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REPORT ASSIGNMENT E-MARKETING

EXECUTIVE SUMMARY
This report compares three airline ticketing companies in the way they use e-marketing tools to do e-marketing. Namely Travelocity.com, Priceline.com and AirAsia.com. These industry players are diverse in the way they use e-marketing tools. Travelocity is an internationally recognized Internet space and Priceline on the other hand being similar to Travelocity has its own way to distinguish and that is its reverse auction base e-marketing strategy. AirAsia, being in the infancy stage of its existence, is domestically operated in Malaysia.

The industry as a whole is reported to be very competitive and innovative in its service. The industry players continue to nurture innovative relationship with other distribution channels and brand leaders. This is due to the force that is created from pricing. It is then analyzed that high e-marketing adopters lead the industry and some lack in establishing that.

The competitive stand of the companies is reported as being in a Monopolistic competition group. The sphere of operation for Travelocity which is an international operation, powers its website with five languages. However, their distribution channel for free offer products are for United States only. Priceline on the other hand is now expanding to more countries other than United States. Products and service for these three companies are generally the same except that its packaging strategies are different example like Virtually There by Trevelocity, Name Your Own Price by Priceline and No Frill airline by AirAsia. The product life cycle for all the products that comes as packaging and promotions are continuously regenerated to make other main products like tickets look interesting.

As for promotions and distributions, affiliates program is much used as part of their strategy to distribute their products and packages. These partners have one click button or a banner advertisements on their website that will automatically pull customer to the other websites. Integrated marketing communication being very important in e-marketing is highlighted in this report on the uses of SMS (Short Messaging System) by AirAsia. 2

Travelocity is using Nextel Communication for its mobile wireless channel information. Priceline is using its self-generated 30 minutes response system.

This report states the electronic tools and e-strategies used by the three companies, which are the Internet, E-Segmentation, E-Positioning, E-Pricing and database marketing. However, the privacy issues always become a question when e-marketing is used extensively and customers starts to worry. Having self-regulated regulations on privacy is the only thing most companies are now doing. Overall, the impact of e-marketing into the new generation paradigm looks very competitive and challenging. The more exiting and remunerable it looks, the more innovative and intelligent the supplier has to be. As prices are very competitive and customer tailored, customers are becoming more demanding.

To conclude, most of the e-marketing tools used by the three companies are similar but their usage is quite distinguished and diverse. The main tools are Internet, telephone and email system. It is however recommended in this report for companies to use Kiosk, Voice Messaging and Multimedia Messaging System (MMS) to reach customer at large.

INDEX

1. 2. 3.

Introduction ................................................................................................................. 5 Industry As A Whole .................................................................................................. 5 Background Of Companies ......................................................................................... 6 a. Competitive Stand ....................................................................................................... 6 b. Sphere Of Operation ................................................................................................... 7 c. IT Savvy ...................................................................................................................... 7 d. Product And Services .................................................................................................. 7 Product Life Cycle, Features and Pricing ............................................................... 7 Promotions And Distribution .................................................................................. 8 e. Integrated Marketing Communication ........................................................................ 9

4.

Competitive Edge Uses Of Electronic Tools ........................................................... 9 Internet .................................................................................................................... 9 E-Segmentation ..................................................................................................... 10 E-Positioning......................................................................................................... 10 E-Pricing Strategy ................................................................................................. 11 Database Marketing .............................................................................................. 11 Privacy Issues........................................................................................................ 12 Impact Of E-Marketing ......................................................................................... 12

5. 6. 7.

Conclusion ................................................................................................................ 13 Recommendation ...................................................................................................... 14 Reference .................................................................................................................. 15 Other sites of references

1. Introduction
This assignment reports the comparison of business use of the Internet and other electronic communication tools in the Airline Ticketing Industry, which is the nations third largest shopping category. Online travel market is estimated to grow at a compounded rate of approximately 25% a year for at least the next four years, representing a tremendous growth opportunity. This report outlays a study that analyzes the use of electronic tools to accelerate in e-marketing environment and also what methodologies are used. The findings will also be illustrated on the differences of strategies and the marketing mix between the industry players and how the electronic tools are used to create the competitive advantage to stay in the market. The companies that are studied are namely; Travelocity.com which is a pure play in e-marketing of tickets, Priceline.com which is similar to the former and very competitive and the third is AirAsia.com, which is an Internet business which represents as click-and-mortar business (Laudon, 2002).

Therefore Laudon, 2002, has stated that, electronic commerce; global competition and the rise of digital firms have made companies think strategically about their business process for managing their relationships with customers and suppliers (Laudon, 2002).

Further to the comparisons, this report will conclude with some recommendations to where e-marketing tools or strategies can be used to optimize profits and increase customer retention.

2. Industry As A Whole
An Industry is a group of firms that offer a product or class of products that are close substitutes for each other. In todays airline industry, the operators need to be very competitive and innovative in its service of providing the best and most convenient customer orientated e-marketing

environment, let it be the online or internet services, database marketing or customer relationship management (CRM) marketing.

As stated by Kotler (2000), in recent years, many businesses have failed to look to the Internet for their more formidable competitors.

Therefore, the industry players continue to search for and nurture innovative relationships with other distribution channels and brand leaders. Adding to that, this industry being in the service-oriented environment is committed to providing utmost customer assistance and ensures satisfaction. Many travel agents are highly competitive in their pricing. It has therefore become important to invite partners and affiliates to link their websites to the travel agents. It is therefore, analyzed in this report, how high e-marketing adopters lead the industry and some lack in establishing that success.

3. Background Of Companies
Travelocity is a pure play in online marketing and is the seventh largest travel agency in the United States. It has been recognized worldwide for its leadership in the online travel space. Priceline is a company similar to Travelocity but is distinguished by its strategy of reverse auction pricing. AirAsia on the other hand is an airline as well as travel agency for its own tickets. Having limited offering online, I would categorize it as being a Click and Mortar company because it sells tickets online and offline.

a. Competitive Stand
These three companies are characterized as in a Monopolistic competition group whereby many competitors are able to differentiate their offers in whole or part. Travelocity stands in the seventh place of the largest travel agency in US. (http://www.travelocity.com/about). Priceline being similar to Travelocity in the nature of the business is distinguished by its reverse auction based marketing whereby customers name the price and destination of their holiday. AirAsia on the other hand is an airline-based company and a travel agent. AirAsias way of remaining competitive is

by allowing customers to walk-into their conventional travel agents and get them to book tickets online.

b. Sphere Of Operation
Trevelocity is and internationally popular travel agent and powers its Websites in five languages. However, Travelocitys distribution network for offers or free products only caters for customers from United States. Priceline on the other hand, is now in the process of expanding its wings from United States to Hong Kong and Singapore and more countries in the pipeline. Air Asia is Asias first low fare, no frills ticket-less airline. AirAsias website services are however limited to domestic tours and vacations.

c. IT Savvy
The SABRE GROUP (a leader in the electronic distribution) pioneers Travelocitys information technology solution. Travelocitys marketing is fully Internet savvy. Their staff members are very knowledgeable and have a successful customer service capability. Priceline on the other hand, lacks in this area because the entire information technology is not outsourced to specialists like SABRE GROUP. AirAsias technology in the Internet is far more remote than that of the former. Their website is very limited to options and very little to survey. Nevertheless, its customer service staff is well versed with Internet and software program that is used for processing orders and payment.

d. Product And Services


Product Life Cycle, Features and Pricing Travelocity has announced several products and services like Virtually There destination guides, travel tips, Trevelocitys Eye on the Sky and many more. These continued new innovations are in the inclining stage and the company is always regenerating new ideas to supplement the generic products like flights, hotels, vacations and cruises, which are the main product. Virtually There is a guide and information about the city to where the customer is traveling. The product is offered free only to customers traveling to certain cities like New York and San Francisco and book tickets through agencies pioneered by SABRE GROUP. Here, the prices of tickets are similar to

other agents but the value added is obviously the competitive advantage. However, Travelocity has to come up with upfront investment of Virtually There before distribution is done. Priceline has created its product in a different way; reverse auction. Name Your Own Price will always encourage customers to surf the website for vacations, for all kinds of budget and occasions. Adding new destinations for vacations to choose from automatically regenerates the product life cycle of selling tickets here. The distribution is to the world at large and there is no upfront investment. Price of the ticket remains and depends on the travel destinations. It is a sellable product rather than free. AirAsias being a new company and domestically operated, has a high tendency to face a premature maturity because its products and services online are very limited and only focus on selling tickets cheap and without any additional services. People only visits AirAsia website to order tickets. No other service is available here. However, their strategies and innovated ideas are focused on selling tickets the most convenient way and how to bring the price down. Here AirAsia depends a lot on economies of scale to ensure customers are offered the best price and everyone from all walks of like can travel by air. SMS (Short Messaging System) is their latest e-marketing strategy for selling tickets and it is now in the inclining or introduction stage. There is no cost to it. Distribution of tickets is for domestic only and cost of tickets will reduce due to reduce in overall cost of operation.

Promotions And Distribution The products and services discussed above are promoted through banner advertisements and affiliates program whereby, by a click of a button on Virtually There Guide takes you to the site where tickets for New York and San Francisco are advertised. This strategy is Rapp and Collins maxi marketing model (Kotler, 2000) whereby a Maximized Synergy is used to combine awareness building with direct response, promoting other distribution channels and sharing cost with other advertisers. As for Name Your Own Price the promotions are for all vacations of the customers choice and the promotion last forever, as it is their main marketing strategy. In the Rapp and Collins model here, including statements like Name Your Own Price is a trigger that

uses the Maximized Activation strategy. The channels used to reach potential customers are by partnering with other travel sites. As for AirAsia which is distinguished from the other two, focuses on reducing price of ticket by reaching customer and allowing them to book tickets as easy and simple as possible. The conventional way of selling ticket is not at all strategic for AirAsia as it requires expensive or highly paid staff to deal with reservation and the ticket itself would be very expensive in design. Here the distribution of tickets is paperless. It means tickets are basically a code number which the customer will obtain after booking is completed. The maxi marketing model used here for promotion is Maximized Accountability, which concentrates on evaluating cost per prospect rather that cost per thousand exposures. Because AirAsias cost per prospect is measured by, the time ticket is booked and not the quantity of tickets booked.

e. Integrated Marketing Communication


Travelocity offers the travelers to view the destination of their vacation before they travel. Customers will be able to view the surroundings through a movie video online. Travelocity has also created the competitive advantage by using Nextel Communications for its mobile channel service, which will allow customer to log into their wireless travel information center. Priceline on the other hand, uses integrated software linked with hundreds of hotels and airlines to provide services during off peak hours to budgeted travelers. Ones the request is logged in, the customer will receive a reply in 30 minutes on destinations available for the price auctioned. This is called the direct response email. As for AirAsia, its integrated marketing communication tools are SMS (Short Messaging System). Here, when the ticket is confirmed, it will be automatically reply to confirm the ticket with a code number given.

4. Competitive Edge Uses Of Electronic Tools


Internet Seeing the various e-marketing strategies used in marketing of airline tickets, the comparisons are done to see how effectively Internet e-marketing is used and the depth each company has explored.

As stated by Kotler (2000), Services are also popping up on the Internet. A little surfing on the Web will turn up virtual service providers. Virtual Assistance will word process, plan events, and handle chores; online consultants will dispense advice by e-mail.

Here the comparison would be to see how each company has achieved in establishing the statement by Kotler (2000) above. How effectively is the Virtual Assistance created through the tools? Airline ticketing companies are categorized in providing intangible product and services. He has also state that it is important to position its strategy through a number of marketing tools namely place, people, equipment, communication material, symbols and price. Kotler, (2000). From the earlier paragraphs in this report it has been studied that all the above marketing tools has to certain extend being utilized competitively like using SMS, wireless communication, Internet and Email. However, there are still areas to be compared that to which extend has the competitiveness been challenged? E-Segmentation Generally, Travelocity uses the occasions behavioral segmentation whereby, during the festival seasons, a lot of promotions are flashed on the banner advertisements and are segmented to usual customers that books tickets through Travelocity. Email system is used for customers who have registered with them and these frequent customers are targeted through the segmentation of their database. Priceline and AirAsia on the other hand use the benefit behavioral segmentation to encourage lower income travelers to book tickets. The benefit to them is that it allows all level income customers to book tickets and go for vacations. E-Positioning The positioning of product and service of the Travelocity and Priceline are similar as the companies are based on Product Class positioning. It is to position the product as being associated with a particular category of other products example airline tickets with hotels and rental cars. With a click on the activities buttons, the customer can immediately book other services. This encourages the affiliates partner program in the Internet. Priceliness

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example is that it has a link to mortgage and home loans. Priceline has chosen to class this product together with its budget tickets and vacation because, most of their customers may be from the lower income group and they are the targeted market for home loans and mortgage. AirAsia on the other hand being a domestic player focuses on Competitor Positioning. This is due to the competition with local Malaysian airline that also fly to local destinations. The positioning is to ensure that what is provided by MAS is also provided by AirAsia and that is shop@asia - online shopping.

E-Pricing Strategy The pricing strategy used by Travelocity is promotional-pricing strategy. Whereby, the strategy utilizes promotional objectives. Example like traveler to New York are given free Virtually There guide for free. Priceline and AirAsia have utilized the Price leadership strategy whereby no other competitors can produce the same price unless the new comers strategy is similar to this. This is because Priceline is using the reverse auction strategy and AirAsia is No frill airline strategy. AirAsia also determine its pricing by price elasticity of demand. The booking through Internet, Email, SMS and other direct response media like telephone will allow the customer to receive different price depending on the time gap before the actual traveling time. If the booking is done much earlier, the price elasticity will be greater (cheaper price) compared to the customer who books much later. Another advantage of pricing package is the availability of direct contact with supplier rather than going through and intermediary or middleman. The disinter-mediation of distribution channel allows for best and cheapest price.

Database Marketing Database marketing is not a new thing for all the three companies discussed in this report but it is used at its advantage. Travelocity allows customers to sign in and fill necessary form to collect relevant information for future promotion proposals. It allows interactivity and individualization through customer relationship management (CRM) via email and direct response. Priceline collects similar information for segmentation use and targeting customer by its target market. Leads are generated via the Internet when the customer visits the site and click on other facilities like home loan and mortgage for example.

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AirAsia similarly captures the information the same way, except that the interactivity and individualization takes place via email, facsimile and telephone. This type of personalization is segmented for frequent customers only example, for those business travelers. However, using the above electronic tools for database marketing allows the travel agents to practice permission marketing whereby the three companies for example seek permission from the customer for future promotion offers to be sent to them. This is possible by filling the necessary form that requires customers detailed information and interest. Privacy Issues All three companies however, handle privacy issues ethically. Especially marketing and promotions via Email system is used to convey messages on Privacy and Security of the customers information. Having self regulated privacy regulations keep the data consumer alert of their duty of care towards the customers privacy. Impact Of E-Marketing The impact of e-marketing on Travelocity is that the marketing strategy used for positioning, segmentation and pricing allows the company to distribute its product to unlimited market segment. By using various marketing tools like wireless communication, online marketing and email marketing allow for multiple revenue streams. However the Porters 5 forces model proves that there is a threat for new comers and competitors into the industry. Here, Priceline and AirAsia, which dominates the auction pricing and No frills airline gives more comfort to customers who are from the lower income group. As stated by Kotler (2000), the Internet population is younger, more affluent, better educated and more male than the general population. This means there is a high tendency of demanding customer. Prices and offers are becoming cheaper and cheaper where else, the personal or direct communication is creating a bigger gap. This makes it impossible to use negotiation skills to sell expensive product. Seller states the price and customer have a huge supplier base in the Internet to buy from. The dimension of value depends on the content, context and infrastructure of the online shop.

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However, the de-massification of transportation has a huge impact on marketing product through e-marketing as it allows speed, hassle free and comfortable from the home order placement.

5. Conclusion
To conclude, Travelocity, Priceline and AirAsia being in the monopolistic competition group is basically competing on the very strongly in this industry because they are selling the exact same product. However their competitive advantage is the packaging with the product that gives the added value. A very established information technology company that provides the entire software system integration pioneers Travelocity. Priceline on the other hand is not in the same group of Sabre Holding but is using its own integrated software which uses direct response system for its reverse auction base marketing. AirAsia which is domestically operated is a mush remote website and caters only for limited service compared to the other two that is activities like hotel bookings and care rental. It is difficult to judge the performance of the staff of all the three companies but however, by looking at their services and tool used like email booking, database marketing and 24 hours customer service staff, it is apparent that their staff are equally competent and IT savvy. Being in the services marketing industry, Travelocity is continuously innovative with its new ideas of improving its products and packages, while Priceline is concentrating on increasing the product line like vacations to allow larger choices for customers. AirAsia on the other hand, is much faster in venturing into new technology like SMS booking and other services like Telemarketing.

On the pricing strategy, it is apparent that for airline ticketing industry, pricing plays a very important part in the business. As for the integrated marketing communication, Travelocity is venturing into wireless information system for customer. Priceline has no apparent technology provided and the same goes for AirAsia. Segmentation strategy is different for all the three companies. However, the benefit behavioral segmentation caters for more market at large compared to occasions segmentation, which only caters for

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some target market. However, for the positioning strategy, it has used the product class strategy.

On the overall impact of the industry, it is apparent that the new generation is more educated and will be demanding. This is due to the innovative products and pricing. The market will become more and more challenging and competitive. It is also highly possible that, companies with none or limited e-marketing activities will be left behind in the near future.

6. Recommendation
My personal recommendation to the ever-innovative industry like airline ticketing industry where the pricing and packaging is very important and crucial is to have more communication channels and also create the permission environment marketing. Focusing on customer convenience and affordability will encourage more people to travel frequently. This is because everything is being in the globalization paradigm and speed is very crucial.

Kiosk Kiosk should be used in future marketing as it allows anyone from all over the world to just book a ticket and collect it from the automated kiosk immediately. This will eliminate the allocation of staff and also any intermediation will be ceased.

Voice Messaging Voice messaging can be very effective is permission is acquired to leave messages. Targeted customers will receive any new promotions and a press of their home answering service equipment. On the other hand, the company can leave messages through a mass telephone calls and an automated message will be recorded in the recipients phone.

Multimedia Messaging System Here, full text or graphic messages can be sent to target market. This can be very convenient and customers can just press the reply button to book their tickets.

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7. Reference
http://www.travelocity.com/about - viewed on 15th Sept 2003

KotlerP, Marketing Management, 2000, The Millennium Edition, Chapter 8, p.220)

KotlerP, Marketing Management, 2000, The Millennium Edition, Chapter 21, p. 653

KotlerP, Marketing Management, 2000, The Millennium Edition, Chapter14, p. 428

KotlerP, Marketing Management, 2000, The Millennium Edition, Chapter 21, p. 663 Laudon K C, Management Information System, 7th edition, 2002, Managing The Digital Firm, Chapter 4, p.110 Laudon K.C, Laudon J.P, 2002, Management Information System, 7th edition, Managing The Digital Firm, Chapter 2, p. 53

Terrel

B.

Jones,

President

and

Chief

Executive

Officer,

Travelocity.com,

http://www.travelocity.com/investorrelation - viewed on 15th Sept 2003

Other Sites Of Reference

Other information related to Travelocity.com, Priceline.com and AirAsia.com are obtained from these sites.

http://www.travelocity.com/investorrelation - viewed on 11th September 2003 http://www.priceline.com/customerservice/faq - viewed on 15th September 2003 http://www.airasia.com/news - viewed on 15th September 2003

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