Air Asia Marketing Strategies

CONTENT

PAGES

1.0 INTRODUCTION…………………………………………………………………2 About the product…………………………………………………….………….2 1.1 Company background…………………………….………………….....7 1.2 Business process and operation…………………..………………….9 1.3 Low cost carrier (lcc) business model……………….………………11 1.3.1 Business model……………………………………………...11 1.4 Competitive Advantages …………………………..…………………..12 1.5 Historical Performance………………………………..……………….13 2.0 ANALYTICAL SWOT ANALYSIS……………………………….……………..18 3.0 PRODUCT ANALYSIS…………………………………………….……………21 3.1 The product Life Cycle (PLC)………………………………....………21 4.0 STRATEGIS AND TACTICS………………………………………..………….24 5.0 SEGMENTATION, TARGETING AND POSITIONING ANALYSIS 5.1 Market Segmentation………………………………………..………….26 5.2 Target Market Profile……………………………………………………30 5.3 Positioning………………………………………………………….…….32 6.0 MARKETING STRATEGIES AND EVALUATION OF MARKET PROGRAM ELEMENTS………………………………………………………………………..33 Refferences……………………………………………………………………………………… …………………….36

1.0 INTRODUCTION AND HISTORY a. Introduction of the product

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Name of the company: Air Asia Berhad ABOUT THE PRODUCT Air Asia is a low cost airline based in Kuala Lumpur, Malaysia. It operates scheduled domestic and international flights and is Asia’s largest low fare, no frills 2

airlines. Air Asia pioneered low cost travelling in Asia. It is also the first airline in the region to implement fully ticketless travel and unassigned seats. Its main base is the Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). Its affiliate airlines Thai Air Asia and Indonesia Air Asia fly from Suvarnabhumi Airport, Thailand and Soekarno-Hatta International Airport, Indonesia, respectively. The airlines established in 1993 and started operations on 18 November 1996. It was originally founded by a government-owned conglomerate DRB – Hicom. On December 2, 2001 the heavily – indebted airlines was purchased by the former Time Warner executive Tony Fernandes’s company Tune Air Sdn Bhd for the token sum of one ringgit. Fernandes proceeded to engineer a remarkable turnaround, turning a profit in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US $ 0.29). Air Asia operates with the world’s lowest unit cost of US$0.023/ASK and a passenger breakeven load factor of 52%. It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilization rate of 13 hours a day. Air Asia currently is the main customer of the Airbus A 320. The company has placed an order of 175 units of the same plane to service its routes and at least 50 of these A320 will be operational by 2013. The first unit of the plane arrived on 8 December, 2005.

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Support As a pioneered in low cost air transportation in Asia, Air Asia has several subsidiaries and associate company to support its operation. Subsidiaries Thai Air Asia was established as Subsidiaries of Air Asia Berhad on 8 December 2003 as joint venture with Shin Corporation. Flight operation was commenced on 13 January 2004 from its base in Don Mueang International Airport. Since 25 September 2006, the airline is based at the new Suvarnabhumi Airport. The other subsidiary is Indonesia Air Asia. This airline is based in SoekarnoHatta International Airport. Air Asia acquired the then defunct Awair in 2004 with a 49% stake in the airline. Awair commenced services on behalf of Air Asia in December 2004; full rebranding to Indonesia Air Asia was completed on 1 December 2005. The airline is based in Soekarno-Hatta International Airport. Associated companies They also have associate companies such as Air Asia X, Fly AsiaXpress, Tune Hotels and Tune Money. Air Asia X is a service operated by Air Asia X sdn.Bhd. (previously known as Fly AsianXpress Sdn.Bhd.) as a franchise of AirAsia. It has started offering long-haul services from Kuala Lumpur to Australia and China using Airbus A330. The inaugural flight was on 2 November 2007 to Gold Coast, Australia. 4

The first AirAsia ‘no-frills’ hotel, Tune Hotels, is ready for occupancy in Kuala Lumpur and Kota Kinabalu and later in Penang, Johor Bahru, KLIA, Miri, Kuching and Sandakan. Tune money is Asia’s first ‘no-frills’ online financial service owned by Tune Air Sdn.Bhd. Modelled aftaer Virgin Money, it comprises life, home and motor vehicle insurance as well as prepaid cards. Destination Air Asia operates over 200 flights a day, to over 75 domestic and international routes covering Malaysia, Thailand, Indonesia, Singapore, Brunei, Myanmar, the People’s Republic of China, Vietnam, Laos, Cambodia, Australia and the Philippines. In 2007, 19 new routes had been introduced over the Air Asia wide network. These include routes from Kuala Lumpur to Gold Coast (Via Air Asia X), Vientiane and Banda Aceh and the connection of Southern China (Macau and Shenzhen) with different Malaysian hubs and Bangkok. In 2008, new routes were introduced which included destinations in India and China. Air Asia future plan is seeking to set up a hub in Malacca serving Medan, Pekan Baru, Palembang, Padang, Penang and Langkawi. Air Asia has gained approval from India authorities to start flying to destinations in India such as Chennai, Madurai and Kochi.

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Value Added Services On 15 May 2007, a service named ‘Xpress Boarding’ was launched, enabling passengers to get priority boarding for a fee. This product is available in all hubs including Thai Air Asia and Indonesia Air Asia. On Air Asia X flights, passengers are given a choice of purchasing extra baggage weight, meals, comfort kit and seat selection all with nominal fees. On 26 November 2008, Air Asia has launched its Air Asia X London flights to London Stanstead Airport. AirAsia is one of the award winning and largest low fare airlines in the Asia expanding rapidly since 2001. With a fleet of 72 aircrafts, AirAsia flies to over 61 domestic and international destinations with 108 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand, and Indonesia. Today, AirAsia has flown over 55 million guests across the region and continues to create more extensive route network through its associate companies. AirAsia believes in the no-frills, hassle-free, low fare business concept and feels that keeping costs low requires high efficiency in every part of the business. Through the corporate philosophy of “Now Everyone Can Fly”, AirAsia has sparked a revolution in air travel with more and more people around the region choosing AirAsia as their preferred choice of transport. AirAsia creates values through the following vision and mission:

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1.1 COMPANY BACKGROUND: In 1993, Air Asia was established and started to operate on November 18, 1996. The airline industry was originally founded by DRB-Hicom which is a governmentowned conglomerate. Fernandes proceeded to engineer a notable and significant turnaround, turning an Air Asia a profit in 2002 and establishing new routes from its hub in Kuala Lumpur International Airport rapidly. On December 2, 2001, Air Asia was purchased by Tony Fernandes. The industry is operating scheduled domestic as well as international flight and known as the largest low-fare in Asia. Air Asia is a pioneer when it comes to low-cost travelling and the first industry in the region to implement ticketless travel and unassigned seats. Nonetheless, as of February 5, 2009, Air Asia has implemented allocated seating for their guests across all their flights which include Thai Air Asia and Indonesia Air Asia. The main base of Air Asia is the Low Cost Carrier Terminal located at the Kuala Lumpur International Airport. The company aims on enabling more people to travel by air by providing them hassle-free, no frills and low-cost airline services. Accordingly, the advent of aviation

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deregulation has been able to provide opportunities to different airline industries and started low-fares operations in 1990. Because of this, low cost carriers has been developed in Asia since 2000 and industries like Air Asia has been able to grab this opportunities. Accordingly, low-cost carrier model is very applicable in the global market, even though deregulated market are most appropriate for its faster spread. It can be said that with the deregulation of aviation market in European Union, airlines are also given the chance to make decisions with regards to market access, fares and capacity. It is said that before the deregulation, airline industries have always been restricted by governments which controlled the destinations of the airline industry and also the product planning and pricing strategy. AirAsia makes the low fare model possible and create values through the implementation of the following key strategies:

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1.2 BUSINESS PROCESS AND OPERATION AirAsia has fostered a dependency on Internet technology for its operational and strategic management, and provides an online ticket booking services to traveler online. The following shows the home page of AirAsia.com as the company key channel of marketing and sales.

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Exhibit 1 – AirAsia.com Home Page To book a flight with AirAsia, customers can either choose the following channels or simply visit the AirAsia.com home page and follow the below 5 steps. 1. Call centre 2. Sales office and airport sales counter 3. Authorized travel agents 4. Mobile booking via mobile.airasia.com or 5. Online (http://www.airasia.com) in 5 easy steps as shown below. Step 1 - Search Step 2 - Select Step 3 - Guest & Contact Step 4 - Payment Step 5 - Itinerary

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1.3 LOW COST CARRIER (LCC) BUSINESS MODEL The low cost airlines like AirAsia have changed the definition of airlines that air travel is a luxury and it is only for the upper segment of the population. The key objective of low cost carriers is to increase their reach and provide the services to a large segment. However, the low cost carriers are now facing some challenges in the market. 1.3.1 BUSINESS MODEL AirAsia follows the Low-Cost-Carrier (LCC) business model in the airline industry, which can be characterized as below:

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FIGURE 1: LOW COST CARRIER BUSINESS MODEL 1.4 COMPETITIVE ADVANTAGES With the Low Cost Carrier business model, AirAsia has the following competitive advantages over the competitors in the airline industry, which can be summarized in the following diagram.

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FIGURE 2: AIR ASIA COMPETITIVE ADVANTAGES 1.5 HISTORICAL PERFORMANCE Air Asia is using Customer Relationship Management (CRM) as their performance measurement system. This performance measurement system is putting customer at the heart of the business. It satisfies the customer needs and wants. It is strategy and process of acquiring, retaining, and partnering with selective customer to create superior value for company and the customer. This will then increase the shareholders wealth and company value in the long term. According to the Chairman of Air Asia, Dato Abdul Aziz, the core of the company is to provide excellent service and all the staff in the company is trained to put customers as their priority. This has shown the company concern of customers’ relationship. Thus, Air Asia has started to implement CRM as their performance measurement system on March 2009. is strategy and 13

process of acquiring, retaining, and partnering with selective customer to CRM in Air Asia helps the company to target market, increase merchandise and launch various promotions by analyzing knowledge about customers. Air Asia official website includes the necessary information such as destination, hospitality, transportation, climate information as well as recommendation. This could convenient the customers in gather information for their decision making. Other than that, Air Asia has an effective CRM system to address the route that has proven to be lucrative and delivered sustained profit which is Malaysia – Singapore route. Therefore, Air Asia has increased the flight from Malaysia to Singapore on 2009. In the effort of customer retention, CRM helps the company to identify loyal customers and implement loyalty programs to treat them better. In addition, CRM recognized and analyzed the buying pattern of the customers. From here, Air Asia can increase flights, number of seats and at the same time provide packages, hotels and number of staying days in tourist locations. In addition, customers will receive information such as travel guide and suggested destination by SMS. These efforts could help the company to acquire more potential customers in align with CRM. Hence, Air Asia managed to secure the first cycle of the CRM which has tremendous effects on the entire chain cycle. Lastly, according to Skytrax Airline Ranking, it was clearly defined. i)

Cost reduction:

With the implementation of CRM, it would help to reduce the operational cost in the company. CRM is the performance measurement system that implement under cross functional integration of the processes, workers, marketing data and operation in the company. With the integration of the components in the 14

company, it could enhance the efficiency and effective in the daily operation in the company and therefore, cost of operating can be reduced significantly. Other than that, CRM detects and alerts to the management the poor operational processes in the company. With this, management can perform corrective action and step and thus, it could lower the unnecessary cost incurred in the operation. ii)

Increase customer satisfaction:

The main objective of CRM is dealing with long term and sustainable customer relationship by satisfy every customer. CRM provides company the systematic data regard to customer value and information which are useful to allow company to execute the steps and attempts in customer relationship. In addition, CRM supply the complete and crucial information about every customer which help company to identify the profitable and potential customers. The information and data can be obtained from CRM are such as personal details of the customers, buying patterns and demands of the customers. The management in the company could then launch the comprehensive efforts to satisfy the customers in accordance with their needs, demands, preferences, and requirements. Customers are considered satisfied not only they obtain what they want but also their perceived value of the particular product and service is exceeds their expected value. Hence, satisfaction of the customers can be increased when the company is able to constantly provide products and services that above customers’ expectation.

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iii)

Growth in number of customers.

CRM upholds two major principles which are customer retention and customer acquire. Customer retention is dealing with retain the existing customers to avoid loss of customers while customer acquire is to attract new customers and therefore increase the portion of the customers. With CRM, company manages to commence various loyalty programs to reward the identified loyal customers. This is one of the efforts in performing customer retention. Other than that, the company could acquire new customers by execute some promotions to attract potential customers through communication medium such as telephone, emails, internet and sales visit. When the company is successful in retain and acquire customers, the numbers of customers is will certainly grow. iv)

Improved marketing strategies and competitors information:

CRM ensures the company to focus to external components such as customers, markets and competitors as well. By implementing CRM, the company can improve their products marketing strategies and plans. With the help of CRM, the company could measure their marketing efforts such as marketing campaign, marketing promotion and figure of sales, so that, corrective action can be taken for improvement. In addition, CRM too facilitates the company in optimizing and controlling the marketing, sales and processes. Other than that, CRM enables company to access to competitors information in the sense of using market intelligence to track competitors information as well as analysis of customers’ trend.

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v)

Provide long term profitability and sustainability:

CRM is a tactical approach that enables company to generate long term profit from the sustainable customer relationship. CRM integrates the marketing strategies and information technology to create long term profitability that derived from relationship with customers. Cost reduction from CRM could avoid the company to operate at low cost. Customer satisfaction and high customer numbers is the core of company earnings. Lastly, effective marketing strategies and competitors’ information allow the company to success. These factors contribute to company long term profitability. When the profit is high and maintained so as the shareholders’ wealth.

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2.0 Analytical Tools (SWOT Analysis) To figure out the internal factors such as strengths and weaknesses, and external opportunities and threats to business objectives, a SWOT Analysis of AirAsia can be conducted and shown below.

Strength AirAsia serves a very basic need of its passenger, getting from point A to point B, its business models derives from Southwest Airlines, Ryanair and EasyJet. AirAsia’s “No Frills’’ module simply means cutting out the unnecessary offering such as in-flight meals, baggage allowance, lesser leg room and reduced seat pitch. The storage space for food has been used to add more seats. And by no free snacks means lesser time spent on the ground and AirAsia spend nothing more than 25 minutes on the ground 18

each time it lands. Averagely a full board airline is airborne for 8-9 hours a day while AirAsia flight is airborne for 12 hours a day. By using the same fleet, AirAsia reduces the cost of training cabin crews and pilots as it is easier to move them around and the floor plan and layout remains the same. The official website of AirAsia, allows you to pay using multiple currency options and with the partnership of Expedia, AirAsia website serves as the only website a passenger need to book a flight, accommodation and ground arrangements. AirAsia has won the prestigious award World’s Best Low Cost Airlines by Skytrax for the last 3 consecutive years (AirAsia, 2012c), Appendix 7 shows the award won by AirAsia for the last 3 years and it certainly helps build trust in the brand. Weakness According to a research, 35% of passengers choose airlines based on punctuality (Emirates247, 2008) by delaying flight AirAsia also loses its air borne time. Another problem that AirAsia faces is the customer service support and there is only 2 ways for one to get in touch with an AirAsia customer service representative, either by writing to their customer service e-mail mailbox with a reply response lead time of 4-5 days or a premium customer service line with a charge of RM 1.95 per minute (AirAsia, 2012e). There also have been incidents whereby AirAsia website is down, most of the time during its promotions and most probably due to heavy traffic and non-redundant data infrastructure. As cost rises and consumers expects to pay lesser AirAsia routes its flights to secondary airports as the handling fees and airport charges are lower. Opportunities

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As the flight to Europe and India has been called off, AirAsia focuses to open more routes in North Asia. With new fleets AirAsia should open more routes such as Palawan, Boracay, Makati, Koh Sa Mui and Madurai. MAS has also confirmed that it will reduce its flight frequency to Sydney and Firefly’s routes to Langkawi, Penang and Singapore post August 2011 agreement to benefit AirAsia (The Star, 2012b) Threats Events such as Bali bombing, 9/11 and Bangkok Airport lockdown are unpredictable potential treats. Aviation rules and government policies also act as a threat and in this case, AirAsia faces fuel price hike, airport tax, handling charges and government protection towards national carrier and predominant route restrictions. Major challenges Increasing competition because of increasing number of low cost airline competitors, and aggressive competition against the large or traditional airline companies • Customer decrease because of poor economy • Rising of the fuel prices • Higher labor cost • Inadequate infrastructure • Route and flight utilization • Safety and security issues of aircraft crash or being attacked

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3.0 PRODUCT ANALYSIS As with living organisms, products have a life cycle. For some, such as the Boeing 747, the life cycle is measured in decades whilst for others, for example the merchandising spin – offs from popular movies, the life cycle may be measured in mere weeks. 3.1 The Product Life Cycle (PLC) A product enters the market in one of three ways. The first may be as an improvement on an existing product, in which case there will already be a customer base. The second is as a competitor to an existing product, in which case a customer base exists, but its loyalties may lie elsewhere. The third way is as a totally new product, in which case a customer base needs to be built up. Research has shown that many new products never move out of the launch stage. In the 1960s it was stated that 96 per cent of all new product launches failed. By the 1980s this had improved to the extent that only 80 per cent of product launches failed. Reasons for failure were given as: · Incorrect segmentation – trying to reach the wrong market. · Incorrect pricing – either too expensive to provide consumer value ortoo cheap to sustain the costs of production and market activities. · Incorrect communication mix – failure to create the required levels of awareness, interest and action. 21

· Incorrect distribution – not in the right channels or if in the right channels, not in enough of them. · The product itself – by far the most common reason. The product does not provide any new benefits or it provides benefits that are not sought or valued by the customer. It has no beneficial differentiation to existing products already established in the market. Air Asia, Airlines Company with 58 flight destination is in the growth phase position of Product Life Cycle (PLC) stage. The growth phase is when loyalty begins to be built up. Some products or services can be taken up by the customer base very quickly and achieve rapid growth. Sales of Air Asia Airlines grew tremendously in every country in which they were available. It is during the growth phase that the product will begin to recover its development and launch costs and slowly move through the break – even mark to begin to make a profit for the organization. During the growth stage of a new market or a new product, competitor will also enter the market with similar products or services and competition will become increasingly evident. The characteristics of products or services in the growth phase are Gain market share instead of create awareness and promote trial as the objective, increasing the sales, moving from the non-profits into profit, the competition is growing. As Air Asia gain high market share begins to make a contribution to overall profitability. Revenue pays off the development costs. It will begin to make rival product or service into problem. As the market still growing, revenues can be expected to

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increase. This period correspond to the star phase of the Boston Consulting Group (BCG). The market mix elements during in the Growth phase are as follows. Product: Product extension and minor modification. Price: Penetration Pricing for Market Share. Advertising: Heavy media even not as heavy as introduction phase, to build awareness and create brand. Sales promotion: Reduce as demand increases instead of intensive sales promotions to encourage trial likes introduction phase. Distribution: Move from selective distribution to intensive distribution. 4.0 STRATEGIES AND TACTICS Strategy is used to refer to an overall plan of action. The strategic plan of a company will indicate where the organization is going and how different functions fit into the plan. Tactics are the smaller scale actions that are taken to realize the objectives of the strategy. Gaining 40 percent market share for a product in order to boost profits is a strategy. Lowering the price of that product for a time in order to stimulate sales is a tactic. The Internet plays a vital part in the Air Asia business and has proved to be critical to the success of the business. As a low – cost operation, controlling the cost of doing business is clearly highly important to the airlines’ ability to be competitive by

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offering low fares. The Internet provides the most cost – effective distribution channel available. AirAsia’s promotions are very well received by the consumer for example its “Free Seat Promotion” and “Mega Sale Promotion”. In order for AirAsia to maintain its profitability and ensure its stays in line with cost leadership business model, AirAsia has to offer more routes and products in its portfolio. Association of Asia Pacific Airlines stated that demand for air travel is projected to grow 5% annually, with the Asia Pacific region expanding at an even faster pace of 6% per annum over the next twenty years (AAPA, 2011). More routes and fleets mean more customers and potential ancillary income, in 2010 ancillary income per guest is RM 44 (AirAsia 2010). Air Asia should also strongly focus on its offering via web booking as 77% of its revenue derives via internet. To further proof this, during AirAsia’s Mind Blowing Fare, 538,000 tickets were sold in 24 hours and a record setting 36,871ticket per hour. (AirAsia 2010) Online Marketing Social media is a very powerful tool, in a recent survey by TNS, Malaysians have the most number of friends in social networking websites and spends 9 hours a weekly. (The Star, 2010). But in total, on average a Malaysian spends 19 hours and 48 minutes online whereby 54% of them are spent purchasing online, and a 46% trust the source obtained online. 94% of Malaysian uses social networking sites as shopping guidelines and 45% of them share their experience on their product, brand or experience. (Nielsen, 2010) AirAsia should continue to carry its promotions and focus even more on online 24

marketing and selling. Social media’s are mostly free and AirAsia should leverage on these platforms to market its product and also use it a medium to collect feedback. However, AirAsia should also be mindful as negative comments and bad customer experience will also be posted on the same platform and it is visible to everybody. AirAsia has to be tactful in handling these situations. Increase Product Offering By partnering with Expedia, AirAsia adds value to its services by easing travellers to book accommodation and ground arrangements. AirAsia should work with more partners to obtain a better price so that its customer will be able to get better deals. Agoda, Booking.com, Wotif and Orbitz are a few other options for AirAsia to work with on accommodation. As for tour packages and ground arrangements, AirAsia should form collaboration with local partners, for example Reliance and Berjaya Holidays. These arrangements with local travel agents will also benefit AirAsia as they may set a quota or have an agreement with the local tour agents to use AirAsia’s services. AirAsia should also focus on new routes, for example, domestic flights within Thailand, Australia and India, respectively 34 %, 49% and 59% of all flight are domestic flights (Forbes, 2010).

5.0 SEGMENTATION, TARGETING AND POSITIONING ANALYSIS 5.1 Market Segmentation

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AirAsia may use segment bases such as demographics, socio-cultural, user-related, user-situation and benefits-sought segmentation to segment their market, as indicated in Table 1. TABLE 1: MARKET SEGMENTATION FOR AIR ASIA Segment Segm ent

Segment 1

Segment 2

Segment 3

Segment 4

Base Demograph ics Income

Sociocultural Social class Userrelated

MYR0 – MYR40,000 (yearly)

Lower class

MYR40,00 1 -MYR60,0 00 (yearly) Middle class

MYR60,00 1 and over (yearly)

Upper class

MYR40,00 1– MYR60,00 0 (yearly)

Middle class

Low

Moderate

High

High

Leisure

Leisure

Leisure

Business

High

High

Low

High

Usage rate Usersituation Time Benefits Sought Value-formoney

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Income Under demographics, income is one of the variables which AirAsia may use to segment their market (Schiffman, Bednall, O’Cass, Paladino & Kanuk, 2008). Income indicates the capability of the consumer to travel with AirAsia as consumers from different income groups are attracted to different airlines. For example, low-income [MYR0 –MYR40,000 yearly] and middle-income [MYR40,001 - MYR60,000 yearly] earners are more price sensitive than high-income [MYR60,001 and over] earners, thus they would be more attracted towards LCCs such as AirAsia. This is because low-income and middleincome earners generally have lesser disposable income than high-income earners, hence are unlikely to be capable of purchasing airline tickets from FSCs such as MAS as their tickets are more expensive. For low-income and middle-income earners, their main need of an airline ticket is simply to travel from one destination to another. Therefore, the pricing of airline tickets is a vital factor that influences purchasing behaviours. Statistics have indicated that consumers have increased their expenditure in air travel due to the availability of more affordable domestic and regional flights from LCCs (Consumer Lifestyles – Malaysia, 2009). Social Class AirAsia may have segmented their market into lower, middle and upper social classes on the basis of this variable because different social classes tend to have different purchasing behaviours, brand preferences and expectations (Schiffman et al., 2008). A consumer’s social class is associated with the income level that the consumer is earning. For example, if a consumer is categorized as a low-income earner, the

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consumer will fall within the lower social class. Moreover, upper social class consumers would tend to have a negative perception about the image of LCCs as a provider of less comfortable services. Usage Rate Usage rate is one of the variables under the user-related segmentation which AirAsia can use to segment their market and is divided into low, moderate and high usage rates (Schiffman et al., 2008). Depending on the consumer’s amount of disposable income and preferences, consumers will have different levels of usage rates. For example, consumers [Segment 4] who travel frequently for business meetings would have a high usage rate of air travel as they are required to travel to different destinations frequently. Consumers with low usage rates are mostly from the low-income category who can only afford to travel at most twice a year depending on the destination. This is because they have less disposable income compared to high-income earners. However, if price levels are affordable, then low-income earners [Segment 1] would be able to travel more often with LCCs. Time As for the user-situation base, AirAsia is able to use time as one of their variables to divide the market (Schiffman et al., 2008). The time variable is categorized into leisure and business. Consumers with different purposes of travelling have different priorities. For example, low-income earners who are planning to go on a leisure holiday would have the ability to continuously monitor ticket prices to ensure that they can attain the

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cheapest price. Travellers on business trips meanwhile would probably have to pay higher prices because they may need to purchase airline tickets in advance. Value-for-money Value-for-money is one of the benefits sought variables which AirAsia can likely use to segment their market (Schiffman et al., 2008). The level of importance of value-formoney can be divided into low, moderate and high whereby consumers with lower income levels tend to place high emphasis on value-for-money products and services. For example, consumers from Segment 4 place high emphasis on value-for-money because these consumers are working for corporations that are currently affected by the economic recession happening, thus they are required to reduce their expenses as much as possible (AirAsia, 2009d). 5.2 Target Market Profile Once the market has been segmented, the organisation can analyse, evaluate and prioritise which segment to pursue (Duncan, 2005). There are three different target markets which AirAsia are targeted. These segments are categorised as Segment 1, Segment 2 and Segment 4 as indicated in Table 2. Table 2: Target Market Profile of AirAsia

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Segment 1 Income

: Low-income level (MYR0 – MYR40,000 yearly)

Social class

: Lower social class

Usage rate Time

: Low : Leisure

Value-for-money : High Segment 2 Income

: Middle-income level (MYR40,001 -

MYR60,000 yearly) Usage rate

: Moderate

Time

: Leisure

Social class

: Middle social class

Value-for-money

: High

Segment 4 Income

: Middle-income level (MYR40,001 -

MYR60,000 yearly) Usage rate

: High

Time

: Business

Social class

: Middle social class

Value-for-money

: High

Segment 1 is referred to as the lower social class consumers who travel at most twice a year for leisure and have high importance on value-for-money. Segment 2 is defined as 30

middle social class consumers who travel moderately for leisure and place high emphasis on value-for-money. Segment 4 meanwhile is classified as middle social class consumers who travel frequently for business purposes but also place high importance on value-for-money. This is because the current economic climate has caused consumers to be more price-sensitive and often search for the best value (AirAsia, 2009e). However, this has not dampened but instead increased the frequency of consumers to travel domestically or internationally on LCCs (Airline Passenger Traffic – Malaysia, 2008; Airline Passenger Traffic – Asia Pacific, 2008). Consumers these days who travel for leisure or business want to pay as little as possible to secure a seat on a flight (Driver, 2001). 5.3 Positioning

FIGURE 1: AIR ASIA’S PERCEPTUAL MAP 31

AirAsia has positioned itself as the leading and largest LCC in Asia with the philosophy of ‘Now Everyone Can Fly’ (AirAsia, 2009b). They believe in the no-frills, hassle-free, low fare business concept and believe that keeping costs low requires high efficiency in every part of the business (AirAsia, 2009b). Efficiency creates savings which are then passed on to consumers in order to make affordable air travel a reality. AirAsia has sparked a revolution in air travel with more and more people around the region choosing AirAsia as their preferred airline (AirAsia, 2009b). Figure 1 indicates the position in which AirAsia currently stands against its competitors. The vertical axis illustrates the price range while the horizontal axis represents the service quality. Despite being Asia’s largest and leading LCC, service quality of AirAsia lacks behind other LCC such as Jetstar. Thus, while AirAsia hopes to maintain its current position as the leading LCC, it also hopes to moves towards providing better services in the future as seen in Figure 1. 6.0 MARKETING STRATEGIES PROGRAM ELEMENTS

AND

EVALUATION

OF

MARKET

Table 3: Comparison of Malaysia’s Top Players in Low Cost Carriers’ Marketing Program Company Price

Variety of Destinatio ns

AirAsia

FireFly

Tiger Airways

Malaysia Airlines (MAS)

Price ranges from RM30 to RM 700.

Price ranges from RM 50 to RM500.

Price ranges from RM30 to RM400.

Price ranges from RM60 to 5000.

-

-

9 countries across South East Asia (40destina tions) 3 countries across South Asia

-

5 countrie s across South East Asia (18 destinati ons)

6 countries across South East Asia (18 destination s)

-

9 countries across South East Asia (32 destinations)

-

5 countries across South Asia

1 country in East Asia

-

(9 destinations) 1 country in Africa

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-

(4 destination s)

-

(5destinati ons) -

1 country in East Asia (6 destination s)

-

1 country in South Asia (3 destination s) 1 country in Oceania (12 destination s)

(1 destination) -

4 countries across East Asia (11 destinations)

-

4 countries across the Middle East (4 destinations)

-

7 countries across Europe (7 destinations)

-

1 country in North America (2 destinations)

-

2 countries across Oceania (6 destinations)

-

1 country in South America (1 destination)

Promotion

Place/ Location

-

Certain amounts of free airline tickets are offered to consumer s.

-

Various call centres across 7 countries.

-

41 airport sales stations across Southeast Asia, South Asia, East Asia.

-

Zero fare promoti ons during shoulder travellin g period.

Low fare promotion offerings to different locations during different travelling periods.

-

1 call centre in Malaysia .

-

8 city ticket offices in 4 countrie s.

Various call centres across 7 countries in Southeast Asia and Oceania.

-

13 airport

Low fare promotion offerings to different locations during different travelling periods.

-

129 sales offices located in 52 countries across the world.

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-

27 sales centres across 5 countries in Southeast Asia.

Branding

The leading and largest low fare airline in Asia.

Added facilities

-

-

Provide online check-in within 24 hours of departure time. Offers “Snack Attack”, a buy-on board programm e offering food and drinks for purchase.

-

Prebooked light meals during flights.

-

Free seating with Xpress Boarding

ticket offices in 2 countrie s. -

2 operatio n centres in Malaysia .

The community airline.

-

-

Light snacks and drinks are included on board for passeng ers. 20kg baggage check-in allowanc e is given to passeng ers.

AsiaPacific’s true low fare airline.

-

-

Offers light snacks and drinks for sale on board (Inflight service) Seat selecting service for purchase during online purchase of flight ticket.

Malaysia Airlines whereby MH stands for Malaysia Hospitality.

-

Provides online check-in service within 24 hours of departure time.

-

Business and First class passengers are entitled to use the facilities in the Gold Lounges in certain airports.

-

Offers customer loyalty program (Enrich)

34

option. -

Self checkin counters at all airports.

-

Self checkin through mobile phones.

-

E-Gift vouchers are available.

Sources: (AirAsia, 2009b; AirAsia, 2009f; AirAsia, 2009g; AirAsia, 2009h; AirAsia, 2009i; AirAsia, 2009j; Tiger Airways, 2009b; Tiger Airways, 2009c; Tiger Airways, 2009d; FireFly¸2009a; FireFly, 2009b; FireFly, 2009c; Malaysia Airlines, 2009b; Malaysia Airlines, 2009c; Malaysia Airlines, 2009d; Malaysia Airlines, 2009e; Malaysia Airlines, 2009f)

REFERENCE LIST Air Passenger Traffic – Asia Pacific. (2008). Euromonitor International. Retrieved August16,2009,from http://www.portal.euromonitor.com.ezproxy.lib.monash.edu.au/passport/ResultsList.aspx Air Passenger Traffic – Malaysia. (2008). Euromonitor International. Retrieved August 16,2009,from http://www.portal.euromonitor.com.ezproxy.lib.monash.edu.au/passport/radGeographyTr ee.aspx AirAsia.

(2003).

Vision

&

Strategy.

Retrieved

August

14,

2009,

from

http://www.airasia.com/investor/vision1.shtm

35

AirAsia. (2008a July 14). Press Releases: AirAsia wins Airline Strategy Award: Finance Category Real 5 Star carrier gets Real 5 Star honour!. Retrieved August 16, 2009, from http://www.airasia.com/site/my/en/pressRelease.jsp?id=2104df98-7f000010-19360e7088061f55 AirAsia. (2008b October 23). Press Releases: AirAsia further improves 5-Star Service Quality Upgrades On-Time guarantee to 2 Hours. Retrieved August 16, 2009, from http://www.airasia.com/site/my/en/pressRelease.jsp?id=2926c6af-7f000010-6dd8e100d734ffa9

AirAsia.

(2009a). Awards

&

Recognition.

Retrieved August

18,

2009,

from

http://www.airasia.com/amazing/en/pageWithHeader.php? menu=one&content=one_awards AirAsia.

(2009b).

Company

Profile.

Retrieved

August

18,

2009,

from

http://www.airasia.com/site/au/en/page.jsp?name=Company+Profile&id=261a884eac1e00ae-edd9de00-4fe3279d&nav=5-0 Malaysia Airlines. (2009d). Annual Report 2008. Retrieved August 15, 2009, from http://malaysiaairlines.listedcompany.com/misc/ar2008.pdf Malaysia

Airlines.

(2009e).

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Retrieved

August

15,

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from

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16,

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from

http://www.malaysiaairlines.com/my/en/loyal/loyalty.aspx Malaysia

Airlines.

(2009f).

Lounge.

Retrieved

http://www.malaysiaairlines.com/my/en/flymh/lounge/lounge.aspx 36

Saha, G. C. & Theingi (2009). Service quality, satisfaction, and behavioural intentions: A study of low-cost airline carriers in Thailand. Managing Service Quality, 19(3), 350-372. Schiffman, L., Bednall, D., O’Cass, A., Paladino, A., Ward, S. & Kanuk, L. (2008). Consumer Behaviour (4th ed.). NSW, Australia: Pearson Education Australia.

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