Marketing Strategies of Star Alliance: An In-depth Analysis of Asian ...

Proceedings of the International Conference on Tourism, Hospitality & Sustainable Development (IC17Dubai Conference) ISBN: 978-1-943579-18-1

Dubai - UAE. 6-8, October 2017. Paper ID: DT745

Marketing Strategies of Star Alliance: An In-depth Analysis of Asian based Airline Members

Chayapoj Lee-Anant, Graduate School of Tourism Management, National Institute of Development Administration, Thailand.

E-mail: chayapoj@

Worarak Sucher, Graduate School of Tourism Management, National Institute of Development Administration, Thailand.

E-mail: wosusher@

_________________________________________________________________________ Abstract

Nowadays, it is very common for everyone, when travelling, they fly. This has resulted in the more intense competitiveness in the airline business around the world particularly Asia. Even though airline business is rapidly growing, the business still needs adaptation to match the rapid economic changes and strategies to survive. One of the approaches the airliners have employed for the regarded purposes is the strategic airline alliance strategy namely Oneworld, Skyteam and Star Alliance. Under the airline formation, the airlines have launched many marketing strategies differently to influence purchasing intention. Some are successful and some are not among the Asia-based star alliance airline members. The Star Alliance, which is the focus of this paper, has 28 airline members worldwide and only 9 airlines are based in Asia. It is interesting to study about how they do for their marketing strategies. The purpose of the paper is therefore aimed at 1) analyzing and discussing the marketing strategies employed by Asia-based airline members of the Star alliance 2) finding the common marketing strategies practiced by the Asia-based airline members of the Star alliance. The discussion of this paper is based on literature review with a support of the vast examples of marketing strategies of Asia-based Star Alliance airline members. It is found that there are 13 marketing strategies, currently employed to increase the purchasing intention by the Asia-based Star Alliance airline members. Those are Strategic Alliance Strategy, Social Marketing Strategy, Quick Response Strategy, Competitive Differentiation Strategy, Product Diversification Strategy, Product Diversification Strategy, Pricing Strategy, Airline Branding Strategy, Customer Retention Strategy, Cost Leadership Strategy, Customized and Personalized Strategy, Market Positioning Strategy and Product Distribution & Digital Marketing Strategy. And among them, only 6 marketing strategies are similarly used, which are Strategic Alliance Strategy, Quick Response Strategy, Pricing Strategy, Customer Retention Strategy, Product Differentiation Strategy, and Product Distribution and Digital Marketing Strategy. This paper is composed of three parts. The first part of this paper explains the current situation of airline business and then the second part discusses the marketing strategies employed for increasing purchasing intention among the 9 Asia-based Star alliance airline members. The last part demonstrates the common marketing strategies. ___________________________________________________________________________ Key Words: Marketing strategy, Star alliance, Asian based airline member, Strategic Airline Alliance, Airline industry JEL Classification: C 19, G13, G 14

1

Proceedings of the International Conference on Tourism, Hospitality & Sustainable Development (IC17Dubai Conference) ISBN: 978-1-943579-18-1

Dubai - UAE. 6-8, October 2017. Paper ID: DT745

1. Introduction

In the past two decades, air transportation has been changed rapidly due to globalization, global dynamics, science and technological advancement. These factors have eased global transportation to be more convenient, leading the increasingly higher demand in air travelling. (Wensveen, 2015; Belobaba, Odoni, and Barnhart, 2015). Air transportation businesses have expanded compared to the past years. Although the global airline industry is continually growing, the profitability of each airline is hardly found. (IATA, 2016). The International Air Transportation Association (2016) declared that the airline industry has double projected revenue from only US$746 billion in 2004 to US$746 billion in 2014. Mainly, the growth numbers mainly come from low-cost carriers (LCCs) which contributes about 25 percent of the worldwide market. These percentages tend to increase yearly especially from the expansion of low-cost carriers in Asia continent. Because of the popularity of low-cost carriers, full service airlines are struggling hard to survive in the high competitive industry. (Morrison and Winston, 2010). Not only because of the high competitiveness, the airline business is also vulnerable to uncontrollable events, such as infectious diseases, security issues, natural disaster and etc. (Borenstein and Rose, 1995; Tavakolian 1995). With these vulnerable concerns, the airlines need to concentrate on increasing revenue margins as well as improving product quality in order to outstandingly perform in the competitive industry.

Presently, there are three global airline alliances which are Star Alliance, Skyteam and Oneworld. By considering the size, Star Alliance is the largest global airline alliance, including 27 airlines, serving more than 1,000 airports in 194 countries and carrying 637.6 million passengers per year on more than 18,000 daily departure flights (Star Alliance, 2016). IATA (2016) shows that Star Alliance covers 23% of total scheduled flights, while Skyteam comes second with 20.4% and Oneworld comes third with 17.8%, leaving 28.8% for minor airline alliances.

Star Alliance had been founded in 1997 with the formation of airlines on three continents including Lufthansa, United Airlines, SAS, Air Canada and Thai Airways (Mitchell, 1998). At the early stage, it primarily focused on code sharing and common frequent flyer benefits. Years after, the Star Alliance network becomes stronger with more airline members, covering broader routes, sharing airline facilities such as check-in counter and ground handling service (Vinod, 2005; Vaara, Kleymann and Seristo, 2004).

The star alliance is considered as the first and the largest airline alliance in the world. There are currently 27 airline members in alliance portfolio under slogan `the way the earth connects'. As of October 2016, the airline partners in the portfolio are Adria, Aegean, Air Canada, Air China, Air India, Air New Zealand, ANA, Asiana Airlines, Austrian, Avianca, Brussels Airlines, Copa Airlines, Croatia Airlines, Egypt Air, Ethiopian, EVA Air, Lot Polish Airlines,

2

Proceedings of the International Conference on Tourism, Hospitality & Sustainable Development (IC17Dubai Conference) ISBN: 978-1-943579-18-1

Dubai - UAE. 6-8, October 2017. Paper ID: DT745

Lufthansa, SAS, Shenzhen Airlines, Singapore Airlines, South African Airways, Swiss Air, Tap Portugal, Thai Airways, Turkish Airlines, and United. The Star Alliance is principally focused on marketing and cost reducing for its airline partners. The founding members in 1997 were Lufthansa, SAS, Thai International and United Airlines. Among 27 airlines, there are 9 airlines operating in Asia, which are Air China, Air India, All Nippon Airways, Asiana Airlines, EVA Air, Shenzhen Airlines, Singapore Airlines, Turkish Airlines and Thai Airways.

Although each Asia-based star alliance airline studied operates under the same alliance, they employ different marketing strategies in driving its business. This causes a visibly disconnection between airlines in terms of alliance brand image, especially under the same airline alliance. In relevant to passengers' perception, they usually expect similar service operational standards when flying with airlines under the same alliance (Weber, 2005).

From the above discussion, it is possible to say here that the competitiveness of airline industry creates the strategic alliance marketing in airline business. Therefore, the purpose of the paper is aimed at 1) analyzing and discussing the marketing strategies employed by Asiabased airline members of the Star alliance 2) finding the common marketing strategies practiced by the Asia-based airline members of the Star alliance. This paper is beneficial for the marketers to improve the service operational effectiveness and purchasing intention via the common marketing strategies in Star Alliance airline members. Additionally, this paper is useful for airline students who would like to further study in strategic airline alliance.

2. Marketing strategies used in Asia-based Star Alliance Members

Given the large marketing share within the industry, airline business has dynamic marketing strategies to gain profitable market share as much as possible (Shaw, 2011). As a result, each airline comes with different or similar marketing strategies to influence more passengers to fly with as well as maintain its existing passengers (Terblanche, 2015). The airline alliance is actually considered as the major marketing tool for airlines within the umbrella to promote the wider network of travel. In airline business, it is believed that branding is the most important for each airline to differently position itself from the competitors and convey the airline personality to passenger retention. Park, Robertson and Wu (2006) state that airline marketing is difficult because it is considered as a service provider. The service perception by customers is also varied relying on the quality of service the passenger received. Nonetheless, the expansion of low cost carriers (LLCs) gradually changes passengers' perception that full service airline is wasteful and over than passengers' requirements. This is in accordance with Hapsari, Clemes and Dean (2016), Namukasa (2013), and Mun (2011) that the characteristics

3

Proceedings of the International Conference on Tourism, Hospitality & Sustainable Development (IC17Dubai Conference) ISBN: 978-1-943579-18-1

Dubai - UAE. 6-8, October 2017. Paper ID: DT745

of passengers in 21st century are more value-conscious, low loyalty, but high empowered, more demanding in flexibility, and service excellence.

Although the alliance is the key marketing tool used by a particular airline alliance in Asia, each airline is still required to work on its own marketing strategies to promote as well as uplift its brand recognition (Gayle and Le, 2013). Each airline employs similar or different marketing strategies depending on the brand position the airline is situated. The airline may include more than two marketing strategies depending on the airline executives to set the directions. Additionally, the airlines need to pay attention to the target market they have as well as the behavior of the passengers. However, it has been found out as Gayle and le (2013) demonstrating that the marketing strategies the airlines launch have created more intense competitiveness, as a result, the airlines have to launch new marketing to complete with each other to increase the market share. Su and Tsang (2015) insert that whatever marketing strategies the airlines employ, pricing strategy seems to be prominent. However, doing so may lead to the downgrade of airlines' image and positioning. The reviews of Asia-based Star Alliance members, there are thirteen key marketing strategies that airlines employ in their marketing plan namely strategic alliance strategy, product diversification strategy, product integration strategy, quick response strategy, competitive differentiation strategy, customer retention strategy, customized and personalized strategy, market positioning strategy, pricing strategy, cost leadership strategy, product distribution and online marketing strategy, social marketing strategy, and airline branding strategy as shown in Table 1 below.

Table 1: Airline marketing strategies employed by the Asia-based Star Alliance members

ASIA-BASED STAR ALLIANCE AIRLINE MEMBERS

NO.

AIRLINE MARKETING STRATEGIES

Asiana

Thai

Air China Air India ANA

EVA Air

Airlines

Airways

(CA)

(AI)

(NH)

(BR)

(OZ)

(TG)

1 Strategic Alliance Strategy

2 Social Marketing Strategy

3 Quick Response Strategy

4 Competitive Differentiation Strategy

5 Product Diversification Strategy

6 Product Integration Strategy

7 Pricing Strategy

8 Airline Branding Strategy

9 Customer Retention Strategy

10 Cost Leadership Strategy

11 Customized and Personalized Strategy

12 Market Positioning Strategy

13 Product Distribution and Digital Marketing Strategy

Turkish Airlines

(TK)

Shenzhen Airlines

(ZH)

Singapore Airlines

(SQ)

The Table shows that among Asia-based star alliance airlines, the strategic alliance strategy, quick response strategy, competitive differentiation strategy, pricing strategy, customer retention strategy, and product distribution and digital marketing strategy have been employed by all airlines while social marketing strategy has been practiced by 5 airlines namely Air

4

Proceedings of the International Conference on Tourism, Hospitality & Sustainable Development (IC17Dubai Conference) ISBN: 978-1-943579-18-1

Dubai - UAE. 6-8, October 2017. Paper ID: DT745

China, ANA, Asiana, Thai Airways, and Shenzhen airlines. It is interesting to point out that only 3 airlines employed product diversification strategy namely EVA, Thai Airways and Singapore Airlines while only Thai Airways and Shenzhen Airlines launched product integration strategy. Furthermore, ANA is the only airline that has not employed airline branding strategy. Regarding the cost leadership strategy, there are only 3 airlines seeing its importance namely Air China, Air India and EVA while customized and personalized strategy has been employed by 3 airlines namely Thai Airways, Turkish Airlines and Singapore Airlines. It is noticeable that there are only 3 airlines namely Asiana Airlines, Shenzhen Airlines and Singapore Airlines, paying attention to market positioning strategy. The analyses of the 13 marketing strategies the Asia-based star alliance members have employed are detailed below.

3. Product Diversification Strategy

It has been defined by Su and Tsang (2015) and Czinkota and Ronkainen (2013) that product diversification is a useful strategy to enhance the business opportunities using an existing product to penetrate new potential markets. The product diversification strategy can be a product extension under the same brand umbrella (Su and Tsang, 2015; Shaw, 2011). Su and Tsang (2015) summed that the product diversification strategy aims at building the new customer base and expand the marketing potential of original product. The analyses signify that the approach that the studied airlines have employed for product diversification strategy is firstly to have subsidiary airlines to target at different market. For example, Singapore airlines has four subsidiary airlines to target different market segmentations, Singapore airlines positioned as a premium airline while tiger and scoot airlines are budget airlines, targeting at budget travelers. Silk air is playing a role as a regional full service airline, targeting Asia-pacific based passengers. (Singapore Airlines, 2015). This increases market shares for Singapore airline while broadens its customer segments. Thai Airways has diversified its business units namely `Thai Airways' offering air tickets, `Royal Orchid Holiday' having package tours as a product and `Puff and Pie' targeting at passengers who like bakery products served on board. (Thai Airways, 2015). Lastly, Singapore and EVA Airlines have diversified a more variety classes on board, economy, premium economy, business and first class. (Singapore, 2015; EVA, 2015).

4. Product Integration Strategy

The product integration always comes up with product placement strategy to expand the customers using new copious media channels. Lu, Wang, Hung and Lu (2012) differentiate the product integration strategy from product placement strategy that the product integration significantly involves the integration of the product into the script of any form of advertisement. It is believed by Shaw (2011) that the purpose of product integration strategy is to orderly manage the tools of marketing communications in order to ensure that the delivered messages

5

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download