British Airways and Virgin Atlantic - Essay Example

British Airways and Virgin Atlantic Part I Background Industry Definition & Scope 2. British Airways 3. Virgin Atlantic Part II Approaches to Marketing 1. Product (Service) 2. Pricing 3. Price 4. Promotion Part III Market Segmentation of Virgin Atlantic 1. Segmentation Strategy 2. Positioning Strategy Part IV Advertising Agency and Its Mission Conclusion Part I Background Airline Industry Airline industry is one of the main industries in the world. The history of development of various corporations, as a rule, testifies, that the level of profit is a result of quality service. The main objective of airline industry is to maintain the level of service quality and develop strategies to improve their services. Airline corporations are dynamically evolving entities operating within a dynamically evolving environment. The dominant economic features of the industry include acquisitions and consolidations strategy. Airline industry is highly influenced by the political and legislative conditions of countries, including the European Union. Ownership of many airline companies is shifting from government to private hands British Airways British Airways (BA) is a leader in airline industry which carries more than 27 millions passengers a year. This company obtains strong market position maintaining high standards of performance. It becomes possible because of improvements and innovation strategy provided by the company recent years. BA delivers scheduled passenger services which accounted for approximately 83% of all its operations. It is flying to over 550 destinations, and a fleet of 340 aircraft. "Its mainline fleet also currently includes 7 Concordes, 71 Boeing 747s, 38 Boeing 777s, 21 Boeing 767s, 48 Boeing 757s, 83 Airbus A318/319/320s in service or on order, and 52 Boeing 737s" (British Airways: Short description 2001). As airline industry becomes mature, BA has focused on market share and how it can be gained. Contracting out of services including aircraft handling, ticketing, baggage handling to third parties are the main difference between BA and other companies. The company employs about 65,157 people. The company offers four classes of service: World Traveller (Economy Class) and World Traveller Plus (Premium Economy), Club World (Business Class) and FIRST (First Class) (British Airways: Short description 2001). Virgin Atlantic Virgin Atlantic is also a UK-based company operating on the market since 1982. It attracts its customers by exceptional service and standards. It is the second largest UK carrier and the third largest European airline. The marketing strategy applied by Virgin Atlantic is essentially a matching process between the needs and expectations of customers, and the organization's ability and capacity to satisfy them. For this matching process to take place successfully, Virgin Atlantic understands who is the customer and what value is required, and how best to deliver this value on a sustainable basis in line with the organization's overall corporate objectives. The company proposes three classes of service: Economy, Premium Economy and Upper Class. It invested in development of customer service in order to optimize performance and deliver customer satisfaction. (Virgin Atlantic. Students Information Pack. 2006) Approaches to Marketing Both companies are dynamically evolving entities operating within a dynamically evolving environment influenced by political changes and economic fluctuations: fuel prices, trade union policies and terrorist attacks. For BA and Virgin Atlantic marketing depends upon effective marketing system. Both companies employ different approaches to marketing and a business philosophy to sustain strong position of the market and compete with each other (Johnson, Scholes, 1998). Marketing Mix Product (Service) BA business philosophy includes reward strategies and insensitive schemes for regular passengers with free flights and services. The main target group of BA under this program is Business Class and First Class passengers. In contrast, Virgin Atlantic does not widely use reward strategies similar to BA, but proposes higher class standards for all passengers. For instance, "Premium Economy provides a separate check-in, a larger seat with more leg room than Economy, and a welcome glass of champagne. Virgin Atlantic terms its business-class fare offering "Upper Class"" (Virgin Atlantic, Wikipedia, 2006). Also, it has similar Flying club aimed to provide repeat customers with additional services and bonus programs. High standards of service quality is the main business philosophy of both carriers. In BA the total-cost approach is not limited to minimizing costs. Performance, or customer service, also is considered. One objective is to maximize service provided to a foreign market area. This is accomplished by minimizing the time involved in order processing and delivery. In contract, in Virgin Atlantic service played a key role in the physical distribution strategy as it adapted to the changing environment. Virgin Atlantic pays special attention to innovations and technological improvements, its logistics focus from price to service, real-time rather than historical information as the basis for logistics decision making (Evin, 2001). Price Pricing decisions influence both companies forcing them to find new ways to reduce costs per fly. Both companies use fflexible cost-plus pricing, to ensure that prices are competitive in the context of the particular market environment. They realize that the rigid cost-plus approach can result in severe price escalation, with the unintended result that exports are priced at levels above what customers can pay. For instance, BA' range of prices between 60 pond from London to Europe and up to 500 ponds by traveling to Far Esat. Virgin proposes the same price escalation. Flexible cost-plus sometimes incorporates the estimated future cost method to establish the future cost for all component elements. For example, Virgin was the first airline company which followed a decrease in oil prices and cut the fee from 30 to 25 per sector. "A spokesperson for the firm commented that it was "only fair" to pass on the savings to its customers" (Virgin Atlantic, Cheap Flight Co.UK, 2006). Because the market price on oil is volatile and varies with supply and demand, airlines use the estimated future cost method to ensure that the selling price they set enables them to cover their costs. Seasoning and weekend prices are used by both carriers. Distribution (Place) Decisions Virgin Atlantic delivers growth in fleet, routs, traffic, revenues and profitability. The high level of responsibility is implemented in all spheres of service activity. Innovation in production technologies and computerized system of services is the main advantage of Virgin Atlantic obtain a strong market position because the technological advances maximizes security of customers and fasten the process of informational interchange. Intranets allow to react faster delivering customer satisfaction. Virgin Atlantic has to spend its own resources in order to meet the requirements focusing on technological efforts, security and internet support. "IT professionals constantly work to uncover ways to provide users with access to the information they need, giving them the flexibility and the ease to gather their own reports, analyze trends, and ultimately deliver better service to the customer" (Virgin Atlantic Airways: Leveraging Information to Keep Frequent Flyers, 1999). BA follows the same strategy improving internet presence and logistics. In selecting from among the alternatives, the total-cost approach is applied by BA (Clark, 2006). This means that an attempt is made to optimize the cost-profit relationship of the various alternatives after considering the total cost of distribution, rather than looking separately at the costs of individual activities. Distribution strategy is on a one-to-one basis.All customers will feel they are a valued friend of BA, and that all employees care about customer satisfaction. The difference is that Virgin Atlantic uses travel agencies as the primary distribution channels of seats while BA prefers more traditional channels (McDonald, Christopher, 2003). Promotion Virgin Atlantic uses brand image and promotion techniques to attract potential customers. Publicity and active international activity are the main tools applied by Virgin Atlantics to inform potential passengers and stakeholders about recent changes and future trends. They use on-line type of promotion, outdoor posters and taxi sides. Charity and sponsorship are also employed by Virgin Atlantic to increase brand awareness and brand recognition. In contrast, BA follows traditional promotion tools using TV and press as the main advertising media. Direct Marketing via the media, call centres or the internet gives BA new opportunities. Broadcast advertisements, brochures, leaflets, presentations and face-to-face and telephone communications are the main techniques used by BA (Walking Tall, 2003). BA uses systemic and repeat marketing to achieve company's objectives. Given the increasing turbulence and complexity of the market place, and the rapid pace and impact of technological change, the need for a disciplined, systematic approach to the market has never been greater. Part III Market Segmentation of Virgin Atlantic Segmentation Strategy Market segmentation involves the key drivers that distinguish one group of customers from another. The key drivers of consumer market segmentation are: socio-economic: (lifestyle, income), attitudinal and transactional. Virgin Atlantic potential customers are consumers with A, B, C1 socio-economic background. Most of the customers cannot afford First class and premium airlines, where the prices are too high for them, but able pay for quality services proposed by Virgin Atlantic. Target market is divided into two broad categories: foreign and domestic customers. Psychographics segmentation includes values and attitudes of potential passengers. The main attitudes for Virgin Atlantic are truly high standards of services and excellent support services at comparatively low price (Virgin Atlantic, Cheap Flight Co.UK, 2006). Positioning Positioning strategy employed by Virgin Atlantic is aimed to create a strong brand in mind of consumers. It enhances the public's perception of Virgin Atlantic, create goodwill, or announce a major change. It is based on emotional and aesthetic appeal and adds an impact on consumers' imagination. The company's logo appeals to customers persuading them to try Virgin services. Effective positioning differentiates each variety from the others. Also, Virgin Atlantic take into account a frequently used benefit positioning strategy which exploits a service reliability and benefit positions. Virgin Atlantic is known for excellent service and safety. Richard Branson's philosophy of "innovation, value for money and the simple idea that flying should be actually fun" (Virgin Atlantic Airways: Leveraging Information to Keep Frequent Flyers, 1999) appealing to consumers creating unique image of a fly. Part IV Advertising Agency and Its Mission Virgin Atlantic should select full-service agency in order to create comprehensive and creative advertising and promotion strategy. The main criterion should be creativity of the agency and ability to find new extravagant solutions in advertising. It should be well aware of national market and have specializing units in direct marketing, marketing services, public relations, and research. Also, the agency should be aware of the trends on airline market and understand positioning and company objectives of Virgin Atlantic. The mission of the agency will be to bring novelty and new vision of the Virgin services to customers. It should impress potential customers appealing to their emotions and rational choice. Also, it is important that it covers all range of advertising services in order to create a single message during this advertising campaign. To compete on the market with BA, Virgin Atlantic requires heavy advertising support to remind consumers about the service and benefits. The mission of full-service advertising agency will be to enhance the public's perception of Virgin Atlantic, create goodwill and announce a major change through different media. The best remuneration strategy for adverting agency can be free flies and free services for the staff during a year. This strategy can influence company's image and help to create a core of loyal supporters. Conclusion The information mentioned above and analysis of airlines carriers depicts that successful marketing is closely connected with business philosophy of the company and information it obtains. Companies without effective marketing planning systems tend to suffer more serious commercial and organizational consequences when environmental and competitive conditions become hostile and unstable. References 1. British Airways: Short description 2001. Retrieved from: http://www.gm-unccd.org/FIELD/Private/BA/BAProfile.htm 2. Clark, A. British Airways warns staff of further job cuts. 2006. Retrieved from http://www.britishairways.com/travel/companyinfo/public/en_gbsource=TOP_companyinfo 3. Evin, M. 2001. Virgin Atlantic Takes Control of Its Customer Data. What Works: Volume 12, November. Retrieved from: http://www.tdwi.org/research/display.aspxID=5403 4. Johnson, G., Scholes, K. 1998. Exploring Corporate Strategy. Hemel Hempstead: Prentice Hall. 5. McDonald M., Christopher M. 2003. Marketing: A complete Guide. Palgrave Macmillan. 6. Profile: British Airways. 2006. Retrieved from www.news.bbc.co.uk/1/hi/business/1554140.stm 7. Profits Soar for British Airways. 2001 The News Letter (Belfast, Northern Ireland), February 6. 8. Virgin Atlantic: Wikipedia. 2006. http://en.wikipedia.org/wiki/Virgin_Atlantic 9. Virgin Atlantic. Students Information Pack. 2006. http://www.virgin-atlantic.com/en/gb/allaboutus/ourstory/forstudents.jsp 10. Virgin Atlantic, Cheap Flight Co.UK. 2006. Retrieved from 2006http://news.cheapflights.co.uk/flights/virgin_atlantic/ 11. Walking Tall: British Airways Tourism for Tomorrow Awards. 2003. Geographical, Vol. 75, December, p. 99. Read More