Price
As previously mentioned Ryanair has the lowest average fares in Europe, and Park (2003) describes how price is the biggest element in Ryanair’s marketing strategy. On Ryanair’s website its passenger charter states that they commit to “offering the lowest fares at all time on all routes”. Ryanair can offer such low prices because the customer simply pays for a seat on the plane and fees (Inc taxes) and nothing else. Any other extras have to be purchased separately. According to their half-year figures for 2009, they have the lowest average fare at €32, which is a drop of 20% on the previous year, this is considerably lower than its closest rival Easyjet whose average fare is €66. Ryanair aim to fill all their aircrafts and they change their prices frequently according to demand, and operate differential pricing, whereby fares booked in advance and during off-peak seasons are cheaper. They have however been investigated on numerous occasions by the Advertising Standards Authority (ASA) over misleading customers about the price of flights, stating how advertised prices were not inclusive of tax or other charges. Ryanair currently displays a table of fees and charges on their website, and when booking a flight the customers are told that the price advertised does not include optional fees or charges.
Place
Ryanair minimise costs by not using travel agents, and therefore avoiding agency commissions. They use direct marketing techniques to attract and maintain a customer base. Customers are encouraged to book through the website, which often promotes discounts and offers, and 96% of Ryanair’s sales do indeed come direct from online (Mintel 2, 2008). Ryanair has the largest coverage of any airline operating over 950 routes, flying in to 151 airports from 26 countries. Ryanair’s UK base is Stanstead in Essex, and they now have 36 bases across Europe. Stanstead is a secondary airport just like many of Ryanair’s other destinations, which allows a quick turnaround and keeps the aircraft in the air as much as possible. Johnson et al. (2008) outline how Ryanair’s low-cost model ensures economies of density by achieving a twenty-five minute turnaround and optimising capacity.
Promotion
Ryanair spend as little as possible on advertising compared to their competitors, and their full-year financial figures for 2009 support this. Per unit cost per passenger Ryanair spent €0.22 on advertising and selling, whilst Easyjet spent €1.18. Ryanair use simple adverts, emphasising the major selling point of cheap fares. A current promotion can be seen on the homepage of the Ryanair website, where they are offering 1 million seats to customers for just £2.99 (excluding charges). O’Leary takes the view that there’s no such thing as bad publicity, and has been involved with a number of controversial advertising scandals.
Ryanair in the past have often used negative advertising, by picking out undesirable features of competitors’ products and services. In 2003 Ryanair launched an attack on its major low-cost competitor by releasing a series of controversial adverts outlining how Easyjet claim of offering low-cost air fares were false. One of the adverts depicts Saddam Hussein's former Information Minister, hailed ‘Comical Ali’ in the ad, as Easyjet head of information (Dalby, 2004). Following the campaign, Dalby (2004) describes how Ryanair began to eat into Easyjet market share, and claims that Ryanair view it as one of their biggest promotional successes.
The elements discussed above relate to the product that Ryanair offer. However, because of the high degree of direct contact between Ryanair and its customers, Jobber and Fahey (2006) state it is also important to consider components that are required for successful services marketing.
People
Ryanair and CEO Michael O’Leary are renowned for taking an anti-union approach to towards their staff. In order to minimise staff wages, Ryanair employ young pilots and cabin crew with little experience. Pilots are recruited as pilot cadets when they are young and are promoted quickly, and cabin crew invest in their own training. Webster (2007) however outlined that the pressure put upon inexperienced pilots to achieve turnaround times of 25 minutes, have led to a number of dangerous mistakes being made. Mayer (2008) described how Ryanair recently launched a Continuing Professional Development Program (CPDP), in order to improve the staff’s service skills.
Physical evidence
Aircraft are the most expensive asset to an airline, and Ryanair purchase its aircraft for as little as possible. They target collapsed or struggling airlines, and capitalise on specific events such as 9/11, when they can get huge discounts on planes. This has proved to be an extremely cost effective and successful strategy. Ryanair currently has a fleet of over 200 leased and financed Boeing 737s.
Process
Ryanair aims to provide customer satisfaction by making the process of flying as cheap, quick and as easy as possible. The majority of bookings are made online, and at the airport you simply present your reference number and passport, which eliminates the need for a lengthy check-in. Also passengers cannot reserve seats, they are allocated on a first come first served basis, which encourages passengers to arrive early and enables quick turnarounds. To further aid quick aircraft turnarounds, Ryanair do not use air bridges that connect to the plane, they provide a bus service or passengers walk to the aircraft.
Recommendations for the Improvements of Ryanair’s Marketing Activities
Product
Ryanair has established itself as Europe’s largest low-cost airline and the largest international carrier worldwide. The growth of the budget sector in Europe has been extraordinary, with the deregulation of Europe’s skies seeing dozens of start-up entries into the market, resulting in fierce competition and fragmentation (Jarach, 2004). However growth seems to be slowing from the 30% growth average the sector has experienced over the last decade (Mintel 2, 2008). This is due to the saturation of the market, and the product entering into the maturity stage of its life cycle. It is therefore recommended that Ryanair focus its efforts on protecting its market share and build brand loyalty with consumers, in an attempt to encourage them to repeat purchase, and maintain awareness about their low-cost European flights (Jobber & Fahy, 2006). Ansoff’s ‘Product-Market Matrix’ (Figure 2) summarises future growth alternatives companies can consider. It is also recommended that Ryanair pursue a diversification strategy, by applying their extremely successful low-cost model to the long-haul airline market, and launching a new low-cost long haul service.
Figure 2, Shows the Ansoff ‘Product-Market Matrix’. Source, edited from Jobber and Fahy (2006)
The ‘EU/US Open Skies Treaty’ was implemented on 31 March 2008. The agreement allows any EU airline to fly from Europe to the US, and any US airline to fly from America to Europe. (Mintel 3, 2009)
Ryanair could capitalise on this, just like they did with the deregulation of Europe’s skies and launch a transatlantic airline flying from existing bases in Europe to non-major secondary US airports.
In doing so, Ryanair will be aiming to penetrate an entirely foreign and unknown market. In order to avoid confusion between the highly successful European low-cost brand, and the new low-cost long haul product, it is recommended that the new product should be launched under a completely new entity (see Figure 3).
Figure 3, shows the new product logo.
In contrast to the “no-frills” model, the new product should include various additional services, as there is a greater need for certain ‘frills’ on long haul flights, including refreshments and food. By launching it under a new entity, it will not detract from the original Ryanair brand. The current recession could be the perfect time to launch the new product. The economic climate has seen the collapse of airlines such as Silverjet, and Zoom, all of which operated a transatlantic route. Ryanair could capitalise on this by purchasing their long haul carriers at a discounted rate (Millward, 2008). Ansoff described a diversification strategy as being high risk and expensive. One option is for Ryanair to grow by merger or acquisition (M&A) with a long haul airline. This will enable Ryanair to gain an instant foothold in the long haul market, and will secure existing landing slots, routes and a long haul fleet to begin its operations quickly. AirAsia X launched their low-cost flight from London Stanstead to Singapore in March 2009 and has experienced early success. AirAsia X allows passengers to purchase extra frills onboard, which is similar to Ryanair’s European low-cost flights (Mintel 3, 2009). This diversification strategy is risky however, and a long-cost long haul service would be hugely affected by fluctuations in fuel prices.
Promotion
To implement the recommendations presented above, Ryanair will need to implement a new product launch strategy. Having analysed Jobber and Fahy’s (2006) ‘New Product Launch Strategy’ diagram (Figure 4), it is recommended that Ryanair follow a rapid penetration strategy combining high promotion levels and low prices.
Figure 4 shows the New Product Launch Strategy diagram. Source, Jobber and Fahy (2006).
Ryanair already use this strategy, which has proved successful. For this reason it is suggested that they adopt the same strategy for their long haul low-cost product launch. Ryanair face direct competition from companies such as British Airways and Virgin Atlantic. These companies have strong, long established brands and high customer loyalty. However due to the credit crunch it has been reported that Ryanair are attracting customers from competitors, “” (Coventry, 2009). If Ryanair diversified into Long haul flights under a new entity, it is recommended that they have a more subtle approach to advertising, attempting to focus on high quality as well as low prices. This will also assist with detracting the new product from Ryanair’s established brand. To stay true to the low-cost model however, Ryanair cannot afford to have high advertising costs, and it is recommended that they continue to use low cost marketing methods, involving using the Internet to promote their new product by either direct emails or internet advertisements. Relating Porters ‘Five Forces’ framework to Ryanair’s promotion strategy, Ryanair could use their promotions to minimise the threats of substitutes. If the transatlantic flights were operating initially only from the major cities across Europe, Ryanair could offer deals such as half price internal flights to the long haul airports. This would deter customers from using other forms of transport to get to the airport (Johnson et al., 2008), and will encourage repeat purchases of the low-cost European flights.
Recommendations for the Types(s) of Consumer Marketing Research that could be conducted by Ryanair to Establish Customer Insight
Low cost flights are the key foundation of Ryanair’s success. However, the question is since it is not the only company who support this service, exactly how can Ryanair continue with this success? Ryanair should undertake market research to increase customer insight, therefore primary data; new and first hand data research would provide Ryanair with more information than the secondary data they already collected. Research also allows companies to understand customer’s wants and needs.
There are four types of primary research:
- Qualitative,
- Quantitative,
- Continuous and
- Ad hoc.
Quantitative research is needed to be implemented in Ryanair’s market research because it involves collecting a reasonable quantity of data with intention of establishing statistical legitimacy.
Table 1, Shows a comparison of survey Methods. Source: Jobber & Fahy (2006)
At present Ryanair issue customer services statistics every month, reviewing the number of on-time flights, complaints, baggage per 1000 people and how many of these complaints are answered within 7 days.
The information shows that they are No.1 for punctuality, flight completions, fewest lost bags and fewest complaints in comparison to their competitors including Easyjet. But this is only secondary data, which is from their internal records and does not give the executives at Ryanair enough information about what the customers really want and if they are happy with product and service they receive.
If Ryanair’s executives wished to review their product and service, for example, the process customers use are:
- Book the flight (online/phone/in person),
- Check in at the airport – computer/person,
- Then the service provided on the flight and finally
- Baggage collection.
Primary quantitative data will assist them in doing so.
It could be recommended that Ryanair should use either email questionnaires or feedback cards, which can be given to each customers on arrival, to obtain customer market information. To encourage people to complete the questionnaires, there could be a promotion attached. For example, chance to win a free flight by filling this questionnaire. Church (2003) found that non-monetary incentives may increase response rate by over 7%. The questionnaire will aid Ryanair collect quantitative data; it needs to be comprised of closed questions that can be analysed statistically.
Due to Ryanair’s low cost strategy and expenditure reducing methods our final recommendation for Ryanair would be email questionnaires. They would be the most convenient and cost affective form of market research, which is shown in Table 1. Over 95% of people who travel with Ryanair are under the age of 65 (Mintel 1, 2007), so it is considered highly likely that they would use the internet regularly. It is also advised that the questionnaires need only be in English, as over 50% of their customers are English speakers (Mintel 1, 2007), this saves the company time and resources as the same questionnaire can be sent to all customers.
Prior to launching a new long haul service, Ryanair would need to undertake market research to establish what their customers would expect from the new product, and what basic frills they would demand on a long haul flight. This can be vital in identifying any unforeseen problems or opportunities. To obtain more information from present and future customers it is highly recommended that Ryanair invest in qualitative research such as in depth, one-to-one interviews. Table 1 show that this is a high cost but also results in a high response rate and increase in information. They need to ensure that they are obtaining constructive information. Using one to one interviews instead of focus groups, ensures that everyone selected for the research gets a chance to put their views forward and not feel influenced by other people’s opinions. Face to face interviews are classed by (Daft and Lengel, 1984) as the richest medium with high levels of effective communication.
Conclusion
With the growth rate of the European low-cost airline industry declining, due to the saturation of the market, and also with the current recession, it is recommended that Ryanair continue with their low-cost marketing activities. By continuing to offer consumers the cheapest fares, Ryanair can protect its dominant market share and build brand loyalty with its current customers, whilst still aiming to offer a much cheaper alternative to customers using airlines such as British Airways. An avenue that can be explored for future growth is the launch of a long haul low-cost service. This will keep Ryanair one-step ahead of its competitors, and the current recession is the perfect opportunity to purchase a discounted long haul fleet. However this option carries a fair amount of risk and in particular is susceptible to rising fuel prices.
In order to gain a better insight into what the customer wants, quantitative primary research is proposed in a form of an online questionnaire to be carried out twice a year, so that trends are updated. This will allow Ryanair to investigate further how their customers perceive the service and where improvements can be implemented. In conjunction with diversifying into the long haul market, Ryanair would need to conduct some one-to-one in-depth interviews. These will help them to develop a new strategy and service in alignment with their customer needs.
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