Strategic Marketing at Qantas - Case Study Example

Strategic Marketing: Case Study Scenario on Qantas Student’s Name: Institutional Affiliation: University: Strategic Marketing: Case Study Scenario on Qantas Executive Summary Situational analysis is one of the methods used to analyze the environment a firm is operating in to find out whether the strategies used by the firm in its operations are working. This paper attempts to analyze the environment in which Qantas Airlines Limited operates and to understand its marketing at all levels of the company. Qantas is the most recognizable airline brand in the Australian airline market and in other parts of the world. It provides domestic flights within Australia and international flights to major cities across the world. It has its headquarters located at its main hub in Sydney airport but also has a strong presence in most of the local airports within Australia. Its international presence is felt through the network of agencies it works with through out the world who do its marketing abroad.. The main sources of information are airline journals and websites on air travel. The information is used to carry out a situational analysis using SWOT analysis on its marketing strategies. The main findings are that Qantas has a strong brand, market share and market accessibility which are all good marketing, Its main marketing weaknesses lie in its low brand affinity, ageing fleet and poor marketing communication. The opportunities lie in new expansions to new markets and strengthening ties and forming world wide ventures. The main threat to the way Qantas does its marketing is in existing completion, decreased demand for travel due to tight economy and fluctuating fuel prices. The conclusion is that the airline needs to improve its brand and customer experience in order to attract new customers. This can be done through extensive marketing campaigns, rebranding and increasing the marketing budget. Situational analysis To identify the marketing factors that affect the success of Qantas, a SWOT analysis is used to analyze the environment in which the airline operates in based on strengths, weakness, opportunities and threats. Strengths Qantas currently has several strengths in its marketing strategy and these will hold the company in good stead for years to come. The first competitive marketing advantage of Qantas is that it has a strong brand both locally and globally. The business has invested heavily in the development of the brand. The services offered by the company are of high quality, which has earned the company an award for best airline in 2008 (world airlines awards, 2008). The company is the second oldest airline operator in the world. The company has created the right brand image therefore its brand is globally respected. There has been a strong perception of the brand within the local market due to its excellent services, reward programs, elite corporate programs and experience of its workforce who run well-established structures. . The company has also successfully positioned itself alongside the iconic Australian Wallabies and Socceroo sporting teams. Theses strategies have become valuable marketing tools, and promote the airline to its customers. The other strength that Qantas enjoys is that it is the largest domestic carrier in Australia with a market share of 65 percent (Deutsche Presse- Agentur, 2011). Locally Qantas cannot be compared with is competitors in terms of market share. The numbers suggest it is the preferred airline of choice by Australians. The large market share acts as a marketing advantage for the firm as it can gain more customers from its publicity. The company’s sharp brand attracts new customers to the airline by influencing the buying decision (Chen, 1996). The third advantage Qantas enjoys over its competitors is that it is accessible by consumers worldwide through the partnership program ‘one world’. This partnership program is the largest global network of Airline operations. It has acquired the data and knows how to optimize its route network to be the most profitable. Purchasing tickets is easy through its agency network, web or from its telephone operators. The airline has competed against other domestic airlines with relative ease for a number of years. It is only until now that Virgin Australia are making a big play for more market share and Qantas will need to step up its marketing in order to remain the dominant player in the Australian Airline industry. Weaknesses The airline also has several weaknesses these are detrimental to the company compared with its competitors. The first weakness about Qantas is that its brand affinity is lower than it should be. The company has not given enough information to the customer to make them feel connected to the brand with an emotion and thus creating strong brand affinity. Brand affinity is measured by how customers react to the brand in terms of pure emotional decisions to fly Qantas instead of other competitors. The loss in brand affinity has led to loss of repeat customers and hence reduction in profitability (Sicco, 2005). The other weakness is that it has been in the market for a long time therefore its aircraft are getting aged but are still safe to fly in. The problem with the aircraft is they are less fuel-efficient and lack the luxury amenities of new aircraft. The planes were manufactured using older designs and technology. This makes it difficult to promote the services offered through the aircrafts as they offer less comfort yet ticket prices remain relatively high (Moller, 1998). Even though the planes may be older, Qantas cannot afford to drop off in customer service. In fact an elite customer service program needs to be implemented to make up for other deficiencies. Another weakness is how poorly Qantas communicates to its target audience. The marketing strategies of the airline are not very clear. The airline targets customers who need comfort. This can be seen from the airport where the terminal for Qantas is comfortable. Other companies like Virgin are targeting who are ready to exchange comfort for saving money. Opportunities There are various opportunities in the market which the airline can exploit. The first opportunity exists in increasing its national and international market. The airline can increase its customer share by targeting more lucrative travel markets locally and internationally. There are new and emerging markets which the airline can target. The markets include traveling to South America and also increasing its current presence in Asia. This can boost the brand in a major marketing ploy. Another opportunity which exists in the market is Qantas trying to strengthen the partnership it has with other airlines. The company can boost its market presence by partnering with more worldwide partners and opening up even more routes. This will increase the market presence of the airline and increase its worldwide ticket sales. An extra opportunity which exist and the airline can pursue is getting new model aircraft that are more fuel efficient. Aircrafts like Boeing 787 dream liners are lighter and can travel 20 percent more efficient than those made of aluminum (Boeing, 2011). The company can therefore save on fuel cost. The company will have the ability to offer cheaper fares on these planes and perhaps structure these planes on routes that have fewer margins in them, whilst balancing the older aircraft on the higher margin routes. This is more of an operational issue, however it does affect marketing because specific campaigns could be established for certain routes and services. Threats There are various threats that exist in the airline market place. The first threat is grlobal decrease in air travel. The slow down in the world economy has led to a decrease in demand for air travel through out the world (UFTAA 2007). This means the promotional money used by the airline may be going to waste. The gas and fuel prices have been fluctuating regularly within the market since 2006 (UFAA, 2007). This has led to poor planning for fuel in the industry. Some of the promotion strategies for the airline are based on the price of fuel. An example is when the airline is able discount fares on routes operated by fuel efficient jets. Promotional strategies are difficult to plan due to the changes in prices. This means that other promotional strategies have to be used apart from those based on prices. Online last minute seating has been a huge driver of revenue for Qantas and has been another alternative marketing tool that buffers the rise and fall of oil prices. Another huge threat that exists is the threat of competition. In any market, there is always competition. Virgin entered the market several years ago as a low cost carrier. Qantas introduced low cost carrier, JetStar, to counter this flank attack made by Virgin. Qantas felt it could not beat the low priced air tickets with its current service but became flexible enough to recognize the threat and came up with a very competitive solution. Problem Identification and Discussion The major issue that is affecting Qantas and the whole industry at the moment is brand affinity. People will look for the company offering the lowest prices in the market even if the competitor is offering better services (Gountas, Mavondo, Walker & Mullins, 2010). Qantas needs look at how the schedule, customer service, comfort and price affect decision-making. In air travel, the reputation of the brand is also very critical and should be protected by the marketing team at all times. The airline needs to develop a marketing plan for increasing brand affinity to the consumer. As consumer spending decreases, value for money is becoming more important. A strong marketing campaign should reflect value and quality and high customer service in its strategy if it is to remain dominant in the Australian domestic airline industry. The other issue is that different consumer group’s travel at different times of the year. Business people travel consistently throughout the year. Families travel during school holidays or and generally in the summer when the weather is better. The airline should identify all these groups and target them with a specific strategy. Virgin is already attempting to gain market share in the corporate sector (Deutsche Presse- Agentur, 2011). As stated earlier, price and value are becoming the main factor when consumers are looking to fly and these issues should heavily influence the airline’s marketing strategy (Tenaja, 2002). If Qantas fares are on the higher end of price point, then the company’s customer service needs to be an industry leader otherwise this is detrimental to the brand and price point is no longer justifiable to the average consumer. The brand is a great marketing tool for the company in attracting all this travelers. The demographic factors are also important when looking for more competitive destinations to operate from (Clarke, 2005). This would include cities the size of Sydney or Hong Kong. Domestically, the airline should serve the markets where the population can reach the airport in reasonable time. It should also serve the international markets where it has the greatest number of travelers to reduce costs (Albers, 2008). Avalon Airport in Melbourne’s southwest for example - the lower cost airlines operate out of Avalon to cater to the fast growing population of Victoria’s southwest. This population is a lower socio economic population and low cost airlines flying out of Avalon are a good fit. Does Qantas need a presence at Avalon? The company already does with its low cost subsidiary in JetStar. The other issue affecting the company is facing is slowing in the market growth rate. The loss in affinity of the brand is causing the company to lose its international customers to other airlines (Mayer, 2007). The airline should engage in an extensive marketing strategy to improve its brand to compete effectively with other airlines. Qantas has good marketing which market the services offered by the company. The problem is that they do not provide enough information and customer service to encourage brand affinity. This is what the airline should concentrate on. The Airline industry is facing a huge problem in capacity surplus (UFTAA 2011). The excess capacity is due to airline customer retention in decline. Excess capacity pushes up costs, pushes prices up and profits down (Solomon, Cornell & Nizan, 2009). The company needs to become creative in marketing its brand as well as increase its customers. Qantas being the only true Australian Airline carrier needs to establish a new campaign where it positions itself as 100% Australian. Perhaps this would encourage some brand affinity. When consumers think Australia, they should immediately think Qantas. Also, last minute seating to fill the plane has been quite successful and maximized revenue per each plane departing (Skytrax 2009). The company should also improve its customer services. Virgin is a leader in this field currently (Virgin 2011). The services offered to clients should be consistently of high quality, especially if Qantas fares are usually more expensive than Virgin Australia fares. The other issue affecting the airline is the high cost capital barriers in the market. The airline has retired some of its fleet and postponed delivery of new aircraft (Deutsche Presse- Agentur, 2011). The brand of the airline is low and Qantas share price is extremely low which has stopped any new capital flowing back to the company. Lately, the Qantas brand has copped a lot of criticism with a lot of negative publicity that has circulated. Employees not being paid well, and mechanical problems with the new Qantas engines are just a few negative stories tarnishing the Qantas brand. The marketing team needs to get on the front foot and control such issues as best they can. Qantas’ problem has been that there has been too much focus on cost cutting rather than rebuilding its brand as well as enhancing its customer-focused service. These have led to slightly reduced prices in airfares while retaining profitability by cutting some routes as well small luxuries. According to Frowley the airline has been trying to differentiate its product rather than the company’s brand (Frowley2011). This is a poor marketing strategy for the firm. Qantas is facing major issues in strategic marketing and customer relations. Customer service should also be enhanced to attract and retain customers. The company should employ existing as well as develop new methods of servicing its customers. The competence of the organization as well as individuals in providing customer service should be applied. One of the methods of achieving this is through direct marketing where the market interacts direct with the client. The company should analyze the market before implementing their strategies. This requires that the company analyses fully the activities of its competitors. By learning from the competitors moves the company can move in second. The company will take the advantage of being a second mover to be successful. This includes analyzing the cost and moving in through cost efficiency and differentiation. The entry should not be immediate not to destabilize the market but the company should take time to analyze the market. Maximum implementation capability and support strategy is required to be innovative and operate in the different markets. This will improve the performance of the company. Recommendation The first thing for Qantas to do is to refocus its energy providing superior quality services. This requires the company to adopt superior quality and image management. This company should put measures for quality control, brand reputation and market sensing by analyzing the market for customer needs. Qantas should also concentrate on offering superior service. The customers who travel on Qantas are those who are after high quality service. This requires the company to embark on relationship building with the customers. This can be achieved through analyzing the market for customer needs, customer linking and superior customer service. The company should engage in product development. Rapid innovation is required to maintain a competitive position. The company can do this through researching customer needs and adding new products and through service development. The company should also offer value priced service. There are customers who pay are price sensitive and will go for the company offering low prices. The company can achieve these through improving on its internal efficiencies. This can be achieved through cost installing cost control systems. 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