For a successful business there need to be strategic plans so as to offer quality products or services to the market and be the best among other competitors. For airlines, segmentation, targeting and positioning are the major factors considered. They first look out to what kind of customers exist, which one among the many are they going to serve and finally implement segmentation and maximize on products or eservices for that segment that they have chosen.
Segmentation entails determining what kinds of consumers with diverse needs exist. In the airline industry, some customers demand speed and recital, while a bigger proportion is concerned with their safety and comfort. A general assumption is that one cannot serve everybody’s needs and from experiences, it has been proved that companies that specialize in a particular field tend to make more profits than the rest. Usually there are common strategies that can be applied in airline business; the undifferentiated strategy, where all customers are given the same treatment without considering any special needs like in the case of commodities, the concentrated strategy is where one organization specialized in one area of a given segment and leave the other parts to its’ competitors just like the Southwest Airlines concentrate on price sensitive customers who prefer paying less than to get the meals on board and the assigned seats, while the differentiated strategy is where there is high priced tickets for business people who are often travelling without planning in advance hence to compensate for their unplanned journeys they pay more than the rest of the passengers (Bowen 290).
Segmentation is a difficult activity for most airlines but with various variables, customers can be differentiated to meet their needs. At times, it is quite cumbersome to try to satisfy all the customers’ needs hence the need to use relevant variables to distinguish these groups of individuals. We have the demographic variables which is concerned with individuals’ income, gender, education, location (rural vs. urban, East vs. West), ethnicity, and family size. Here customers are served on the basis of their social interests, values, and lifestyles (Bowen 292).
Price segmentation is another variable that is used by airlines. Difference in income distribution offers an opportunity for segmenting customers’ preferences. Airlines categorize customers accordingly since they want to serve a better part of the population therefore depending on their income they will have a variety of choices while travelling. Personal earnings usually have different ranges hence the need to provide services that can be afforded by the customer. The other variable of segmentation is the psychographic or lifestyle. This takes into consideration multivariate analyses of the passengers’ attitudes, behaviors, beliefs, perception, and likes. It is a justifiable method of market segmentation if proper variables are identified (Jerry 67)
Silverjet majorly concentrated on the price segmentation where they dealt clearly with people of varied income. Hence necessitated them to lower their prices as compared to those of their giant competitors. Choosing the busiest and most lucrative route, they offered a $2,200 for a return trips from London Lupton to New York this was much less as compared to those of British Airways, which charge $8,000 for the same trip. Also on price segmentation, the silverjet used to have carbon offset fee on every ticket as a way of balancing whatever deficit they may incur and at the same time running the firm smoothly. This made them achieve their objective since their targets were met at the seven month of their operation, which they had stipulated to achieve on the nine month. The offset fee was an after sale service which is usually offered to attract and maintain customers in an organization. In this situation the company was trying to serve everyone regardless of their economic deficiencies, since in business you cannot choose your customers instead they are the ones’ who chooses your products and service basing on their capabilities (Gubta & Lehmann 73).
Silverjet also employed the demographic segmentation where individuals’ variables were of major concern. The variables include gender, interests, and age. From the case study, we realize that the firm mainly had an affinity for female gender, where they only had lavatory for female. Food and drinks were delivered by hand to minimize noise caused by trolleys and to take interest of some people who like being served by hand rather than using equipments, which are against their culture. In this segment, they were targeting the women and more so, those who are possessed by culture and those who like sleeping while travelling like the businesspersons (Gubta & Lehmann 74).
The airline service also providers the use of geographic variables and choose to operate only within a specified route serving certain countries only. Since the firm was still new in the market they had to concentrate forces within a specified locality (between London and New York) for it to grow and attain its’ objectives. Here they were targeting the high population who travel constantly across the countries mentioned, keeping in mind that business growth depends on the number of customers you have, hence the need to attract and maintain (Kernchen 21).
The carbon-offset charge should not have been there since the airline was considering the needs of low class people their main segment area. This was another burden to this group of individuals and had to loose interest in the firm because of the additional fee. Owing to the economic level of those who use this airline they needed no additional charge on their tickets rather they could not have chosen that type of airline. Customers need to be satisfied and once they lose interest in your products, there is nothing you can do about (Holloway 71).
Though silverjet made tremendous growth during its’ initial stages, there was weakness in there operation because they never laid down long-term objectives and how they will go about it. Instead, they relied on the internal market only; hence, during the times of crisis they had no enough market support. At any given time in business, there are hard times and one should always be prepared for such. The segmentation strategy was good but it had some weaknesses, for example, they never thought of venturing into other fields and provide extension services such as handling commodities, and having different routes so as to diversify their services.
The market share was also not satisfactory enough, silverjet should have collaborated with other major companies so that in case of such crisis of investors withdrawal they could have sold their shares and avoid being declared bankrupt. Financial matters are the most concrete resources of any firm failure to maintain a certain capital then the firm is doomed. Business is all about survival therefore proper and future plans need to be considered during the initial stages of any business. No plan is misplaced but was the right tools used; implementation process also is a tricky path since not everything is on the limelight it requires courage and being focused all the time (Drummond et. al 190).
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