Marketing assignment Essay
1.1 Ryanair are pioneers of low cost airlines in Europe operating more than 1600 daily flights from 57 bases across 1600 low far routes connecting 180 destinations in 29 countries. They recently announced that they have ordered 175 new Boeing craft. 1.2 In order for Ryanair to keep the costs to a minimum, their airline uses small, regional airports only to reduce operational costs and operates as a point-t-point airline carrier, thus when other airlines avoiding the cost associated with a hub-and-spoke service. 1.3 Ryanair advertises it’s self as a “The low fare airline” and has a price promise under which it will pay double the difference if a customer finds the same flight cheaper elsewhere.
1.4 They pay as little as possible for their aircraft. They get big discounts on aircraft because they buy them when other airlines want them. 1.5 They spend as little as possible on advertising. They do not employ advertising agencies; instead all of their advertising is done in-house. 1.6 They don’t use travel agencies, so they don’t pay commissions. Ryanair uses direct marketing to recruit and retain customers and to extend products and services to them and this reduce cost. You book online or on the internet. This saves 15% on agency fees.
Kulula and Mango are South Africa’s low cost airlines. These airlines have in some areas imitated the Ryanair business model. 2.1 Kulula uses Lanseria Airport as an alternative to OR Tambo airport which can be attributed to reduction operational costs. Ryanair makes use of smaller airports instead of the large busy airports to reduce costs and reduce the time between flights.
2.2 The low cost airlines in South Africa, such as Kulula and Mango also upsell products such as car hires, travel packs and hotel accommodation. This is similar to the business model of Ryanair. 2.3 The low cost airlines in South Africa also reduce their costs by not including food on the fare; you can buy your food if you want. 2.4 To make bookings simpler the customers of Kulula and Mango can also book and buy flight tickets at Shoprite/Checkers for there’s is no commission paid to travel agencies. The internet online process also exists for self-service of making bookings.
The marketing environment consists of Micro and Macro environment. According to Kotler and Armstrong (2012;90) Micro environment consists of the actors close to the company that affect its ability to serve its customers such as the company its self, its suppliers, its marketing partners, customers and the general public. The macro environment is said to consist of the larger societal forces that affect the macro environment such as political, economic, social, technological, natural environment, and legal framework (Kotler & Armstrong, 2012) 3.1 The Micro environment
Ryanair’s mission is to keep their customers happy by offering a simple service and that involves maintaining low-cost fares, such as offering no meal options or extended service elements such as beverage consumption, thus keeping labour-related costs low and inviting the more humble or thrifty consumer to enjoy travel to regional destinations without the worry of excessive airline expense.
Suppliers are very important to the company and they are the determining factor for Ryanair to keep customer value. In a running an airline Ryanair require a lot of fuel but they are unable to influence their suppliers since the price of fuel is controlled by external bodies such as OPEC(Ryanair Annual Report, 2004). 3.1.3 Competitors
The increasing number of competition with carriers offering lower-cost fares is impacting the consumer mentality regarding which carrier to choose when travelling within European destinations. 3.1.4 Marketing Partners
Ryanair does not use advertising agencies instead all their advertising is done in-house by doing so they are cutting cost and making sure that they maintain low cost strategy. They simple use adverts that tell passengers
that Ryanair has low fares. 3.2 Macro environment
The external political environment is one of significant advantage to Ryanair, as the majority of its operations are contained within Europe. It is relatively common knowledge that this region maintains political stability, thus Ryanair does not experience issues with governmental instability in Europe as a concern regarding passenger volumes or flight destinations. 3.2.2 Technological
The technological environment does not appear to significantly impact the firm in a negative capacity as the firm. Additionally, supply chain software programs and other integrated software applications are available to assist Ryanair in streamlining labour functions and improve internal organisational efficiency. 3.2.3 Economical
Economical factors in the Euro region such as the Greece debt issues, increased unemployment in Spain and other countries have a negative impact in the number of customers for air travel like Ryanair.
Low cost airline offer a no-frill service, they sell the cheapest tickets you can buy. Unlike branded airlines that argue that passengers are willing to more for a better level of service. These are the reason I would not use low cost airlines such as Ryanair. 4.1 Customer Service
Ryanair offers poor customer service such as when your bag is broken into no compensation is provided. It is also reported that their staff is unfriendly and rude. Ryanair also do not make provisions for fragile items that you wish to carry on the aircraft with you. Musical instruments and sporting equipment can be taken but at a fee. 4.2 Value added services
There is no complementary food and what is offered is expensive and unhealthy. 4.3 Misleading pricing
The policy of 70% sets sold at lowest fares and 30% at higher fares can be misleading. This means that you may not always be paying the lowest price for the fares. 4.4 Convenience
Ryanair does not offer convenience as you cannot chose seat. You also cannot change flights. Their plains are old and offer low comfort. They use secondary airports which tend to be smaller regional airports.
Ryanair’s objective is to firmly establish itself as Europe’s leading low-fares scheduled passenger airline through continued improvements and expanded offerings of its low-fares service. Ryanair aims to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies 5.2 Understanding customer needs and wants
5.2 Design a customer driven marketing strategy
5.3 Construct an integrated marketing program that delivers superior value
5.4 Build profitable relationships and create customer delight
6.1 Product or Service
Low cost, no frills air travel to Europian destinations. There is no free food or drink on-board. Food and drink are income streams. You buy on-board, or you do take your own food and drink if you like. 6.2 Price
Ryanair has low fares. 70% of seats are sold at the lowest two fares. 24% of seats are charged at higher fares. The last 6% are sold at the highest fare.
Ryanair does not use travel agents so it does not pay agency commissions. It uses direct marketing techniques to recruit and retain customers, and to extend products and services to them (i.e. Customer Relationship Management). This reduces costs. You book online over the Internet. This saves them 15% on agency fees. They are based in Stansted in Essex – which is known as a secondary airport. It is new and accessible. It is cheaper to fly from Stansted than either Heathrow or Gatwick, and since it is less busy Ryanair can turn aircraft around more quickly. 6.4 Promotion
They spend as little as possible on advertising They do not employ an advertising agency. Instead all of the advertising is done in-house. In fact O’Leary himself oversees much of the promotion of Ryanair. They use simple adverts that tell passengers that Ryanair has low fares. Ryanair employs controversy to promote its business. For example in 2009, the company reasoned that passengers would be charged £1 to use the toilets on board.
O’Leary reasoned that passengers could use the terminals at either the destination or arrival airport. This would speed things up. It was reasoned that this is what passengers wanted – since they did not want other passengers leaving their seats and walking the aisles to go to the toilet. O’Leary also argued that larger passengers should be charged more since they took up more room – again it was reasoned that this is what the majority of passengers wanted. 6.5 People
Pilots are recruited when they are young as pilot cadets. They work hard and take early promotions and then move on after 10-years or so to further their careers. Cabin crew pay for their uniforms to be cleaned. They invest in their own training. They are mainly responsible for passenger safety as well as ancillary revenues onboard
6.6 Physical Evidence
They pay as little as possible for their aircraft. Planes are the most expensive asset that an airline can make. They get big discounts on aircraft because they buy them when other airlines don’t want them, for example after September 11th, or on the invasion of Iraq and Afghanistan. Aircraft manufacturers cannot simply stop a supply chain in minutes. If orders are being cancelled or delayed, this is when to buy. It was rumored within the industry that Ryanair was buying Boeing 737s – list price around £40,000,000 (forty million pounds) – with up to a 50% discount. 6.7 Process
There is no check in. You simply show your passport and supply your reference number. You cannot select a preferred seat. It is first come, first served. This aids speed. There are no air bridges (the tunnel that connects to the side of the aircraft when to board it). You walk or are bused to the aircraft. Baggage is deposited directly onto the terminal – it’s quick. However if your bag is broken don’t expect high levels of customer service.
7.1 Cultural factors
Ryanair has addressed a global cultural need for leisure travel by making their prices extremely low and the easy availability of tickets operating between two points. One of the factors that influence consumer behavior is social class such as people’s income. Ryanair get most of their business from lower income group.
7.2. Social factors
One the factors that influence consumer factors is the social factors such as consumers small groups family and social roles. According to the case study Ryanair make use of buzz marketing by their controversial promotions. This influences people opinions about their services as it gets people to discuss the controversial promotions.
7.3 Personal factors
Personal factors are influenced by personal characteristics such as customer’s age and life cycle stage, occupation, economic situation, life style and personality and self-concept. The people that would be influenced into buying Ryanair’s would need to have an easy going personality and not be concerned much about the service of the airline since many of the luxuries are removed from the service.
7.4 Psychological factors
A person’s buying choices are further influence by four psychological factors motivation, perception, learning and beliefs and attitudes. Customers that would be influences to use Ryanair are customers that believe that are getting value for money through the low cost pricing.
Consumer market consists of individuals and households that buy goods and services for their personal consumption. These would normally be consumer goods such as soft drinks, cosmetics, travel and household goods. Ryanair’s consumer market is the individuals in the European region that use air travel as a form of transportation.
Below is an example of Ansoff’s Matrix which shows growth strategies that organisations can use to expand their operation followed by the explanations for each growth strategy (Riley, 2012).
Figure 1 Ansoff’s matrix. Sourced from Riley (2012)
9.1 Market penetration
Market penetration is when the company expands in the same market using the same products. For Ryanair, market penetration would involve increasing the number of flights in the same routes. This way they are in the same markets and using the same service. 9.2 Market Development
Market development requires the companies to enter new markets while using the same products. For Ryanair, this would require the company to go to new markets such as Africa, Asia or America using the same low cost air travel service. 9.3. Product Development
Product development means that in order to expand the company must introduce new products or services in the existing market. For company like Ryanair, product development would mean that they introduce new service such as business class or first class into the existing market.
Diversification is when the company seeks to enter into new markets with new products. For Ryanair diversification could mean that the company introduces new services such as leisure sea cruising. This would also mean that the company moves into a new market since leisure sea cruising would require different destinations and customer base.
Riley, J. 2012. Ansoff Matrix. [online]. Available at: http://www.tutor2u.net/business/strategy/ansoff_matrix.htm [Accessed on 02 September 2013]. Kotler, P. and Armstong, G. 2012. Principles of marketing. 14th edition. Essex: Pearson.