Commercial airlines have grown tremendously over the past decade, and looks set to continually rise again, after a downfall due to the global recession, as airline tickets become cheaper for consumers to purchase. Some of the factors that have contributed to the growth are in part due to the growth of multinational corporations and industrial growth, as well as the continued growth of the internet, allowing consumers worldwide to find cheapest deal available. Customers over the last decade have been more inclined to travel whether it is for business or leisure; all of these factors have created an increased demand for worldwide travel. Travel routes across the continent, and further continue to open up, allowing customers to travel to various locations across the globe at a lower cost than ever before. New customers are on the rise, with more customers coming from destinations that, in the past, could not, for various reasons, find it feasible to travel.
“Everyone should have the right to fly as often as they like…at a fair price!”
Richard Branson
More aircrafts are available for use now than ever before, and with airports being manufactured in new cities across the globe shows that the recent economic downturn is having only a small effect on customers wishing to travel. Airlines are now more inclined to ‘go green’ and are finding more methods to impact the environment as little as possible, building relationships with the more environmentally minded traveller, In turn gaining more customers. All of this has resulted in cheaper airline fares, so that families can travel for less. “Since 1960 airfares have reduced by about 70 per cent in real terms.” (Jones, 1999)
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Air travel is “likely to jump to 3.3 billion passengers by 2014” (Kennedy A., 2011) due mainly to the rise of Asian travellers, who “will likely account for 45 per cent of the 800 million increase in air travellers…” (Bisignani, G., 2011) Growth in the Asian market is enormous, with carriers set to “earn about $4.6 billion…compared with just $100 million of profit for their European competitors.” (Bisignani G., 2011)
http://1.bp.blogspot.com/_0ZFCv_xbfPo/TEOGxlktmcI/AAAAAAAAAi0/in4brQiY73Y/s1600/boeing.rpks.jpg(Boeing, 2010)
The large growth in the Asian market puts more pressure on the European market to be successful, so the branding and positive customer perceptions of the low budget airlines are becoming increasingly important if these airlines want to stay in business.
1.2 Growth of the Low Cost Airline
In the past, commercial air travel was reserved for those who were stable financially, as tickets where more costly than they are now today. However, due to the increase in low cost carriers this conception can be abandoned. Due to this the marketing and branding of the airline industry changed, low cost airlines began marketing to families and customers with lower incomes, with the promise of low cost flights to various locations, where international and more traditional airlines stuck with their higher prices but gave benefits; in-flight services such as audio/visual entertainment, and a free meal. This differentiation between low cost airlines and traditional airlines continues today. The airline industry hit a major downturn in September 2001, due to the terrorist attacks in New york City. This led to multiple airlines being shut down and filing for bankruptcy, and this is where the major low cost airlines became a hugely popular method of travel. Easyjet and Ryanair both had vastly increased profits, and from that point have continued to grow.
http://www.centreforaviation.com/images/stories/2011/january/05/easyjet.png(Asian Pacific Aviation, 2011)
Part of the success of the low cost airlines is due to “the use of secondary airports and point-to-point services, which help to increase fuel efficiency and limit emissions.” (Ryanair, 2006) The point-to-point system is the cheapest and fastest, as flights go strictly from A to b, with no connections. Low cost airlines continually change routes, on a periodic basis (winter and summer) this allows for new routes to open up and an influx of new customers. These low cost airlines also allow for cheaper, smaller holidays, such as weekend breaks, which work out significantly cheaper and are more viable and feasible to the consumer demographic. The point-to-point system implemented by the low cost airlines, as well as using secondary, and therefore, a smaller airport is a welcome benefit to customers, thus increasing the perception they have to these smaller airlines. Cheaper flights and shorter waiting times are both highly effective ways in keeping customers not only content, but more likely to use the service again.
1.3 Low Cost Airlines Impact on the Market
Low cost carriers have had a large impact on the airline market since it has become the most prevalent method of commercial air travel. However, “The expansion of low-cost airlines has had little impact on overall air traffic growth in Britain.” (Starmer-Smith, 2006) With “growth in short-haul traffic between 1996 and 2006 averaged five per cent a year – no greater than in the years before the arrival of no-frills airlines.” The low cost airlines are having a small impact on the population’s use of air travel, only increasing in small increments every year; however it is important to show that although there is little growth it “seems to have been at the expense of other carriers – both scheduled and charter airlines – which have been forced to close down unprofitable routes.” (Starmer-Smith, 2006) Low cost airlines are impacting the market not in the sense of increasing the amount of consumers, but taking consumers from different, more expensive airline firms, and building on that consumer base yearly. Due to the popularisation of low cost airlines, more and more airlines are become available and saturating the market, this in turn leads to more traditional firms, such as British Airways losing market share and shutting down routes, “British Airways sold off its last remaining routes from regional airports to Europe, operated by BA Connect, to Flybe. BA Connect made an operating loss of £20 million [in 2005].” (Starmer-Smith, 2006) It is also difficult for the more traditional airlines to follow the example of the low cost carriers and make their own service that can cater to the low cost traveller, but this may come at a cost in its brand imaging. Larger, more traditional airlines, such as British Airways have a certain brand image, where they provide comfort and in-flight entertainment. Starting a new, low cost service would be the antithesis of the BA brand, and could possibly do more harm than good.
The low cost airlines are taking the airline industry into a new, cheaper direction, where customers can expect the basics and in return make large savings on the cost of the airline ticket.
2. Literature Review
“Any damn fool can put on a deal, but it takes genius,
faith and perseverance to create a brand.”
David Ogilvy
The literature review will discuss the various concepts of what branding is and studies of how branding can effect a company’s position in the market place. Reference will be made to Aaker’s: “Building strong brands” Shaw’s “Airline Marketing and Management” As well as Al and Laura Ries’ “22 immutable laws of branding.” This research will be the framework guideline to understanding branding and customer perception within the low cost airline industry.
The literature review will also review brand loyalty and brand equity, both of which are fundamental aspects of how the customer perceives the brand of the low cost airlines, as well as how the low cost airline will affect the airline industry.
2.1 Branding
“If this business were to be split up, I would be glad to take
the brands, trademarks and good will and you could have all the bricks
and mortar – and I would fare better than you.
John Stuart
Branding is an integral part of all businesses, every company wants to become more brand aware, becoming a household name internationally. “Spurred by the emerging theory of intellectual capital assets, the brand was soon recognized as the ultimate intellectual capital asset…for any and every successful enterprise.” (Moore, 2004)
The basic concept that is branding is not a new aspect in the marketplace, where “companies that sold patented medicines and tobacco began branding their products as early as the early 1800s.” (Daye, 2006) Even at this early period, branding played a vital role in the selling of products; this is just one example, as branding dates back even further than that. On the concept of branding, “from a business point of view, branding in the marketplace is very similar to branding on the ranch. A branding program should be designed to differentiate you cow from all the other cattle on the range, even if all the cattle on the ranch look pretty much alike.” (Al Ries et al, pg 7, 1989) A successful brand has to “bring sales in the short term…if you want to build a powerful brand in the minds of consumers, you need to contract your brand, not expand it.” (Al Ries et al, pg 14/15, 1989) As the brand grows, there is ever more likely that more people will distance themselves from it, for various reasoning, simply put, no one company can have universal appeal. All the methods of increasing the appeal of the company and its market share, such as widening their demographic are the same things that can possibly weaken and hinder the brand itself.
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Aaker (1996) states that “a company’s brand is the primary source of its competitive advantage and a valuable strategic asset,” (Aaker, pg , 1996) this concept holds true as a brand is the image given to the consumer on what the company is, and what they stand for. The brand is the first thing that will catch the attention of the consumer, and if any company wants to have a positive perception from the consumer they must make sure that the brand stands out, and holds the same beliefs as that of possible customers. After all the whole concept of branding is to make the customer believe that you stand out in a market full of similar firms, all vying for the same market share.
There are two main benefits to having a strong brand, “firstly they can add value to the product, allowing branded products to be sold at a premium price…secondly, they assist firms in establishing and maintaining control of their distribution channels.” (Shaw, pg 229, 2007) due to the nature of the low cost airline industry, there is little benefit to charging at a premium price, so that can be replaced by the customer perception of their brand, EasyJet and Ryanair both are recognised as giving the customers the basic in air travel and, if they want, they can purchase the extras such as in-flight meals, if they wish.
2.1.1 The Law of Expansion
The law of expansion is quite simply, putting your brand name on as much as possible. Trying to increase brand awareness and bring in potential new customers. This may occur when a company tries to brand a new service or even cater to a whole new industry. Companies always look for new ways to make a profit, and in turn look to expansion as an easy way to extend their brand name and make that possible, however it is impossible to cater to all people across all the various markets. It’s the battle of “short term vs. long term. Do you broaden the line in order to increase sales short term?” (Al Ries et al, pg 10, 1989) for the airline industry this is not as bad as it could be in other areas.
Low cost carriers are unlikely to make an exponential change to add new customers, however it has been done. Easyjet brought out a service, Easybus, which is a bus service that runs to and from London airports, this expansion from easyjet shows how companies need to expand, and in this case it was successful. Other than the example above it is very unlikely that the low cost airline will venture out of the airline industry, the biggest expansion comes from the routes available, as the airlines constantly expand their coverage and travel across the globe vying for new potential customers.
2.1.2 The Law of Publicity
“The birth of a brand is achieved with publicity, not advertising.” (Al Ries et al, pg 25, 1989) getting the brand name out into the public is a great way to increase the brand name and potentially gain new customers. Publicity is far more important than advertising, one example of this is the Body Shop, Anita Roddick who built up the Body Shop brand used no advertising at all, and “instead she travelled the world on a relentless quest for publicity, pushing her ideas about the environment. It was the endless torrent of newspaper and magazine articles, plus radio and television interviews that literally created the Body Shop brand. (Al Ries et al, pg 26, 1989) in the past heavily endorsed advertising was the most common way for trying to build the brand, however in modern society it just doesn’t work as well as pure publicity.
2.1.3 Law of Name
“In the long run a brand is nothing more than a name.” (Al Ries et al, pg 73, 1989) one of the most important decisions to make is the name chosen for the brand.
The name has to be catchy and easily remembered by the public if it is to gain widespread publicity and curiosity. “In the short term a brand needs a unique idea or concept to survive…but in the long term, the unique idea or concept disappears. All that is left is the difference between your brand name and the brand name of your competitors.” (Al Ries et al, pg 73, 1989) ask anyone some examples of low cost airlines and Ryanair and EasyJet will in all probability be two that are names, both companies have, over the last decade, become protagonists in the airline industry, for their ludicrously cheap airline prices, and ease of service, each brand name is synonymous with each service, “the difference between brands is not in the products, but in the product names. (Al Ries, et al, pg 73, 1989) the strategy for any company should be to improve their service to best fit that of the customers they serve, and the brand will serve as an extension, that which gains publicity to gain and increase the consumer base.
2.2 Brand identity
The brand identity “is a set of brand associations that the brand strategist aspires to create or maintain. These associations represent what the brand stands for and imply a promise to the customers from the organisation members.” (Aaker, pg , 1996) the brand identity is the face of the company, it represents the core values that are undertaken, the services provided as well as the future goals of the company. Brand identity can lead to positive publicity, and help gain loyalty, all helping towards increasing the customer’s perception of the company. “A brand is a symbolic embodiment of all the information connected to the product and serves to create associations and expectations around it.” (John Philip Jones)
For the low cost airline industry, there is a general brand identity in that they provide the same services, albeit departing and arriving from different locations, as they all look to give as low as possible base costs to the customer. They travel in a point-to-point system, taking the most direct route available to save time and money, and finally using smaller secondary airports to save waiting times for customers. Everything is done to promote the brand identity in the low cost airline business that they wish to get customers from point A to point B for as little cost and distance as possible. This method is used to improve customer perceptions of the company and increase brand loyalty.
2.3 Brand Equity
In this modern day there are thousands of brands available for customers, a wide scope of variety and choice to cater to any one person’s needs. However, it is only in recent history that branding as taken the form that it currently uses to gain customers. Intellectual property and trademarks have significantly been recognised over the last half century or so. Trademarks, designs, patents are taken very seriously, and any breach or copyright infringement that could occur can lead to immense legal battles and vast sums of money being paid due to the intellectual property infringement that has taken place. It is due to these factors that branding of services and products can maintain loyalty, one brand may imitate another, however consumes will always know the original intellectual property holder, and may perceive that the original is quite simply the best, and any brands that clone those products and/or services are inferior.
Brand equity can be described as “a set of assets (or liabilities) linked to a brand’s name and symbol that adds (or subtracts from) the value provided by a product or service to a firm and that firm’s customers.” (Aaker, pg , 1996) The brand name lives on, longer than any of the products and services that fall under that brand. The flexibility that is held by powerful brands is a very attractive aspect to possible investors. Today the value of the brand is in creating a market as well as the perception of the customer and how much money can be made from that brand. Brand equity can also be considered as “the financial and commercial value of the brand to the organisation which owns and utilizes it.” (Crainer, pg 33, 1995)
Aaker (1996) says that there are four main categories that assets and liabilities of brand equity fall under;
“1. Brand name awareness
2. Brand loyalty
3. Perceived quality
4. Brand associations” (Aaker, pg 16, 1996)
These four categories are the basis to brand equity and bring in value for customers and the company itself, all in order to gain a good customer perception and increase market share.
Brand awareness brings publicity to the brand name, in the low cost airline it is vital to not only be well publicised, but publicised with a high customer perception. Brand loyalty can lead on, as more customers are being shown the brand, when they use the service, and they feel that service is good, the customer is more likely to stay loyal to that company. In the low cost airline industry customer loyalty can go a long way, and will help increase market share, meaning that it is possible for that company to increase the routes and destinations they undertake, again gaining a larger consumer base.
2.4 Brand Loyalty
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