.

Un-Differentiated Strategy

Differential Pricing Strategy

Home

Previous

3 Levels of Services based on the type of customers

Next

Help

First Class

Economy Class

Business Class

If Differential Strategy Is Implemented

Home

Total Revenue = Sum Of Revenue from all the classes Let us assume First Class = F

Previous

Business Class = B
Next

Therefore Business class = 3F Economy Class = 2B i.e 2x3F=6F

Help

First Class = F
Total = 3F + 6F +F= 10F 240= 10F, F=24 Assuming 80% load factor

Home

Previous

Next

Help

Therefore Business Class = 72 Passengers Economy Class = 144 First Class = 24 Revenue: Buisness = 72 x 500 = $36,000 Economy = 144 x250 = $36,000 First Class = 24 x 1000 =$ 24,000 Total = $96,000 Profit = 96000-50000= $46000 Including variables i.e $40, $20, $100 Total Revenue = $1,04,160 Total Profit = 104160-50000=$54160

Fare Vs No of Seats
Home

Previous

Next

Help

Beneficiaries in Airline Industry

Home

Previous

Next

Airlines Management get to know their target audience and serve them better

Help

Air travellers can identify the right airlines that meet their requirements. E.g. Business Travellers and Leisure travellers

Absolute Vs Relative Satisfaction

Home

Absolute Satisfaction: It means that the consumer is completely satisfied with the consumption of the product/ services. Relative Satisfaction:

Previous

Next

Help

Performance of the product/services relative to the customers priorities.

When can segmentation go wrong

Home

Previous

When airlines dont understand their services properly

When airlines are not able to identify the correct target audience Airlines are not aware about the profitable audience among the pool of audiences Unable to position themselves among competitors Airlines need to answer the following WHO, WHAT and WHY?

Next

Help

Home

Previous

Next

Help

Thank You