AirAsia, an airline company that has experience the “from rugs to riches” storyline, is one of the leading airlines in Asia. It was established with the aim of saving it form the heavy debt that it was incurring at the time, as well as, as an idea that was new at least to the country; the low cost flying concept. Established in 1996, the airline has used strategical marketing strategies and innovative methods in order to survive and establish itself as a leading airline in the industry.
This report aims to analysis the marketing strategies that the airline adopted into its marketing management practises, and focuses on the 7 Ps; price, place, product, promotion, people, process, physical evidence.
Also, evaluation will be made on the methods that the company used to identify and market its products to its target market, and illustrating the ways in which they managed to implement this marketing mix to make their marketing management practises and strategies both effective and efficient, to achieve the company goals set.
1.0 Marketing practices adopted by AirAsia:
In AirAsias’ marketing mix, they incorporated the 7 Ps market mix strategy that helped them advertise their products. Amongst the 7 Ps marketing practises, the company capitalized in each in the following ways:
Billions of people around the world move from one location to another for various reasons every single day. This will continue to happen until the end of time. If you were to start a business, Internet or otherwise – one way to increase your chances of success is to start within an industry with lots of Prospects, find places they’re not being served properly, and then offer your products/services to them.
People need to move from one place to another for various reasons that include business trips, holidays, studies amongst other ventures depending on the where the venue is, their budget, intentions, necessity amongst other reasons and circumstances. Therefore AirAsia capitalized in these needs but focused on low fares as to include those who were on a lower budget than what was available in Malaysia at the time. With low budget fares, no frills amongst other offers that the airline made, it was possible for a large crowd to travel via airlines. The company also took into consideration to the fact that airline industry in general had repeat customers thus they knew that in their marketing strategies they would have to come-up with ways to make people keeping return, let alone coming. Therefore, under the marketing conditions that created, the airline targeted repeat customers either through choice thus attracting them from other airlines or even better, through a lack of choice, meaning the ones that could not afford to fly before due to high flight ticket costs.
Asia is the world’s largest continent thus has the largest population. With the billions of people here, an d the fact that they travel for their own reasons provides a great market surface that AirAsia can built it business on. Therefore, taking into account just a small percentage of this market is enough to make the airline very profitable both in the short and long term, for a long time to come.
The low-cost carrier model keeps costs down to the bare minimum thus attracting a larger customer based to opt for their services and products. This is one of the keys to AirAsias’ success and a major concept of their marketing strategy. The airline keep costs low in many forms that in the end made their offering very attractive.
When it comes to the business process, the company modelled it to provide a marketable theme that they could capitalize on. As is known, “Most flights are about 3 – 3.5 hours max. This enables AirAsia to use the same set of crew to make a return flight from the arriving destination back to the departing destination, carrying another load of passengers in the process – all without any further increase in the cost of the crew.” (SenZe, 2004)
With this process, the airline also manages to save on its own cost which enables it to make the flight fares cheaper for its customers which is a main concept for their marketing campaigns. Since there is also no cost for accommodating the crew at the arriving destination since they’re back home on the same day, thus only work for approximately 8 – 10 hour period. This enables the airline to cut cost that they would otherwise incur in longer flights like having to pay for the crews’ sustenance allowances while they take residence in foreign countries. As stated, “With the tremendous cost savings, AirAsia plans its destinations very carefully, flying only to places that can be reached in 3-3.5 hours. However, if necessary, flights of 4 hours’ durations or longer can be considered if it makes business sense to have them.” (SenZe, 2004)
As an airline, AirAsia mainly concentrates their products in ticket sales for the flights that they offer. Here, the marketing strategies practised here are such as
No frills, low cost as well as ticketless flights that they advertise. Also, to promote the increase n sales for their products, the company has established several channels through which one can book and buy tickets. One of these channels are the traditional purchasing through the airport counter and regional offices that they have set-up country wide, and also in other countries that they transport their customers to. However, the airline has also taken other steps in order to increase the sales of its products through marketing these channels.
Including a payment channel on their official website, they were able to use to website to advertise thus market other products that they were offering. This were done through pop ups and other media supported by their website. Also, innovation was used to market their products and prompt people to buy them. With their pioneering to establish ability to book through Sms/mobile and other wireless devices, they were about to create an interest that captured the attention of people thus inflicting a mouth-of-mouth marketing and advertising practises.
With the introduction of their low fare flights, this made it possible for those could not initially afford to fly, to be able to. With this “promotional” flights concept, everybody could now fly; even locally.
This also enabled customers who had no choice to take the more costly flights to now have a choice thus millions of flyers started to switch to low-cost carriers because of the cost savings the company offers. This also enabled individuals as well as company save money which is the idea that the airline marketed, especially to the frequent flyers.
2.0 Integration of marketing mix
As can be seen through the properties under each category of the 7 Ps that AirAsia has incorporated in their quest to their marketing management and strategical moves, each marketing move has more than one category. This is dues to the way the marketing team has integrated each category with the other, to make a blend between them that forms an effective if not perfect marking mix that the airline requires in order to capture the customers that they have now, as well as the targeted ones.
Starting with the physical evidence, it is states that, “Malaysia Airlines is not part of an alliance, but 68.5% of its connecting passengers surveyed were transferring to other code-share flights. Only 6.6% of Malaysia Airlines passengers questioned connected with Air Asia at Kuala Lumpur. Very few of Air Asia passengers surveyed were transferring: four were connecting to a Malaysia Airlines long haul service, while the remaining three were transferring to Air Asia flights. As the market begins to mature and Air Asia develops additional hubs, there will be a greater opportunity for passengers to transfer to other flights. The perception is evident in the Asian market that passengers can use a combination of carrier types to reach their destinations, and that interlining via a low cost carrier network is certainly a workable option.” (John F. O’Connell, George Williams)
This goes to show how marketable AirAsia and their low cost concept is, as well as the competitive advantage gained through their strategies that have been established through the other marketing mix categories that the airline has adopted.
It is also evident that people travel a lot and Asia has a large population of flyers in general. Also as know about Asian countries, most are still grouped under the “3rd world” and “developing countries” category meaning that they is a considerably large population o middle and lower class people as compared to developed countries thus this hard evidence shows that in AirAsia’ marketing practises, this category of analysis enables them to research and identify their target market thus gear their marketing campaigns towards them.
The price aspect in the main business process of the airline, and this has been heavily marketed as it is the main reason as to why AirAsia was established in the first place. The transferring of flights from one airline to AirAsia, as well as the retaining of connecting flight with the same airline (AirAsia) is mainly caused by the budgeting marketing strategy and practise that the company has adopted.
This in turn, facilitates another aspect of the 7 Ps which is product. Here by making the product cheap and affordable, this increases the potential for customers, both who are already in the market and those willing to enter to purchase their product. As stated about customer behaviour in general, it is said that, “For most customers price by itself is not the key factor when a purchase is being considered. This is because most customers compare the entire marketing offering and do not simply make their purchase decision based solely on a product’s price. In essence when a purchase situation arises price is one of several variables customers evaluate when they mentally assess a product’s overall value…..For the buyer value of a product will change as perceived price paid and/or perceived benefits received change” (knowthis, 1998)
This statement illustrates just how the product is an important aspect to consider when pricing it. As can be seen, AirAsia took a product/ service which is normally considered as an expensive and plush experience, and made it affordable thus increasing the product value of their services.
Through promotions offered on their services, the airline managed to was able to further install the concept of their business process into the heads of their target customers. As they say, “you cannot miss what you have never had” (anonymous). Here, the marketing aim of the airline was attract those who could still not afford it, with the aim of further increasing their sales or their products, as well as promote sales and even physical evidence that people do travel and desire a higher standard of transportation. This aspect of promotion blended all the marketing practises together into one aspect thus creating a very effective marketing mix that helped in the growth of both the company and its reputation of providing low cost fares. Also, the No Frills, low costs itself as well as other promotional factors such as ticketless booking were marketing strategies that helped to increase their sales, competitive edge and also their reputation to deliver.
3.0 Target segment identified& strategy plan
The founder Dato’ Sri Anthony Francis Fernandes, mission of establishing this airline was to target the flyers that take the economy class flights as well as those who could not afford even this class, and make it affordable. He figured out that in order to create, establish and increase his market share, was through aiming at the area of the industry where there was the most costumer based that already existed, as well as one that had the biggest potential at tapping into the audience that were willing to enjoy the experience. And the economy class was the best choice; a perfect fit. With this in mind, he identified this niche as his target market and geared his strategies to cater for this section.
In identifying its target market niche, AirAsia started with the local market and structured its 7 Ps marketing practises to cater for people whose income ranged from the middle income or lower.in addition, the airline also targeted the economy class flyers of other airlines through offering a cheaper price tag for relatively the same product.Therefore it can be suggested that aim was not only to make it affordable, but also cheaper to incorporate those economy flyers from other airlines. Also, in the target customer identification process, the airline also targets the age group who mostly young adults and above, because they have the spending power and potential to travel more often as compare to other age groups.
Therefore as can be seen, the airline was built under a low cost fare concept, which was imprinted into their business process and marketing plans in order to create a new market audience and attract a good market of those who were already being competed for in the industry. Through implementing the 7Ps marketing practises, the company was able implement its plans, policies and market its products effectively, for it to be able to turn from a company that was deeply buried in debt to one that turned out to be really profitable and has a good marketing positioning in the industry.
Also as can be witnessed through other articles, the company adopted a business model that was already being carried out in other airline companies in the world in order to survive and thrive.
Passengers’ perceptions of low cost airlines and full service carriers; A case study involving Ryanair, Aer Lingus, Air Asia and Malaysia Airlines, By John F. O’Connell, &George Williams
(Viewed on 20th November 2010)
KnowThis.com; Price vs. Value, 1998
(Viewed on 20th November 2010)