marketing project_air india
DESCRIPTION
Air IndiaTRANSCRIPT
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Introduction
Objective
Background
Situation Analysis – current situation , SWOT, BCG
Growth strategy
Segmentation and Target Market
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Positioning
Product
Price
Placement
Promotion
Recommendation
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Objective
Analyse the background and current situation
Apply marketing concepts learnt during course
Suggest marketing plan using primary and secondary research
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Background
Air India is the flag carrier airline of India. It is part of the government
owned Air India Limited(AIL).
Headquartered at the Indian Airlines House in New Delhi
Third largest airline in India (after IndiGo and Jet Airways) in
domestic market share
Became the 27th member of Star Alliance on 11 July 2014
It has highest number of employees, aircrafts and assets
Has one of the highest manpower to flight ratio in the world
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Kill Air India, if you want to revive it.
That is the prescription aviation industry veteran and Emirates'
President & CEO Tim Clarke has given to rescue India's so-called
national airline. 13 March,2014
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Situation Analysis (good and bad points)
On domestic front, Air India is making losses on every 2 routes out of 3 itoperates. That means it is losing money on 300 flights out of 450 flightsdaily.
Total losses are more than all other airlines combined
On some routes , it is not even able to recover fuel costs.
Aircraft utilization rate is abysmally low for it. At any point of time, it usesonly 100 out of 120 odd aircrafts it has.
Political and Regional bias influence
Has one of the worst flight safety record among all Indian carriers.
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The airline's current avatar is a result of the merger of state-
run carrier Indian Airlines with Air India in 2007.
Both airlines posted profits in 2005/06. But rising competition,
worsening operational performance, massive aircraft purchases,
and the ill-conceived merger pushed the combined airline deep
into the red. Total losses have accumulated to almost Rs 20,000
crore while the debt burden is at a staggering Rs 43,000 crore.
Combined market share of both companies fell from 60 per cent to
less than 15 per cent in 2012, and is now hovering near 20 per
cent.
Even seven years after the merger, only 80 per cent merger has
been completed. Pay scales, HR policies and promotions are still
different in both companies.
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Recent Consumer affairs report
Maximum number of complaints
Unhygienic food(worm inside food)
Customer dissatisfaction
Source: http://www.consumeraffairs.com/travel/air_india.html
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Good points
Bright spot- The airline's Ebitda (Earnings Before Interest,
Taxes, Depreciation, and Amortisation) — a measure of comparing
profitability between companies — rose to Rs770 crore from Rs19.45
crore.
If it's any consolation though, private airline Jet Airways reported its
highest-ever annual loss of Rs4,129 crore in 2013-14.
Air India's on-time performance improved to 82 per cent in May this
year from 80 per cent a year earlier, according to data from industry
regulator Directorate General of Civil Aviation.
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Strategies in Place
Air India's structural and systemic weaknesses were recognised
decades ago. In fact, in 1997, Air India was one of the first public
sector companies to be referred to the newly constituted
Disinvestment Commission of India (DC).
Downsized its operations. Grounded some airlines. Some of its loss
making international operations are being shut down.
National Carrier Air India in talks with OnAir to have Wifi on board
Advertisements
The Modi government in its first 90 days hasn't really spelt out its
plan for Air India except stating that it wouldn't be privatised
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Planned to speed up its international expansion this year, adding
eight Boeing Dreamliner 787 aircraft to its fleet – fuel efficient
aircraft.
Air India will also start flying to Moscow, Rome and Milan this year
Replacement on almost all the routes in South-East Asia with the
787 aircraft which is more economical
Celebration of Air India day to commemorate the merger of
erstwhile Indian Airlines and Air India on 27 Aug in 2007 – target
towards employees satisfaction and customer connect.
Air India offers tickets for Rs 100.
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Strengths Weakness
1. Strong Backing by the government of India2. Brand New Fleet of aircraft. 108 fleets (31 on orders)3. Known for its unique and high quality "Maharaja" advertising4. Present in nearly 19 countries5. Covers 60 destinations in India and 31 destinations Worldwide
1. Poor management decisions
2. Labour problems and political intervention is a cause of worry
3. Financial crisis leading to payment issues of employees
4. Financial debts5. High Cost structure6. Compulsions of being a
Public Sector Unit
Internal and External analysis
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Opportunity Threats
1. Domestic Market Growth2. Dedicated set of
customers. Can leverage on brand new fleet
3. Expansion of routes and international destinations
4. Target low income groups5. Solving internal issues
regarding workforce can hugely boost image and operations
6. Targeting the passengers who travel by 1st AC/2nd AC coaches in trains over long distances
1. Rising Labour Costs2. Rising Fuel Costs3. Growing Competitor base
and entry of Low-Cost Carriers (LCC’s)
4. Price Wars5. Middle East Aviation6. Terrorist Threats
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AIR INDIA
Threat of New
Entrants• Vistara – A Tata and
Singapore Airlines
Joint Venture for
premium segment
• AirAsia and Tata Joint
Venture for low cost
segment
Bargaining Power
of Sellers• Air India is not
dependent on a
single supplier
• Its has many
suppliers like Airbus,
Boeing, Bombardier
and ATR
Bargaining Power
of Buyers• Buyers are the flight
passengers
• They have a good
bargaining power as
many competitors
are willing to offer
low cost flights
Threat of
Substitutes• 1st class, AC class
coaches of Indian
Railways
• Video Conferencing
instead of face to
face meetings
Threat of
Competitors• Lot of competitors
domestically and
internationally
• IndiGo, JetAirways,
GoAir, SpiceJet
• Leads to Price
Wars
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BCG Matrix of AIR INDIA’s travel routes
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Segmentation
and
Target Market
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TitleSegment 1
Low Income
Segment 2
Middle Income
Segment 3
High Income
Income Low Moderate High
Usage Rate Low Moderate High
Value for Money High High Low/High
Identification of Segments:
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Psychographic Segmentation:
• Air India has a strong image of an
official national carrier.
• Most of the government officials,
bureaucrats including the
President and Prime Minister of
India travel by Air India.
• People who are travelling by Air
India since the past few decades
are still loyal to it.
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Market Segmentation
Demographic
Segmentation: (Income
Based)
Business Class:
Boeing 787 Dreamliner
18 business class seats
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Market Segmentation
Economy Class:
Boeing 787Dreamliner
238 economy seats
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Geographic Segmentation
International Market:
31 international
destinations in 19
countries across
Australia, Asia, Europe
and North America.
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Domestic Market:
Air India serves 60 domestic
destinations in India
Geographic Segmentation:
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Justification for Choosing the Segments
Segment 1Low Income
Segment 2Middle Income
Segment 3High Income
Measurability The current sales in thissegment is low. Preferredonly in case ofemergencies
The sales in thissegment is increasingas they now constitutea major share ofpassengers
This segment constitutes themajor portion of businessclass travel. Sales in thissegment in growing
Accessibility Newspapers, Radio,Television
Newspapers, Radio,Television, Online Ads,E-mails, Mobile-ads
Newspapers, Radio,Television, Online, Ads, E-mails, Mobile-ads
Substantiality A major portion ofdomestic market belongsto low income group
Middle income group inthe country is growing
High income group is alsogrowing in the country
Actionability Low fares on advancebooking can attract thissegment
Low fares and goodcustomer service andin-flight crew servicewill attract thissegment
Customer service, in-flightcrew service and FrequentFlyer miles can attract thissegment
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Target Market Strategy
• Air India should follow a Multi-Segment strategy to target different
segments.
Marketing Mix 1Low Fares, Economy Class Travel, Easy
ticket booking via travel desk/online, Ads
through papers, radio, TVs
Marketing Mix 2
Low/Medium Fares, Economy Class
Travel, ticket booking via websites/travel
desks/mobiles, Ads through papers, online
media, mobile-ads.
Marketing Mix 3Normal / High Fares, Business / Economy
Class Travel, Ticket-booking via websites /
travel desks / mobiles / agents, Ads
through papers, online media, mobile-ads.
Segment 1
Low Income
Segment 2
Middle Income
Segment 3
High Income
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POSITIONING
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Positioning Statement
To the travelers who have to travel long distances in a short span of
time, Air India is the airline that gives you the best on-flight experience
with on-time performance and low cost ticket pricing.
Value Proposition
The value proposition of Air India will be to provide good customer
service, faster connectivity at convenient timings and at a cheaper
price.
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Current Perceptual Mapping of Domestic
Airlines
High
price
Low
price
High OTP
Low OTP
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Future Perceptual Mapping of Domestic
Airlines
High
price
Low
price
High OTP
Low OTP
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Product
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Air India Products:
Flight
Tickets
Seating
Configuration
In-Flight
Entertainment
Crew
Info
System
Frequent Flier
Program
Convenient
Flight
Timings
Customer
Friendly
Service
Special
Incentive
For
Corporate
ClientsDrinks
Easy
Ticket
Booking
Easy
Check-In
And
Boarding
Quick
Transportation
of Passengers
and Cargo
CORE
ACTUAL
AUGMENTED
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Air India Products
• Fleet of 21 B737 Aircraft
• Capacity of 180 seats
• 13 International destination from 12 Indian cities
Air India Express
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Air India Products
Air India Regional/
Alliance Air
• Fleet of 4 CRJ and 4 ATR aircraft
• Operated mostly to Tier 2 and 3 cities
• 196 flights per week
• easy connections to/from smaller
cities via the hubs of Delhi, Kolkata,
Mumbai & Bengaluru .
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Air India Products
Air India Cargo
• 58 Domestic and 29
International destinations.
• An active member of IATA.
• Logistic Management System
(LMS)
• Odd-Sized Cargo, Dangerous
Goods, Valuables, Couriers etc.
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Product by Involvement
Air Travel can be classified either as a convenience product or as a shopping
product.
• Convenience:
If the pricing and convenient timings are the major factors influencing
the customer’s decision, then it falls under Convenience product
• Shopping:
When factors like customer service, available leg space, food quality
influence the decision to buy the flight tickets, the customer spends
some time analyzing the available options before choosing the airlines.
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Branding
• Air India will be portrayed as a Functional Brand.
• To be a functional brand, the following factors should be addressed:
Pricing
Check-In and Boarding procedures
On-time performance
Convenient flight timings
Customer service
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PRICING
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Pricing
• Pricing should take into account the following factors into account:
• Fixed and variable costs.
• Competition
• Company objectives
• Proposed positioning strategies.
• Target group and willingness to pay
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Data from yatra.com taken on 28th Aug 2014
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Value or cost based pricing approach
A value-based pricing company considers the value of its
product or service, as opposed to the cost the company incurred
to create and produce it. To do this, the company determines
how much money or value its product or service will generate for
the customer. This value could originate from factors such as
increased efficiency, happiness or stability.
Cost-based pricing uses manufacturing or production costs as
its basis for pricing. The cost-based pricing company uses its
costs to find a price floor and a price ceiling.
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PRICE ELASTICITY CONSIDERATIONS
The demand for air travel is sensitive to changes in air travel
prices and incomes. However, the degree of sensitivity (i.e. its
demand elasticity) will vary according to different situations. To
ensure that air
transport policies are effective, reliable estimates for demand
elasticity's are essential.
The elasticity of air travel demand varies according to the
coverage and location of the market in which prices are changed
and the importance of the air travel price within the overall cost
of travel.
India is the only domestic market in the world to see a decline in
air traffic demand this February compared to last year, even as
global traffic continued to show "solid" growth in the same month.
Highly elastic market
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India is the only domestic market in the world to see a decline in
air traffic demand this February compared to last year, even as
global traffic continued to show "solid" growth in the same month.
Route Level: -1.4
National Level: -0.8
Supra-National Level: -0.6
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Estimated Price Elasticity's of Passenger
Demand
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Skimming vs Penetration vs Parity strategy
skimming pricing, a strategy wherein the initial price for the product is set quite
high for a relatively short time after introduction.
Penetration pricing is a strategy employed by businesses introducing new goods
or services into the marketplace. With this policy, the initial price of the good or
service is set relatively low in hopes of "penetrating" into the marketplace quickly
and securing significant market share
Skimming pricing results in much slower acceptance of a new product, but higher
unit profits. Penetration pricing results in greater initial sales volume, but lower
unit profits
PARITY method takes the total budget to be allocated for marketing
communication at par with what competitors spend on the same.
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Placement
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Air India’s distribution channels
Air India
Travel agent
Customer
Customer
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• About 80 per cent of airline tickets sold in India are
through travel agents and online portals.
• The rest is sold through airline websites and booking offices.
• Airlines are moving towards differential pricing so as to promote
travel agents and online portals.
• This will help airlines save on sales and distribution costs
Source : http://www.business-standard.com/article/companies/
differential-pricing-to-lift-ticket-sales-through-airline-websites-113092601069_1.html
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• From our primary and secondary data we saw that Air India is doing quite well in the international sector
• Alliance Air is a fresh brand with very little customer opinion so we recommend Alliance Air take over the domestic operations by following LCC model
• Air India should operate exclusively on international routes
Recommendations
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Recommendations
• Focus must be given to customer centric development
• Appoint a very pragmatic MD with full authority to radically restructure Air India, financially and operationally. This has worked for Malaysian Airlines and Garuda Airlines.
• Privatize the airline??. Divest. Use FDI in aviation industry. Sell 49% stake in the airlines to foreign players.
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Promotion
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Developing Effective Marketing Strategy
Awareness Knowledge Liking Preference Conviction Purchase
• Above steps has been followed to develop promotion/marketing strategy for Air India and Alliance Air
• Air India is been in airlines industry since past 60 years and so they have effectively went through the above stages.
• Due to various negative things going on with the airline above stages needs to be revisited so that a powerful and likeable promotion is created for Air India.
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Applying the buyer readiness stages to Air India
Awareness&
Knowledge
• Air India has not created enough buzz about its star alliance membership which needs to be done immediately
• Alliance air must start creating awareness through its prices
Liking & Preference
• Air India : Provide free tickets to 1000 people and collect testimonials
• Alliance air: Just needs to provide on time services and create a buzz regarding this
Conviction & purchase
• The promotional campaigns for both Air India and Alliance Air must succeed in all stages of the AIDA framework.
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Benefits for passengers due to Star Alliance
•Better connectivity•Greater flexibility for passengers•Low prices due to shared ticketing•More destinations than any one airline offers•The chance to earn miles or points•Round the world tickets with multiple airlines at good prices
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Maharaja of Air India
• Continue with Maharaja as Air India’s Brand Ambassador
• He symbolizes graciousness and high living
• Naughty diminutive Maharajah of Air India has become a world figure
• He has completed 56 years and become the most recognizable mascot the world over
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Use messages like “Fly royally” or “Fly with the Maharaja” in their campaigns
http://www.mbaskool.com/hwdphotos/uploads/64/10/qnqakkf0ty2h74.jpg
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Aam Aadmi for alliance air
Like Narendra Modi suggested make Aam Aadmi the symbol of Alliance air
Alliance air must work on similar lines as Indigo airlines
Focus on On-time performance and cheap rates in advertisements
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