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British Airways - Product strategy

Extracts from this document...

Introduction

Contents 1. British Airways - Product strategy 1.1 Introduction to product strategy 1.2 Product Levels 1.3 Adding value to the customer (the augmented product) 1.4 Branding 1.5 Relation within the sector 2. British Airways - Pricing Strategy 2.1 Introduction to pricing strategy 2.2 Pricing strategies 2.3 British Airways pricing policy 2.3.1 Pricing objectives 2.3.2 Determine the demand 2.3.3 Cost estimation 2.3.4 Pricing methods 2.4 Promotional pricing 2.5 Relation within the sector 3. Conclusion 4. References 2. British Airways - Product strategy 1.1 Introduction to product strategy Product is the most important component in an organization. Without a product there is no place, no price, no promotion, and no business. Product is anything that can be offered to a market to satisfy a want or a need. It is the core ingredient of the marketing mix and is everything favorable and unfavorable, tangible and intangible received in the exchange of an idea, service or good (Kotler 11th edition, 2003). British Airways is a business offering service products, flights across destinations, in the transportation industry. Service is an intangible product involving a deed, performance or effort that cannot be stored or physically processed, were customers directly participate in the production process. Product strategy is therefore very vital for the organization's success. It needs to be developed and manage very careful in order to be successful. British Airways product strategy includes flight services, quality of flights, various destinations across Europe and the world, executive class, business class, speed, security, support facilities and years of experience. It provides the basic product and various alternatives to satisfy all the different customer needs. 1.2 Product Levels If we have a brief look at Kotler's five-product levels theory, there are five products levels in regards with the quality and the expectation of the customers and each level adds more value to the customer (Kotler 11th edition, 2003).1 1. At the beginning is the core benefit, the fundamental service or benefit that the customer really buying. ...read more.

Middle

Their product strategy stops to the actual product without concern about the augmented product, where is the main strength and weapon of British Airways. They don't offer service at all but just the ticket. For example Easy-Jet's product strategy ends at the expected level of five-product levels. There is no augmented product. There is no business seat on flights, no executive lounge at airports, no free food and drinks on flights, no entertainment on flights, and in most cases Easy-Jet flies from airports too far from big city's center. Other airline that offers augmented products is Virgin Atlantic with Virgin's Clubhouse lounge, with bath facilities, shower, restaurant, library, music room and many more. Further more it provides Jacuzzi's, Internet and sleep cabin on certain aircrafts. Virgin also wants to give the top product level, the potential one by adding Casino's in certain flights. There is different product level for different product strategies. When a company is setting a product strategy is considering a lot of elements till it decide which one is the more appropriate to employ. British Airways product strategy has to come in terms with its objectives and mission to maintain the first position as the largest airline in Europe. To keep this position British Airways has to keep looking customer's expectation and needs for comfortable flight. 2. British Airways - Pricing Strategy 2.1 Introduction to pricing strategy Price is the value placed on what is exchanged during the marketing process. The customer exchanges his/her money or donation in return for a satisfaction or utility (S. Dibb and L. Simkin 2001). The neoclassical economists believed that utility is the end of the economic activity (Adam Smith). Thus it is very important the price to be set in a manner that customer will perceive value of his/her belief in terms of the money spent. First thing should be taking into account when setting a price is where to position the company's products considering two variables: quality and price. ...read more.

Conclusion

They eliminated the intermediaries, the on board value and basically they eliminated completely the augmented product. They have concentrated just on the basic product which is the flight ticket from the on destination to the other. They using a low cost low quality pricing strategy and set a market penetration objective in order to gain more market share. The have a method of value pricing of selling their tickets, the basic, in a greater value than their competitors. Other companies with same objectives as British Airways like Lufthansa and Virgin have followed the same pricing strategies and policy. They set different price rates in relation with value added and looking after how to gain a bigger piece of the market pie. 3. Conclusion Considering the increased competition in the flying industry which is rising people expect that companies will reduce cost by providing less quality products. That is partly true considering what easy jet and Raynair has succeeded. However this is only one part of the true. Companies like British Airways fight the competition with different methods like introduction of low cost ticket where customer can still enjoy a good quality product in a low affordable price. Just considering an example where easy jet (a low cost airline) flight's to Greece from �40 return and British Airways from �99 return. The problem though with easy jet is that you can find this cheep ticket if you book it about three months ago. But if you try to book it a month or even one an a half month before your journey the price has gone up at � 200 return when British Airways price will be still remaining the same until a week before your journey. So does it really worth flying with the low cost airlines which offer just a ticket with no allocated seat, no food or drinks and from unfrequented airports when you have a company like British Airways with so much extra for almost the same price? That's a question that each of as has to answer on his own. 4. ...read more.

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