British Airways - Product strategy

4. Brand identity

A brand identity is the message sent out by the company through its form, name, visual signs, advertising etc. Kapfferer introduced the brand pyramid shown in the figure below to help marketers analyze brand’s identity (Peter Doyle 1994). British Airways application to Kapfferer’s brand pyramid can be analyzed as:

1. Brand core: “Quality flights for all people”. This brand core is applied to focus on the quality of the British Airways brand which is available at different levels for different types of customers.
2. Brand style include:

• Culture: An airline company based in the United Kingdom.
• Personality: Confident, glamour, convenient.
• Self image: Quality of service, Business class.

3. Brand themes include:

• Physical: Quality flights across the world.
• Reflection: For everyone, with any needs and any wants.
• Relationship: Reliability, security, convincingness comfortableness.  

British Airways brand cores are narrow concentrate only in the flight industry and it is hard to see it expanding in other market areas. In contrast with Virgin who has been far beyond their current products and areas across an airline, radio station, colas, record shops, insurance and financial products. Easy jet as well has moved to different market areas such as the internet café, car rentals, insurances and financial services.

5. Branding

Branding is a major issue in product strategy. It is the art and cornerstone of marketing. It is the name, term, sign, symbol or design, or a combination of them, indented to identify the good or services of one seller or group of sellers and to differentiate from the competitors (The American Marketing Association). British Airways brand is the safeness, the assurance, the confidence, the luxury, the comfortableness that the brand has built in the years. It is the symbol of British Airways when you see generate awe of a brand strong enough to fulfill every customer attitude. A symbol which is simple but represent the one of the best in safety and luxury airlines in the world on customers minds.  

The branding as a symbol conveys six levels of meaning (Kotler P., 2002):

1. Attributes: British Airways is a luxury, safety, reliable and convenient airline which transfer people to different destinations.
2. Benefits: In other words the translation of the attributes into functional or emotional benefits. The term luxury represents functional benefit when having your own comfortable seat with a nice meal and beverages of your choice and all the kind of comforts a customer would like to make his flight easier and better. The attribute safety could be translated into emotional benefits that calms down the customers and make them feel safe. The attribute reliability represents an emotional and functional attribute. British Airways makes the customer feel important with safe, reliable, scheduled flights always on time.
3. Values: British Airways brand stands for a prestige, glamour, comfortableness, safety and reliability that he airline has which can be used by all kind of people.
4. Personality: Flying with British Airways gives a personality which makes you feel like a business man or an executive traveler. It has the glamour any traveler would dream and the right on time concept for people on a hurry.  
5. Culture: British Airways is an airline company based in the United Kingdom representing the English culture: organized, reliable, kindly.
6. User: The brand suggests the kind of consumer using the service. For example in British Airways you see more business people than you see students. However people from any background can afford to use the service.  

However, a brand is more than a name or logo or color or symbol. It is a marketers promise to deliver a specific set of feature and benefits to the customer. British Airways is a big airline which flight international and oversea and offers great deals of luxury safety and comfort flying from and to the most central and busiest airports in the world.  

6. Relation within the sector

However nowadays the competition brought to life a new different business position the low-cost airlines as Easy-Jet and Raynair. Those companies position them self as low-cost airlines or better as cutting costs airlines. 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

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. The company must set the price in relation with the value delivered and perceived by the customer. If the price is higher than the value perceived then the company will loss potential profit. However if the price is lower than the value received then the company will fail to harvest potential profits (Kotler P. 2003). British Airways prices are in the middle of the figure 1 where price = value in other words where customers get what they pay.  

British Airways has set its pricing strategies in a manner that customers can chose the how much from the extras the company providing they want. For example someone can buy just a ticket for ₤100 to flight to Greece in the economy class which will include just the basic product. Someone else for the same flight can pay ₤400 in the business class which will include much more extra value (i.e. executive lounge, selection of meals etc) add to the service they bought in order to satisfy their need.

2.  Pricing strategies

For these different types of customers British Airways has set different prices considering their different needs: a) the executive class (golden members), b) the middle class (silver members) and the economy class (blue members and free travelers). The figure 2 shows the various price quality strategies. As shown from the figure British Airways pricing strategy attacks with three strategies:

1. Premium strategy (High-quality/High-price),

5. Medium-value strategy (Medium-quality/Medium-price) and

9. Economy strategy (Low-quality/Low-price)

Those three strategies used by British Airways in order to satisfy the three different types of travelers and give them the opportunity to choose the price they want in relation with quality of the service they would like. The perceptual map in figure 3 shows British Airways different pricing strategies in relation with quality. It as well shows how the competitors’ pricing strategy is attacking the market. British Airways has split its pricing strategy in order to cover the three possible segments.  

        

• The premium strategy gives high quality in high prices for executive and business users. With this strategy British Airways attacks the business class of its competitors in overseas and international flights like Virgin, American Airlines and Lufthansa.
• The medium price strategy gives medium quality, less than quality than the premium strategy and more quality than low price strategy, in medium prices.
• The low price strategy has been developed to gives the basic product as the low cost airlines (such easy jet and Raynair) with some more extra benefits which add more quality plus the advantage of the brand image of British Airways.  

3. British Airways pricing policy

        Some years ago at 1997 before easy jet has been introduced to the market and set a different type of Airline Company structure, the low cost airlines, and set a different level of competition the market structure was an oligopoly which enabled companies under the oligopolistic environment to set their own prices. However under the competitive environment low cost airlines are getting more and more share out of the market and consequently many profits. The prices now are set by the competition instead of the companies under oligopolistic market structure. British Airways has revise its pricing policy considering the new competitors and is determined by the following attributes

• Selecting the pricing objectives
• Determine the demand
• Estimate the costs
• Analyzing competitors costs, prices and offers
• Selecting a pricing method

1. Pricing objectives

        British Airways had a pricing objective to maximize profits. However since the introduction of the low cost airlines and the increased competition the game has changed and with those objectives British Airways was going nowhere. The low cost airlines wanted to penetrate the market and thus they used a maximize market share pricing objective. In other words, small airline companies with low prices willing to gain more and more customers than the big airline companies. Under this change of fortune and the higher competition British Airways had to change its pricing objectives from maximizing profits to market share maximization. It introduce different price plans, the economy class, with lower prices which matching those from the low cost airlines.

        Another pricing objective of British Airways is the product-quality leadership which is still having it despite of the changes. They have the executive club which offers the best quality of the product. This objective British Airways will keep it and follow because it is the brand’s image.  

2. Determine the demand

        Each price will lead to a different level of demand and therefore have a different impact on a company’s marketing objectives. The higher the prices are the lower the demand of the goods (Kotler 2002).  British Airways has two types of customers:

• Price sensitive customers (students, independent travelers, frequently travelers) who are looking for the cheapest prices and the best offers, and
• Low sensitive customers (business and executive customers) who are concerned more in the quality than the price.

        Considering the three different pricing strategies of British Airways the demand curve will be as shown in the figure below. The price demand considers being elastic which means that for the different pricing strategies the demand is noticeable changing. For the low cost price the demand is high and for the premium value the demand is low.

3. Cost estimation

        British Airways estimating the cost of the products in relation with the quality its one provide. The cost of the ticket includes:

• The price of the service
• The added value (extras)
• The airport fees, and
• The travel agents extra fees

However if someone book a ticket from the internet has at  has a discount of ₤10.

4. Pricing method

        Considering the three different types of customer, the three segments, British Airways has set a pricing method of perceived value. Perceived value is the value promised by company’s value proposition and the customer must perceive this value. British Airways perceived value is made up by the company’s brand mane and image, the customer’s image, the performance of the company and the quality of the product created by the company.  

4. Promotional pricing

 British Airways has set some promotional prices on flights to some special occasion:

• Christmas gift voucher. The promotional offer for the Christmas known as British Airways escape ticket offers a perfect present. Flying to 14 travel zones from ₤59 return on UK and Europe destinations and from ₤269 return on the rest of the world.
•  Domestic and European fares from ₤49 return: Low fares to 135 destinations across Europe.
• Club World business class offer: When flying to club world business class you can upgrade to first class on a free one way ticket.

5. Relation within the sector

        The competition has increased since the introduction of the low cost airlines as easy jet and Raynair. Those airlines have achieved to sell chip tickets by eliminating all the unnecessary costs. 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. References

1. Bathgate I. (2003), Designing pricing and strategies and programs, Lecture notes, University of East London
2. Doyle P. (1994), Marketing Management and strategy (2nd edition), Building successful brands, Prentice Hall Europe.
3. Kotler P. (2002), Marketing Management (3rd edition), Setting the product and branding strategy, Prentice Hall International edition.
4. Kotler P. (2002), Marketing Management (3rd edition), Developing price strategies and programs, Prentice Hall International edition.
5. Rogers, D. (2002) Cheap flights or decent service? - Low-cost airlines have had their honeymoon and people are beginning to notice the service. How will budget carriers respond?, Marketing, 22 August: Haymarket Publications Ltd.
6. BA.com (2003), British airways official web-page.

      Base:  

7. Marketing Teacher free lessons (2002) Pricing.                                                Base:  
8. easyjet.com (2002) a quick guide to easy jet.                                                        Base:

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