Marketing Introduction, 4Ps, History, and Models

Introduction to Marketing

• Marketing is a social and managerial process where individuals or groups obtain what they need through creating, exchanging products, and offering value.

Four P's (Marketing Mix)

• Product, Price, Place, and Promotion are the four key components.

Historical Context

• 1950: Neil Borden (Harvard) introduced the concept of business methods aimed toward target customers
• 1964: "The concept of the Marketing Mix" suggested still-relevant techniques for designing/executing business models and marketing goods/services.

Market Development

• It involves expanding or promoting products to reach new markets and new customers.

Business Models

• Business Models are business strategies that generate profit through providing a product or service
• They also target a selected market while anticipating costs.
• Businesses determine the capital and investment requirements, personnel and hiring needs and short/long term business objectives to ensure success
• Business models help investors to evaluate companies and help employees understand the future of a company.
• Adapt Business strategies to respond to constantly changing demands and industry developments, and find a response to trends

Customers, Consumers, and Value

• Customers purchase products/services for their own use/consumption
• Consumers obtain, utilize, and pay for goods/services, providing access to a range of goods and providers for individuals or corporations.
• Companies seeks to attract and persuade clients/customers to purchase products/services to retain/keep them
• Customer Value is how the worth of product/services is perceived (based on advantages, price-to-quality ratio)
• Value Proposition are the factors which make the offering unique and desirable

Pricing and Profit

• Pricing refers to what the customer pays for goods/services, plus the costs of producing those goods/services
• Gross Profit is the result of selling minus what has been purchased
• A healthy gross profit, equals a strong business plan

Creating a Business Model

• There is not a single blueprint for creating a business model; it is based on business type and the current market environment
• One must start by identifying the target audience in terms of customers, unique customer traits, customer needs, focused strategy designed to sell to target customers and appeal to them
• Business models should define problems so that issues are resolved the needs are sufficiently met
• Propose clear services that sell directly to customers needs
• Map out the operational plan which is the business activities within 12 months in order to deliver the product or service
• Monetization describes how revenue is generated, how much customers will pay, and whether the company can cover costs and generate profit.
• The business model is tested/evaluated for validity and viability through market studies and customer feedback

Airline Business Models

• Focuses on how operators deliver services, the value propositions, and how revenue is generated
• Airlines generate profit through passenger ticket prices and additional fees, even if they have government bailouts

Transportation Metrics

• RPKs (revenue passenger kilometers) measure revenue passenger kilometers
• RPMs (revenue passenger miles) measure revenue passenger miles, which are figured by the distance paying passengers have traveled for indication of the volume for said airline.
• RPMs are calculated by the quantity of paying passengers multiplied by distance traveled.
• ASMs (available seat miles) measure overall carrying capacity, and how much revenue is generated
• ASMs are the number of seats on the aircraft multiplied by the total distance traveled
• The load factor equals RPMs/ASM or sold seats divided by available seats

Airline Business Combinations

• Mergers happen when multiple companies combine together
• Acquisitions happen when one company purchases another

Existing Airline Business Models

• Defining these has become increasingly difficult
• Full-Service Network Carriers (FSNC) or Flag Carriers are hub and spoke systems; for example, ATLANTA-BALTIMORE - -> BALTIMORE-ATLANTA
  • These often have additional passenger service like in-flight comfort, and connected baggage services
  • FSNCs were past government entities, compared to private owned entities today

Low-Cost Carriers (LCCs)

• These offer lower fares between city pairs for a basic transportation
• Have less facilities and do not include baggage, meals and drinks
• Charter/Integrated Tour Operators offer unscheduled flights, and are not part of any routine airline route
  • Timings/locations are chosen by the operator
  • They commonly include tour companies, and tour operator
  • Regional Carriers face insufficient demand from major airlines, and operate shorter routes on smaller aircraft (100/50-80 seats)
  • They are commonly known as commuter airlines

General and Business Aviation

• Is only for military or commercial airlines
• Has aircraft and helicopters for commercial purposes Urban Air Mobility: entails moving goods and people short low altitudes around cities
• Addresses traffic congestions and uses tiny automated planes
• Utilizes conventional helicopter, VTOL (vertical-takeoff-and-landing aircraft) , UAVs (unmanned aerial vehicle)
• Cargo Carriers has cargo and freight with no passengers on scheduled containerized air freights

Historical Development of Airline Business Models

• Mid-1990s saw new airline business models like low-cost and hybrid airlines emerge
• The 7 business models allowed low-cost carriers to establish network operator characteristics because of competition that increased interconnectivity and frequent flyer programs
• In 1903 the Wright brothers built the first powered flight which lasted 12 seconds
• The first usable airplane came to be in 1905 followed by new planes and technologies in the early 20th century

Early Aviation

• WWI saw the invention of the US Air Mail service
• Flying was dangerous after WWI because of primitive pilots and navigational tools (only magnetic compasses)
• Landing fields had night/limited visibility signaled by bonfires
• The US Air Mail Act in 1925 caused the US government to contract for the supply and delivery of passengers which led to the invention of Pan American, Western Air Express, and Ford Air transport
• Through the middle 1930's, companies such as United, American, Eastern, Transcontinental, Western Air

Europe and Aviation

• The Jet Age transformed aviation with the development of the jet engine
  • Jet engines have less complex piston engines, are more affordable, burn kerosene, which thrusts bigger and faster flights with more endurance, at less operating costs
  • These led to decreased airline prices and doubled the passenger numbers

Jetsetters

• The jet set is a new type of traveler

Deregulation

• It removes airline restrictions regarding entry and various costs
• The Airline Deregulation Act in 1978 sought to demolish all previous policy
• In 1935 the National Recovery Act Illegal was reversed by the Supreme Court
• Deregulation saw productivity increase as lower fares were available
• In 1990 91% of passenger miles were made with discount tickets out of 65% of the available tickets on the Air Transport Association
• The outcome wasn't equally distributed because of price competition and the markets --Less traffic (+pay) happened vs more traffic (-pay) as some passengers paid more for full coach costs
• This saw the rise of refusal of discount tickets with the increase in advanced booking - non-refundable fares which helped airlines recover lost capital

Aviation Around the Globe

• Market of Europe was government regulated with a high desire to see a singular centralized market
• Towards the 80s-90s the European Union began to see liberalization aviation industry occur

Post Chicago Convention

• April 1997 saw regional integration states enter member states like Iceland, Norway, Switzerland, (POST CHICAGO CONVENTION)
• This led to traffic congestion, fierce competition bankruptcy in major airlines, and financial issues, with the the losses, bankruptcies, and less revenue to the market

Full-Service Network Carriers

• FSNC, network, legacy, traditional airlines offer travel to several destinations with lots of optional services like booking options flexible booking options, lounges at the airport, and multiple classes on the airline
• They operate domestic and international flights to business and leisure travelers
• Their hub and spoke networks have connections and flight schedules designed for seamless network management to maximize profit

Major Players

• FSNCs have various classes (first, premium, comfort, economy) and amenities (food/drinks)
• They offer short/medium/long-haul trips for leisure and business travellers
• These services have higher rates for people for each contents of the flight
• Provide benefits, loyalty programs, and airport lounges through special partnership which create revenue for both sides
• Differ aircraft depending on if there's a high operating cost to capital & labor
• Utilizing yield management, computerizations are used for reservations, systemically as well as customer relationships are managed regarding scheduling, frequency and capacity
• KLM has been the longest airline to be in Europe and has a past with Air-France-KLM and is viewed as a power brand airline

Extensive Fleet

• Large airline businesses have large regional/international flights requirements depending on the demand or supply
• Fleet commonality is not ignored because it helps share high levels of crew training and lowers maintenance cost
• This only works when air crafts belong to specific flight families

Frequent Flyer Programs (FFP)

• These create the opportunity to earn customer loyalty through reward systems, through motivate points leading to flight changes and other customer perks
• FFP is managed by Customer Relationship Management (CRM) in order to develop customer contacts, understand date analysis to increase revenue

SWOT

• Analyzing strengths, weaknesses, opportunities, and threats
• Strengths identify the the areas where a competitive adavntage can be created
• --Flying guarantees an economic efficient mode of transportation
• -In 2022 the global safety report identified less accidents then 2020, meaning flight is becoming safer
• -Flights promote local & global tourism in addition to people using airlines contributing to growing of revenues
• Weaknesses involve understanding limitations
• • Capital investment is the most critical when dealing with purchasing of aircrafts to return money for investment
• Opportunities are the best way to identify market growth, and how business can be amplified to increase profits
• -This has led to technical innovations and a better supply chain/delivery of services
• Threats identify current negative impact that can prevent revenue and promote economical success
• -Some examples are fluctuating economical changes that reduce travel opportunities and may increase economical loses

Low-Cost Carriers (LCCs)

• They are also viewed as not having as much of a safety protocol compared to that of larger airlines, however those airlines utilize new and modern fleets
• LCC outsource pivotal functions that can affect passengers who may want to take flight for points destinations
• Skytrax recognized the importance of LCC in 2019, placing 10 of them on a rating report

LCC Aim

• To transport people from certain point at the fastest and most efficent way, different from legacy career who may have amenities or free selection choices

Opportunities and Threats

• Ryannair is a company that focuses on a customer business package by providing better pricing ranges in the form of flexible scheduling and premium row seating Threats to revenue come from
• -Fluctuating fuel costs, competition from larger airlines and new aircraft

EUROWINGS and VUELING

• Businesses that follow these metrics come in the form of Lufthansa and Air France KLM

Charters integrated tour operators

• General aviation involves both commercial and recreational sectors

International Civil Aviation Organization (ICAO)

• General aviation encompasses recreational activities, while commercial aviation refers to transactional activities that provide flight for both FSNC and charter flights
• Global aviation is known to have many flights that range up to 150+
• Tour operators don't only deal with flights; they may include hotels and other services too

Integrated Markets

• Europe is known for its aviation market as it's used to tour destinations

####Tour Operators

• Provide tourism that has many tasks
• -The purchase tourism based services & provide plans for flights all times of the year which may include flights
• They are known too sells a diverse options/items for profit
• Tour operators, and their travel agency and brand agencies, seek create revenue by keeping expenses to a negligible

Aviation Roles

• Aviation roles provide flights to tourists from an economical stand point
• These are done by direct and charter flights at a low cost
• Aviation, for many agencies means finding different suppliers in order to see service success

Sale Approaches

• This can include the delivery of beverages to various airport locations while focusing to ensure consumers success and happiness
• -These tasks comes different negotiation deals as one as
• Hotels, Airways to ensure success