Marketing Principles of Virgin Atlantic - Assignment Example

?Marketing Principles Assignment Virgin Atlantic Introduction Virgin Atlantic, one of UK’s most popular airlines, partially owned by Richard Branson (51%) and Singapore Airlines (49%) is a classic example of exemplary marketing strategies. The primary goal of the airline was to provide travelers with low cost travel opportunities with the highest quality. The Company’s first flight took off from London to New York on June 22, 1984. Subsequently their operations expanded to Miami, Boston, Orlando, Tokyo and Los Angeles (www.virginair.com). The Company’s uses all sorts of marketing techniques to promote its products which are mainly airline tickets and holiday packages. It uses print media, TV advertisements, posters and taxi sides to promote its logo and offers. The Company also offers a frequent flyer program that encourages loyalty in its existing customers, where customers are rewarded with free miles and “special services” such as access to lounges, dedicated phone and the like. Q1A: Marketing Concepts  Marketing is known as the act of communicating a product or service’s value to customers, it is about identifying the customer’s needs and delivering what they want at a price that they are willing to pay. Effective marketing involves examining business; its capabilities and limitations, and aligning that with the needs of the customer. Some people associate marketing with just advertising, however, advertising is just one of the four key aspects of marketing, the other aspects are; product, pricing, placement. Product design is also a key part of marketing, since the ‘usage’ of the product is what customers are actually interested in, if the product does not satisfy the customer’s need then no degree of promotion will help in persuading them to buy the product. The second key aspect of marketing, price is essential since if the price is not affordable, then the customers will not buy the product, regardless of how much they need it, or they may buy the product, but the sales level would be very low. On the other hand, the price should not be too low as well since it gives off a feeling of poor quality, so consumers might be put off with the low price. Placement is also essential, if consumers cannot access the product, then they cannot buy it. And this overrides the definition of marketing, which as mentioned earlier is delivering what the customer needs. . Various ELEMENTS of Virgin’s marketing planning process: The Company’s marketing process can be investigated using the SOSTAC model: Situation Analysis: Virgin Atlantic is currently one of the most popular airlines in the UK, with a fleet of 42 aircrafts, and 34 registered destinations. It made a reported loss of 80.2 Million pounds, and has stopped flying to a number of destinations since the last two years. Objectives: The objective of the Company is to increase the passenger number, fly to profitable destinations and be the number one choice for passengers. Strategy: The Company plans on achieving it’s objectives by engaging in more effective marketing, cutting unnecessary costs and providing better and more unique services. It is important to conduct a market research in order to identify what passengers of today expect in an airline, whether they are concerned with service or price. The requirements of passengers has changed from the last couple of years, where the main concern for individual and business travellers was price alone. Things have changed since then and it is important to realign the company’s strategy according to customer’s needs. Tactics: The Company will seek to sponsor more international events and support more causes so as to spread the brand name and make it more attractive to prospective passengers. Virgin Atlantic will also focus more on business travellers and provide differentiated services for them through enhancing their departure lounges, providing internet access during the flight, offer round the clock service in long flights and making their seats more comfortable. Another market that Virgin Atlantic will focus on is families with children. The Company will provide inflight nanny service that will take care of the kids before, during and after the flight, giving the parents a chance to relax. Action: The Airline has begun enhancing its lounge in London Heathrow and has placed advertisements in business magazines and business news websites. Personalized mails are being sent to a number of selected companies with the option of providing tailor made travel packages. Sky nannies are currently in training and more children friendly material is being installed inside aircrafts. Control: the prime measure of effectiveness of the marketing strategies would eventually be the passenger numbers and the year end profit. It is expected that within four months the number of passengers should increase by at least 5 %, if that is not the case then the strategies will be revised and modified according to the situation. Q1b: Marketing Orientation benefits and costs Marketing Orientation can be defined as an approach that focuses on recognizing and meeting the needs of the consumer, either hidden or stated. Businesses that have a marketing orientation focus most of their resources in satiating their customers’ needs in all facets of their organization. Not all businesses are marketing oriented, some are product oriented; where they focus their resources on producing a quality product, whereas those who are sales oriented, focus their resources in selling their products. Marketing oriented businesses have a number of advantages; They are Customer Centric: Since the businesses focus is customers, they are quick to respond to customer changes, and can provide the desired product or service in minimal time. These businesses also have a thorough understanding of their customers as they spend significant time researching customer needs and identifying what goes with current product or service offerings They have a competitive advantage: Marketing oriented businesses have up to date information about customer needs and trends, therefore they can react more quickly as compared to their competitors and provide the customers with that they need. Customer Value: Adopting a marketing orientation approach enables an organization build customer value, increase customer loyalty and develop repeat customers. When customers realize that a business is targeting its resources towards satisfying their needs, then the customer will reward the business with increased frequency and size of purchases. A larger number of customers mean increased revenue and profitability. As with most things in life, marketing oriented business also have their disadvantages; some of them which are: Constant Change: Businesses with a marketing orientation are often required to change their strategic direction according to the needs of their customers. This change can come at a very high price, as it may involve completely changing a product, or a distribution channel or employees. Organizational Involvement: Marketing oriented organizations require coordinated effort from all the departments. This means disparate functions such as Human Resource, Finance and Distribution all have to be on the same page at all times, this can get difficult for large organizations who have branches all over the world. Research Investment: a great deal of marketing oriented businesses’ resources is spent on research just to understand and predict the needs of the consumers. Small companies do not have the resources required to carry out detailed consumer research and have to hire specialized research companies, this can be very costly. Investment on research can be detrimental to large businesses as well, especially when the results of the research do not provide significant or new information. Q2A: Environmental Influences The macro and micro environment greatly influence marketing decisions, since companies market for customers and customers purchasing habits are in turn influenced by the market environment. We can analyze the effects of the external environment through using PESTLE analysis as follows: Political : The Government supported the airlines efforts to reduce CO2 emission and backed its initiatives of investing in social causes. The Airline has stepped up its security in line with the world wide threat of terrorists and has adopted the no liquids in plane policy Economical : The airline made over 60.9 million pounds profit in 2008 with a yearly turnover of 2,336 million pounds. However it made a loss of 80.2 million in 2012, this shows that the airline is not performing as it was previously, this can be attributed to the global financial crisis that hit after 2008. However the airline has stepped up its efforts to increase passenger numbers. For example,when consumer demand was low due to the global recession in 2008, Virgin Atlantic differentiated its marketing strategy by focusing more on the brand, and developing hope in the minds of its customers, that is why it launched the “Red is back” campaign (Tellis 2009, p. 305). Similarly, when oil prices were increased, the Company had to figure out a way to explain its increased ticket prices to customers, it could do this by advertising its extraordinary inflight services, or offering something more than the other airlines. Social : during recessions, when consumers became price conscious, and other companies focused more on “affordability” and “savings” during their advertisement campaigns. Virgin Atlantic, however did just the opposite, they used emotional advertising to lure customers through promoting “fame” and bring about the “Virginness” in every customer. Virgin Atlantic is known as the challenger brand, it is seen as trendy, hip and “cool”, customer associate themselves with Virgin Atlantic to be part of the trend, therefore when Virgin Atlantic focused it advertisements on fame, consumers automatically associated it with being cool and it brought about a ray of hope, and was different, more encouraging when compared to advertisements of other airlines. It was this “different” feeling that increased Virgin Atlantic’s customer base. Technological: Virgin is adapting state of the art inflight entertainment systems and using the most comfortable seats available, that allow passengers to sleep on their seats. The airline has also hired the world class computer software to speed up its airline booking system. Legal: The airline was engaged in a price fixing allegation with Cathay Pacific on its flights to Hong Kong. The airline is still under investigation Environmental: The Company had been affected by the financial environment in 2008, and it changed its tactics to overcome the situation. However given the increased oil prices, company costs increased and it had to overcome this increased cost through increasing ticket prices in a hidden manner. The Airline can be further analyzed using SWOT analysis : Strengths : The brand is recognized by over 90 % of UK’s population The airline has teamed up with Singapore Airlines, allowing the transfer of core competencies The Airline is known as trendy and challenging. The Airline uses advanced technology to provide excellent services to its customers The owner, Richard Branson is a business mogul Weaknesses Flight delays, according to customer reviews Cut routes resulted in customer dissatisfaction Late presence on the Internet Increased Cost as a result of exceptional service Opportunities: Adaptation of Galileo system, which would speed up the booking process In flight internet connection Additional routes Become more innovative and introduce fun promotional tactics Threats Competition from BA and United Airlines Global recession may change the flying styles of a number of people Q2B: Market Segmentation Virgin Atlantic offers its customers two products; for individuals and corporations. Individual products focus more on services and travel packages (Virgin Atlantic 2012). Their advertising is more friends and family based, portraying a happy group of family and friends enjoying a vacation together. In their marketing campaign they have to focus on advertising services for kids as well as adults and choose and advertisement media that will reach both audiences such as newspaper and television or sponsoring family events. On the other hand, when targeting corporations, Virgin Atlantic changes its marketing strategy to portray itself as business friendly. It offers packages that include staying in hotels that have large conference room and have video conferencing facilities available. Virgin also offers to plan out the itinerary of employees planning to go to more than one destination to attend conferences and seminars. The Company also provides with a frequent flyer program for corporations, it is called Flying Co, which rewards the corporation and its employees for flying frequently. The advertising tactics also differ, for Virgin Atlantic advertises its corporate services in Business Journals and magazines and airs it advertisement on business channels. Marketing to two different consumers involves a lot of strategizing since in this industry, the end product is the same, and the only way they can differentiate the product is by packaging it differently. The same airline and the same flight is used by both consumers at the same time, thereby the standard services are the same, the method by which the airline manages to differentiate its services is by segmenting the aircraft into three classes; Upper Class, Premium Economy and Economy, ( decreasing prices). Therefore, those in the Upper Class receive more services than those in Premium Economy and so on. Q2C: Consumer behaviors Consumer behavior investigates when, why, how and where do consumers make purchases of a certain product or service. Factors that affect consumer behavior for Virgin Atlantic include: Price: after the global financial crisis of 2008, consumers have become more price conscious, hence the airlines pricing strategy will affect consumer demand Service: The services offered by the airline will influence consumer buying decisions, if the services are business oriented, then corporate consumers will be attracted to the airline. Moreover, if the airline service lacks quality then it will loose its customers as the reason why customers choose to pay more than low cost airline fair is because of the quality of service. On the ground services also count specially customer support. Travel Agents: if Virgin Atlantic authorizes more agents to sell its products then the consumer base will increase as tickets and packages will be more accessible to prospective passengers Q2D: Using the Marketing Mix The Company ensures that its marketing strategies are fully integrated into all of its marketing mix elements. It ensures that its products are in line with the marketing message. It offers distinctive services to its customers, it amplifies its status as a “luxury” and “trendy” name by offering its upper class passengers with extravagant complimentary services such as pick and drop and drive thru check in in a limo, in-flight beauty therapy, on-board standup bar, sleep services and a dedicated sleeping area. Thus Virgin Atlantic ensures that passengers are treated the same way as they see on the advertisements. It makes sure that its holiday packages offer fun activities, peace and entertainment, just as advertised. Similarly when the Company advertises itself to corporate customers as a business friendly airline, it makes sure that it does just that. For its corporate customers the airline provides free internet browsing (Disbatino 2001), dedicated airport lounges, personalized customer service and trip planning services. Hence when an organization purchases tickets for its employees, Virgin Atlantic ensure that the organization employees receive the exact same service they were promised, with no compromises. Acting in line with advertising strategies is not an easy task as standards have to be maintained throughout, and it is impossible to know what part of the airline convinced passengers to purchase the ticket; therefore it is important to maintain all the standards promised throughout their advertising campaign. Since the Company advertises itself as trendy and luxurious, it ensures that the prices also reflect the same. It ensures that the prices are not too high to repel customers, but not too low to make customers doubt the marketing message. In order to segment its market, Virgin Atlantic used price differentiation strategies by charging different prices for three classes of seats mentioned previously. Customers who like luxury and can afford high prices are attracted to the Upper Class Cabin, those who also like luxury but have a limited budget are attracted to the Premium Economy cabin where they receive a different set of luxury services at a lower price, lastly, those passengers who are not looking for luxury and only a pleasant travel experience, are attracted to the Economy Class Cabin where they receive basic friendly services (Virgin Atlantic 2012). Since majority of Virgin Atlantic’s ticket sales come through travel agents, it should ensure that the travel agents also project the same message as Virgin Atlantic does. Hence all its travel agents are well equipped with the knowledge of Virgin Atlantic’s service offerings, its travel packages and its special packages. The agents are encouraged to give a positive and “trendy” feel to the airline, and this is done by placing posters, models and pictures of the airline in a favorable way that compliments the marketing message. Moreover Virgin Atlantic chooses the travel agents carefully to ensure that the location, customer base and work environment of the travel agent are in line with what the Company stands for. Along with the brand name, Virgin Atlantic also ensures that its employees, particularly its stewards and stewardesses also exude the air of “luxury” and “trendy”. It trains employees at all levels to be well presented, confident and most importantly friendly. Since Virgin Atlantic’s 25th birthday celebration, it brought back the color red into its corporate identity, and now associated the color red with the Airline. Airline staff, on the ground and in the air wears some form of red, and they are known for their “redness”. The Company carefully selects and trains employees so that they correctly represent the airline to passengers. The color red has become part of Virgin Atlantic’s corporate identity, as it has for the entire Virgin group. The color is being used everywhere from the airlines offices to its cabin crew uniform to its frequent flyer cards. Recently the airline has also launched its own red lipstick to compliments its Upper Class cabins. Hence it seems that in the long term, the Company wants to associate itself with the color red, in the minds of its passengers. Q4C: International VS Local Marketing Marketing strategies differ when marketing to local and international audiences. Comparatively, marketing to local audiences is easier since the marketer knows and understands the culture of the local market; the marketer knows what is trending and what attracts the local audience. And the opposite is true for the international market. It is no different for Virgin Atlantic, for its domestic market, i.e. the UK market, the company emphasizes on local values and cultures. For example when it advertises its domestic routes it emphasizes the popular elements of each of the routes that only those living in the UK would understand. It also designs special packages for its local passengers, which make it stand out from other alternative forms of transport available such as other domestic airlines, trains and buses. Modes of marketing are also different; the Company has a number of choices, from advertising in the tube, to universities to sides of taxis. The Company has more knowledge of the local market and can control to some extent the impact of their advertisements. On an international level, Virgin Atlantic primarily focuses on building its brand and exemplifying its status as a “luxurious” and “trendy” company. It is impossible to cater a marketing strategy to the whole world, hence a tactful strategy would be to portray a general picture that has no cultural significance, and one that is based on a universal belief or feeling. International marketing requires a large amount of financial resources, before entering into a country’s market, companies have to know the laws and regulations of that country, they have to know about the culture, consumers tastes and their preferences.Advertising for an international audience can be very tricky as companies have to ensure they do not upset certain cultures and maintain a positive image universally. Virgin Atlantic has successfully entered into the international market by projecting a positive image of itself and not offending any consumer groups (Brand Image 2012). A few mistakes were made and some advertisement campaigns did offend a group of consumers, however the owner of Virgin Atlantic, Richard Branson, was quick to come forward an apologize for the mistake. Conclusion Virgin Atlantic has pulled a number of marketing stunts and has engaged in marketing strategies that left other companies perplexed. The success of the marketing strategies adopted by Virgin Atlantic is reflected on the Company’s financial documents. What we can learn from the Company’s marketing strategies is that it is important to think out of the box, to think logically, and not to follow market trends blindly. It is differentiation that would put the Company apart from its competitors. Consumers are always looking for something new, something that will intrigue and fascinate them, hence Companies should focus on just that; how to jog the interest of its customers. References 1. Disabatino J, 2001Virgin Airways Set to Fly the Wired Skies, Computer World Retrieved January 13, 2013 from http://www.pcworld.com/article/45565/article.html, 2. Oyama, D. 2001, ‘Virgin Atlantic Plans to Reduce Capacity, Cut 1,200 Positions’. The Wall Street Journal, Vol. 14 No. 3 pp 245-255. 3. G. J.Tellis& K Tellis 2009, ‘A Critical Review and Integration of Research on Advertising in a Recession’, Journal of Advertising Research, Vol. 49. No. 3, pp 304–327. 4. Brodovcy, A. 2012, ‘Travel Start: Flash Mob on Virgin Atlantic. . Retrieved January 13, 2013 from: http://www.travelstart.com/street/flash-mob-on-virgin-atlantic-flight/. 5. Parsons, R. 2012 Marketing Week: Virgin Atlantic Offers Alternative to Bland and Beige. Retrieved January 13, 2013 from::http://www.marketingweek.co.uk/news/virgin-atlantic-offers-alternative-to-bland-and-beige/4005233.article. 6. Travel Pulse 2013 Travel Pulse: Virgin Atlantic Launches Ad Campaign Focused on Employees. Retrieved January 13, 2013 from: http://www.travelpulse.com/virgin-atlantic-launches-ad-campaign-focused-on-employees.html. 7. Virgin Atlantic 2012, Virgin Atlantic Student Information Pack. Retrieved January 13, 2013 from: http://www.virgin atlantic.com/en/gb/allaboutus/ourstory/forstudents.jsp#marketing. 8. Brownswell 2010, Brand Republic: Virgin Atlantic Shifts to Global Marketing Focus. Retrieved January 13, 2013 from:http://www.brandrepublic.com/news/990362/virgin-atlantic-shifts-global-marketing-focus/. 9. PR News Wire 2001.Virgin Atlantic Implements Galileo International, Retrieved January 13, 2013 from: http://www.prnewswire.co.uk/news-releases/virgin-atlantic-implements-galileo-internationals-inside-availability-155528545.html. 10. Virgin Holidays 2013, The Virgin Holidays Sale. Retrieved January 13, 2013 from: http://www.virginholidays.co.uk/default.aspx . Read More