West London School of

Management & Technology

International Diploma in
Business
Marketing

FLY-IT-CHEAP

Name of the Course Coordinator:

Mr.Muhammad Touseef

Student Name: Hasan Ahmed

Student ID: 206884
 Table of Contents

1 Introduction 3
1.1 The passengers fare varies in two ways 3

1.2 What are the key characteristics of low cost airlines? 3

Task 1 2 New Marketing Strategy 4

2.1 Branding airlines and experience marketing 4
2.2 Great marketing strategy and long-term overall strategy 4
2.3 Employee loyalty 5
2.4 Airlines and experience marketing 5
2.5 6
E-mail marketing
2.6 7
Airlines against high speed trains
3 8
Task 2 Difficulties in marketing for airways
4 10
Task 3 Communication tools and uses
Task 4 5 14
Maintaining the customer service philosophy
Task 5 6 Conclusion 15

1 Introduction

Fly-it-cheap is a UK based low cost airline, which was founded in Bristol 10 years ago by
Gray Macdonald. After 10 years the customer satisfaction is high and customer planned to fly

2
with fly-it-cheap. Competition requires companies to make choices as to what to do and what
not to do to attain growth and maintain survival [1]. Fly-it-cheap has a strategy — the
creation of a tailored set of best-fit activities. Fly-if cheap began as a low-cost, no frills airline
10 years ago. One initiative that is attracting interest is zero-gravity flights. If the selling
point of these flights is the feeling of being as light as a feather, then it is surely possible for
this feeling to be associated with the many brands or products that incorporate this as part of
their values [2]. It is of particular interest for these flights to be used as rewards or gifts in
communication campaigns. MacDonald and his team focused upon the following terms;
service, price, place, promotion, people, process and physical evidence. Now they want some
new marketing strategy so the fly-it-cheap can survive next 2015.

1.1 The passengers fare varies in two ways

1. Different fare structures

2. Different overall costs

1.2 What are the key characteristics of low cost airlines?

The low-cost model was pioneered by Southwest Airlines in the US, and European low-cost
carriers have all followed this to an extent [3]:

1. High seating density and load factors

2. Uniform aircraft types (usually the 737-300)

3. Direct booking (internet/call centre - no sales commissions)

4. No frills such as “free” food/drinks, lounges or ‘air miles’

5. Simple systems of yield management (pricing)

6. Use of secondary airports to cut charges and turnaround times

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Task 1

2. New Marketing Strategy

2.1 Branding airlines and experience marketing

The desire to fly seems to be a constant human aspiration. Aviation has conquered the skies,
but it is still possible for airborne experiences to be unforgettable beyond commercial flights.
These experiences are remembered, are etched on our memory for years, and this is the
starting point for experience marketing strategies. If consumers associate a brand or product
with a powerful experience, then a very special bond is created [4].
One initiative that is attracting interest is zero-gravity flights. If the selling point of these
flights is the feeling of being as light as a feather, then it is surely possible for this feeling to
be associated with the many brands or products that incorporate this as part of their values. It
is of particular interest for these flights to be used as rewards or gifts in communication
campaigns. Among other companies, ZERO-G (zero gravity) offers the service out of
McCarran International Airport. Aboard a modified Boeing 727, passengers experience a
series of 15 parabolas (something like a row of rolling hills) that when a specific speed is
reached, including certain scientific factors, intervals of 30 seconds of weightlessness are
created for those aboard [6]. A special suit is provided as a keepsake, a party is laid on after
landing, and an official certificate proving the achievement is awarded.

2.2 Great marketing strategy and long-term overall strategy

Competition requires companies to make choices as to what to do and what not to do to attain
growth and maintain survival. Southwest has a strategy — the creation of a tailored set of
best-fit activities. Southwest began as a low-cost, no frills airline 30 years ago [5].

It has grown to be a national airline, but still has its basic cost structure. Southwest has never
served meals or reserved seats in advance. It still has what is basically a linear route structure.
It only flies one type of airplane and it wants to stay in high-density markets. Its operation is
highly efficient. The end result of this strategy is a sustainable, competitive advantage and
superior profitability.

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2.3 Employee loyalty

Southwest treats its employee’s right. The airline adopted the first profit-sharing plan in the
U.S. airline industry in 1973. Through this plan, its employees own at least 10 percent of the
company stock. It has a highly motivated workforce. The employee retention rate is 92.3%. It
lost a huge amount of business after September 11, but each of its 32,000 employees gave
back some of their pay to help tide over the temporary difficulty of the company [6]. Its
corporate culture really stands out.

Southwest fully utilizes its resources and capabilities to make up its core competencies. It
focuses on short-haul, point-to-point routes, no-frills service and less-crowded airports. It
minimizes turnaround times and keeps its planes in the air longer than its competitors. The
design of these best-fit activities, the superior management skills and the employees’
commitment are its core competencies. They demonstrate three characteristics which are (1)
it is valuable to the customers; (2) it is applicable in a variety of markets; and (3) it is difficult
for competitors to imitate. That is why they result in a sustainable, competitive advantage [7].

2.4 Airlines and experience marketing

The desire to fly seems to be a constant human aspiration. Aviation has conquered the skies,
but it is still possible for airborne experiences to be unforgettable beyond commercial flights.
These experiences are remembered, are etched on our memory for years, and this is the
starting point for experience marketing strategies. If consumers associate a brand or product
with a powerful experience, then a very special bond is created [8].
One initiative that is attracting interest is zero-gravity flights. If the selling point of these
flights is the feeling of being as light as a feather, then it is surely possible for this feeling to
be associated with the many brands or products that incorporate this as part of their values. It
is of particular interest for these flights to be used as rewards or gifts in communication
campaigns.

5
2.5 E-mail marketing

E-mailing as a marketing tool can provide highly effective results if the right strategy is
employed. Austrian Airlines used this method to boost its sales resulting in the capture of
around 11,000 new customers at a crucial time for the company, as the European
Commission had just approved its merger with Lufthansa [9].
The campaign was conducted in two waves, one in spring and summer, to capture customers
travelling for work or holidays and was designed to appear to the consumer when really
needed, stated Paul Nonwestern, founder of www.emailingnetwork.com, the company
responsible for the campaign.
Nonwestern went on to explain that the goals were the mailing of special offers in order to
obtain brand notoriety and boost online sales in Spain as part of a strategy for capturing new
niche markets [10],
The following are key factors in the results:
• Approval of the recipient, i.e. permission marketing. Not having this approval and using
spam as a modus operandi will provide no benefit whatsoever, on the contrary, only low
quality contacts will be obtained, many recipients will feel angry for their space being
invaded without their permission, and the brand image will eventually deteriorate.
• Thorough planning. Here the key is the specification of the goal to be attained with the
option, from obtaining high vitality to increasing the number of subscribers or customers. The
way the campaign is defined will vary depending on what results are expected. A suitable
database must be operative (this can either be purchased or produced).
Should it be decided for it to be prepared, then there are many methods that will help in
attracting users, from simply providing information on the advantages associated with
subscription to the creation of competitions or prizes available through subscription. In
general, subscription generated solely by interest in contents or special offers provides a
much more solid base but the use of extra incentives should not be dismissed.
This basic database should be subjected to a complete analysis for it to be processed
correctly. Thorough segmentation is absolutely vital. Although geographic or demographic
variables can be of help in this process, other criteria such as attention to lifestyle are
becoming more significant in the way they provide more coherent groupings, more revealing
of what, in essence, characterize the customer base and defines their interests.

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2.6 Airlines against high speed trains

These two means of transport can either work together or enter into strong competition.
Users’ decisions about which are the best choice on those routes where both services are
available are based on four main variables: Cost of service: if the price difference is not too
great then this will be the least important variable. Journey time: airlines have the edge in this
respect, although technological advances in high speed rail travel and the creation of routes
with a minimum number of intermediate stops will reduce this difference. Waiting time: this
is the key to choice. Airlines have the advantage in shorter journey times, but when the time
required for checking in and boarding the total time increases significantly. In comparison,
high speed train travel is much less demanding in this respect, users are not required to be at
the station as far ahead as they would be at the airport [9].
Access at origin and destination: many airports are located on the outskirts of cities, which
means that an additional land journey must be made in order to access the desired source-
destination. High speed trains, however, usually stop at a main station in the city centre,
preventing or significantly reducing further displacements. Although the contest is open
(especially for shorter and middling distances), it is also possible for valuable partnerships to
be developed between these two means of transportation. One option could be to work
together in cases where high speed trains could link a city with a major international airport
with one that doesn’t. Long-haul flights could then perhaps increase the amount of passengers
from neighboring regions through this rail connection [8].

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Task 2

3. Difficulties in marketing for airways

The marketing of airlines has evolved dramatically throughout the past 50 years. Since
earliest times the aviation industry has been a cyclical business. It is affected by recessions
and other economic conditions and because of political intercession has been the subject of
cartels, protectionism and hidden subsidies. The airline industry has recently lost the benefit
of political support owing to deregulation in the USA and liberalization in Europe [6]. The
1990shave witnessed the world airlines struggling for demand and market share on the basis
of both discounted fares and promotional campaigns. While this is the case profitability will
remain a major problem. In order to address these problems airlines are adopting relationship
marketing (RM) schemes which aim to bond the customer to the brand through specific
loyalty programmes.
Customer acquisition and break-even costs: It is important to estimate the allowable cost
which will be employed to acquire a customer.
Attrition curves: It is important to analyse the attrition of customers over time. There is a
need to collect periodic figures to analyse the losses being suffered in order to check on
natural attrition (death, relocation) as opposed to substantive reduction. The problem with
airline loyalty schemes is that members may be inactive because they have joined other
schemes rather than having left the scheme.
Lifetime values: There is a need to identify the lifetime value of the customer so as to
calculate the costs and benefits of different acquisition and retention strategies. As loyalty
scheme members often belong to several schemes it is easy for cross comparison research to
be carried out. Virgin is a small company which has to check on its loyalty scheme position
in relation to BA and other airlines. In addition airlines often have shared global schemes and
companies can assess the global partnership benefits based on different performance
measures. Many airlines will utilize CPM (cents per mile) and RPM (revenue per mile)
figures to compare the benefit of members and non-members of loyalty schemes [6].
Profit potential: Based on the above, the profit potential of different loyalty programmes or
new sector and product launches is critical as a guide to future business planning.

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The relationship marketing problems of frequent flyer programmes

Relationship marketing in the form of FFPs can be ruined if there is no due concern for the
alienation of third parties and the overall cost and efficiency of expanding customer loyalty.
The following four points explain the current dilemmas associated with airline RM schemes
[5].
(1) There is a growing hostility to the programmes by companies which fund business
travel and cannot control their travel policies effectively owing to employee distortion
of company guidelines. Here the adage, 'it is better to travel than arrive', takes on a
whole new meaning.

(2) Airlines have failed to recognize the heavy liability of unredeemed miles. This has
placed a huge onus on preplanning the rules and coalitions of FFPs.
(3) There has been a failure to consider that when everyone offers similar rewards there is
no competitive advantage and the cost of retaining existing or winning new customers
may increase.
(4) The government may introduce taxation on FFPs as a means of acquiring revenue
benefits.
(5) There may also be tighter control of FFPs to re-establish a fairer market for smaller
airlines or new entrants to the market-place.

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 Task 3

4. Communication tools and uses

The approach is to achieve acquisition through current marketing methods to acquire

customers from prospects, however, the difference is that there is then the requirement for
effective retention or relationship marketing approaches. Retention requires the steps of
[4]:
(1) Identify more about customer through database analysis;
(2) Improve and make the product/service more attractive (at check-in Advantage
members are identified by a star against their name; Gold and Platinum members are
identified as requiring VIP treatment)
(3) Inform to build customer's knowledge of the company;
(4) Tempt customers to purchase more regularly, try different products etc (this is often
achieved through creating different levels of membership - member, gold, platinum,
based on revenue miles flown);
(5) retain the customer by developing different forms of loyalty schemes;
(6) As a system this should lead to increased customer value to company, provide higher
profits and enable the company to make increased investment in further acquisition of
new members. The foregoing can be viewed as an increasing spiral which places the
company in a stronger and stronger position [2].

I would like to analyses some factor that can be competitive advantage of fly-it-cheap:

Analyses the airline industry as a whole, reviewing its historical development, important
trends over time and key aspects of the industry’s economics. Issues discussed include the
impact of government intervention; uncontrollable factors such as oil prices and political
events; factors such as the perish ability of seats, seasonality of demand, and long time
horizons in infrastructural decisions that inject additional levels of complexity; airlines’ fixed
and variable direct operating costs and their indirect operating costs; and lastly the
chronically poor and volatile performance of the whole industry. Key trends in the industry,
such as the formation of alliances and the emergence of budget carriers, are examined. Lastly,
strategic imperatives for airlines are considered, such as adopting cutting-edge technology,
controlling costs and raising productivity, managing alliances effectively, avoiding the herd

10
instinct, and overcoming commoditization. Focuses on fly-it-cheap itself, looking at its
important strategic choices and resource deployment decisions, in order to get a broad
understanding of the company’s superior performance. Factors discussed include its young
fleet, low staff costs, global revenue base, striving for efficiency, brand reputation, response
to crises, and alliance and acquisition strategies. In addition to their significant individual
impacts on fly-it-cheap performance, these factors also interact with one another, thus
enhancing the magnitude of their impacts [3]. A key conclusion drawn from this analysis is
that fly-it-cheep’s superior performance is attributable to a complex array of strategic
decisions which have been highly consistent over time I believe is fly-it-cheep’s core
competence: cost-effective service excellence. It is relatively easy to deliver excellent service
if one pours money into doing so. What is much harder to do is to deliver service excellence
in an efficient manner, in other words implementing a strategy that integrates differentiation
and cost leadership [9]. How has fly-it-cheap managed to achieve this? In common with other
organizations with a reputation for service excellence, fly-it-cheap displays characteristics
such as top management commitment, customer-focused staff and systems, and a customer-
oriented culture. However, our research has provided further insights into how fly-it-cheap
develops and maintains a reputation for service excellence, which its achieves through what
we call the ‘five pillars’ of fly-it-cheep’s activity system. These pillars are rigorous service
design and development, total innovation, profit and cost consciousness ingrained in all
employees, holistic staff development, and reaping of strategic synergies through related
diversification and world-class infrastructure. These five pillars of fly-it-cheep’s cost-
effective service excellence are supported, operational zed, and made real to everyday
decisions and actions through a self-reinforcing activity system of virtuous circles, presented
in the chapter [8]. The core competences of cost-effective service excellence, and the cultural
values supporting it, are ingrained into both the hearts and minds of employees as well as into
organizational processes. This may help explain why fly-it-cheep’s competitive advantage
has been sustained for decades. While it is easy to copy single elements, it is much harder to
reproduce an entire, self-reinforcing, activity system. Fly-it-cheap investments in biometrics,
further illustrating the two pillars of rigorous service design and development as well as total
innovation. fly-it-cheap has started to employ biometric technologies to enhance the customer
experience while at the same time raising security and efficiency. I suggest that sustaining
competitive advantage through the strategic use of technology involves developing
innovations that have a significant positive impact on the customer experience and also
entails significant business process redesign to make the processes difficult to imitate. It

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sheds light on fly-it-cheap ability to be a serial innovator, introducing many firsts in the
airline industry and sustaining this innovative orientation over decades in the face of intense
cost pressures, industry crises and the push towards commoditization. I first present senior
management’s perspective of the key challenges they face in delivering sustained and cost-
effective service excellence [11]. These challenges include, firstly, how to consistently satisfy
the sky-high and rising expectations of customers; secondly, how to deal effectively with the
tension arising from offering uniform service that is at the same time personalized; and,
thirdly, how to approach a large number of services in a holistic manner to attain consistent
excellence in all related processes and sub processes. This also to address fly-it-cheap
innovation process, characterized by the seamless combination of hard, structured and
rigorous innovation that is centralized with soft, emergent and continuous innovation that is
undertaken by different functional departments. This competence is further enhanced through
an integrated customer and front-line staff feedback system that provides valuable insights on
innovation. Fly-it-cheap human resource management processes, a crucial aspect of any
service business, where people, especially front-line staff, are a core part of the offering and
the most visible element of the service. I analyze the five elements forming fly-it-cheap
human resource management and how each of these elements reinforces its service
excellence strategy. The five elements are stringent selection and hiring of people, extensive
training and retraining, formation of successful service delivery teams, empowerment of the
front line, and staff motivation. Even though these service elements are simple to state, very
few firms have been able to implement systems that deliver the desired results. The reason we
undertook this study was to gain a deeper understanding of the factors that can help a
company achieve sustainable success in extremely tough industries, based on a detailed study
of the strategy and the organizational features of a company that has achieved just that [12].

I believe apply to any company that aims to achieve sustainable competitive advantage, the
holy grail of strategy. I do not aim to provide the answers but rather to suggest useful
strategic principles and to help executives ask the right questions.
It is so hard to be successful in the airline industry. I then proceed with strategic lessons,
which relate to the need to be clear about the company’s generic strategy (or a combination of
generic strategies); the need to achieve high levels of strategic alignment among strategy,
capabilities, organization and market demands; the importance of nurturing and investing in
capabilities and core competencies that support the strategy; and finally the need to
understand and foster strategic innovation. I then examine fly-it-cheap institutional context

12
and suggest that, even though SIA has definitely gained from being located in a supportive
institutional context, this is far from a comprehensive explanation of its success. Its success
can ultimately be traced to robust strategies, seamless execution, and continuous vigilance
and realignment.

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Task 4

5. Maintaining the customer service philosophy

The underlying principle that customer came first must carried through at all levels of the
organization. How customers were handled at each contact was considered of paramount
importance. Fly-it-cheap must spend money for excellent training centre, designed to drill all
employees in the fine art of serving customers. Everyone-from the floor sweeper to the
deputy managing director-would receive this training. The underlying philosophy was to
enable staff to place themselves in the customer position. A lot of the training time was thus
experientially based. Key people were sent on special mission to see what other airlines were
doing and how customers were handled. Special delay simulation games groomed staff on
ways to cope with delay situation, one of the major complaints received from passengers.
Staff must be flexible as possible in their dealing with customers even it took more time and
effort. Management constantly reiterated that customers could not be told what to do simply
because it suited the company; some passengers wanted to eat as soon as they boarded, others
preferred to wait. Customers could not be pigeonholed, they often changed their minds. They
might come on board intending to sleep and then decide to watch a movie after all. On long
hauls, flexibility was especially important. Most passengers had individual’s habits that
correspond to their travel agendas, which could include sleeping at the beginning and
working later, or vice versa. Staff must learn that customers were happier when given a
choice. Offering more meal variations automatically reduced the number of unhappy people.
Menus typically changed by other airlines no more than four times a year. Information
technology enabled chefs to fine-tumed meals and immediately withdraws any dishes that
were poorly received. Although there will more cost associated with such tactics, but
management firmly must believe that these effort distinguished fly-it-cheap from its
competitors. Complaints must encourage as they providing insight problems. Once they
received, something could be done to rectify the situation; all complaints will track down and
follow up. Traveller will invited to submit this complaint in writing. While some customers-
typically Americans, Germans and Australians-readily compiled, others were less willing to
so in writing. These customers were specifically questioned in follow-up surveys. At the
airport in Jakarta, staffs were encouraged to do everything possible to deal with legitimate
customer problems. Senior cabin crew members met every Monday morning for feedback
and exchange sessions with service support personnel. One ritual practiced was to address the

14
crew from the control canter just before takeoff about topical issues, special promotions and
other issues, special promotion and other issues relevant to services.

Task 5

6. Conclusion

Despite the airlines’ achievements, there were some disquieting signs on the horizon.
Competition was intensifying and service quality improving among a number of both
Western and Asian Airlines, including Honking-based Cathay Pacific, Japan Airlines, Eva air
and Thai International and Malaysia Airlines. Fly-it-cheap airline now featured in eye-
catching uniforms based on traditional customers.

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