When looking at the overall marketing strategy of any company it is a good idea to know what a marketing strategy actually is. Cravens, Merrilees and Walker (2003) define marketing strategy as the analysis, planning, implementation, and control process designed to satisfy customer needs and wants by providing superior customer value. Analysing opportunities, competitors, and targeting, all go towards the marketing strategy of a business.
Qantas is not only Australia’s oldest and largest airline but also the second oldest airline in the world. Qantas started in 1920 as Queensland and Northern Territory Aerial Services Limited, and soon became known simply as Qantas. Ever since Qantas merged with Australian Airlines in 1995, they have been able to fly a widespread service throughout all Australian Capital cities as well as regional cities and towns. Qantas also flies many international routes to and from Australia (www.fact-index.com). Qantas is Australia’s primary Domestic airline and together with Qantaslink and Jetstar, operate over 5,000 flights a week. Qantas’s main focus is on passenger transportation and they are always looking out for new opportunities to retain their dominant position in the aviation marketplace (www.qantas.com.au).
Consumers’ needs and wants are changing constantly, which means a firms marketing strategy must also change. Markets only exist because of people that have the ability and are willing to spend money on a product or service that satisfies their needs (Cravens, Merrilees & Walker, 2003). A company must recognise these needs and implement a product or service to meet them (Kotler, Adam, Brown & Armstrong, 2001). Domestic air-travel in Australia has increased dramatically over the past year from 2.63 million to 3.03 million (www.btre.gov.au).
Qantas was quick to take advantage of this by introducing a low-cost subsidiary airline called Jetstar (www.abc.net.au). Qantas has also recognised the growing market of Air New Zealand and have been trying to gain a strategic alliance, coordinating pricing, schedules and capacity. The ACCC have denied the applications for such an alliance though, because they felt it wasn’t good for the public and the profits were more likely to be taken by shareholders rather than reflected through lower airfares. This is an example of how not all opportunities work out and there is a need to weigh up all options (www.lawyersweekly.com.au).
People are also looking for more efficient ways to book flights and holidays. Instead of depending on travel agents to book airfares, consumers are using the Internet and saving time and money. The airlines have recognised this as an opportunity to offer last-minute deals and cheap Internet only deals such as Qantas’s Red-e-deals (www.redsheriff.com). Another way the market seems to be heading is in pre-booked package deals including flights, transfers, accommodation, tours etc. people are relying on everything being done for them, and this may be an area that Qantas could develop in the future (www.atec.net.au). Qantas must also be aware of their competitors’ actions to stay one step ahead.
In the Australian domestic market Qantas’s main competitor is Virgin Blue, instigated by Richard Branson in August 2000 as a budget airline for the cost conscious consumers of Australia (www.virginblue.com.au). An example of Qantas and Virgin Blue competing was the introduction of Jetstar to combat Virgin Blue. Jetstar upon opening gave away 100,000 one-way seats for $29, to which Virgin Blue responded by offering 200,000 seats for the same price in an attempt to upstage Jetstar’s launch (Dorman, 2004).
Qantas introduced their budget subsidiary airline early in 2004 in the hopes of capturing two-thirds of all new domestic airline passengers and to protect Qantas’ market share. Jetstar hope to have 20 percent of the market within two years, leaving Virgin Blue where it is today, with about a third of the market (Creedy, 2004). Qantas and Virgin Blue compete for business by offering consumers greater value, through lower prices or benefits that justify a higher price (Kotler, Adam, Brown & Armstrong, 2001). Virgin Blue offers 2-3″ more legroom than it’s competitors as well as “Blue Zone” which is a seating arrangement that passengers can pre-book to secure emergency exit seats or front row seats that have considerably more legroom. They also have special holiday packages for a discounted price, which may be attractive to many budget leisure travellers (www.virginblue.com.au). Benefits such as these will help Virgin Blue reach their goal of ultimately achieving 50 percent of the market. Qantas will also have to be aware of new entrants to the market. Cheong Choong Kong, the head of Singapore Airlines says the prospects of Australia having another domestic airline are good and it’s simply a matter of branding, finding your niche and knowing your competition (www.bandt.com.au).
Qantas has built up a reputation as being an aggressive competitor. Several domestic Australian airlines have gone out of business largely due to Qantas’s ability to successfully recognise and capture the target market. After September 2001, and the collapse of Ansett Airlines, Qantas had a near monopoly over the Australian domestic air travel market (www.fact-index.com).
Market segmentation is the process of identifying distinct groups of consumers whose purchasing behaviour differs from other groups. Markets can be segmented geographically, demographically and psychologically and because there are so many different consumer segments, firms have to adjust their marketing mix from segment to segment. The goal is to maximise sales through optimising the fit between purchasing behaviour and the marketing mix (Hill 2003).
With the introduction of Jetstar, Qantas abolished 86 direct flights a week, mainly key leisure routes, to be provided by Jetstar (Kerr, 2004). While it is cheaper to fly with Jetstar, you also have to put up with no in-flight entertainment, no meals and the smallest amount of leg-space ever flown and legally allowed on an airline (Dorman, 2004). Jetstar doesn’t offer frequent flyer points to loyal customers either and while the cheaper Jetstar air fares will be attractive to some, Qantas frequent flyers will more likely choose to fly with Qantas (Kerr, 2004).
With Jetstar taking over the bulk of Qantas’s lower-class domestic operations, Qantas can concentrate on providing a superior service to the business class passengers (Rochfort, 2004). There has been phenomenal growth in capacity, particularly on the leisure routes, which has reduced Qantas’ mainline routes. Qantas can still work on its cost base and use higher-yielding domestic passengers from the international sector to buffer the overall declines (Knight, 2004). Qantas will be increasing its frequencies on the main business routes such as Sydney-Melbourne and Sydney-Brisbane (www.Qantas.com.au).
In a survey compiled by readers of “Readers Digest” it showed Qantas was the 3rd most trusted brand in Australia (B&T, 2002). This is vital for positive branding of a company and in a talk with the head of Jetstar, Tony Eastley, about where Qantas is heading, he said that good branding is important to people who are looking for a full service. People that want international connections, domestic connections, and people that want the added value service, and there are people that are willing to pay for that (www.abc.net.au).
Strategic Area of Focus
In the movie “Rain Man” the character played by Dustin Hoffman resists all attempts by his brother, played by Tom Cruise, to get him onto a plane. Hoffman demands to fly with Qantas because it’s the only airline that has never crashed. The aviation business is so sensitive that everything that Qantas is in involved in goes towards its brand image (www.pwcglobal.com). Branding for Qantas is not just in the name but also in all the benefits they offer to consumers (Cravens, Merrilees ; Walker, 2003). The “Spirit of Australia” catchphrase on the side of Qantas planes is not just a sexy slogan but also a very real part of the airline. Qantas lives that spirit and it’s heavily tied with the value of the brand. Along with promoting Qantas, especially internationally, the brand is promoting Australia and all it stands for (www.pwcglobal.com).
The most important aspect of a firm with a branding strategic focus is promotion. There needs to be a consistent representation of the brands identity. This could include visual aspects such as logos, mottos, endorsements, and sponsorship (Cravens, Merrilees & Walker, 2003). Qantas have over the last 83 years have built up a brand that stands for safety, reliability, engineering excellence and customer service. When you think about Qantas, things like the notorious flying Kangaroo painted on the tails of all Qantas planes come to mind. Advertisements such as their “I still call Australia home” television campaign all go towards building a reputable brand name (www.pwcglobal.com).
Not only do the promotional tools of a firm have to be first-class, the product itself has to be unsurpassed. Qantas has a very high expectation placed on them to maintain a leading-edge product. Qantas last year spent $400 million on new business class cabins, $50 million on upgrading all its airport lounges and more than $300 million on upgrading economy in-flight entertainment (www.pwcglobal.com).
Sometimes branding comes without warning, as was the case when John Travolta, an aviation enthusiast from his childhood days, came to Qantas asking to work for the airline. Travolta became an Ambassador and describes Qantas as an airline that embodies the spirit of Australia and the spirit of friendship. He said, “I’ve always admired the Qantas safety record and culture and I’ve been attracted to its values of quality, openness and friendliness.” John Borghetti, the Qantas Executive General Manager Sales & Marketing said that Travolta’s contribution was branding you can’t buy because he spoke from the heart, and that’s where brands live (www.pwcglobal.com).
Borghetti received a letter from a man in Brisbane along with a photograph of a solider who had just returned from Iraq, kneeling down to hug his children. In the background was the Qantas jet that had brought him home. The writer told Borghetti that this was what Qantas is all about (www.pwcglobal.com).